Sit Back and Wait To Be Sued

Try getting Hollywood to listen to your pitch. If you're not represented by a big-name agent, you may as well forget it. Unless you're David Simon, a relative nobody who now holds the rapt attention of every major movie studio and the Motion Picture Association of America. His strategy? Take existing entertainment (no matter that it isn't yours), distribute it on the Internet, and wait to be sued.

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Try getting Hollywood to listen to your pitch. If you’re not a player represented by a big-name agent or lawyer, you may as well forget it. Unless, of course, you’re David Simon, a relative nobody from the ‘burbs of Agoura Hills, Calif., who now holds the rapt attention of every major movie studio and the Motion Picture Association of America. Nope, he didn’t emerge from the shadows by writing the next blockbuster film. He didn’t even marry a movie star. He did it through what has recently become standard business practice for high-tech entertainment start-ups: Take existing entertainment (no matter that it isn’t yours), distribute it through the Internet, sit back and wait to be sued. As surely as the lawsuit will come, so will the eventual payday for the pirate (or the Internet entrepreneur, depending upon your perspective). At least that’s the theory. It’s the approach that Simon, creator of RecordTV.com, is banking on. The computer programmer created a way for users to log onto his Web site, choose TV shows from 42 channels of a Los Angeles area cable, record and watch them later on their personal computers. That nifty move garnered the immediate ire of the studios. Television distributors like Warner Bros. and Disney sell their programs on a market-by-market basis; a hit show like “Seinfeld” can fetch more than $1 million per episode in a major market. That value could evaporate if viewers in any city can watch the same show on the Internet. The threat prompted all the studios and the MPAA to band together pronto in a huge suit against RecordTV.com, a miracle of sorts in Los Angeles, where no one can agree on anything, much less put themselves in the hands of the same lawyer. The studios and the MPAA engaged Robert Schwartz, 40, an entertainment litigation partner with O’Melveny & Myers in Century City, Calif., with a strong track record for studio clients like Sony Pictures and Warner Bros. The studios filed the complaint against Simon June 15 in U.S. district court in Los Angeles. Why would Simon risk invoking the wrath of Khan? Hey, it worked for Michael Robertson, founder and CEO of MP3.com, who drew a similar legal response from the music industry when he enabled online users to download digital copies of hit songs, for which neither Robertson nor the users had licenses. In a settlement earlier this month, the major record labels agreed to license Robertson’s MyMP3.com, which allows users to copy their CDs onto his online folders and listen to them from anywhere. Robertson has to pay $100 million in damages, but considering what he stands to gain by bringing digital delivery to the $40 billion music business, it’s a slap on the wrist. No doubt Simon is hoping to cash in on the same dynamic, although he hasn’t said anything remotely like that. In fact, he’s telling anyone who will listen that he only created his company so his children could watch recorded programs like “Pokemon” on computers in their bedrooms. Simon insists he doesn’t “want to fight the big guys” and says he’s “scared to death.” More tellingly, he says he wishes the studios had contacted him before suing and told the Associated Press, “If there’s a way to make this more acceptable to [Hollywood], I would love to do it.” While some observers are willing to apply the David vs. Goliath analogy to the RecordTV scenario, that can go only so far, says Carole Handler, an entertainment litigator at Kaye, Scholer, Fierman, Hays & Handler in Los Angeles. “Sometimes Goliath is right. Theft is theft,” says Handler, who brands Simon’s method as “license by extortion … Web entrepreneurs who think blatant infringement will get them a license need a better business model.” And at least as far as RecordTV goes, the studios aren’t exhibiting any concessionary feelings toward Simon. Mark Litvack, director of legal affairs for worldwide anti-piracy at the MPAA, calls RecordTV.com “a business model based on thievery” and says, “If you want to watch CNN, you know you have to purchase cable. [Simon] says, ‘I steal it and I can send it to you for free.’” Indeed, Simon’s promos for his service have been brazen. As the studios allege in their complaint, RecordTV.com’s business plan brags that the “beauty of this business is that we have ZERO cost of content for the Web site.” Not for long, says Schwartz. “If he reopens the site, we will request an injunction and order to seize his servers,” he vowed. “Unless it goes legit, RecordTV.com will not survive.” There’s precedent for that, too. A Canadian company, iCraveTV.com, which also allowed users to watch American TV shows over the Internet, ran away with its hard drive between its legs a few months ago. When the lawyers came knocking, iCraveTV.com shut down its site, saying it couldn’t afford to fight the litigation. Simon shut down his site last week but is still insisting that his service is legally protected because it is “no different from a VCR.” He may have a point there, says Michael Rhodes, a Cooley Godward partner in San Diego who represented MP3.com and was sought by RecordTV. Rhodes, who would say only that he is “disinclined to get involved,” did say that Simon’s service is entirely controlled by its users, which “makes it look and feel more like a virtual VCR.” The legal linchpin, however, is what it does. While the law permits personal use of a VCR to record free broadcasts, the Supreme Court has made it clear that “fair use” doesn’t include taping for profit. And as Schwartz says, paralleling Michael Corleone’s comment to his brother Sonny in “The Godfather”: “RecordTV is a business; it’s not personal. Case closed.”

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