Just weeks after new rules were introduced in Germany to curb unfair business practices it is clear that sending file sharing warning letters remains a lucrative business. The law firms that send warning letters are using every trick possible to keep the compensation demands high.
File sharing and unfair business practices
For years, internet users who exchange copyright-protected files on file sharing websites have been receiving warning letters. These letters often contained exaggerated demands for the payment of compensation and for the reimbursement of legal fees.
The legislation on unfair business practices sought to address the growing anger at the business practices used by file sharing law firms. But just weeks after the new legislation was introduced, questions are beginning to be asked about how effective the provisions are at protecting individuals.
The first area the legislation on unfair business practices seeks to address is transparency. Accordingly, law firms are supposed to breakdown to financial claims they make in file sharing warning letters.
It seems that law firms have quickly adapted to the high transparency requirements introduced by the legislation on unfair business practices.
These examples show how easily the lawyers have adapted their warning letters:
“The whole point of the new legislation was to make file sharing warning letters more transparent. However, we have seen that the amount of money being demanded varies from law firm to law firm.
“The suspicion arises that the numbers listed are completely arbitrary. It can sometimes be difficult for internet users to determine the true amount they should be paying. It is therefore more advisable than ever to seek legal assistance.”
Demands for increased compensation
In addition to creating more transparency, the new rules on unfair business practices introduced a cap on claim values at 1,000 euros. In turn, this reduces the amount the law firms can claim in legal fees.
The law firms have also adapted this new rule. To “compensate” their “loss” they have now increased the amount of compensation they are demanding.
A file sharing warning letter from the law firm Waldorf Frommer demonstrates this point:
In reaction to this new development, Christian Solmecke said:
“It was clear that the file sharing law firms were not going to let parliament have the last word. By requiring recipients of file sharing warning letters to pay increased compensation, the law firms can make up for the decreased legal fees. I assume that a presumably legal cross-financing deal has been agreed. Future legal cases will no doubt reflect the level of compensation being sought.”
File sharing and series
The new rules on unfair business practices have led file sharing law firms to develop new and lucrative business models. The model involves the law firms sending warning letters for individual episodes from TV series.
Internet users rarely download just one episode from a series. By itemising each individual series episode in a file sharing warning letter, the law firms can artificially increase the amount of compensation they demand.
The excerpt below shows how the episodes from a well-known American series have been itemised.
The same principle applies to the classic warning letter infringements called “German Top 100”.
Even though claim values have been capped by the new legislation on unfair business practices, making these so-called “chart containers” available to the public through file sharing software can still prove costly.
In theory, the law firms can demand 100 payments of compensation, in other words for each individual song. Compensation could therefore amount to €15,000.
“For many internet users, it is unjustifiable that the judges accept a compensation claim of 150-300 euros for each piece of music, when the same songs can be bought on iTunes for just one euro,” Solmecke explains, “The difference, however, between iTunes and file sharing is that through file sharing a piece of music is not just downloaded once, but also uploaded and therefore widely distributed to the general public.”
“Whether the new amounts of compensation being sought will be accepted by the courts, remains to be seen,” the partner at Wilde Beuger Solmecke concluded.
Exceptions to the cap
While the new legislation on unfair business practices caps claim values, file sharing law firms are able to plead an exception to the rule. The exception applies if the cap would be “unreasonable in the individual circumstances”.
The law firm Sasse & Partner, for example, calculates its compensation claims in cases concerning episodes from the series “The Walking Dead” based on a claim value of 15,000 euros.
Lawyers from the firm argue that as the series is currently only available in the USA, it is brand new and highly popular, and it is therefore unreasonable for the claim values to be capped in such a situation.”
The law firm Waldorf Frommer has also announced that if recipients of warning letters are unwilling to reach an out-of-court settlement, it will charge high fees in court.
Christian Solmecke contends, “Parliament created this exception intentionally. It cannot be the case that the law firms skew this exception by attempting to assert that the cap on claim values is unreasonable in every file sharing case.”
“Unfortunately examples of file sharing cases are not mentioned in the explanatory memorandum to the unfair business practices legislation. It is therefore conceivable that the courts could accept the file sharing law firms’ arguments and allow higher claim values,” Solmecke says.
One positive development in the file sharing saga since the introduction of the legislation on unfair business practices is that file sharing law firms are no longer at liberty to choose the court before which to bring their claim. This means that internet users will no longer be forced to travel the length of the country to defend a file sharing claim against them.
“It is also commendable that this new rule applies retrospectively; i.e. to those individuals who have already received a warning letter, but have not yet been sued. However, it remains to be seen whether the law firms will recognise and accept these new rules,” Christian Solmecke points out.
The legislation on unfair business practices has made some important changes to the file sharing landscape in Germany.
There are strict requirements on the content of warning letters and this does improve transparency; there is a cap on claim values and there are clear rules on exclusive jurisdiction.
Nevertheless, Christian Solmecke concludes that, “The new rules do not go far enough. The position in which internet users find themselves is hardly any better than that in which they were in before the legislation came into force.”