Court Orders PayPal & Alipay to Freeze VPN Company’s Funds in Piracy Lawsuit

VPN services are generally seen as neutral intermediaries. Technically speaking, they simply route traffic through their servers, adding an extra layer of protection for their users.

However, some VPN providers have gone a step further by marketing their services directly to online pirates. This is also what the Panamanian company “VeePN” did, according to a group of filmmakers.

Filmmakers sue VeePN

Earlier this month, several movie companies including Voltage Holdings and Screen Media Ventures filed a complaint against VeePN at a Virginia federal court. The filmmakers were joined by Hawaiian company 42 Ventures, which is owned by anti-piracy lawyer Kerry Culpepper who registered the trademarks for terms such as Popcorn Time, YTS, and RARBG.

The plaintiffs’ complaint argues that VeePN ‘promotes’ the use of pirate sites and Popcorn Time, while advertising its services on popular torrent site YTS.mx. This activity amounts to both copyright and trademark infringement, the film companies claim.

VeePN has yet to respond in court but the company is already facing its first setback. To stop the infringing activity and to secure VeePN’s assets, the filmmakers previously requested a temporary restraining order (TRO) that was granted last week.

Court Freezes VeePN’s Funds

The order requires various companies to freeze VeePN-related funds while the lawsuit is pending. This also applies to PayPal and Alipay, two of the payment processors used by the VPN.

In addition, VeePN is also required to immediately stop using the term “Popcorn Time VPN.” The VPN provider can no longer mention the piracy app in its promotional materials either. Meanwhile, the rightsholders are required to post a bond of $25,000.

In his order, District Court Judge Anthony Trenga concludes that the rightsholders satisfied all four factors that are necessary to issue a restraining order. This includes the likelihood that their initial claims could lead to a win at trial if the case goes forward.

Bad PR

The Judge cites several passages from the complaint which are sufficient to back the trademark and copyright infringement allegations. These have nothing to do with VPN technology, but more about how the service promoted itself.

“The Copyright Plaintiffs are likely to succeed on their contributory infringement claim because they have shown that VeePN promotes and distributes Popcorn Time VPN,” Judge Trenga writes, noting that this suggests that the VPN service induces or encourages direct infringement.

“Additionally, at the website https://veepn.com/blog/popcorn-time-vpn, Defendant VeePN promotes itself as ‘Popcorn Time VPN,’ explicitly stating that: ‘Downloading and sharing files via torrent is a violation of copyright law. It means that you may be punished by law. That’s why you need a Popcorn Time VPN’,” Judge Trenga added.

The other factors, including the likelihood that the rightsholders will suffer irreparable harm if no action is taken, are satisfied as well.

Ex Parte

Judge Trenga issued the order ex parte, which means that VeePN wasn’t heard. The court explains that this is warranted because the rightsholders fear that the VPN service would otherwise try to relocate the money, as other defendants have done in movie piracy cases.

Ironically, allegations that VeePN and the persons affiliated with the service took steps to conceal and obscure their identities, played a role in the decision to grant the ex parte motion. If the defendants were notified in advance, they might have attempted to transfer the funds elsewhere.

While there hasn’t been an official response from VeePN yet, the company did remove the “Popcorn Time VPN” blog post from its site over the past few days. That said, PayPal and Alipay are still listed as payment options at the time of writing.

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A copy of the Virginia District Court Judge Trenga’s temporary restraining order is available here (pdf).