IPTV Piracy Lawsuit Targets ‘DMCA Ignored’ Host in $42M Lawsuit

A lawsuit filed at a Seattle court this week targets Ukraine-based hosting Provider Virtual Systems. Coordinated by the International Broadcaster Coalition Against Piracy (IBCAP), the lawsuit focuses on Virtual Systems' self-promotion as a 'DMCA-ignored' host. After allegedly ignoring over 500 DMCA-style infringement notices relating to dozens of pirate IPTV services, the lawsuit demands over $42m in copyright damages.

 As famously pointed out by The Pirate Bay’s Anakata in response to a Dreamworks takedown notice 20 years ago, the DMCA does not apply to countries outside the United States.

While technically correct, ignoring takedown notices isn’t risk-free; inaction can increase risk where none previously existed.

DMCA notices and equivalents issued under the EU’s E-Commerce Directive, for example, not only aim to counter infringement. They also support ‘safe harbors’ that protect hosts from incurring liability for customers’ infringements. In general terms, takedown notices indicate an allegation of infringement for which the host could incur liability if no action is taken.

A copyright lawsuit, filed by an American company against a ‘DMCA ignored’ hosting provider in Ukraine, provides an up-to-date example of how disregarding takedown notices can lead to escalation.

DISH Network vs. Virtual Systems, LLC

Filed yesterday at a district court in Seattle, the complaint sees broadcaster DISH Network, supported by the International Broadcaster Coalition Against Piracy (IBCAP), take on Ukraine-based hosting provider Virtual Systems, LLC, and its alleged owner and CEO, Vyacheslav Smyrnov.

The lawsuit follows a similar pattern to those filed previously by DISH against other hosting providers. Using monitoring systems deployed at IBCAP, pirate IPTV providers hosted by Virtual Systems were observed distributing copyrighted works owned by the plaintiff, thereby infringing its exclusive distribution and public performance rights.

“The Pirate Services transmitted the Works to Users over the internet using Virtual Systems’ servers and network as part of linear streams of the Channels or on a VOD basis,” the lawsuit notes.

“Users accessed the Works through a set-top box (STB) or a website that links to the Works or provides a playlist used to access the Works. Users often had to purchase a subscription to view the Pirate Services’ content, in addition to purchasing any required STB. DISH did not authorize the Pirate Services to distribute or publicly perform the Works and received no compensation from them.”

The lawsuit describes the scale of the pirate IPTV services’ infringement as extensive. It’s claimed that linear channels containing the works often aired on a 24/7 basis, in some cases continuously for the past several years, with pirated content distributed on a VOD basis adding to already significant infringement.

Efforts to Curtail Infringement

The complaint notes that the pirate IPTV providers were notified of their infringement on multiple occasions but continued regardless. At least three of the services are already the subject of permanent injunctions following legal action in the United States but, since they were based elsewhere, the complaint concedes they have little incentive to comply.

Also indicated as problematic are the efforts deployed to disguise the true identities of those behind the pirate providers, most believed to operate outside the United States. This certainly isn’t unusual, neither is the response from the plaintiff; when IPTV services refuse to comply, pressure is applied to their host.

“Virtual Systems and [CEO/owner] Smyrnov were sent written notices asking that they remove or disable access to Works that the Pirate Services were transmitting from Virtual Systems’ servers and network, thereby infringing DISH’s copyrights,” the complaint reads.

“Virtual Systems and Smyrnov, collectively, were the recipients of at least 512 Infringement Notices. Virtual Systems did not respond to the Infringement Notices and did not take any measures to stop the Pirate Services’ infringement occurring on its servers and network. The Pirate Services kept infringing DISH’s copyrights in Works aired on the Channels, even using the same IP addresses and URLs previously reported to Virtual Systems.”

Based on Virtual Systems’ marketing of its own services, this isn’t a bug – it’s a feature.

DMCA Ignored

The complaint alleges that Virtual Systems appeals to pirate IPTV services due to its “DMCA Ignored” policy. The company states that it ignores DMCA takedown notices concerning servers operated from its Ukraine datacenter; the complaint alleges that similar promotion is applied to Virtual Systems’ servers in Seattle and the Netherlands.

“Virtual Systems acted true to its ‘DMCA Ignored’ policy by disregarding the Infringement Notices and turning a blind eye to the Pirate Services’ infringement of DISH’s copyrights,” the complaint continues.

“Virtual Systems also did not comply with orders from United States courts, entered in lawsuits involving three of the Pirate Services, that permanently enjoined Virtual Systems from providing its servers and network to those Pirate Services because they were using them to infringe DISH’s copyrights.”

As highlighted earlier, the DMCA framework includes safe harbors for hosting providers that are responsive to takedown notices and meet other recognized standards. Failure to meet the requirements introduces greater risk at the lawsuit stage.

No Safe Harbor

The lawsuit was filed in Seattle where Virtual Systems reportedly operates a datacenter and servers, which were utilized by the pirate IPTV providers responsible for the alleged infringement. As far as safe harbors are concerned, the lawsuit claims that the inaction of Virtual Systems means it can avail itself of none.

“Virtual Systems is not entitled to assert any DMCA safe harbor defense because it does not adopt and reasonably implement a policy that provides for the termination of its services to repeat infringers,” the complaint reads.

“Virtual Systems is also not entitled to assert most DMCA safe harbor defenses because it does not have a designated DMCA agent to receive infringement notices; because when such notices are received or it otherwise has knowledge of infringement, Virtual Systems does not respond expeditiously to remove or disable access to the infringing material; and because Virtual Systems receives financial benefits directly attributable to infringement that is under its control.”

While not illegal per se, other policies and business practices at Virtual Systems are criticized for encouraging pirate IPTV providers to infringe copyright. With no ‘Know Your Customer’ policy, Virtual Systems says that it “do[es] not require personal data [of customers]” when they make a purchase and since they “love and accept” cryptocurrencies, and communicate via anonymous email, customers are “completely protected.”

$41.85m Claim for Damages

As a result, the complaint alleges “willful, malicious, intentional, and purposeful” contributory copyright infringement, inducement of copyright infringement, and vicarious copyright infringement, demanding statutory damages for each of the registered works in suit, as detailed by IBCAP in an announcement this morning.

“The complaint seeks statutory damages of up to $150,000 each for the willful infringement of 279 registered works — up to $41,850,000 total; Virtual Systems’ profits attributable to the infringement of thousands of unregistered works; an injunction prohibiting Virtual Systems from providing access to copyrighted works owned by IBCAP members; attorneys’ fees and costs; and pre-and post-judgment interest,” the anti-piracy coalition explained.

“[Virtual Systems CEO] Smyrnov was sued in his personal capacity because he authorized, directed and participated in Virtual Systems’ infringement and failed to exercise his ability to stop that infringement.”

Referencing an earlier lawsuit that resulted in a settlement with CDN provider Datacamp, Chris Kuelling, executive director of IBCAP, says the lawsuit filed this week is part of a strategy to hold non-compliant intermediaries to account.

“This case against Virtual Systems represents the culmination of IBCAP’s strategy to identify non-compliant CDNs and hosting providers and make them not only cease their illicit activities, but also pay for ignoring IBCAP takedown notices,” Kuelling says.

“As we have made clear through other legal actions, CDNs and hosting providers who support pirate services by delivering infringing content over their networks will be held accountable. The Datacamp case’s favorable outcome and the filing of this lawsuit should send a clear message to non-compliant CDNs and hosting providers that supporting pirate services is not worth the risk.”

The complaint, filed yesterday at a district court in Seattle, is available here (pdf)

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