In my last article, I mentioned that “On April 18th, 2016, Keith Lipscomb told all of his local counsel that he is no longer representing Malibu Media, LLC (citing a lack of profitability).”
Was Lipscomb right? Were the Malibu Media LLC v. Doe lawsuits no longer profitable?:
I thought a lot about this one, and I will answer it using fuzzy numbers (rough estimates).
Malibu Media, LLC filed 6,800+ lawsuits in federal courts. Since the start of their lawsuit, the cost of filing a lawsuit increased to $400.
$400 filing fee/case x 6,800 cases = $2.7 Million in filing fees (likely $2.4 mil based on the fee change because the filing fee was not always $400).
6,800 cases, estimate 10% pay a settlement fee (one out of every ten John Doe Defendants), and assume an average settlement amount of $10,000. [6,800 cases x .1 settlement rate = 680 settlements x $10K/settlement = $6.8 Million in settlement funds received].
But what if the average settlement was $8,000 but they didn’t tell you about that, and only 5% actually paid the settlement? Then the numbers would look like this: [6,800 cases x .05 settlement rate = 340 settlements x $8K/settlement = only $2.72 Million in settlement funds received].
Now the local attorneys who “extract” the settlement likely get a 30% piece of the settlement. So let’s assume 30% in commissions goes to the local counsel. [$2.72 Million in settlements received x .7 [that’s 70% after the 30% attorney cut] = $1.9 Million Left for Lipscomb].
Subtract the $1.9 Million Left for Lipscomb from the $2.7 Million in filing fees paid, and Lipscomb has a loss. Likely a businessman like Lipscomb would see this coming and would not allow 6,800 cases to be filed if they were not significantly more profitable. Thus, I think my original numbers were more accurate (if not, Lipscomb was not a smart businessman and is about to file for bankruptcy).
Going back to the original numbers, even if you take the original assumptions of a 10% settlement rate, and an average settlement of $10K (=$6.8 Million), minus the local counsel’s 30% cut, that leaves a net profit of $4.76 Million Left for Lipscomb. Minus the $2.7 Million in filing fees from the $4.76 Million Left for Lipscomb, and that leaves a $2 Million Net Profit, but Lipscomb only paid Malibu Media $100,000 (which would be a 5% commission rate to Malibu Media, LLC).
Thus, based on what the real numbers actually were, I do see how Lipscomb may be able to claim that the copyright trolling campaign was not profitable for him. My best guess is that the truth of what the numbers really were are somewhere in between my estimations, however, the only way we will be able to learn the truth is 1) if it comes out in discovery in the Malibu v. Lipscomb lawsuit, or 2) if the feds analyze their books.
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