Student Term Paper Website Brings a Lawsuit; Instead Gets Nailed With $700k Award Against It–Axact v. Student Network Resources

By Eric Goldman

Axact (Pvt.) Ltd. v. Student Network Resources, 2008 WL 4754907 (D. N.J. Oct. 22, 2008). The Justia page. Axact’s initial complaint. A letter from defense counsel to the judge recapping some of the sad story.

I’m always fascinated when plaintiffs initiate a lawsuit but end up owing the defendants money. I understand that litigation inherently involves uncertainty about the outcomes. However, when the plaintiff ends up owing money, the plaintiffs appear to have made a major miscalculation. Certainly they should have just stayed home rather than mixing it up in court.

Today’s case involves the apparently brutal and cutthroat (perhaps literally?) business of student term paper websites. You may recall that Google blacklisted all term paper websites from its AdWords program. I’ve also blogged on Blue Macellari’s complaint against some term paper sites she thought had ripped her off (the case settled). The Turnitin lawsuit is also relevant.

The litigants in today’s case are competitors in the student term paper business. Axact, a Pakistan-based IT services company, initiated the lawsuit by alleging that SNR was trying to steer business away from Axact through defamatory statements at the home page and user forums of a website operated by SNR. The complaint cites some pretty strong allegations by the defendants beyond just selling bogus term papers, including purported accusations that the plaintiffs are a “crime syndicate,” run a “prostitution ring” and threatened reporters with murder. [Note: I have received legal demands from Axact regarding this paragraph. To make sure there's no confusion, the last sentence refers to the allegations, all of which Axact has denied.]

The defendants fought back with counterclaims alleging that Axact was ripping off SNR by buying term papers and then republishing them through the Axact website. The defendants then sent a Rule 11 letter asserting that the complaint’s allegations lacked merit. After the letter, plaintiff’s counsel withdrew, saying “Dreier discovered information which, if known at the time the complaint was filed, would have caused Dreier to refuse to file the complaint in this matter on behalf of Axact.” This left Axact without counsel, and apparently it had difficulty finding new counsel because it asked the court if it could proceed pro se. The court predictably denied the lawsuit because companies can’t appear pro se in court. As a result, the litigation went to default judgment on defendants’ counterclaims.

In the Oct. 22 opinion, the court awards damages of $300k and attorneys’ fees of $36k for the copyright infringements, plus regular damages of $2.5k and punitive damages of $350k under the NJ unfair competition act. All told, an award of nearly $700k to the defendants in a lawsuit that the plaintiffs should not have brought.

Axact may have defaulted, in part, because it is pursuing a parallel lawsuit in Pakistan. Assuming it can win in its home court, it’s still not clear how Axact can collect on a Pakistani judgment against the defendants. At the same time, it will be interesting to see if the defendants can get paid themselves.