Righthaven LLC., a law firm that became known as a "copyright troll" for filing hundreds of lawsuits against media companies and bloggers, was forever banished from its business model on Tuesday by a judge who ordered a transfer of all their copyrights to settle the company's substantial debts.

After a series of stinging legal defeats last year, Righthaven found itself owing defendants more than $200,000 for their frivolous lawsuits. That was quite enough for U.S. District Judge Philip M. Pro, who ordered the company on Tuesday to forfeit all its intellectual property, which will be sold at auction.

For about a year Righthaven's business model was a success: they would find a news website or blog that had republished snippets of a copyrighted news story that they had purchased rights to or represented, then file a lawsuit threatening up to $150,000 in penalties for every alleged infringement. Because the punitive damages are so hefty, most early defendants settled for much smaller sums, usually several thousand dollars.

But that all change after they went after liberal news forum Democratic Underground, which they sued in Sept. 2010 over a five sentence news excerpt from The Las Vegas Review Journal, posted in the forum for readers to comment on.

Righthaven was chastized by U.S. District Judge Roger Hunt months later in 2011, who wrote that Righthaven "made multiple inaccurate and likely dishonest statements to the court" regarding their ownership of certain Review Journal copyrights.

In his ruling, Judge Hunt wrote that Righthaven’s claims were invalid because it did not actually hold a copyright on the story they sued the forum over — that they were simply representing the paper, even though they claimed the copyright had been transferred to them. He even warned that Righthaven may have misled judges in hundreds of other lawsuits by claiming that it owned certain copyrights which it was really just representing.

That's when the pile-on began, and counter-suits seeking to recoup attorney fees began racking up against the company.

Righthaven stopped filing lawsuits a short time later, then they lost a key client: MediaNews Group, Inc., which owns more than 50 newspapers, including The Denver Post.

In one of those counter-suits, Righthaven was ordered last December to begin selling off its assets and participate in a court-run debtor examination. Its representatives did not show up for two consecutive hearings, and a third follow-up by Judge Pro on March 5 similarly lacked a Righthaven presence.

As a result, Judge Pro ruled on Tuesday (PDF) that he must assume they agree that all of the company's 275 copyrights should be transferred and auctioned off -- a decision that effectively kills Righthaven's business.

"This Court acknowledges that there is a dispute over what intellectual property rights Righthaven actually possesses," Judge Pro wrote. "Nonetheless, the Court may use its powers under 17 U.S.C. § 201(d)(1) to transfer Righthaven’s copyright rights, whatever they are deemed to be, to the Receiver for auction pursuant to the Court’s December 12, 2011 order."

Disclosure: Righthaven sued Raw Story Media, Inc. over reuse of a Denver Post photograph that was featured on dozens of major websites. The matter was settled out of court.

Photo: Shutterstock.com, all rights reserved. (H/T: Wired)