Update: According to Vegasinc.com, Righthaven has warned that it might have to file for bankruptcy. The warning came in an emergency request for a stay on an order that it pay $34,045 in legal fees to blogger Wayne Hoehn, who successfully defended himself against a Righthaven lawsuit. (original article continues below)

Over the past year, we have reported a couple of times on a company called Righthaven, which buys certain copyrights on newspaper content and sues bloggers and aggregators who repost said content, either in part or in full. This week, several news outlets have reported that Righthaven is facing an existential crisis. Where did Righthaven come from, and how close are they to extinction?

Righthaven began filing lawsuits in July of 2010 in collaboration with Stephens Media LLC, a company that owns a number of newspapers, including the Las Vegas Review-Journal. Stephens Media invested $500,000 to the creation of Righthaven. Over the course of the past year, Righthaven has filed around 275 lawsuits against alleged infringers.

Righthaven's business model is to buy copyrights from Stephens Media and other companies, including MediaNews (parent company of The Denver Post) and then sue based on those copyrights, sometimes for up to $150,000. Many defendants in Righthaven cases settle out of court with the company. While it's common for both parties to sign non-disclosure agreements as part of a settlement, the few that have been made public were in the $5,000 range. At least in the case of Stephens Media, any settlements received are split between the two companies.

Righthaven's lawsuits have attracted attention for a number of reasons, chief among them being that Righthaven doesn't follow the standard procedure of sending takedown requests under the Digital Millenium Copyright Act. It simply goes straight to filing lawsuits. Righthaven has also attracted attention for the targets of their lawsuits. It has sued non-profits, hobby bloggers with disabilities, and blogging powerhouses like The Drudge Report. Late last year, Righthaven sued Eriq Gardner, a freelance writer for the blog Ars Technica when he posted an article that featured a grainy xerox of a Denver Post photo that the author got from a Righthaven court filing in the Drudge Report case. Righthaven later called the lawsuit against Gardner a "clerical error."

In the Righthaven lawsuits that have gone to trial, the courts have been almost categorically unsympathetic to its business model, primarily because the courts have said again and again that Righthaven has lacked legal standing to sue.

For every copyrighted work, there are numerous copyrights that can be transferred or sold. You can transfer the right to reprint an article, for example, or adapt it into a stage play or a movie. But for many months, the only copyright that Righthaven was purchasing from the original holders was the right to sue. 

Lawyers for the defendants in several cases have argued successfully that Righthaven didn't have legal standing to sue for the copyrights because their interest in the copyrighted works was so narrow. Righthaven attempted to amend its agreement with Stephens Media several times, but Judge Roger Hunt of Nevada has called these amendments "cosmetic."

So why are bloggers now describing Righthaven as being "on life support?" First of all, it stopped filing cases entirely in June of this year. Also, in the intervening months, Righthaven has been dealt a couple of blows - a $5,000 penalty for misleading the court about its financial relationship with Stephens Media, and in August, Righthaven was ordered to pay $34,000 in lawyer's fees to a defendant in a case that was determined to be fair use.

And that's not all. Paidcontent.com reported yesterday that "the company also laid off in-house attorney Steven Ganim, who was involved in at least 53 of Righthaven’s lawsuits." Additionally, it is being reported that MediaNews, one of Righthaven's two largest partners has decided to let its contract with the company expire.

It's unclear what the future holds for Righthaven. CEO Steve Gibson has acknowledged in an article on Wired.com that the company has stopped filing new lawsuits while some appeals make their way through the 9th circuit appellate court, but that process can take month or years. When asked by email for a comment on this story, Gibson replied simply "time will tell."