A California film company on Monday dropped its copyright infringement lawsuit against 5,865 BitTorrent users who allegedly downloaded the movie Nude Nuns with Big Guns between January and March of this year, but an identical lawsuit by a different company is ongoing for now.

Camelot Distribution Group dismissed its case (.pdf) following a dispute about whether it legally owns the movie’s rights, and after skeptical questions from the judge in the case over Camelot’s mass-litigation strategy.

Jessica Kelly, a Camelot vice president, said Camelot might refile the case in San Francisco, where “we have a better chance.”

Camelot’s March 7 lawsuit was one of a nationwide surge of suits collectively targeting more than 130,000 BitTorrent users for pilfering indie films, porn and exploitation flicks from the internet. Unlike the RIAA’s former litigation campaign, which targeted only a handful of defendants at a time, the film companies have been suing thousands of defendants by internet IP address, and then asking federal judges to order ISPs to identify the subscribers by name.

U.S. District Judge Dean Pregerson in Los Angeles last month asked Camelot to explain why it was suing so many people at once, and appointed the EFF to defend the rights of the 5,865 IP addresses. Corynne McSherry, an intellectual-property attorney for the Electronic Frontier Foundation, suspects that the reason the plaintiff’s lawyers are getting cold feet is because “this case is getting more expensive to litigate than they’d hoped.”

The Nude Nuns lawsuit, first reported by Threat Level, was among the largest of its type. But after our report, it emerged that Camelot’s claim to the film was in dispute. One of the company’s creditors, Incentive Capital of Utah, claims it has legal ownership over Nude Nuns, and in May it filed its own mass lawsuit against the same 5,865 IP addresses.

Joseph Pia, Incentive Capital’s attorney, said in a telephone interview Tuesday that Incentive has not decided whether it will continue pursuing its BitTorrent case now that Camelot has dropped its lawsuit. So far, the court has not allowed either party to issue subpoenas to internet services providers.

“We are exploring our options,” Pia said.

Incentive Capital claims it took ownership of the film in February after foreclosing on and assuming Camelot Distribution Group’s titles because of an allegedly soured loan. That was two weeks before Camelot filed the mass copyright lawsuit claiming it owned the rights.

For its part, Camelot claims the ownership switch was a “usurpation of its assets,” according to court documents.

The dispute centers on a $650,000 loan that Incentive provided to Camelot last year, which was used by Camelot to acquire the rights to Nude Nuns and other low-grade movies.

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