They can demand anything they want. You don't have to give into demands.

For instance, I demand you give me some money.

Not exactly, a contract must bind both parties to do something. You cant have a contract which states "you give me money and you dont say anything about it." It must also bond the other side: "and in return I will not sue you for piracy committed on the date of..."

A contract is a list of demands (amongst other things). It can't be enforced until you agree to the contract. Until then it's just a demand.

You missed chacham's point. You are right that both parties have to agree to make a contract. But on top of that it's not a contract unless both sides get something out of the deal. If you sign a piece of paper to exchange $10 for nothing, it's not a contract.

You always have the right to refuse though and have the courts sort it out, should they choose to pursue a case.

The idea being that for "normal" people, doing anything through the civil justice system is far too expensive and time consuming than just paying out up front.

So the choice is simply: Pay X up front and promise not to tell anyone, then be left alone OR Don't pay, attempt to fight it in court (using lawyers/solicitors/barristers) and absorbing the cost of this upfront yourself, regardless of the outcome.

New start up idea; propose the same deal to everyone that is likely to not fight in court.

That's not new, that is the tort law industry.

If you or I tried to do this, we'd be sued into oblivion for blackmail because that's what this is, blackmail. Pay us money and we won't tell on you. This world is messed up.

I believe that this is a side effect of the corporatist political system we find ourselves in.

http://en.wikipedia.org/wiki/Corporatism

Some interesting quotes on the subject - http://www.goodreads.com/quotes/tag/corporatism

There have been more egregious examples of this with regards to piracy of pornography.

A few of the accused tend to stand up (grandparents who don't even own a computer, etc.) but I bet most just pay up to avoid the embarrassment of being dragged through the courts accused of pirating some smut.

Courts are best as you can put in counter claims and with todays technlology we still don't have storage that ties up that data to a user that is as good as DNA and DNA is not perfect.

Counter sue, entrapment, backmail, bullying, cartell - just anything remotely tangable then chuck it at them back. There rules after all