Tag: secondary liability

March 11, 2024 Copyright, DMCA

Print-on-demand platform avoids liability for illustrator’s copyright claims

Plaintiff illustrator (known for his works involving fish) sued defendant print-on-demand online platform operators for copyright infringement. Defendants’ platform enabled third parties to upload designs that could be printed on items such as t-shirts, mugs and tumblers. Plaintiff alleged that four of his works had been uploaded to the platform and had been printed on goods without plaintiff’s authorization.

Defendants moved to dismiss, arguing that defendants were neither directly nor secondarily liable for any alleged infringement. The magistrate judge submitted a report and recommendation that the matter be dismissed. Plaintiff objected to the magistrate judge’s report and recommendation. The district court overruled the objections and granted the motion to dismiss.

No liability for direct copyright infringement

The court examined the question of defendants’ alleged volitional conduct and its relation to a claim for direct liability for infringement. The magistrate judge had found that plaintiff failed to adequately allege that defendants had engaged in volitional conduct required to pin liability on defendants for infringements occasioned by defendants’ platform’s third party users. The court agreed that an allegation that defendants merely displayed plaintiff’s copyright-protected works did not plausibly suggest that defendants knew the work was protected by copyright. Moreover, plaintiff did not, for example, allege that defendants designed, manufactured or even selected the products on their website.

No liability for secondary copyright infringement

As for secondary liability for copyright infringement, plaintiff had objected to the magistrate judge’s determination of the question at the motion to dismiss stage. But the court rejected this objection to the magistrate judge’s report and recommendation. The court agreed with the magistrate judge’s determination that plaintiff failed to state a valid contributory infringement claim because he did not allege that defendants induced the third-party infringers; and he failed to state a valid secondary liability claim because he did not allege defendants “declined” to stop or limit third parties from infringing. It appears plaintiff sought to limit any application of these secondary liability elements to questions arising under the safe harbors of the Digital Millennium Copyright Act (“DMCA”). But the court found that plaintiff conflated the DMCA and general theories of copyright infringement liability.

Tomelleri v. Sunfrog, LLC, 2024 WL 940238 (E.D. Michigan, March 5, 2024)

See also:

February 21, 2024 Copyright

Fourth Circuit overturns massive jury verdict in copyright case against internet service provider

music infringement

Plaintiff copyright holders sued defendant internet service provider alleging both vicarious and contributory copyright infringement liability arising from defendant’s customers downloading or distributing songs using BitTorrent. The jury found defendant liable and awarded $1 billion in statutory damages. Defendant sought review with the Fourth Circuit. On appeal, the court affirmed the jury’s finding of willful contributory infringement but remanded the action for a new trial on damages because it found plaintiffs failed to prove vicarious liability, as defendant did not profit from its subscribers’ acts of infringement.

No vicarious liability

Citing to Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004), the court observed that “[a] defendant may be held vicariously liable for a third party’s copyright infringement if the defendant ‘[1] profits directly from the infringement and [2] has a right and ability to supervise the direct infringer.’” In this case, the court found that plaintiffs failed to prove that defendant profited directly from its subscribers’ copyright infringement.

The crux of the financial benefit inquiry was whether a causal relationship existed between the subscribers’ infringing activity and defendant’s financial benefit. To prove vicarious liability, plaintiff had to show that defendant profited from its subscribers’ infringing download and distribution of plaintiffs’ copyrighted songs. The court found that plaintiffs did not meet that burden.

The appellate court disagreed with the lower court’s determination that defendant’s repeated refusal to terminate infringing subscribers’ accounts was enough to show financial benefit for these purposes. Instead, the court found that continued payment of monthly fees for internet service, even by repeat infringers, was not a financial benefit flowing directly from the copyright infringement itself. “Indeed, Cox would receive the same monthly fees even if all of its subscribers stopped infringing.”

The court rejected plaintiffs’ alternative theories for financial benefit. Plaintiffs argued that the high volume of infringing activity on defendant’s network, with roughly 13% of traffic from peer-to-peer activity and over 99% of that being infringing, suggested that the ability to infringe attracted customers to defendant’s internet service. However, the evidence did not conclusively show that customers chose defendant’s service specifically for its potential to facilitate copyright infringement. The argument overlooked the fact that internet service is essential for many aspects of modern life, and there was no specific evidence that defendant’s internet service was selected over competitors due to a more lenient stance on copyright infringement.

Additionally, plaintiffs claimed that defendant’s subscribers were willing to pay more for internet services that allowed for copyright infringement, citing defendant’s tiered pricing and the correlation between peer-to-peer activity and higher data usage. However, there was no substantial evidence to support the claim that subscribers chose higher internet speeds with the intention of infringing copyright. Plaintiffs’ own expert acknowledged that increased data usage could be attributed to numerous legal activities like streaming and gaming. The argument failed to establish a direct link between the desire for higher internet speeds and the intent to infringe copyright, leaving plaintiffs’ assertion that defendant profited from copyright infringement unsubstantiated. Consequently, the court found no basis for vicarious liability on defendant’s part for its subscribers’ copyright infringements, making it necessary to overturn the lower court’s decision on this issue.

Contributory liability upheld

The court upheld the lower court’s determination that defendant was contributorily liable for its subscribers’ infringement, finding that defendant was aware of and materially contributed to the infringing activities. The court emphasized the need for defendant to have knowledge of specific instances of infringement and the substantial certainty of continued infringement by particular subscribers. Despite defendant’s tiered internet services and a variety of lawful uses, the evidence presented at trial demonstrated defendant’s knowledge of repeat infringements and its decision to continue providing service to infringing subscribers, primarily to avoid losing revenue. The court rejected defendant’s arguments against contributory liability, affirming that providing a service with knowledge of its use for infringement, especially when specific instances are known, constituted material contribution to infringement.

But what are the damages now?

Because the $1 billion damages award was not allocated between the two theories of liability, and the jury was instructed to consider various factors, including the profits defendant earned from the infringements, the court could be sure that the vicarious liability verdict did not impact the damages awarded. Given this uncertainty and the significant discretion granted to the jury in determining statutory damages, the court vacated the damages award and remanded for a new trial on the damages issue.

Sony Music Entertainment v. Cox Communications, Inc., 2024 WL 676432 (4th Cir., February 20, 2024)

See also:

October 25, 2023 Copyright, DMCA

No knowledge of infringement, no secondary copyright liability for YouTube

This case underscores that platforms like YouTube, when promptly addressing DMCA takedown notices, are not necessarily held liable for user-uploaded content that infringes copyright.

Plaintiff sued defendant YouTube accusing it of secondary copyright infringement liability — that YouTube was contributorily and vicariously liable for infringement concerning three videos that nonparty TV-Novosti (operator of various RT channels, including RT Arabic) posted on YouTube. These videos contained content from documentary videos plaintiff had created and for which it owned the copyright.

Defendant moved to dismiss the complaint. The lower court granted the motion to dismiss. Plaintiff filed a motion for leave to file an amended complaint, which the court denied. That court had determined that the proposed amendments would be futile. Plaintiff sought review with the Second Circuit, arguing it had sufficiently alleged YouTube’s liability under theories of contributory and vicarious liability. On appeal, the court affirmed the denial of the motion to amend.

The court rejected plaintiff’s argument that YouTube was liable for infringement by failing to delete TV-Novosti’s entire YouTube account. Plaintiff’s argument apparently went something like this: “We made YouTube aware of the infringement by sending a DMCA takedown notice. Though YouTube took down the videos (which it did not catch in its copyright-detection technology) once it found out about them, by continuing to provide the platform for this infringer, YouTube took on liability for the infringement.”

The court held that it agreed with the lower court’s denial of the motion for leave to amend. “[B]ecause YouTube promptly and permanently removed the [allegedly infringing videos] from its platform once it received the plaintiff’s DMCA notices, the Amended Complaint does not permit an inference that YouTube acted in concert with TV-Novosti.”

Business Casual Holdings, LLC v. YouTube, LLC, 2023 WL 6842449 (2d Cir., October 17, 2023)

See also: BitTorrent site liable for Grokster style inducement of copyright infringement

June 11, 2022 Copyright

Company president may be liable for vicarious copyright infringement

vicarious liability copyright

Plaintiff sued a company and its president for copyright infringement, over some photos that the company published online. The individual defendant moved to dismiss the claim against him, arguing that the complaint (1) did not plead any facts concerning action that he took, (2) did not try to pierce the company’s corporate veil, and (3) contained no facts to establish that the company is the alter ego of the individual defendant. Plaintiff conceded it was neither pursuing an alter-ego theory nor seeking to pierce the corporate veil. Instead, plaintiff argued that the individual defendant was vicariously liable for the company’s infringement. The court denied the motion to dismiss.

The court looked first to Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), which provides that one infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. But then it cited to later Tenth Circuit cases (e.g., Diversey v. Schmidly, 738 F.3d 1196 (10th Cir. 2013)) which state the test for vicarious liability a bit differently. Under  Diversey, “[v]icarious liability attaches when the defendant ‘has the right and ability to supervise the infringing activity’ and ‘has a direct financial interest in such activities.” There is no mention of declining to exercise the right to stop or limit the infringement under this test, as there is in Grokster.

The court found that the plaintiff’s claims for vicarious liability against the individual defendant survive because the complaint alleged that defendant was the owner and president of the company, had the ability to supervise and control content on the website, and received a financial benefit from the operation of the website. It rejected the individual defendant’s argument that the claim should fail because there were no allegations that he declined to exercise the right to stop or limit the infringement.

Great Bowery v. Best Little Sites, 2022 WL 2074253 (D. Utah June 9, 2022)

See also:

July 16, 2019 Copyright

Photographer’s copyright claim against officer of company over photos on website moves forward

Plaintiff, a professional photographer, sued defendant company and an individual who was its “registered agent and … officer, director, manager, and/or other genre of principal” for copyright infringement over two photographs that appeared on the defendant company’s website. The infringement claims against the individual defendant included one for vicarious infringement.

The individual defendant moved to dismiss the vicarious infringement claim. The court denied the motion.

One “infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). “In order to establish vicarious liability, a copyright owner must demonstrate that the entity to be held so liable: (1) possessed the right and ability to supervise the infringing activity; and (2) possessed an obvious and direct financial interest in the exploited copyrighted materials.” Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505, 513 (4th Cir. 2002).

In this case, plaintiff alleged that the individual defendant controlled nearly all decisions of the company and was the dominant influence in the company. In addition, plaintiff alleged that the individual defendant “had the right and ability to supervise and/or control the infringing conduct of the company, and/or stop the infringements once they began.” Finally, plaintiff alleged that the individual defendant had an obvious and direct financial interest in the infringing activities of the company since he was an officer, director, manager or other principal of/for the company. As a principal of the company, the individual defendant’s financial interests were intertwined with the company’s. Therefore, the individual defendant had a direct and obvious financial interest in the company.

So the court concluded that plaintiff had presented sufficient facts with regard to each element of the vicarious liability claim.

Oppenheimer v. Morgan, 2019 WL 2617080 (W.D.N.C., June 26, 2019)

January 31, 2014 Copyright

No copyright liability against founder of competing company for overseeing development of infringing website

oversightAfter defendant left plaintiff’s employment to co-found a competing company, plaintiff sued defendant personally for copyright infringement based on the new company’s website’s resemblance to plaintiff’s website. The infringement theory was interesting – plaintiff alleged that defendant did not commit the infringement himself, but that he was secondarily liable for playing a significant role in the direct infringement by the new company’s employees.

Defendant moved to dismiss the copyright infringement claim. The court granted the motion.

There are two types of secondary copyright infringement liability: contributory liability and vicarious liability. A defendant is a contributory infringer if it (1) has knowledge of a third party’s infringing activity, and (2) induces, causes, or materially contributes to the infringing conduct. See Perfect 10, Inc. v. Visa Int’l Service Ass’n, 494 F.3d 788, 795 (9th Cir.2007) (quoting Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004)). In the context of copyright law, vicarious liability extends beyond an employer/employee relationship to cases in which a defendant has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir.2011) (quoting Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir.1996)).

In this case, the court held that plaintiff had not alleged enough detail to state a claim of secondary liability against defendant. Instead, the complaint simply recited the elements of contributory and vicarious liability. Specifically, plaintiffs failed to allege:

  • That defendant was uniquely in possession of the original material on plaintiff’s website, but rather plaintiffs alleged that the material was publically available on the website for anyone to read and copy.
  • How defendant, as a non-employee (but founder) of the new company, was personally responsible for the content of the new company’s website. (Interestingly, the court held it was not sufficient to allege that defendant was a founder of the new company. Although plaintiffs alleged some factual details about what was actually copied from plaintiff’s website, they alleged no factual details as to defendant’s personal involvement in the infringement.)
  • Facts that suggested that defendant induced the new company to infringe plaintiff’s website.
  • Facts that suggested that defendant had the right to control and supervise the new company’s employees who were involved in the alleged infringement.

Plaintiff’s attempts to impose secondary liability were (if they had worked) a clever method for accomplishing the same objective as piercing the corporate veil. Granular control by the individual founder could be equated with the “alter ego” aspect of the veil-piercing analysis. The absence of such specific control by the individual defendant, however, left the possibility of liability only with the company.

BioD, LLC v. Amnio Technology, LLC, 2014 WL 268644 (D.Ariz. January 24, 2014)

October 30, 2012 Copyright, DMCA

Court rules against Ripoff Report in copyright case

Xcentric Ventures, LLC v. Mediolex Ltd., 2012 WL 5269403 (D.Ariz. October 24, 2012)

Plaintiff Xcentric Ventures provides the infamous Ripoff Report, a website where consumers can go to defame complain about businesses they have dealt with. Defendant ComplaintsBoard.com is a similar kind of website.

Ripoff Report’s Terms of Service provide that users grant Ripoff Report an exclusive license in the content they post to the site. Based on this right, Xcentric sued various defendants associated with ComplaintsBoard for “encourag[ing] and permit[ing] consumers to post content that has been exclusively licensed to Xcentric.”

Defendants moved to dismiss the copyright infringement claim, asserting they were protected by the safe harbor provision of the Digital Millennium Copyright Act (“DMCA”). The court granted the motion to dismiss, but not because of the DMCA.

DMCA Analysis

The safe harbor provision of the DMCA states that a “service provider shall not be liable for monetary relief” if all of the following requirements are met:

(1) it does not have actual knowledge that the material on its network is infringing;

(2) it is not aware of facts or circumstances that would make the infringing activity apparent;and

(3) upon obtaining knowledge or awareness of such infringing activity, it acts expeditiously to remove or disable access to the copyrighted material.

In this case, Xcentric alleged that defendants actively “encouraged and permitted” copyright infringement by ComplaintsBoard users. The court held that this allegation, if taken as true, could be sufficient to preclude defendants from taking advantage of the DMCA’s safe harbor provisions.

But the court went on to hold that Xcentric had failed to state a copyright claim on which relief may be granted.

Secondary Liability Insufficiently Pled

Xcentric did not allege that defendants directly infringed copyright. Instead, it alleged that by encouraging and permitting users to copy and republish material, ComplaintsBoard was engaged in secondary infringement — either vicarious or contributory infringement.

To state a claim for contributory copyright infringement, Xcentric had to plead that ComplaintsBoard had knowledge of the infringing activity and induced, caused, or materially contributed to the infringing conduct of its users. The court found that Xcentric had not alleged any facts that would lead to a reasonable inference that defendants knew of their users’ republishing Xcentric’s copyrighted content or that defendants had induced, caused, or materially contributed to such republication.

To successfully plead vicarious infringement, Xcentric had to show that defendants had the right and ability to supervise the infringing activity and also had a direct financial interest in those activities. The court found that Xcentric had not put forward enought facts to show that defendants had the right and ability to supervise the infringing activity.

August 5, 2010 Defamation, Section 230

Communications Decency Act immunizes hosting provider from defamation liability

Johnson v. Arden, — F.3d —, 2010 WL 3023660 (8th Cir. August 4, 2010)

The Johnsons sell exotic cats. They filed a defamation lawsuit after discovering that some other cat-fanciers said mean things about them on Complaintsboard.com. Among the defendants was the company that hosted Complaintsboard.com – InMotion Hosting.

Sassy is my parents' cat. She hisses whenever I'm around, though they say she's a nice cat otherwise.

The district court dismissed the case against the hosting company, finding that the Communications Decency Act at 47 U.S.C. §230 (“Section 230”) immunized the hosting provider from liability. The Johnsons sought review with the Eighth Circuit Court of Appeals. On appeal, the court affirmed the dismissal.

Though Section 230 immunity has been around since 1996, this was the first time the Eighth Circuit had been presented with the question.

Section 230 provides, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” It also says that “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.”

The Johnsons argued that Section 230 did not immunize the hosting company. Instead, they argued, it did just what it says – provides that a party in the position of the hosting company should not be treated as a publisher or speaker of information provided by third parties. The Johnsons argued that the host should be liable in this case regardless of Section 230, because under Missouri law, defendants can be jointly liable when they commit a wrong by concert of action and with common intent and purpose.

The court rejected the Johnsons’ argument, holding that Section 230 bars plaintiffs from making providers legally responsible for information that third parties created and developed. Adopting the Fourth Circuit’s holding in Nemet Chevrolet v. Consumeraffiars.com, the court held that “Congress thus established a general rule that providers of interactive computer services are liable only for speech that is properly attributable to them.”

No evidence in the record showed how the offending posts could be attributed to the hosting provider. It was undisputed that the host did not originate the material that the Johnsons deemed damaging.

Given this failure to show the content originated with the provider, the court found in favor of robust immunity, joining with the majority of other federal circuits that have addressed intermediary liability in the context of Section 230.

June 23, 2010 Copyright, DMCA

YouTube victorious in copyright case brought by Viacom

District court grants summary judgment, finding YouTube protected by DMCA safe harbor.

Viacom v. YouTube, No. 07-2103, (S.D.N.Y. June 23, 2010)

The question of whether and to what extent a website operator should be liable for the copyright infringement occasioned by the content uploaded by the site’s users is one of the central problems of internet law. In talks I’ve given on this topic of “secondary liability,” I’ve often referred it simply as “the YouTube problem”: should YouTube be liable for the infringing content people upload, especially when it knows that there is infringing material.

Charlie Bit My Finger - Harry and his little b...
Image via Wikipedia

Today was a big day in the history of that problem. The district court granted summary judgment in favor of YouTube in the notorious billion dollar copyright lawsuit brought against YouTube by Viacom way back in 2007.

The court held that the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”) (at 17 USC 512) protected YouTube from Viacom’s direct and secondary copyright claims.

Simply stated, the DMCA protects online service providers from liability for copyright infringement arising from content uploaded by end users if a number of conditions are met. Among those conditions are that the service provider “not have actual knowledge that the material or an activity using the material on the system or network is infringing,” or in the absence of such actual knowledge, “is not aware of facts or circumstances from which infringing activity is apparent.”

The major issue in the case was whether YouTube met these conditions of “non-knowledge” (that’s my term, not the court’s) so that it could be in the DMCA safe harbor. Viacom argued that the infringement was so pervasive on YouTube that the site should have been aware of the infringement and thus not in the safe harbor. YouTube of course argued otherwise.

The court sided with YouTube :

Mere knowledge of prevalence of such activity in general is not enough. . . . To let knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation of the DMCA.

Given the magnitude of the case, there’s little doubt this isn’t the end of the story — we’ll almost certainly see the case appealed to the Second Circuit Court of Appeals. Stay tuned.

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January 14, 2010 Copyright

BitTorrent site liable for Grokster style inducement of copyright infringement

Columbia Pictures v. Fung, No. 06-5578 (C.D. Cal. December 21, 2009).

This case came out three weeks ago, but it’s pretty significant and hasn’t gotten the coverage and analysis it deserves. Of course Professor Goldman covered it in a timely manner. But his blogging agility surpasses that of us mere mortals.

Fung and his company Isohunt Web Technolgies ran a number of popular BitTorrent sites where users could find and share torrent files that permitted the downloading of video files. [Here’s how BitTorrent works.] Several Hollywood studios sued Fung and his company for copyright infringement over the operation of the sites and the activites of the sites’ users.

Ostriches don't actually put their head in the sand

The plaintiffs moved for summary judgment on the copyright claims. The court granted the motion.

The court based its ruling on a theory of “secondary liability” — that is, Fung and his company were liable for the copyright infringement (i.e., the distribution of copyrighted movies and TV shows) committed by users of the sites. More specifically, the court held that the defendants induced copyright infringement, citing to the 2005 U.S. Supreme Court decision in MGM v. Grokster.

The defendants’ inducement of copyright infringement

Under Grokster, “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”

In this case, the court found numerous ways that the defendants had induced copyright infringement. Among the defendants’ activities that gave rise to secondary liability were:

  • Providing categories on the sites to assist users in locating and downloading currently-popular movies, and making express statements to third parties to encourage copyright infringement
  • Providing technical support to users who desired to download and view copyrighted materials.
  • Implementing technical features (such as crawling The Pirate Bay) to locate copyrighted material
  • Relying on an advertising based business model that benefitted from high volume traffic drawn by the availability of infringing material

Rejection of the defendants’ DMCA affirmative defense

The court rejected the defendants’ argument that the safe harbors of the Digital Millennium Copyright Act (DMCA) should shield the torrent sites form liability.

A service provider can sail its ship into a DMCA safe harbor if, among other things, it does not have actual knowledge of, or is not willfully blind to, infringing activities being undertaken through its system. Said another way, the limitation of liability afforded by the DMCA is lost if the provider becomes aware of a “red flag” from which infringing activity is apparent.

The court found that the defendants did not qualify for safe harbor protection because of the “overwhelming” evidence that the defendants knew of the infringing activity. The court borrowed from the Aimster case to state that the defendants would not have known of the infringement only if they engaged in an “ostrich-like refusal” to observe what was happening. That willful blindess would not serve as an excuse.

Ostrich photo courtesy of Flickr user Pedronet under this Creative Commons license.

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