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IP/Entertainment Case Law Updates

Columbia Pictures Industries, Inc. v. Fung

Ninth Circuit affirms in part and vacates in part grant of summary judgment in favor of motion picture studios, finding defendants liable for contributory copyright infringement where their use of peer-to-peer file-sharing protocol BitTorrent induced third parties to download infringing copies of the studios’ copyright works.

Plaintiffs, motion picture studios, filed suit against the defendants, Gary Fung and his company, isoHunt Web Technologies, Inc., alleging that the services offered and websites maintained by the defendants induced third parties to download infringing copies of plaintiffs’ copyrighted works. Defendants’ websites use the BitTorrent peer-to-peer file-sharing protocol to collect and organize content files and, while not itself containing any copyrighted content, permits users to find and download such content from other users’ computers. In addition, each time a torrent file (a file containing information regarding a specific piece of content) is added to isoHunt, Fung’s flagship site, the site automatically modifies the torrent file by adding additional backup trackers to it, rendering the torrent files more reliable and better able to find the specific content than when they are uploaded to the site. Defendants also host an electronic message board, or forum, where users can post comments, queries, and other content, and on which Fung posted comments and also moderated. The district court granted plaintiffs’ motion for summary judgment, finding defendants liable for contributory copyright infringement for inducing others to infringe plaintiffs’ copyrights in their movies. The court rejected defendants’ argument that they were entitled to protection under the Digital Millennium Copyright Act’s safe harbor provisions and granted plaintiffs’ request for a permanent injunction. On appeal, the Ninth Circuit affirmed, holding that the defendants were liable for contributory copyright infringement on an inducement theory and that defendants were not entitled to safe harbor protection under the DMCA. The court also reversed and modified the district court’s award of a permanent injunction, holding that certain provisions of the injunction were too vague and unduly burdensome.

Citing to the standards set by the U.S. Supreme Court in its 2005 decision in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., the Ninth Circuit instructed that a defendant is liable for acts of infringement by third parties if the defendant 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. As enunciated in Grokster, a claim for contributory infringement under the inducement theory has four elements: (1) the distribution of a device or product, (2) acts of infringement, (3) an object of promoting its use to infringe copyright, and (4) causation.

The court held that plaintiffs had carried their burden with respect to each element of their claim for contributory infringement. With respect to the first element, Fung argued that because he did not develop or distribute any device—that is, the software or technology used for downloading—he is not liable under the inducement rule enunciated in Grokster. Although the court acknowledged that the defendant did not develop and does not provide the client programs used to download media products, the court noted that Grokster applies to services as well as devices. Whether the service makes copies using machines of its own manufacture, machines it owns, or machines in someone else’s shop would not matter because copyright liability depends on one’s purposeful involvement in the process of reproducing copyrighted material, not the precise nature of that involvement.

Next, the court concluded that plaintiffs established the second element—acts of infringement—because they adduced evidence of actual infringement by users of Fung’s services. Both uploading and downloading copyrighted material, stated the court, are infringing acts. Based on statistical sampling, the plaintiffs’ expert averred that between 90 percent and 96 percent of the content associated with the torrent files available on Fung’s websites are for material that is either confirmed or highly likely to be infringing material.

The third element, which the court noted was usually dispositive, requires that the device or service be distributed with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps to foster infringement. Using the evidentiary categories applied in Grokster, the court concluded that there was more than enough unrebutted evidence in the summary judgment record to prove that Fung offered his services with the object of promoting their use to infringe copyrighted material. First, the court found that Fung actively encouraged the uploading of torrent files concerning copyrighted content by, among other things, prominently featuring a list of the highest-grossing “Box Office Movies” on his website. When a user clicked on a listed title, she would be invited to upload a torrent file for that movie. In other words, explained the court, she would be asked to upload a file that, once downloaded by other users, would lead directly to their obtaining infringing content. The court further noted that Fung posed numerous messages to his isoHunt website requesting that users upload torrents for specific copyrighted films. Second, the court found that Fung communicated a clear message by responding affirmatively to requests for help in locating and playing copyrighted materials. While the court cautioned that certain corroborative evidence would not be independently sufficient to establish the third element, it stated that Fung’s failure to develop filtering tools and other mechanisms to diminish the infringing activity, coupled with his generation of revenue from selling advertising space on his websites, further supported the conclusion that Fung acted with a purpose to cause copyright violations.

With respect to the causation element, both parties advanced competing interpretations. Fung argued that the acts of infringement must be caused by the manifestations of the distributor’s improper object, i.e., the inducing messages themselves. Plaintiffs, advancing a more lax causation requirement, maintained that they need only prove that the acts of infringement by third parties were caused by the product distributed or services provided. The court adopted the plaintiffs’ interpretation, but mindful of the potentially enormous reach of liability in the digital age, emphasized three points of caution. First, mere knowledge of infringing potential or of actual infringing uses does not subject a product distributor or service provider to liability. Second, when dealing with corporate or entity defendants, the relevant intent must be that of the entity itself, not on stray or unauthorized statements that cannot fairly be imputed to the entity. And third, proving that an entity had an unlawful purpose at a particular time in providing a product or service does not infinitely expand its liability in either temporal direction.

Turning to the defendants’ affirmative defenses under sections 512(a), (c), and (d) of the DMCA, the court found that Fung did not meet his burden of establishing these defenses. As an initial matter, the Ninth Circuit rejected the district court’s holding that inducement liability is inherently incompatible with protection under the DMCA safe harbors. The DMCA does not, instructed the court, exempt from protection any mode of copyright liability, including liability under the doctrine of inducement. Moreover, the court noted that the DMCA’s legislative history confirms that Congress intended to provide protection for at least some vicarious and contributory infringement. In addressing Fung’s affirmative defense under section 512(a), the Ninth Circuit noted that the district court should not have rejected this safe harbor on the ground that infringing materials do not pass through or reside on Fung’s system. The court explained that the statute contains no requirement that the communications must themselves be infringing. The court, nonetheless, concluded that Fung was not entitled to safe harbor under section 512(a) on other grounds. The court instructed that section 512(a) applies to service providers who act only as conduits for the transmission of information. Because Fung’s trackers select which users will communicate with each other, stated the court, they serve as more than “conduits” between computer users and are therefore not “service providers” for purposes of section 512(a). The court further held that defendants were not entitled to safe harbor under sections 512(c) and (d) because safe harbor under those provisions is available only if the service provider does not have actual knowledge that the material or an activity using material on the system or network is infringing. The court stated that Fung had “red flag” knowledge of a broad range of infringing activity. Moreover, instructed the court, a service provider loses protection under the safe harbor if two conditions are met: the provider receives a financial benefit directly attributable to the infringing activity, and (2) the service provider has the right and ability to control such activity. The court concluded that both conditions were met because defendants’ revenue stream is predicated on the broad availability of infringing materials for his users and they unquestionably had the ability to locate infringing material and terminate users’ access.

Finally, the court modified the district court’s grant of an injunction on the grounds that it was vague and unduly burdensome. First, the court noted that the injunction’s definition of a key phrase, “Infringement-Related Terms,” was too vague to provide the notice required by Rule 65(d). For example, the injunction prohibited Fung from including Infringement-Related Terms in metadata for any web pages. The definition of Infringement-Related Terms states that it includes “terms that are widely known to be associated with copyright infringement,” however, and the court concluded that no one reading the injunction could discern what that meant. Furthermore, stated the court, the injunction could be interpreted to prevent Fung from ever working for any technology company whose services others might use to infringe copyright, even if those other companies are not themselves liable for primary or secondary copyright infringement. Insofar as the injunction can be interpreted to prohibit Fung from seeking legitimate employment, stated the court, it is more burdensome than necessary to provide plaintiffs’ relief. Accordingly, the court held that the permanent injunction should be amended appropriately to limit the employment prohibition.

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