Copyright and Technology 2011: Hillel Parness Presentation

Liability and Immunity in the Face of Technological Limitations Hillel I. Parness hiparness@rkmc.com Copyright & Technology 2011 Conference November 30, 2011rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Shapiro, Bernstein and Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir.1963) • “Green has the power to police carefully the conduct of its concessionaire Jalen; our judgment will simply encourage it to do so, thus placing responsibility where it can and should be effectively exercised. Green’s burden will not be unlike that quite commonly imposed upon publishers, printers, and vendors of copyrighted materials….in many cases, the party found strictly liable is in a position to police the conduct of the ‘primary’ infringer.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Shapiro, Bernstein and Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir.1963) • “Even if a fairly constant system of surveillance is thought too burdensome, Green is in the position to safeguard itself in a less arduous manner against liability resulting from the conduct of its concessionaires. It has in fact done so, by incorporating a save-harmless provision in its licensing agreements with Jalen….Surely the beneficent purposes of the copyright law would be advanced by placing the jeopardy of Jalen’s insolvency upon Green rather than upon the proprietor of the copyright.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) • “In such cases, as in other situations in which the imposition of vicarious liability is manifestly just, the ‘contributory’ infringer was in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner. This case, however, plainly does not fall in that category. The only contact between Sony and the users of the Betamax that is disclosed by this record occurred at the moment of sale.” • “If vicarious liability is to be imposed on petitioners in this case, it must rest on the fact that they have sold equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorized copies of copyrighted material.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Cubby, Inc. v. Compuserve, Inc., 776 F. Supp. 135 (S.D.N.Y. 1991) • “CompuServe has no opportunity to review Rumorville’s contents before DFA uploads it into CompuServe’s computer banks, from which it is immediately available to approved CIS subscribers.” • “CompuServe has no more editorial control over such a publication than does a public library, book store, or newsstand, and it would be no more feasible for CompuServe to examine every publication it carries for potentially defamatory statements than it would be for any other distributor to do so.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Stratton-Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710 (N.Y. Sup. 1995) • “Let it be clear that this Court is in full agreement with Cubby and Auvil. Computer bulletin boards should generally be regarded in the same context as bookstores, libraries and network affiliates. It is PRODIGY’s own policies, technology and staffing decisions which have altered the scenario and mandated the finding that it is a publisher.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure (Sept. 1995) • “It is estimated by some that trillions of bits representing millions of messages and files travel through networks each day. Of course, only a percentage of those appear on any given service provider’s system. Nevertheless, it is still virtually impossible for operators of large systems to contemporaneously review every message transmitted or file uploaded. On-line service providers are not alone in this position. Millions of photographs are taken to photo finishers each day by individual consumers. It is virtually impossible for these service providers to view any of those works before they are reproduced from the undeveloped film. Yet, they operate under strict liability standards. Likewise, book sellers, record stores, newsstands and computer software retailers cannot possibly read all the books, listen to all the records, review all the newspapers and magazines or analyze all the computer programs that pass through their establishments for possible infringements. Yet, they may be held strictly liable as distributors if the works or copies they deal in are infringing.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Zeran v. America Online, Inc., 129 F.3d 327 (4th Cir.1997) • “‘The Internet is an international network of interconnected computers,’ currently used by approximately 40 million people worldwide.” • “Zeran seeks to hold AOL liable for defamatory speech initiated by a third party. He argued to the district court that once he notified AOL of the unidentified third party’s hoax, AOL had a duty to remove the defamatory posting promptly, to notify its subscribers of the message’s false nature, and to effectively screen future defamatory material.” • “The amount of information communicated via interactive computer services is therefore staggering….It would be impossible for service providers to screen each of their millions of postings for possible problems. Faced with potential liability for each message republished by their services, interactive computer service providers might choose to severely restrict the number and type of messages posted. Congress considered the weight of the speech interests implicated and chose to immunize service providers to avoid any such restrictive effect.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Barrett v. Rosenthal, 40 Cal.4th 33 (Cal. Sup. Ct. 2006) • “We share the concerns of those who have expressed reservations about the Zeran court’s broad interpretation of section 230 immunity. The prospect of blanket immunity for those who intentionally redistribute defamatory statements on the Internet has disturbing implications. Nevertheless, by its terms section 230 exempts Internet intermediaries from defamation liability for republication. The statutory immunity serves to protect online freedom of expression and to encourage self-regulation, as Congress intended. Section 230 has been interpreted literally. It does not permit Internet service providers or users to be sued as ‘distributors,’ nor does it expose ‘active users’ to liability.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Religious Technology Ctr. v. Netcom On-Line Communic. Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995) • “The court is not persuaded by plaintiffs’ argument that Netcom is directly liable for the copies that are made and stored on its computer. Where the infringing subscriber is clearly directly liable for the same act, it does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet.” • “The court does not find workable a theory of infringement that would hold the entire Internet liable for activities that cannot reasonably be deterred. Billions of bits of data flow through the Internet and are necessarily stored on servers throughout the network and it is thus practically impossible to screen out infringing bits from noninfringing bits.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Fonovisa v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996) • “This analogy to absentee landlord is not in accord with the facts as alleged in the district court and which we, for purposes of appeal, must accept. The allegations below were that vendors occupied small booths within premises that Cherry Auction controlled and patrolled. According to the complaint, Cherry Auction had the right to terminate vendors for any reason whatsoever and through that right had the ability to control the activities of vendors on the premises. In addition, Cherry Auction promoted the swap meet and controlled the access of customers to the swap meet area. In terms of control, the allegations before us are strikingly similar to those in Shapiro and Gershwin.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Academy of Motion Picture Arts and Sciences v. Network Solutions, Inc., 989 F.Supp.1276 (C.D. Cal. 1997) • “The hardship to Network Solutions of implementing a massive pre-screening process would drastically change the nature of their business. Network Solutions’ evidence leads the Court to believe that such a change in the process would likely drive the cost of registration up and slow the process down.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949 (C.D. Cal. 1997) • “The flea market operators directly controlled and monitored their premises. NSI neither controls nor monitors the Internet. A domain name, once registered, can be used in connection with thousands of pages of constantly changing information. While the landlord of a flea market might reasonably be expected to monitor the merchandise sold on his premises, NSI cannot reasonably be expected to monitor the Internet.” • “Nor can NSI be compared to the flea market operators who provide space, parking, food service and advertising to vendors selling infringing merchandise.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) • “The district court, however, failed to recognize that the boundaries of the premises that Napster ‘controls and patrols’ are limited….Put differently, Napster’s reserved ‘right and ability’ to police is cabined by the system’s current architecture. As shown by the record, the Napster system does not ‘read’ the content of indexed files, other than to check that they are in the proper MP3 format. Napster, however, has the ability to locate infringing material listed on its search indices, and the right to terminate users’ access to the system. The file name indices, therefore, are within the ‘premises’ that Napster has the ability to police.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

In re Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003) • “Our point is only that a service provider that would otherwise be a contributory infringer does not obtain immunity by using encryption to shield itself from actual knowledge of the unlawful purposes for which the service is being used.” • “Aimster hampered its search for evidence by providing encryption. It must take responsibility for that self-inflicted wound.” • “[Vicarious liability] could conceivably have been applied in the Sony case itself, on the theory that while it was infeasible for the producers of copyrighted television fare to sue the viewers who used the fast-forward button on Sony’s video recorder to delete the commercials and thus reduce the copyright holders’ income, Sony could have reduced the likelihood of infringement, as we noted earlier, by a design change.…By eliminating the encryption feature and monitoring the use being made of its system, Aimster could like Sony have limited the amount of infringement.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F.Supp.2d 1029 (C.D. Cal. 2003) • “However, Defendants correctly point out that in order to be liable under a theory of contributory infringement, they must have actual knowledge of infringement at a time when they can use that knowledge to stop the particular infringement. In other words, Plaintiffs notices of infringing conduct are irrelevant if they arrive when Defendants do nothing to facilitate, and cannot do anything to stop, the alleged infringement.” • “While the parties dispute what Defendants feasibly could do to alter their software, here, unlike in Napster, there is no admissible evidence before the Court indicating that Defendants have the ability to supervise and control the infringing conduct (all of which occurs after the product has passed to endusers). The doctrine of vicarious infringement does not contemplate liability based upon the fact that a product could be made such that it is less susceptible to unlawful use, where no control over the user of the product exists.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F.Supp.2d 1029 (C.D. Cal. 2003) • “The Court is not blind to the possibility that Defendants may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefitting financially from the illicit draw of their wares. While the Court need not decide whether steps could be taken to reduce the susceptibility of such software to unlawful use, assuming such steps could be taken, additional legislative guidance may be well-counseled.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 380 F.3d 1154 (9th Cir. 2004) • “In the context of this case, the software design is of great import.” • “Indeed, at present, neither StreamCast nor Grokster maintains control over index files. As the district court observed, even if the Software Distributors ‘closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption.’”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 125 S.Ct. 2764 (2005) • “Second, this evidence of unlawful objective is given added significance by MGM’s showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants’ failure to develop such tools as irrelevant because they lacked an independent duty to monitor their users’activity, we think this evidence underscores Grokster’s and StreamCast’s intentional facilitation of their users’ infringement.” • “FN: Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

UMG Recordings, Inc. v. Veoh Networks Inc., 665 F. Supp. 2d 1099 (C.D. Cal. 2009) • “UMG contends that Veoh had knowledge of infringing material that it did not act expeditiously to remove. But Veoh has shown that when it did acquire knowledge of allegedly infringing material – whether from DMCA notices, informal notices, or other means – it expeditiously removed such material, and UMG has failed to rebut that showing.” • “Perfect 10 contended that CCBill was aware of several ‘red flags,’ including that it provided services to websites with such ‘come hither’ names as ‘illegal.net’ and ‘stolencelebritypictures.com.’….CCBill teaches that if investigation of ‘facts and circumstances’ is required to identify material as infringing, then those facts and circumstances are not ‘red flags.’” • “In light of the principles articulated in CCBill that the burden is on the copyright holder to provide notice of allegedly infringing material, and that it takes willful ignorance of readily apparent infringement to find a ‘red flag,’ Veoh has provided substantial evidence that it fulfilled the requirements of section 512(c)(1)(A). UMG has provided no material evidence to the contrary.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Viacom Int’l Inc. v. YouTube, Inc., 95 U.S.P.Q.2D 1766 (S.D.N.Y. 2010) • “That observation [by the UMG v. Veoh court] captures the reason why awareness of pervasive copyright-infringing, however flagrant and blatant, does not impose liability on the service provider. It furnishes at most a statistical estimate of the chance any particular posting is infringing – and that is not a ‘red flag’ marking any particular work.” • “Plaintiffs complain that YouTube removes only the specific clips identified in DMCA notices, and not other clips which infringe the same works. They point to the provision in § 512(c)(3)(A)(ii) that a notification must include ‘Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.’ This ‘representative list’ reference would eviscerate the required specificity of notice [] if it were construed to mean a merely generic description (‘all works by Gershwin’) without also giving the works’ locations at the site, and would put the provider to the factual search forbidden by § 512(m).”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Capitol Records v. MP3tunes, 2011 U.S. Dist. LEXIS 93351 (S.D.N.Y. 2011) • “Undoubtedly, MP3tunes is aware that some level of infringement occurs. But, there is no genuine dispute that MP3tunes did not have specific ‘red flag’ knowledge with respect to any particular link on Sideload.com, other than the URLs noticed by EMGNA and EEW.” • “As to the issue of control, EMI contends that MP3tunes can prevent the infringing activity of its users and has physical possession of its systems and servers. Specifically, MP3tunes can monitor songs downloaded by users and the third-party sites listed on Sideload.com and remove those songs and sites at will. However, ‘control of infringing activity’ under the DMCA requires something more than the ability to remove or block access to materials posted on a service provider’s website.” • “At worst, MP3tunes set up a fully automated system where users can choose to download infringing content. If enabling a party to download infringing material was sufficient to create liability, then even search engines like Google or Yahoo! would be without DMCA protection. In that case, the DMCA’s purpose –innovation and growth of internet services – would be undermined.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124 (S.D.N.Y. 2009) • “[I]f Defendants were aware of such red flags, or worse yet, if they encouraged or fostered such infringement, they would be ineligible for the DMCA’s safe harbor provisions…. Defendants’ bad faith spoliation of documents and other evasive discovery tactics have prevented Plaintiffs from ascertaining the extent to which they have been prejudiced with respect to their own claims or their arguments in opposition to Defendants affirmative defense. [T]he appropriate sanction in this case is to preclude Defendants from asserting their affirmative defense of protection under the DMCA’s safe harbor provision.” • “[W]hile Defendants had in place various tools and mechanisms that could be used to block access to infringing articles or newsgroups, Defendants never used them to limit copyright infringement on its servers…. Defendants had developed such tools, but declined to use them when to do so would have harmed their business model and customer base…. Defendants’ failure to exercise their clear ability to filter and limit infringement under such circumstances is strong circumstantial evidence of their intent to foster copyright infringement by their users.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Tiffany Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010) • “eBay, Inc., through its eponymous online marketplace, has revolutionized the online sale of goods....” • “eBay has been enormously successful. More than six million new listings are posted on its site daily. At any given time it contains some 100 million listings.” • “To impose [direct] liability because eBay cannot guarantee the genuineness of all of the purported Tiffany products offered on its website would unduly inhibit the lawful resale of genuine Tiffany goods.” • “Tiffany’s reliance on the ‘flea market’ cases, Hard Rock Café and Fonovisa, is unavailing. eBay’s efforts to combat counterfeiting far exceeded the efforts made by the defendants in those cases.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

Viacom Int’l Inc. v. YouTube, Inc., 95 U.S.P.Q.2D 1766 (S.D.N.Y. 2010) • “Tiffany alleged that eBay knew, or had reason to know, that counterfeit Tiffany goods were being sold ‘ubiquitously’ on eBay, and the District Court had found that eBay indeed ‘had generalized notice that some portion of the Tiffany goods sold on its website might be counterfeit’. Nevertheless, the District Court dismissed, holding that such generalized knowledge was insufficient to impose upon eBay an affirmative duty to remedy the problem…. Although by a different technique, the DMCA applies the same principle, and its establishment of a safe harbor is clear and practical: if a service provider knows (from notice from the owner, or a ‘red flag’) of specific instances of infringement, the provider must promptly remove the infringing material. If not, the burden is on the owner to identify the infringement. General knowledge that infringement is ‘ubiquitous’ does not impose a duty on the service provider to monitor or search its service for infringements.”rkmc.com © 2011 Robins, Kaplan, Miller & Ciresi L.L.P.

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