On March 29, 2007, the Ninth Circuit issued its opinion in the case Perfect 10, Inc. v. CCBill LLC, et al. in which it attempted to clarify when immunity is available to internet service providers for copyright infringement under the Digital Millennium Copyright Act (“the DMCA”), 17 U.S.C §512. Perfect 10, the publisher of an adult magazine and a related subscription website, brought a lawsuit claiming that CCBill and CWIE violated copyright laws by providing services to other websites that posted images stolen from Perfect 10’s magazine and website. CWIE provides web hosting and related internet connectivity services to the owners of various websites. CCBill allows customers to use credit cards or checks to pay for subscriptions or memberships to various websites. The U.S. District Court granted summary judgment in favor of CCBill and CWIE as to the copyright claims finding that they qualified for the “safe harbor” provisions from copyright infringement liability under the DMCA.
The Ninth Circuit began by recognizing that the DMCA created specific “safe harbors” to “provide protection from liability for: (1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools.” While the safe harbor provisions limit liability, they “do not affect the question of ultimate liability under the various doctrines of direct, vicarious and contributory liability.” The Ninth Circuit recognized that to be eligible for any of the four safe harbor provisions, a service provider must first meet the threshold requirements set out in section 512(i). Specifically, a service provider such as CCBill or CWIE must have “adopted and reasonably implemented, and informed subscribers and account holders, of . . . a policy that provides for the termination in appropriate circumstances of subscribers and account holders . . . who are repeat infringers.” (17 U.S.C. § 512(i)(1)(A).)
The Ninth Circuit observed that the DMCA does not define “reasonably implemented,” but held that “a service provider ‘implements’ a policy if it has a working notification system, a procedure for dealing with DMCA – compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications.” While the DMCA allows a service provider to implement a variety of procedures, a policy implementation is reasonable if under “appropriate circumstances” the service provider “terminates users who repeatedly or blatantly infringe copyright.”
In turning its attention to these factors, the Ninth Circuit addressed Perfect 10’s claim that CCBill and CWIE prevented the implementation of their policies by failing to track webmasters who repeatedly infringed. The Ninth Circuit disagreed and found that CCBill/CWIE had implemented a policy of tracking repeated infringers. The Court recognized that CCBill and CWIE posted a “DMCA Log” which attempted to identify those webmasters who were repeat infringers. The DMCA Log, although having some gaps, indicated the email address and/or name of those webmasters who routinely infringed. Therefore, there was no triable issue of fact that CCBill and CWIE implemented a repeat infringer policy.
As to the issue of reasonableness, the Ninth Circuit recognized that “[a] service provider reasonably implements its repeat infringer policy if it terminates users when ‘appropriate’.” The Ninth Circuit again recognized that the DMCA does not define when it is “appropriate” for service providers to act. The Court emphasized, however, that service providers do not need to “affirmatively police its users for evidence of repeat infringement.” This is premised on the fact that the DMCA provides that a service provider is not liable for monetary relief “if it does not know of infringement.” The Court also observed that the DMCA provides that a service provider is not liable “if it acts ‘expeditiously to remove, or disable access to, the material’ when it (1) has actual knowledge, (2) is aware of facts or circumstances from which infringing activity is apparent, or (3) has received notification of claimed infringement meeting the requirements of § 512(c)(3).”
The Ninth Circuit found that Perfect 10’s claimed notice of infringement did not give rise to a triable issue of fact since it did not substantially comply with the notice requirements of section 512(c)(3). The Ninth Circuit ruled that compliance is not “substantial” if the notice complies with only some of the requirements of § 512(c)(3)(A). The Court held that the DMCA requires “substantial compliance with all of section 512(c)(3)’s clauses, not just some of them.” The Court rejected Perfect 10’s claims that it had substantially complied with 512(c)(3) since it claimed that its notices were provided in a “combination of three sets of documents.” The Ninth Circuit recognized that each of these communications contained more than mere technical errors, rather, one or more of the required elements were entirely absent from the notices. The Ninth Circuit recognized that substantial compliance with section 512(c)(3) is necessary because of the drastic consequences of accusations of alleged infringement: i.e., a user could have content removed or may have his access terminated entirely. Since Perfect 10 did not provide effective notice, the Ninth Circuit held that actual knowledge of infringement could not be imputed to CCBill/CWIE based on Perfect 10’s communications.
In granting summary judgment, the District Court had held that notices of infringement sent to CCBill and CWIE by other, non-party copyright holders were not relevant to the issue of Perfect 10’s claims of copyright infringement. However, the Ninth Circuit disagreed and ruled that CCBill/CWIE’s actions toward copyright holders who were not parties to the litigation was “relevant in determining whether they reasonably implemented their repeat infringer policy.” The Ninth Circuit recognized that a “policy is unreasonable only if the service provider fails to respond when it had knowledge of an infringement.” Thus, the Ninth Circuit held that the District Court on remand must consider whether CCBill and/or CWIE “implemented its repeat infringer policy in an unreasonable manner with respect to any copyright holder other than Perfect 10.”
Finally, the Ninth Circuit held that a service provider “may lose immunity if it fails to take action with regard to infringing material when it is ‘aware of facts or circumstances [“red flags”] from which infringing activity is apparent.’” Perfect 10 argued that CCBill/CWIE were aware of a number of “red flags” since it provided service to various websites such as illegal.net and stolencelebritypics.com. The Ninth Circuit rejected this argument, however, ruling that there was nothing in these titles to put CCBill/CWIE on notice of apparent infringing activity since these “titillating” titles “may be an attempt to increase their salacious appeal rather than an admission that the photographs are actually illegal or stolen.”
Perfect 10 also argued that CCBill was not entitled to immunity because it interfered with “standard technical measures” by blocking Perfect 10’s access to CCBill-affiliated websites in order to prevent Perfect 10 from discovering whether those websites infringed on Perfect 10’s copyrights. The Ninth Circuit remanded to the District Court to determine “whether access to a website is a ‘standard technical measure’ and if so whether CCBill interfered with [Perfect 10’s] access.”
CCBill argued that, because it provides a hyperlink so that a user may access a client website after it processes that user’s credit card, it fell under the “information location tools” safe harbor of section 512(d). The Ninth Circuit found that even if the hyperlink provided by CCBill could be viewed as “information location tool,” the majority of CCBill’s activities fall outside of the safe harbor. The Ninth Circuit recognized that section 512(b) provided immunity only for the infringement “by reason of the provider referring or linking users to an online location containing infringing material or infringing activity.”
The Ninth Circuit’s opinion in Perfect 10 requires copyright holders to remain vigilant and observe strict compliance with the notice of infringement requirements in the DMCA. Otherwise, a service provider can claim that it did not have actual knowledge of the infringing activity because of the defective notice. A copyright holder then risk being thrown out of court for failing to comply with these notice requirements if a service provider can establish immunity under the “safe harbor” provisions of the DMCA.
James Kachmar is a Senior Associate in Weintraub Genshlea Chediak Tobin & Tobin’s litigation section. He represents corporate and individual clients in both state and federal courts and various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes. For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.