By: David Muradyan

In order to prevail on a claim for contributory copyright infringement, a plaintiff must show that a defendant had knowledge of or had reason to know about direct infringement by a third party and that it substantially contributing to the infringing activities. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 n.2, 1019 (9th Cir. 2001). “One who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.” Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996) (citation omitted).

In a very recent case, the Court held that there was no contributory copyright infringement because the defendant was not aware of its employees’ copyright infringement. In Hitek Software LLC v. Timios Inc., Case No. CV 12-709 CAS (C.D. Cal. June 18, 2012), Plaintiff Hitek Software LLC (“Plaintiff”), a software company who sells its copyrighted programs over the Internet, filed a complaint against defendants Timios, Inc. (“Timios”), Scott Chamberlain (“Chamberlain”) and Y. Sarumaru (“Sarumaru,” and together with Timios and Chamberlain, the “Defendants”), alleging claims for copyright infringement and contributory copyright infringement, among others. Chamberlain was a computer specialist who provided computer services to Timios as an independent contractor but who was later hired as an employee of Timios. Sarumaru was also a computer specialist and was an employee of Timios.

Plaintiff’s claims arose out of alleged unauthorized access, reproduction, adaptation, display, and usage of plaintiff’s copyrighted software called AbleFtp (“AbleFtp”), a program that Plaintiff typically offered for a limited trial period, after which time users may purchase a license to continue use of a particular program. In its complaint, Plaintiff alleged that Defendants illegally registered for the trial version of AbleFtp and that this registration used an illegally generated product key to unlock the software to unlimited use. Pursuant to a stipulation between the parties whereby Defendants agreed that there was evidence of copyright infringement, the Court issued a permanent injunction, enjoining the Defendants from operating the AbleFtp program. Plaintiff filed a motion for partial summary judgment as to Defendants’ liability.

With respect to plaintiff’s claim for contributory copyright infringement, Defendants argued that neither Timious nor Sarumaru were aware that Timios was using AbleFtp without authorization until they were informed by Plaintiff in Plaintiff’s letter. Defendants also argued that Chamberlain was an independent contractor when he brought to Timios the AbleFtp program he used at a previous employer, and that neither Timios nor Sarumaru played any material part in the unauthorized loading of AbleFtp onto Timios’ computer system and its subsequent use. As such, Defendants contended that a triable issue of fact exists with respect to Timio’s knowledge and participation such that Plaintiff is not entitled to summary judgment on its contributory copyright infringement claim. Plaintiff countered that Sarumaru—an employee of Timios at the time—“obviously knew” that Timios’ use of AbleFtb was unauthorized given that he was a highly qualified software expert, and also given the fact that he had worked at Chamberlain’s previous employer and must have known that AbleFtp required a license.

In analyzing Plaintiff’s claims, the Court found that a triable issue of material fact as to Defendants’ knowledge precluded summary judgment as to Plaintiff’s claim for contributory copyright infringement. In particular, the Court stated that when viewed in the light most favorable to Defendants—which is the proper standard for summary judgment—the evidence indicated that Timios and Sarumaru were not aware and had no reason to know that Chamberlain was using AbleFtp without authorization until they were so informed by Plaintiff’s letter. As such, since Timios and Sarumaru were indeed unaware of any unauthorized use of AbleFtp, they could not have “knowingly contribute[d] to the infringing conduct.” Fonovisa, Inc. v. Napster Inc., 2002 U.S. Dist. LEXIS 4270, at *12-13 (N.D. Cal. Jan. 28, 2002). The Court further analyzed that whether or not Sarumaru’s status as a “software expert” or his previous employment with the same firm as Chamberlain meant that he knew or had reason to know that Timios’ use of AbleFtp was unauthorized presented a question of fact, and could not be decided by the Court as a matter of law. Cf. Flava Works, Inc. v. Gunter, 2011 U.S. Dist. LEXIS 50067, at *11 (N.D. Ill. May 10, 2011) (no triable issue as to the knowledge element where a party was notified of specific infringing uses of its technology and failed to prevent future infringing uses). As a result, the Court denied Plaintiff’s motion as to its claim for contributory copyright infringement.

This case is instructive as it sets forth the proper test to determine whether one is liable under a contributory copyright infringement theory; specifically, the plaintiff must show that a defendant had knowledge of or had reason to know about direct infringement by a third party and that it substantially contributing to the infringing activity.