IP Law Daily Usenet providers not liable for users’ distribution of Perfect 10’s images
Monday, January 23, 2017

Usenet providers not liable for users’ distribution of Perfect 10’s images

By Thomas Long, J.D.

Usenet service providers Giganews, Inc., and Livewire Services, Inc. (hereafter, "Giganews") were not liable for infringing copyrights to adult images owned by Perfect 10, Inc., that allegedly were illegally distributed over their servers by users, the U.S. Court of Appeals in San Francisco has held. The appellate court affirmed a decision of the federal district court in Los Angeles, partially dismissing and partially granting summary judgment in the service providers’ favor on Perfect 10’s direct and indirect copyright infringement claims. With respect to its direct infringement claims, Perfect 10 failed to establish that Giganews engaged in "volitional conduct"; the evidence showed that the providers’ actions were akin to passively storing material at the direction of users in order to make that material available to other users upon request. Giganews was not liable for contributory copyright infringement because it did not materially contribute to or induce infringement of Perfect 10’s copyrights, and there were no simple measures available for Giganews to remove Perfect 10’s images from its servers. Finally, Perfect 10’s vicarious infringement claim failed because there was no causal link between the infringing activities and a financial benefit to Giganews (Perfect 10, Inc. v. Giganews, Inc., January 23, 2017, Nelson, D.W.).

The dispute revolved around Usenet, "an international collection of organizations and individuals (known as ‘peers’) whose computers connect to one another and exchange messages posted by USENET users." Users must gain access to Usenet through a commercial provider, such as the defendant in this case, Giganews, or an Internet service provider. Giganews owned and operated several Usenet servers and provided subscribers with fee-based access to content stored on Giganews’s servers as well as servers of other Usenet providers. The content offered through Giganews’s servers was almost exclusively user-driven; users posted content via text-based articles to online bulletin boards called newsgroups. Giganews’s browser application offered a feature allowing users to open binary files, allowing them to view media formats such as images, songs, and movies. Other than setting basic parameters for the "peering process" that allowed messages to automatically propagate to other Usenet servers—which essentially was limited to comparing unique "Message-IDS" to make sure duplicate articles were not shared—Giganews did not take any actions to select the content available on its servers.

Perfect 10 owned the exclusive copyrights to tens of thousands of adult images, many of which were illegally distributed over Giganews’s servers. Perfect 10 made numerous "takedown" demands to Giganews pursuant to the Digital Millennium Copyright Act. When Perfect 10 sent Giganews machine-readable Message-IDs, Giganews quickly removed those messages from its servers. When Perfect 10 faxed Giganews notices containing illegible Message-IDs, Giganews responded with a letter asking Perfect 10 to provide the Message-IDs in a legible, machine-readable format. Perfect 10 repeatedly declined to do so.

In April 2011, Perfect 10 filed suit against Giganews for direct and indirect copyright infringement. The claims were resolved by the district court in Giganews’s favor, and Perfect 10 appealed.

Direct infringement. To establish direct infringement, a plaintiff must show causation—also referred to as "volitional conduct"—by the defendant, the Ninth Circuit noted. Perfect 10 alleged that Giganews directly infringed its right to display, distribute, and reproduce its works by uploading infringing content onto the Usenet via Giganews’s servers. Perfect 10 failed to show that Giganews engaged in the requisite volitional conduct, the court held. With respect to the display rights, the evidence demonstrated that the user who called up images via Giganews’s platform—not Giganews—caused the images to be displayed. Similarly, with respect to distribution rights, it was the users who uploaded infringing content, and Giganews did not play any sort of active role in causing the distribution, the court said. Finally, the evidence provided by Perfect 10 did not demonstrate copying or reproduction of Perfect 10’s works by Giganews. Perfect 10 provided no evidence showing that Giganews exercised control, other than by general operation of a Usenet service; that it selected any material for upload, download, transmission, or storage; or that it instigated any copying, storage, or distribution.

Contributory infringement. The contributory infringement claim failed because Perfect 10 failed to establish that Giganews materially contributed to or induced infringement of Perfect 10’s copyrights. Computer system operators have been held liable under a material contribution theory of infringement when they had actual knowledge that specific infringing material was available using their systems, and could have taken simple measures to prevent further infringement, yet continued to provide access to the infringing works. In this case, Giganews showed that, absent machine-readable Message-IDs, there were no simple measures available to remove infringing material. There was no evidence of any other simple measure that Giganews could have taken to remove Perfect 10’s images, the court said.

The court rejected Perfect 10’s contention that Giganews induced infringement by advertising and promoting its browser’s capacities for locating media files and images. However, nothing indicated that Giganews promoted its services "with the object" of infringing copyright, in the court’s view.

Vicarious infringement. To establish liability for vicarious infringement, Perfect 10 was required to demonstrate a causal link between the infringing activities and a financial benefit to Giganews. According to the Ninth Circuit, it failed to do so. Perfect 10 did not meet its burden in providing evidence that customers were drawn to Giganews because of the infringing Perfect 10 content at issue. There was no evidence that anyone subscribed to Giganews because of infringing Perfect 10 material.

Attorney fees. The district court found that Giganews was entitled to an award of its attorney fees under Section 505 of the Copyright Act as the prevailing party. The district court did not abuse its discretion in finding that Perfect 10 had an improper motivation, that the "objective unreasonableness" factor weighed slightly in Giganews’s favor, that considerations of compensation and deterrence weighed in favor of a fee award, and that it would not be inequitable to award fees.

The case is Nos. 15, 55500, 15-55523, and 15-56026.

Attorneys: David N. Schultz (Law Offices of David N. Schultz) for Perfect 10, Inc. Andrew Phillip Bridges (Fenwick & West LLP) for Giganews, Inc., and Livewire Services, Inc.

Companies: Perfect 10, Inc.; Giganews, Inc.; Livewire Services, Inc.

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