“Counterfeit orders” alleged to give rise to copyright infringement

Hackers accused of unlawful distribution of copyrighted works

DeVry/Becker Educational Development Corp. produces materials used by persons studying for the CPA exam. It maintains a database which it uses to track and process orders of the copyrighted study materials. DeVry has filed a lawsuit in the U.S. District Court for the Northern District of Illinois [No. 07-3280 — download the complaint here], alleging that a number of John Doe defendants accessed the database and caused unauthorized orders to be shipped to residences in New York and Pennsylvania.

Not surprisingly, the complaint alleges common law fraud and violations of the Computer Fraud and Abuse Act [18 U.S.C. 1030], which prohibits unauthorized access to certain computer systems. The more creative claims, however, are for copyright infringement.

DeVry’s theory is that by causing the delivery of the study materials, the John Doe defendants engaged in an unauthorized distribution of the copyrighted works. It’s an interesting theory, and it raises some conceptual issues as to what “distribution” means. The complaint (e.g. at paragraph 52) says that DeVry is the one who (relying on the “counterfeit orders”), sent the course materials. It will be interesting to see whether one who is doing the sending can be different than the one doing the distributing.

DeVry Becker Ed. Dev. Corp. v. Does 1-10, No. 07-3280 (N.D. Ill., filed June 11, 2007).

A tiny dose of copyright on Viral

Veoh Networks’ Viral (for which I am the Legal Correspondent) has released Episode 18. I do a brief piece on the basics of copyright. My part comes in at about the 2:50 mark. But watch the whole episode — it’s entertaining!

Thanks to my friend Mike Pugh who helped me film this segment.


Online Videos by Veoh.com

[If you’re seeing this in an RSS reader and the embedded video isn’t showing up, click through to see it.]

Ninth Circuit rules on Perfect 10 v. CCBill appeal

Another expansion of CDA immunity, as court holds online service providers are immune from state law-based intellectual property claims arising from content provided by third parties.

Perfect 10 v. CCBill, — F.3d —- (9th Cir. March 29, 2007)

Nearly three years after a significant district court opinion [340 F.Supp.2d 1077 (C.D. Cal. 2004)] examining the contours of DMCA safe harbor provisions and immunity under 47 U.S.C. 230, the Ninth Circuit has ruled in the appeal of Perfect 10 v. CCBill. This is a significant decision. Joe Gratz has posted a copy of the opinion.

One aspect of the opinion that is immediatley striking is the Ninth Circuit’s interpretation of 47 U.S.C. 230(e)(2). This provision requires the court to “construe Section 230(c)(1) (one of the immunity provisions) in a manner that would neither ‘limit [n]or expand any law pertaining to intellectual property.'” Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409, 413 (S.D.N.Y. 2001).

Perfect 10 had brought a number of state law claims that arguably sounded in intellectual property, like unfair competition, false advertising and violations of the right of publicity. The district court held that the unfair competition and false advertising claims were not intellectual property claims, so the immunity was not limited by Section 230(e). But the lower court held that the right of publicity claim was one properly classified as intellectual property, so as for that, there was no immunity.

In this decision the Ninth Circuit made a bold leap to define “intellectual property” as it is used in Section 230. (You may recall this was almost an issue last year in the case of Almeida v. Amazon.com, Inc.)

Here’s the heart of the Ninth Circuit’s opinion on this point:

Because material on a website may be viewed across the Internet, and thus in more than one state at a time, permitting the reach of any particular state’s definition of intellectual property to dictate the contours of this federal immunity would be contrary to Congress’s expressed goal of insulating the development of the Internet from the various state-law regimes. *** In the absence of a definition from Congress, we construe the term “intellectual property” to mean “federal intellectual property.”

Accordingly, the Ninth Circuit reversed the district court’s holding that the claim for violation of the right of publicity was not barred by Section 230 immunity. So as the law stands now, at least in the Ninth Circuit, providers of interactive computer services are immune from suit under state-law intellectual property claims arising from content provided by third parties.

Copyright infringement and DMCA claims subject to arbitration clause in software license

Packeteer, Inc. v. Valencia Systems, Inc., No. 06-7342, 2007 WL 707501 (N.D.Cal. March 6, 2007)

Valencia Systems developed customized software and licensed it to Packeteer. Valencia began to suspect that Packeteer had reverse engineered some of Valencia’s proprietary source code, so it filed a demand for arbitration, claiming copyright infringement and violation of the anticircumvention provisions of the Digital Millennium Copyright Act (“DMCA”).

The development and license agreement between the parties provided, among other things, that “any dispute concerning [the] Agreement … shall be resolved by binding arbitration before one single arbitrator … under the rules of the American Arbitration Association.”

Packeteer filed a declaratory judgment action in the U.S. District Court for the Northern District of California, asking the court to make a determination that arbitration of the copyright infringement and DMCA claims was improper. Valencia moved to dismiss, arguing in favor of the arbitrability of the copyright and DMCA claims. The court granted the motion to dismiss, holding that arbitration of the claims was proper.

The court first gave a nod to the “long established” principle that when a contract contains an arbitration clause, there is a presumption of arbitrability, “in the sense that an order to arbitrate [a] particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”

Valencia argued that because the agreement incorporated the rules of the American Arbitration Association, the agreement was sufficiently broad to give the arbitrator the authority to determine arbitrability of issues. (The AAA rules give the arbitrator the authority to make such a determination. See, e.g., Rule R-7(a): “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.”)

The court agreed with Valencia’s assertion that the claims were subject to arbitration. It also rejected Packeteer’s assertions that arbitration would be improper given that Congress had provided the federal courts with exclusive jurisdiction over copyright and DMCA matters. See 28 U.S.C. 1338(a). With little analysis, the court looked to a number of cases, including Lorber Industries of California v. Los Angeles Printworkers, Corp., 803 F.2d 523, 525 (9th Cir.1986), McMahan Securities Co. v. Forum Capital Markets, 35 F.3d 82, 89 (2d Cir.1994), and Saturday Evening Post Company v. Rumbleseat Press, Inc., 816 F.2d 1191, (7th Cir.1987) to hold that “someone other than a federal court [may] determine a copyright claim.”

Viacom sues YouTube

Update #2, a rundown of the complaint:

Viacom’s complaint alleges six causes of action against YouTube and Google. The first three causes of action seek to hold YouTube and Google directly liable for copyright infringement, while the remaining three seek to hold the defendants liable on secondary liability theories. The causes of action are: (1) direct copyright infringement related to the unauthorized public performance of the uploaded videos, (2) direct copyright infringement related to the unauthorized public display of the videos, (3) direct copyright infringement related to the unauthorized reproduction of the uploaded videos by the YouTube service, (4) inducement of copyright infringement, (5) contributory infringement, and (6) vicarious infringement.

It will be interesting to see how, in pursuing the direct liability claims, Viacom overcomes the challenges presented by precedent such as Religious Tech. Ctr. v. Netcom, 907 F.Supp. 1361 (N.D. Cal. 1995). The Netcom case held that “[a]lthough copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant’s system is merely used to create a copy by a third party.” Arguably, the manner in which videos are performed, displayed and created (i.e., transcoded after being uploaded) is automatic, without any active, volitional involvement by YouTube in each instance.

Count IV is particularly interesting, as the allegations parrot the language from MGM v. Grokster, 125 S.Ct. 2764, 2780 (2005). Grokster provides that “[o]ne who 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, is liable for the resulting acts of infringement by third parties.” Some commentators had speculated that YouTube might face some Grokster problems. See, e.g., Mark Cuban’s commentary here. Viacom has alleged that “[d]efendants operate the YouTube website service with the object of promoting its use to infringe Plaintiffs’ copyrights and, by their clear expression and other affirmative steps, Defendants are unlawfully fostering copyright infringement by YouTube users.”

Count V, for contributory infringement, has some interesting allegations supporting it. One of the elements required to prove contributory infringement is knowledge on the part of the defendant of the infringing activity. See, e.g., Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)(“[O]ne 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.”). To get around the potential problem that it might be implausible for YouTube to gain knowledge of each infringement, Viacom borrows from the language used to describe the real property doctrine of adverse possession, in calling the infringement occurring on YouTube “open and notorious.” So the argument apparently is, YouTube would have no way of not knowing that infringement is occurring.

To support its allegations of vicarious infringement in Count VI, Viacom addresses the purported “right and ability” of YouTube to supervise the infringing conduct, and to prevent further infringement. Perhaps realizing that it would be impossible to police each of the literally millions of videos uploaded to the site, Viacom makes much of the fact that YouTube has apparently been unwilling to use filtering technology in connection with works owned by any entities other than with whom YouTube has entered into licensing arrangements. In the complaint, this selectiveness of YouTube is characterized as “withhold[ing]” of protections.

Update #1: Here is a copy of the complaint.

According to Techdirt and this press release, Viacom filed a huge copyright infringement suit this morning against Google and YouTube in the U.S. District Court for the Southern District of New York.

More details are sure to emerge when a copy of the complaint becomes available, but the press release states that Viacom is seeking a billion dollars in damages plus injunctive relief.

As you’ll recall, early last month, Viacom sent DMCA takedown notices to Google demanding the removal of over 100,000 video clips to which Viacom owns the copyright.

Web pages used as exhibits to court filing protected by fair use

The parties in the matter of Shell v. Devries, a case from the U.S. District Court for the District of Colorado, are no strangers to litigation with one another. In a previous civil rights lawsuit filed by plaintiff Shell, the defendants filed a motion for attorney’s fees, attaching thereto a copy of ten pages of Shell’s copyrighted website, profane-justice.org.

Shell filed a second lawsuit against the same defendants, this time claiming that the use of the pages as an exhibit to the filing in the previous case was an infringement of copyright. The defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6), asserting a fair use defense. The court granted the motion.


Photo courtesy Steve Rhodes under a (CC) license.

The court disagreed with the defendants’ contention that use of copyrighted works in legal proceedings is “inherently” a fair use. Citing to the case of Images Audio Visual Productions v. Perini Bldg. Co., 91 F.Supp.2d 1075 (E.D.Mich.2000), it observed that where judicial proceedings are one of the intended markets of the copyrighted work, the copyright holder is entitled to exercise control over the use of his works within this market; the fair use doctrine does not require the wholesale abandonment of copyright protection at the courthouse door.

But at least two other cases have held that use of copyrighted works in court proceedings is protected by fair use. In Religious Technology Center v. Wollersheim, 971 F.2d 364, 367 (9th Cir. 1992) the court found fair use where the defendants copied and distributed religious scriptures from former members of the Scientology Church and gave them to expert witnesses for the purpose of preparing testimony in the case. In Jartech v. Clancy, 666 F.2d 403, 406-07 (9th Cir.1982), abbreviated copies of adult movies for use as evidence in a nuisance abatement proceeding were considered fair use.

In this case, the court examined the four factors of 17 U.S.C. 107 to conclude that the use made by the defendants in attaching the web pages to the motion was a non-infringing fair use.

First, there were no allegations in the complaint that the defendants used the material for the “intrinsic purpose for which it was prepared,” namely, to “generate income” or provide “creative analysis and commentary about events occurring related to the [previous] lawsuit.”

The second factor also weighed in favor of fair use, as the materials were primarily a chronology of events, and thus were more factual in nature than creative.

As for the third factor, the court observed that the use of the work was limited. Accordingly, the factor carried “very little weight.” In any event, citing to Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1526 (9th Cir. 1992), the court hled that “the fact that an entire work was copied does not . . . preclude a finding of fair use.” (The case of Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003) would also have been a good case to cite for this point.)

Finally, for the important fourth factor — the effect on the market of the copyrighted work — the court found that the complaint did not allege that the marketability of the work was impaired. Moreover, the court observed that “[i]ndeed, it is impossible to imagine how the defendants’ use of the materials as an exhibit to a motion for attorneys’ fees could in any way impact the marketability of the materials.”

Shell v. Devries, (Slip Op.) No. 06-318, 2007 WL 324592 (D.Colo. Jan. 31, 2007)

Ninth circuit rejects efforts to liberate “orphan works”

“Orphan works” are works that are protected by copyright, but for which it is difficult, if not impossible, to locate the copyright owner. These works usually have little or no commercial value, but some argue that the uncertainty surrounding their ownership needlessly discourages subsequent creators and users from incorporating them into new creative efforts.

Works created before the effective date of the Copyright Act of 1976 (i.e., under the 1909 Act) were subject to copyright protection for 28 years. That duration could be extended if the copyright owner renewed the copyright for another 28 years. Accordingly, the old system has been characterized as an “opt-in” system, in that to extend the duration of copyright ownership, the owner had to take certain affirmative steps.

The Copyright Renewal Act of 1992, Pub. L. No. 102-307, 106 Stat. 264, eliminated the renewal requirements for works created between 1964 and 1977. The Sunny Bono Copyright Term Extension Act, Pub. L. No. 105-298, 112 Stat. 2827 (1998), extended the term of copyright ownership to the life of the author plus 70 years (in the case of works authored by individuals). The present framework has been described as an “opt-out” system, in that copyright protection attaches automatically, unless a person takes some affirmative act to convey the work to the public domain.

The opt-out system and longer terms of copyright mean a larger number of orphan works. Some say that orphan works “probably comprise the majority of the record of 20th century culture.”

Brewster Kahle, founder of the Internet Archive, along with a number of other plaintiffs, sought to fix the present situation of orphan works by challenging the constitutionality of the Copyright Renewal Act of 1992 and the Sunny Bono Copyright Term Extension Act. They filed a declaratory judgment action in federal court in California, emphasizing the increased possibilities for archiving and disseminating content over the Internet. When the court granted the government’s motion to dismiss, the plaintiffs sought review. On appeal, the Ninth Circuit affirmed the dismissal of the action.

[Aside: Check out this interesting interview that Dr. Moira Gunn did with Brewster Kahle last year.]

The plaintiffs raised two arguments. First, they argued that the change from an “opt-out” system to an “opt-in” system “altered the traditional contour of copyright” and therefore, under the holding of Eldred v. Ashcroft, 537 U.S. 186 (2003), should be subject to First Amendment review. The second argument was that the current copyright term — providing what the plaintiffs characterized as a term that is “effectively perpetual” — violated the Constitution’s “limited Times” prescription, found at Article I, Sec. 8, Clause 8.

The court rejected each of these arguments. Relying on the Eldred case, the court held that the Copyright Renewal Act of 1992 and the Sunny Bono Copyright Term Extension Act both served to “lengthen the term for [certain works], but in doing so they simply placed existing copyrights in parity with those of future works.” In Eldred, the act of creating “parity” survived constitutional scrutiny. And so it did in this case too.

As for the second argument, namely, that the current term of copyright — in many instances well over a century — was too long, the court relied again on Eldred. Noting that the decision of Congress to extend the term of copyright was subject to rationality review, the court looked to the “rationally credited projections that longer terms would encourage copyright holders to invest in the restoration and public distribution of their works.” In other words, Congress had undertaken an appropriate balancing test between encouraging creativity and bringing works into the public domain.

Kahle v. Gonzalez, (Slip Op.), —F.3d—-, No. 04-17434 (9th Cir., Jan. 22, 2007).

Enthusiast website owner enjoined from streaming webcasts of racing events

The RIAA and the MPAA aren’t the only ones out there suing their fans for copyright infringement. Live Nation Motor Sports, Inc. (formerly known as SFX Motor Sports) has convinced a federal judge in Texas to enjoin fan-site owner Robert Davis from streaming live webcasts of racing events through his site supercrosslive.com.

It appears that Davis was simply running the live ClearChannel webcast of Supercross racing events through his own website. According to papers filed by the plaintiff, Davis was “transferring” the webcasts to his own website and thereby displaying or performing them in real time. It doesn’t look like there was any copying of the sound recording — instead, Davis was broadcasting or performing the “same audio web cast.”

The court granted the plaintiff’s motion for a preliminary injunction, finding that the plaintiff would likely succeed on its claim that defendant’s actions constituted copyright infringement.

In concluding that the “transfer” of the audio webcast to the supercross.com website was likely an infringement, the court cited to National Football League v. PrimeTime 24 Joint Venture, 211 F.3d 10 (2d Cir.2000) in which the Second Circuit upheld a permanent injunction against a defendant accused of providing unauthorized satellite transmissions of NFL games to viewers in Canada. In that case, the court held that the process of uplinking the NFL’s original signal to a satellite was an unauthorized public performance of the broadcast.

Perhaps the court would have come to a different conclusion on the question of whether the defendant’s “transfer” of the audio webcast was a public performance had it compared it instead to in-line linking. This concept was discussed earlier this year in Perfect 10 v. Google, Inc., 416 F.Supp.2d 828 (C.D. Cal. 2006). In-line linking is the process where a web developer shows an image on his or her website by providing a path in the <img> tag to a file residing on another server.

In the Perfect 10 v. Google case, the court concluded that Google did not itself display or distribute images to which it in-line linked. [More] It applied the “server test” (as opposed to an “incorporation test”) to conclude that “the website on which content is stored and by which it is served directly to a user, not the website that in-line links to it, is the website that ‘displays’ the content.” It found that in aggregating images from other sites, the Google image search engine was not in the process of storing or serving content. “Rather, [users’] computers have engaged in a direct connection with third-party websites, which are themselves responsible for transferring content.”

Live Nation Motor Sports, Inc. v. Davis, (Slip Op.) 2006 WL 3616983 (N.D.Tex., December 11, 2006).

Big time blogger faces big time copyright suit

Case promises fair use showdown in blogging context.

[Thanks to Venkat for alerting me to this case.]

The widely-read Los Angeles-based gossip blogger Perez Hilton, whose blog features all sorts of tabloid-like commentary on Hollywood culture, has been sued by X17, a photo agency known for collecting images of celebrities in sometimes not-so-flattering situations. X17 is claiming copyright infringement, and, according to this article from the Boston Herald, the claimed damages are quite substantial (about $7.5 million).

X17 says that Hilton has used its images of celebrities without permission, but Hilton is claiming fair use. And this presents and interesting question. The plaintiff is characterized as a paparazzi agency by this L.A. Times article. It looks like Hilton simply appropriates the images of others, and, using photo editing software, scrawls handwritten messages upon the images. He then posts them with commentary and reports of the celebrities’ goings on.

So will Hilton’s fair use argument get him off the hook? The Copyright Act provides that a defendant’s use of a work is fair if, among other things, the use was made “for purposes such as criticism, comment, [and] news reporting.” Hilton’s lawyer says that the use in this case is fair commentary and a transformation of the original works.

With the dispute framed this way, we’re presented with the question of what are the purpose and character of original paparazzi photos? Are they made for purposes of poking fun and fostering gossip or are they made for some other reason? That “some other reason” seems like it could be elusive. In any event, we’re likely to see X17 make some distinction between serious paparazzi efforts and the efforts of Hilton to make his commentary.

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