Interesting Japanese file-sharing case

[Hat tip to Colette for alerting me to this case.]

From Japan, there are reports of a recent decision in a criminal prosecution against the creator of the file-sharing software Winny. From this article we learn that Isamu Kaneko has been ordered to pay 1.5 million yen (almost $13,000 USD) as a fine for creating the software, even though “the court acknowledged that [Kaneko] did not actively encourage copyright infringements over the Internet.”

A holding like this is likely to elicit comparisons between Japan’s framework for secondarily liability and that of the United States, where the law of the land under the Grokster holding calls for liability when one 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.”

Court sides with record companies in dueling motions to dismiss

Elektra Entertainment Group, Inc. v. Perez is one of the thousands of copyright infringement lawsuits that the record companies have filed against accused individual P2P file-sharers. The suit is pending in a federal court in Oregon.

Defendant Dave Perez moved pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the copyright infringement claim filed agasint him, contending that the plaintiffs had failed to state a claim upon which relief could be granted. He argued that the complaint didn’t specify the sound recordings that were at issue, and that the plaintiffs hadn’t specified what activities constituted the illegal distribution of the copyrighted files.

The court rejected those arguments, however, noting that exhibits to the complaint listed the songs that were alleged to be infringed, and demonstrated that those songs were being made available through Kazaa.

Having denied the defendant’s motion to dismiss, the court next turned to a motion filed by the record companies under Fed. R. Civ. P. 41(a)(2) to voluntarily dismiss the infringement claim against Mr. Perez. It turns out that discovery in the case had revealed to the plaintiffs that maybe it wasn’t Dave Perez trading the files, but other members of his household.

Interestingly, Mr. Perez objected to the voluntary dismissal of the claim against him. That seems odd, doesn’t it, given that he had argued in his own motion that the claim should be dismissed? But a closer look reveals the likely motivation for Mr. Perez’s objection: he didn’t want his own counterclaim for attorney’s fees to get thrown out as well.

The court sided with the record companies, holding that Mr. Perez would not suffer any prejudice by having the suit dismissed. The fact that he had spent a significant amount of money defending the suit and should have been dismissed a year ago were insufficient arguments. The case against the remaining family members will apparently proceed.

Elektra Entertainment Group, Inc. v. Perez, No. 05-931, 2006 WL 3063493 (D.Or., October 25, 2006).

Evidence-destroying defendant severely sanctioned in P2P file-sharing case

In the case of Arista Records v. Tschirhart, the U.S. District Court for the Western District of Texas has shown little mercy on a defendant accused by record companies of illegal file-sharing.

Knowing that a court order was in place requiring her to turn over her hard drive to be copied, the defendant allegedly used “wiping” software in an attempt to destroy all evidence of her illegal P2P file sharing. In response, the plaintiff record companies moved, pursuant to Fed. R. Civ. P. 37(b), for the most severe form of sanctions against the defendant – entry of default against her. The court granted the plaintiffs’ motion, and provided them with 30 days to submit a proposed order spelling out their damages.

Given that the record companies’ expert opined that the defendant had downloaded over 200 sound recordings during 2005, those requested damages will probably be substantial. Statutory damages under the Copyright Act can go as high as $150,000 per work infringed, in the most egregious cases.

In reaching its decision to enter default against the defendant, the court exercised its inherent power to do so, making a note of its obligation to act with “restraint and discretion.” It found that the defendant had acted in bad faith. That bad faith was exacerbated – and the default was further warranted – by the fact that the defendant herself was responsible for the destruction of evidence, that the deletion of the files destroyed the strongest evidence relevant to the plaintiff’s infringement claims, and that less drastic sanctions would not be appropriate.

Not only was the sanction intended to dissuade the plaintiff from destroying evidence in the future, it was intended to make an example out of her. Merely awarding the plaintiffs their attorney’s fees or giving the jury an adverse inference instruction at trial would not have been enough to remedy the situation. Given the defendant’s “blatant contempt” for the court and a “fundamental disregard for the judicial process,” only default would be an adequate punishment and deterrent to others considering similar conduct.

[Hat tip to Techdirt for posting on this case.]

Arista Records, LLC, v. Tschirhart, No. 05-372 (W.D. Tex., August 23, 2006).

Selling fake software on Amazon.com can get you five years in prison

[Thanks to Tech Law Advisor for alerting me to this case.]

Defendant Banks devised a scheme where he would make copies of various Microsoft products and sell them through Amazon.com to buyers who purchased them cash-on-delivery. After getting orders for at least $300,000 worth of software in this way, the plan began to collapse. Dissatisfied customers turned Banks into the FBI, and a federal grand jury indicted him on several counts, including mail fraud, possessing false securities, and criminal copyright infringement. A jury convicted him, and he got five years in prison.

Banks appealed his conviction and sentence, but the Third Circuit affirmed. On the criminal copyright infringement claim, Banks argued that the government had not introduced sufficient evidence to show that the Microsoft software was protected by copyright.

The criminal provisions of the Copyright Act, at 17 U.S.C. §506 state that

Any person who willfully infringes a copyright shall be punished as provided under [18 U.S.C. §2319], if the infringement was committed– (A) for purposes of commercial advantage or private financial gain; (B) by the reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000…. (Emphasis added.)

The court held that evidence introduced at trial through an “antipiracy specialist associated with the Microsoft company” was sufficient to show Microsoft’s ownership of the copyrights in the works. In the specialist’s unrebutted testimony, she stated her “belief” that Microsoft copyrights covered the works at issue. Further, the specialist had testified that Microsoft sent Banks the same type of cease and desist letter as it did to others who were suspected of violating Microsoft’s copyrights.

One is left to wonder why the government did not introduce any of Microsoft’s copyright registration certificates in the course of proving the element of copyright ownership. One would think that that would be the best practice for making such proof. In any event, the question before the court was whether the jury correctly concluded that Microsoft owned the copyrights in the works. The antipiracy specialist’s testimony — even if a bit weak on this point — apparently was enough.

United States v. Vampire Nation, (Slip Op.) — F.3d —, 2006 WL 1679385 (3d Cir., June 20, 2006).

Court slaps BitTorrent user with $35,000 default judgment

Columbia Pictures filed a copyright infringement suit against defendant May in the U.S. District Court for the Eastern District of Wisconsin. Columbia accused May of operating a server and website that allowed users to download infringing copies of copyrighted motion pictures and television shows for free and without authorization.

Despite numerous opportunities, May never answered Columbia’s complaint, nor contested the entry of default. In awarding damages to Columbia, the court considered “the massive online piracy that May apparently orchestrated, and the harsh effects illegal downloads have on the motion picture industry.” Accordingly, the court concluded that Columbia’s request for $35,000 in statutory damages was a “suitable award.”

In addition, the court enjoined May from “downloading, uploading, and/or otherwise reproducing or distributing [Columbia’s] copyrighted works, whether using the BitTorrent network or by any other means.”

Columbia Pictures Indus. v. May, (Slip Op.) 2006 WL 1085120 (E.D.Wis., April 24, 2006).

File sharers now have even more to fear

Decision confirms that illegal P2P users can expect to get sued many miles from home.

The United States District Court for the District of Columbia has handed another procedural victory to plaintiff record companies in a copyright infringement suit relating to music traded over P2P networks. The court ruled that it had personal jurisdiction over an out-of-state accused file-sharer merely because the defendant offered sound recordings to the public and was able to download recordings made available by others.

Plaintiff record companies filed suit against 35 John Doe defendants, identifying those defendants by their IP addresses and the songs they were accused of illegally distributing. John Doe #18, who was notified of the suit by his ISP Verizon, asked the court to dismiss the case for lack of personal jurisdiction, arguing that he did not have sufficient contacts with the District of Columbia.

The court denied John Doe #18’s motion to dismiss. For one thing, the motion was premature. “Simply, the parties [could not] formally litigate any aspect of personal jurisdiction until the defendant [had] actually been identified.” Without knowing who the defendant was, the court could not tell whether it had jurisdiction.

As it turns out, the prematurity of the motion was inconsequential. The court held that, anonymous or not, the plaintiffs established that the court had personal jurisdiction over John Doe #18. By simply contracting with Verizon, a “District of Columbia-based ISP,” and using a Verizon facility to trade files, John Doe #18 was “transacting business” in the District, and caused tortious injury in the District.

Further, by simply making files available for download by others through his file-sharing software, and being able to download other files, John Doe #18 “clearly directed tortious activity into the District of Columbia.”

Finally, citing to the case of Gorman v. Ameritrade Holding Corp., 293 F.3d 506 (D.C.Cir. 2002), and the famous case of Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, (W.D.Pa.1997), the court held that John Doe #18’s computer was “transformed . . . into an interactive Internet site.” This “interactivity” provided the sort of “continuous” and “systematic” contacts with the forum sufficient to support personal jurisdiction over the defendant.

Virgin Records America, Inc. v. Does 1-35, Slip Copy, 2006 WL 1028956 (D.D.C., April 18, 2006).

Google caching not copyright infringement

Suit by plaintiff who “manufactured” claim against Google dismissed on summary judgment.

The Google search engine uses an automated program called the “Googlebot” to crawl the World Wide Web, indexing the information that is contained on billions of pages. During this process, Google makes and analyzes a temporary copy of each page the Googlebot encounters, and stores those copies on the Google servers. These stored copies are referred to as “cached” versions.

For years, Google has provided to its users links not only to the original location of web pages, but also provides links to the cached versions. A cached version shows how a particular page appeared the last time the Googlebot visited it, and also presents the user’s search terms, where they appear on the page, in highlighted text. A cached version may also provide a copy of a page that no longer exists on the server where it was originally published.

People generally agree that Google provides a useful service by making the cached versions available, and most website publishers consent to their pages being indexed in this way. Publishers who do not want Google to index their content can simply add a few lines of HTML to their pages, which instruct the Googlebot not to index those pages. This method is widely known among web developers.

Blake Field is an author who published his own literary works online. Although he knew how to include the HTML in his pages which would prevent the Googlebot from indexing his site, he left out those instructions. Eventually, Google indexed the pages containing Field’s works, and links to cached versions of the pages began showing up in Google search results.

In 2004, Field sued Google in federal court in Nevada. He alleged that by allowing users to download cached versions of his web pages, Google was infringing on the copyright to his literary works. Both Field and Google moved for summary judgment in the case, and the court ruled in favor of Google, dismissing the suit.

Google raised a number of affirmative defenses against Field’s claim of copyright infringement, and the court ruled in Google’s favor on each of them.

Implied license

The court held that Field had impliedly given Google a license to provide cached copies of his works. Of particular importance was the fact that Field knew how to prevent Google from redistributing cached versions of his work, but chose not to enact such measures. The court found that Field instead made a conscious decision to permit the caching. Accordingly, the conduct could be “reasonably interpreted as the grant of a license . . . for that use.”

Estoppel

The court also held that Field was estopped from claiming that Google had engaged in copyright infringement. On this defense, Google successfully demonstrated that (1) Field knew of Google’s allegedly infringing conduct beforehand, (2) Field intended for Google to believe it had a right to cache the pages, (3) Google was unaware of Field’s true intentions, and (4) Google detrimentally relied on Field’s conduct.

Fair use

Perhaps the most provocative portion of the court’s decision comes from its holding that Google’s providing of the cached links was protected under the doctrine of fair use. Looking at the factors set forth in Section 107 of the Copyright Act [17 U.S.C. §107], the court found that the functions served by the cached copies, e.g., showing how a page appeared in the past and highlighting search terms, made them sufficiently transformative of the original use of the pages. Even though Google provided cached copies of the entire works, the court found such use permissible, because “[w]ithout allowing access to the whole of a Web page, the Google Cached link cannot assist Web users (and content owners) by offering access to pages that are otherwise unavailable.” Finally, the court found that there was no evidence that Google’s cached copies adversely affected any market for Field’s works.

Field v. Google, — F.Supp —, No. 04-CV-413 (D.Nev., January 19, 2006).

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Decision provides guidance on registering a copyright for web pages

Plaintiff Darden filed an application with the Copyright Office to register his claim of copyright in the text, maps and formatting of the website Appraisers.com. The Copyright Office denied the application, and this denial was affirmed each time during two reconsiderations within the Copyright Office. Noting that in general, the formatting of web pages is not copyrightable, the examiners determined, among other things, that Darden’s claim of copyright was too broad: the website as a whole lacked the requisite amount of originality to sustain registration.

Darden sought review in federal court of the Copyright Office’s adverse decision. However, the court affirmed the decision, holding that the denial was not an abuse of discretion. The court determined that the examiners at the Copyright Office had “intelligently account[ed]” for the denial via “reasoned decision making.”

The real problem with Darden’s application was that he was trying to claim copyright not just in the specific textual and graphical elements of the site, but was trying to claim copyright in the basic way the website was laid out. The “unoriginal formatting elements” and “uncreative layout” are not subject to protection, thus could not be included in the registration. The examiners had explained:

[T]he longstanding practice of the Copyright Office is to deny registration of the arrangement of elements on the basis of physical or directional layout in a given space, whether that space is a sheet of paper or a screen of space meant for information displayed digitally.

Accordingly, the Copyright Office was correct when it denied Darden a copyright registration for the style in which many web pages are formatted.

Darden v. Peters, — F.Supp.2d —, 2005 WL 3370676 (E.D.N.C., December 6, 2005).

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Infringement action against eDonkey user will proceed toward trial

In a copyright infringement action pending in the Eastern District of Pennsylvania, the court has refused to grant Paramount Pictures’ motion for summary judgment. Defendant John Davis has been accused of being the “first propagator” – that is, the first person to offer illegal copies for P2P distribution – of last year’s movie “Lemony Snicket’s A Series of Unfortunate Events.”

The court determined that several material issues of fact remained, thus precluding summary judgment. The court ruled that Davis should be allowed to present evidence at trial as to, among other things, whether he was properly identified as the person engaging in infringing activity over the eDonkey network, and whether he was indeed the “first propagator.”

The court put forth a significant amount of effort analyzing Paramount’s claim that Davis should be sanctioned for reformatting his hard drive just a few days after receiving notice of the potential lawsuit against him. Because of this activity, all evidence of whether eDonkey or a copy of the Lemony Snicket movie were ever on Davis’ computer was lost. The court found that given the circumstances, Davis should have known to keep this evidence intact. The court also determined that this “spoliation” of relevant evidence caused significant prejudice to Paramount, resulting in substantial unfairness and the need to deter such conduct in the future. Although the court denied Paramount’s request to enter judgment in its favor because of the spoliation, the court stated that it would consider the deletion of the information in weighing Davis’ liability at trial.

Perhaps the most interesting aspect of this opinion lies not in the legal analysis, but in the detailed explanation by the court of the process by which Paramount monitors file sharing networks to determine whether any copyrighted works are being infringed. There is also a detailed description of the forensics involved in identifying “first propagators.” Anyone interested in the detective work that goes on prior to file-sharing lawsuits would find this case particularly interesting.

Paramount Pictures Corp. v. Davis, 2005 WL 3303861, (E.D. Pa., December 2, 2005).

Seventh Circuit rules in BMG v. Gonzalez: downloading music via P2P is not fair use

The lawsuits filed by the music industry against individual users of peer-to-peer (P2P) software are beginning to make their way through the court system. The Seventh Circuit has affirmed a lower court’s grant of summary judgment against a user of Kazaa, holding that the downloading of copyrighted music files is not fair use under the Copyright Act.

Defendant-appellant Gonzalez used the Kazaa P2P software to obtain over 1,300 copyrighted sound recordings, some of which were contained on CDs she owned. BMG music and others filed a federal lawsuit against Gonzalez in 2003 alleging copyright infringement. Gonzalez’s defense was that by downloading the songs, she was merely sampling them to see whether she would want to purchase the entire CD. Accordingly, Gonzalez argued, she was not liable for infringement, because her conduct was protected under the doctrine of fair use.

The District Court disagreed, and granted summary judgment in favor of the recording industry plaintiffs. The District Court enjoined Gonzalez from engaging in any further infringement, and ordered her to pay over $22,000 in damages. Gonzalez sought review with the Seventh Circuit, which affirmed.

Judge Easterbrook’s opinion is unequivocal in rejecting Gonzalez’s fair use argument. The Court easily distinguished the present case from Sony Corp. of America v. Universal Studios, Inc., 464 U.S. 417 (1984) (also known as the Betamax case).

“This is not a form of time-shifting along the lines of [the Betamax case]. A copy downloaded, played, and retained on one’s hard drive for future use is a direct substitute for a purchased copy – and without the benefit of the license fee paid to the broadcaster.”

The Court’s analyzed Gonzalez’s claim in light the effect of P2P file-sharing on the potential market for the music. The Court emphasized that downloading unlicensed copies of music, even if for the purpose of testing whether one would want to later buy it, directly competes with legitimate means for consumers to sample music they might like.

For example, broadcast radio allows potential music purchasers to listen for free – and the artists and publishers profit in this scenario not only from future sales, but from the royalties paid by the broadcaster. Similarly, in legitimate online services such as iTunes and the revived Napster (who pay artists and publishers agreed-upon royalties), potential purchasers can sample music for little or no cost and later buy the tracks.

The Court noted that these modes of previewing music in an authorized manner “share the feature of evanescence.” Because downloading unlicensed permanent copies from the Internet directly competes with these legitimate means for artists and publishers to generate profit, the only relevant fair use factor weighed against Gonzalez. Accordingly, the District Court was correct to have found that Gonzalez committed copyright infringement.

BMG Music v. Gonzalez, — F.3d — No. 05-1314 (7th Cir., December 9, 2005).

More coverage of this case:

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