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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.

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.”

Saw this on YouTube (oh, the irony) but am posting the authorized version here. Wish I could have come up with commentary like this (“Meanwhile Google says, ‘…safe harbor provisions in copyright law protect it from liabilty…’ YAWN!”)

Hat tip to Christian and Nick, and Ed. via Denise.

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.