Tag Archives: contributory liability

No copyright liability against founder of competing company for overseeing development of infringing website

oversightAfter defendant left plaintiff’s employment to co-found a competing company, plaintiff sued defendant personally for copyright infringement based on the new company’s website’s resemblance to plaintiff’s website. The infringement theory was interesting – plaintiff alleged that defendant did not commit the infringement himself, but that he was secondarily liable for playing a significant role in the direct infringement by the new company’s employees.

Defendant moved to dismiss the copyright infringement claim. The court granted the motion.

There are two types of secondary copyright infringement liability: contributory liability and vicarious liability. A defendant is a contributory infringer if it (1) has knowledge of a third party’s infringing activity, and (2) induces, causes, or materially contributes to the infringing conduct. See Perfect 10, Inc. v. Visa Int’l Service Ass’n, 494 F.3d 788, 795 (9th Cir.2007) (quoting Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004)). In the context of copyright law, vicarious liability extends beyond an employer/employee relationship to cases in which a defendant has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir.2011) (quoting Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir.1996)).

In this case, the court held that plaintiff had not alleged enough detail to state a claim of secondary liability against defendant. Instead, the complaint simply recited the elements of contributory and vicarious liability. Specifically, plaintiffs failed to allege:

  • That defendant was uniquely in possession of the original material on plaintiff’s website, but rather plaintiffs alleged that the material was publically available on the website for anyone to read and copy.
  • How defendant, as a non-employee (but founder) of the new company, was personally responsible for the content of the new company’s website. (Interestingly, the court held it was not sufficient to allege that defendant was a founder of the new company. Although plaintiffs alleged some factual details about what was actually copied from plaintiff’s website, they alleged no factual details as to defendant’s personal involvement in the infringement.)
  • Facts that suggested that defendant induced the new company to infringe plaintiff’s website.
  • Facts that suggested that defendant had the right to control and supervise the new company’s employees who were involved in the alleged infringement.

Plaintiff’s attempts to impose secondary liability were (if they had worked) a clever method for accomplishing the same objective as piercing the corporate veil. Granular control by the individual founder could be equated with the “alter ego” aspect of the veil-piercing analysis. The absence of such specific control by the individual defendant, however, left the possibility of liability only with the company.

BioD, LLC v. Amnio Technology, LLC, 2014 WL 268644 (D.Ariz. January 24, 2014)

Court rules against Ripoff Report in copyright case

Xcentric Ventures, LLC v. Mediolex Ltd., 2012 WL 5269403 (D.Ariz. October 24, 2012)

Plaintiff Xcentric Ventures provides the infamous Ripoff Report, a website where consumers can go to defame complain about businesses they have dealt with. Defendant ComplaintsBoard.com is a similar kind of website.

Ripoff Report’s Terms of Service provide that users grant Ripoff Report an exclusive license in the content they post to the site. Based on this right, Xcentric sued various defendants associated with ComplaintsBoard for “encourag[ing] and permit[ing] consumers to post content that has been exclusively licensed to Xcentric.”

Defendants moved to dismiss the copyright infringement claim, asserting they were protected by the safe harbor provision of the Digital Millennium Copyright Act (“DMCA”). The court granted the motion to dismiss, but not because of the DMCA.

DMCA Analysis

The safe harbor provision of the DMCA states that a “service provider shall not be liable for monetary relief” if all of the following requirements are met:

(1) it does not have actual knowledge that the material on its network is infringing;

(2) it is not aware of facts or circumstances that would make the infringing activity apparent;and

(3) upon obtaining knowledge or awareness of such infringing activity, it acts expeditiously to remove or disable access to the copyrighted material.

In this case, Xcentric alleged that defendants actively “encouraged and permitted” copyright infringement by ComplaintsBoard users. The court held that this allegation, if taken as true, could be sufficient to preclude defendants from taking advantage of the DMCA’s safe harbor provisions.

But the court went on to hold that Xcentric had failed to state a copyright claim on which relief may be granted.

Secondary Liability Insufficiently Pled

Xcentric did not allege that defendants directly infringed copyright. Instead, it alleged that by encouraging and permitting users to copy and republish material, ComplaintsBoard was engaged in secondary infringement — either vicarious or contributory infringement.

To state a claim for contributory copyright infringement, Xcentric had to plead that ComplaintsBoard had knowledge of the infringing activity and induced, caused, or materially contributed to the infringing conduct of its users. The court found that Xcentric had not alleged any facts that would lead to a reasonable inference that defendants knew of their users’ republishing Xcentric’s copyrighted content or that defendants had induced, caused, or materially contributed to such republication.

To successfully plead vicarious infringement, Xcentric had to show that defendants had the right and ability to supervise the infringing activity and also had a direct financial interest in those activities. The court found that Xcentric had not put forward enought facts to show that defendants had the right and ability to supervise the infringing activity.