Court allows Microsoft to unmask unknown Comcast users accused of infringement

A federal court in Washington state has given the green light for Microsoft to subpoena records from Comcast to discover the identity of the person or persons associated with an IP address used to activate thousands of unauthorized copies of Microsoft software.

Statue_of_Anonymus_(Budapest,_2013)

Generally, in federal court litigation, a party cannot serve discovery requests or subpoenas until after the plaintiff and defendant have conferred (in a Rule 26(f) conference). But when the plaintiff does not know the identity of the defendant, there is a bootstrapping problem – discovery needs to be taken to find out the defendant with whom to conduct the conference. In situations like this, the plaintiff seeking to unmask an unknown defendant will file its complaint against one or more “John Does,” then ask the court for leave to serve discovery prior to the Rule 26(f) conference.

That is what happened in this case. It is a common tactic used by parties legitimately seeking to enforce intellectual property, as well as parties that may be considered copyright trolls. See, e.g., this early bittorrent case from 2011.

Microsoft filed its complaint and also filed a motion for leave to take discovery prior to the Rule 26(f) conference. Finding that good cause existed for the early discovery, the court granted the motion.

It held that

(1) Microsoft had associated the John Doe Defendants with specific acts of activating unauthorized software using product keys that were known to have been stolen from Microsoft, and had been used more times than were authorized for the particular software,

(2) Microsoft had adequately described the steps it took in an effort to locate and identify the John Doe defendants, specifically by utilizing its “cyberforensics” technology to analyze product key activation data, identifying patterns and characteristics which indicate software piracy,

(3) Microsoft had pleaded the essential elements to state a claim for copyright and trademark infringement, and

(4) the information proposed to be sought through a subpoena appeared likely to lead to identifying information that would allow Microsoft to serve the defendants with the lawsuit.

Microsoft Corp. v. John Does 1-10, 2017 WL 4958047 (W.D. Wash., November 1, 2017)

Image courtesy Dmitrij Rodionov under Creative Commons Attribution-Share Alike 3.0 Unported license. Licensed granted hereby under same terms.

Website liable for statutory damages and attorney’s fees for copyright infringement

Plaintiff photojournalism company sued defendant retail website operator for copyright infringement arising from the publication on the site of two celebrity photographs. Plaintiff moved for summary judgment on its copyright infringement claim. The court granted the motion.

Infringement Claim

Defendant argued that the copyright registration – which was a compilation of photographs taken over a couple of months – did not cover the photographs in question, because the registration made no specific mention of the photos. But the court rejected this argument, finding that the registration certificate for the compilation was valid because (a) all the photographs were by the same photographer, (b) all the photographs were published in the same calendar year, and (c) all the photographs had the same copyright claimant. Defendant could not point to any specific evidence in the record to cast doubt on the validity of the registration.

The parties did not dispute that defendant’s employees copied and reposted the photographs. Accordingly, the court found that plaintiff had established the elements required for a copyright infringement claim.

But defendant argued that it had a license to reuse the photographs, based on the terms of the E! website from which it obtained the photos. The court easily rejected this argument, noting that the defendant had not provided a copy of that purported license agreement, nor come up with any other evidence to support the claim.

Statutory Damages and Attorney’s Fees

The court awarded $750 in statutory damages – the minimum amount that the Copyright Act authorizes. The court based this in part on looking at the actual licensing fees charged for the photographs. Plaintiffs had charged E! a license fee of $75 for use of the photos. Even trebling this amount would not bring the damage calculation within the statutory minimum. So the court raised it to the lowest threshold permitted under the act.

As for attorney’s fees, the court found it appropriate to award fees to promote the stated purposes of the Copyright Act. Specifically, shifting fees here, in the court’s view, served to encourage and reward innovators for their contributions in the march toward progress rather than burdening them with the costs of defending their protected works.

Fameflynet, Inc. v. The Shoshanna Collection, — F.Supp.3d —, 2017 WL 4402568 (S.D.N.Y. October 2, 2017)

Online platform’s EULA barred software developer from claiming copyright ownership

eulaDeveloper entered into an agreement with the TD Ameritrade platform that gave him access to the platform’s APIs so that he could develop his own analytical tools. He claimed that without his authorization, the platform incorporated his software routines into its own technology. Developer sued for copyright infringement.

The platform moved to dismiss the claim and the court granted the motion.

Developer had presented to the court a registration certificate as evidence that he owned the copyright in the software he created. Such a registration certificate serves as prima facie evidence of copyright ownership, and establishes a rebuttable presumption of such ownership.

In its argument to dismiss developer’s claims, the platform pointed to its agreement with developer that stated, among other things, that use of the services “[would] not confer any title, ownership interest, or any intellectual property rights to me.” It also expressly prohibited the developer from creating derivative works from the services. The platform looked to these provisions in the agreement to rebut the presumption that the developer owned the copyright in the tools. The court agreed.

Developer argued that the platform had actually encouraged – and thereby authorized – the development of tools such as the ones he had created. But the court observed that while such a claim is “possible,” the developer had failed to allege any facts to demonstrate that the claim is “plausible.” So in sum, the court credited the terms of the agreement, and took those terms to preclude the developer from owning the copyright in the software he had developed.  It should be noted that the court left open the option for plaintiff to re-plead. But that does little to mitigate the extent to which the court’s reasoning here as to how the agreement could limit a claim of copyright is questionable.

TD Ameritrade v. Matthews, 2017 WL 4812035 (D. Alaska, October 25, 2017)

[Post updated 27 Oct 2017 at 8:08 CST to address option to re-plead.]

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Ninth Circuit revives software download copyright infringement case

The main issue before the Ninth Circuit Court of Appeals in the case of Design Data Corp. v. Unigate Enterprise was whether the trial court properly granted summary judgment in defendant’s favor on the theory that one unauthorized download of a copy of plaintiff’s software was a de minimis infringement. The court held that the grant of summary judgment was not proper and sent the case back to the lower court.

Defendant claimed that it downloaded an authorized free trial version of the plaintiff’s software. But plaintiff brought forward evidence that it did not offer free trial versions. And plaintiff found evidence of the installation of two versions of its software on defendant’s computer systems, as well as patches designed to circumvent the software’s licensing requirements.

The Ninth Circuit determined that on this record, important questions of fact remained to be resolved surrounding the downloading and use of the software. Importantly, the appellate court held that the trial court committed error in determining that any infringement would have been merely de minimis. It was a mistake to have granted summary judgment in light of “the overwhelming thrust of authority” that upholds liability even under circumstances where use of a copyrighted work is of minimal consequence.

Another interesting issue before the court was whether defendant’s distribution of output files generated by its contractor’s use of an unauthorized copy of the software was actionable as infringement. The court affirmed summary judgment on this issue. It noted that copyright protection may extend to a program’s output if the program does the “lion’s share” of the work, with the user’s role being so “marginal” that the output reflects the program’s contents. But in this case, plaintiff did not put forth enough evidence to meet this standard, so the appellate court let stand the grant of summary judgment in defendant’s favor on this issue.

Design Data Corp. v. Unigate Enterprise, Inc
. — F.3d —, 2017 WL 541010 (9th Cir. Feb. 9, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Is a copyright registration required before filing an infringement lawsuit?

It depends on what court you are in. In the Western District of Wisconsin, you have to have the registration certificate in hand.

Plaintiff photographer sued defendant sports memorabilia dealers for infringement of the copyright in a photo of Green Bay Packers quarterback Aaron Rodgers. Certain defendants moved to dismiss for failure to state a claim, arguing that since he had not obtained a copyright registration certificate before filing suit, plaintiff had not satisfied this required precondition for making a copyright infringement claim.

The court granted the motion, holding that under 17 USC 411(a)‘s plain meaning, it is not sufficient for a plaintiff to simply allege it has filed an application to register the infringed copyright before filing suit. Instead, the statute’s language requires that a registration “has been made”.

Copyright litigants should note that there currently exists a circuit split on this issue — whether an application or actual registration –- is sufficient to meet the precondition for bringing an infringement action. And even district courts within the same circuit have differed on the reading of Section 411(a) (this is the case in the Seventh Circuit). The issue even splits well known copyright commentators William Patry and (the late) Melville Nimmer. Patry reads the statute to require registration certificate in hand, while Nimmer would read it to require only that an application has been filed.

The safer route, absent guidance from an authoritative appellate court, a Supreme Court decision, or a clarifying amendment to the Copyright Act, a plaintiff should make sure it has a registration certificate in hand before filing suit. The Copyright Office, for a fee, will process applications on an expedited basis. That extra fee is certainly more affordable than having the litigation matter hung up and possibly dismissed.

Robbins v. Svehla, 2016 WL 6900719 (W.D. Wis. November 22, 2016)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Website operator faces copyright liability over use of allegedly infringing third party add-on

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The recent case of Live Face on Web, LLC v. Biblio Holdings LLC illustrates some important risks of which any purchaser of third-party technology services or deliverables should be aware. The defendant in this case faces potential copyright liability (and the expenses associated with defending such claims) arising from technology that a third party vendor provided for defendant to enhance defendants’ website.

Plaintiff’s software

Plaintiff developed software that allows website operators to display video of a personal “host” to welcome online visitors to the website. A website operator implements plaintiff’s software by embedding an HTML script tag in the code of its website. The added code links the website to a copy of plaintiff’s software stored on the same server as the customer’s website or on a different server. When a user points his or her browser to the web page, the embedded HTML script tag causes the distribution of plaintiff’s software, which in turn causes the personal host video to be displayed. The browser saves plaintiff’s software into cache or hard drive or both, and automatically loads the software into RAM.

Defendants’ alleged infringement

Defendants allegedly used an infringing version of plaintiff’s software to display a spokesperson video on its website. Specifically, defendants claim that they contracted with a third party vendor that processed video that defendants provided, then sent defendants HTML code which defendants implemented into their site. When a user visited defendants’ website, his or her browser would call on the allegedly infringing code, which was stored on the third party vendor’s server. This caused a copy of the allegedly infringing software to be stored on the visitor’s computer in cache, memory, or its hard drive.

The proceedings

Plaintiff filed suit for copyright infringement in the U.S. District Court for the Southern District of New York. Defendants moved to dismiss for failure to state a claim upon which relief may be granted. The court denied most of the motion to dismiss, leaving the majority of copyright-related claims remaining in the case. It granted the motion to dismiss on the question of contributory liability.

Direct copyright infringement

Defendants raised several arguments as to why they should not be liable for direct copyright infringement . Although the court rejected each of these arguments, it observed that defendants’ most promising argument was that any infringement was actually done by the third party vendor that provided the technology to defendants. In this part of its opinion, the court considered the holdings of Perfect 10 v. Amazon, 508 F.3d 1146 (9th Cir. 2007) and other cases that involved in-line linking. The court observed that the reasoning of these cases appeared to limit plaintiff’s ability to hold defendants liable for direct infringement of plaintiffs distribution right. Nonetheless, the record did not have enough information for the court to definitively make a determination at this early stage. Accordingly, the court decided to permit discovery on the relationship between the third-party technology vendor and he allegedly infringing software.

The court also rejected defendants’ other arguments against liability for direct infringement. It found unpersuasive defendants’ arguments that the software was never downloaded. On this point, the court found that the complaint had sufficiently alleged that the infringing software was automatically saved into the cache or hard drives and automatically loaded into computer memory or RAM of visitors to defendants’ website. The court also rejected defendants’ arguments that the DMCA Safe Harbors protected them from liability, that any copying was only de minimis, and that previous lawsuits against the third-party technology provider should relieve defendants from liability.

Contributory infringement

On the question of contributory liability, the court granted defendants’ motion to dismiss. To bring a claim for contributory infringement, a plaintiff must allege both that its copyrighted work was directly infringed and that the defendant, with knowledge of the infringing activity, induced, caused, or materially contributed to the infringing conduct of another. The court found that plaintiffs had alleged only a bare legal conclusion that defendants knew or had reason to know they were using an infringing version of the software. Without strong enough allegations on the knowledge element of contributory infringement, this claim failed.

Vicarious infringement

Vicarious liability for copyright infringement may be imposed where a defendant profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement. The court denied the motion to dismiss on this point, as plaintiff plausibly alleged that defendants controlled the allegedly unlawful distribution of copies of plaintiff’s software to its website visitors. The court drew inferences in plaintiff’s favor, noting the allegation that defendants did modify their website to include code linking to the allegedly infringing software. Plaintiffs also successfully alleged that defendants profited from the use of the infringing software in that having the video host captured, held and prolonged the attention of the average online user, and did in fact generate revenues and profits for defendants. On this point, the court look to Arista Records v. MP3Board, 2002 WL 1997918 (S.D.N.Y. August 28,2002), which stands for the proposition that “infringement which increases a defendant’s user base or otherwise acts as a draw for customers constitutes a direct financial interest.”

Implications

In the course of negotiating technology development and service agreements, a customer should seek to get assurances from its vendor that any technology being provided will not infringe third party intellectual property rights. It is critically important to, were possible, have the vendor warrant and represent that the deliverables are non-infringing. It is equally important, still from the customer’s perspective, to have the vendor obligate itself to indemnify the customer in the event there are third party claims of intellectual property infringement. Although from this opinion we do not see all the facts, it appears this could be a situation where the defendant/customer is being taken to task and having to incur needless expense for the use of infringing software provided by its vendor. If that is the case, it is an unfortunate situation, one which a prudent customer of technology services would be well advised to seek to avoid.

Live Face on Web, LLC v. Biblio Holdings LLC, 2016 WL 4766344 (S.D.N.Y., September 13, 2016)

Photo courtesy of Flickr user J E Theriot  under this Creative Commons license.

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Cruz campaign still facing copyright and breach of contract liability over songs used in political ads

Court denies motion to dismiss copyright and breach of contract claims over songs used in YouTube and TV political ads.

Months after Ted Cruz ended his presidential bid, his campaign, and the advertising company hired to create ads for the campaign, still face liability over two songs used in YouTube and television ads. A federal court in Washington state has denied the defendants’ motion to dismiss copyright infringement and breach of contract claims brought against them.

An employee of the Cruz campaign’s advertising company allegedly downloaded two songs from Audiosocket, and then used those songs in two separate campaign ads. Audiosocket and the copyright holders sued for infringement and breach of the licensing agreements under which the songs were provided.

The court rejected the defendants’ arguments. It held that the plaintiffs had adequately pled the existence of their copyright registrations, and that the claims for breach of the licensing agreement were not preempted by the Copyright Act. Because the licensing agreement expressly prohibited the songs to be used for political purposes, the breach of contract claims were not “equivalent” to a copyright infringement claim, and therefore not subject to preemption under 17 USC 301.

The case is a reminder of the risks that companies and organizations face when hiring outside vendors to procure and create content. The hiring party should seek, at minimum, to ensure that the vendor has obtained the appropriate rights in the content it will integrate into the deliverables provided under the arrangement. And the vendor should utilize appropriate internal protocols and form documents to help ensure that the content it provides to its customer does not infringe. That kind of diligence will help avoid unpleasant situations between vendor and customer that arise when third parties claim against both of them that intellectual property rights have been infringed.

Leopona, Inc. v. Cruz For President, 2016 WL 3670596 (W.D. Washington, July 11, 2016)

No statutory damages in online copyright case where infringement continued after copyright registration

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If a copyright infringement begins before the plaintiff registers its copyright, and continues after the date of registration, can the plaintiff recover its attorney’s fees and statutory damages for the infringement that occurs after registration? The U.S. District Court for the Southern District of Indiana recently considered that question in the case of Bell v. Turner, 2016 WL 1270221 (S.D. Ind. March 31, 2016).

The prospect of recovering statutory damages and attorney’s fees is a big motivator for copyright plaintiffs. The Copyright Act (at 17 U.S.C. § 504(c)(1)) provides that a plaintiff can receive an award of statutory damages — in lieu of actual damages and profits — in a sum not less than $750 or more than $30,000 for each infringement. If the copyright infringement is willful, “the court in its discretion may increase the award of statutory damages to an award of not more than $150,000.” And 17 U.S.C. § 505 provides that a successful party in a copyright action can recover its costs and attorney’s fees in the court’s discretion.

But statutory damages and attorney’s fees are only available if certain conditions are met. The Copyright Act precludes a plaintiff from obtaining statutory damages and attorney’s fees if the infringement of the work commenced after publication but before registration. The Copyright Act provides, at 17 U.S.C. § 412(2), that “no award of statutory damages or attorney’s fees…shall be made for…any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work”.

In Bell v. Turner, the court granted summary judgment to the defendant on the issue of whether plaintiff was entitled to recover statutory damages and attorney’s fees. Plaintiff first published his photo of the Indianapolis skyline online in 2000. In 2009, defendant copied the photo and placed it on his website. In 2011, plaintiff registered the copyright in the work, but defendant left his copy of the photo online, even after the work was registered.

In granting summary judgment to defendant, the court cited to Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696 (9th Cir. 2009) and observed that “the first act of infringement in a series of ongoing infringements of the same kind marks the commencement of one continuing infringement under § 412.” Because the defendant posted the photo online more than three months before the date plaintiff registered the work, plaintiff was not entitled to recover statutory damages or attorney’s fees, even though the infringement continued after the date of registration.

Bell v. Turner, 2016 WL 1270221 (S.D. Ind. March 31, 2016)


Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Website operator not liable for copyright infringement despite lack of DMCA safe harbor protection

Online platforms that allow user-generated content should take advantage of the safe harbor provisions of the Digital Millennium Copyright Act (DMCA), which protect the platform in the event of a third party claim of copyright infringement over the user-generated content. But the recent case of BWP Media USA, Inc. v. T&S Software Associates, Inc., 2016 WL 1248908 (N.D. Tex., March 25, 2016) shows that a platform may still avoid liability for infringement even if it has not availed itself of the benefits of the DMCA.

Plaintiff copyright holders sued defendant online forum board operator for direct and vicarious copyright infringement, over photos uploaded by users of the online forum board. Defendant moved for summary judgment. The court granted the motion. The defendant successfully defeated these claims of copyright infringement even though it had not met the DMCA safe harbor requirement of designating an agent with the Copyright Office to receive takedown notices.

Direct Infringement

The court found there was no triable issue on plaintiffs’ claim that defendant was liable for direct infringement, because the parties did not dispute that defendant played no direct role in uploading the photos. Citing the seminal case of Religious Tech. Ctr. v. Netcom OnLine Comm’cn Servs., 907 F, Supp. 1361 (N.D.Cal. 1995), the court observed that “making an internet company liable for direct copyright infringement simply because it gave users access to copyrighted material posted by others would create unreasonable liability.”

Vicarious Liability

A defendant may be vicariously liable for copyright infringement where it “profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement.” Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). In this case, the court found that although plaintiffs contended that (1) the copyrighted photographs were displayed alongside paid advertising, (2) defendant received revenue from the paid advertising on its forum, and (3) the revenue received was based, in part, on the website traffic, plaintiff failed to point to any evidence in the record showing that defendant directly profited from the infringing conduct.

Observation: DMCA Safe Harbor Not Needed Here

Online service providers that make their platforms available for the storage of user-generated content (even if such ability is trivial, e.g., allowing users to upload profile pictures) are encouraged to take the appropriate steps to place the service provider within the protections of DMCA safe harbor. These steps include providing appropriate information in the platform’s terms of service, employing internal processes to handle takedown requests and repeat infringers, having a plan in place for dealing with counternotifications, and designating an agent with the Copyright Office to receive takedown notices. Being in the safe harbor means that the service provider has an affirmative defense if it is sued by a third party copyright holder for infringement causaed by the platform’s users.

Many have mistakenly believed that if a service provider fails to get safe harbor protection, it is automatically liable for infringement occasioned by user generated content uploaded to the service. That is not true, and the BWP Media case serves as an example. A copyright-owning plaintiff must still establish the elements of infringement against the service provider — whether for direct infringement or under a theory of secondary liability (like vicarious infringement) — even if the defendant does not find itself within the DMCA safe harbor.

BWP Media USA, Inc. v. T&S Software Associates, Inc., 2016 WL 1248908 (N.D. Tex., March 25, 2016)


Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Digital locker service not liable for copyright infringement based on user download of unlicensed ebook

digital locker

A boon for cloud service providers: Court decision protects locker service from infringement over user’s storage and downloading of unlicensed copy of ebook.

Plaintiff-author granted a license to defendant-digital locker service, authorizing users of defendant’s services to store and download sample copies of plaintiff’s ebook. Plaintiff later terminated the license. On two separate occasions, one of defendant’s customers — who had acquired a sample copy of the ebook during the license period — downloaded her sample copy from defendant’s locker storage service and onto her e-reader device. Plaintiff filed suit, claiming these post-license termination customer downloads amounted to direct and contributory infringement by the file locker service.

Both parties moved for summary judgment. The court granted defendant’s motion and denied plaintiff’s motion.

As to the question of direct infringement, the court relied heavily on Cartoon Network v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008) to hold that a lack of evidence of defendant’s “volitional conduct” in distributing and reproducing the downloaded copies precluded a claim for direct infringement. Quoting from Capitol Records v. ReDigi, 934 F.Supp.2d 640 (S.D.N.Y. 2013), the court found that defendant “did not have a ‘fundamental and deliberate role,” such that it was transformed ‘from a passive provider of a space in which infringing activities happened to occur to an active participant in the process of copyright infringement.’”

Plaintiff’s contributory infringement claim failed under the “substantial noninfringing uses” test (the “Sony-Betamax Rule”) set out in Sony v. Universal, 464 U.S. 417 (1984). The court held that defendant could not be held liable for contributory infringement because its digital locker systems was capable of substantial non-infringing uses, and indeed was used for commercially significant noninfringing uses.

Smith v. BarnesandNoble.com, No. 2015 WL 6681145 (S.D.N.Y. Nov. 2, 2015)

Evan Brown is a Chicago attorney helping clients in matters dealing with copyright, technology, the internet and new media. Call him at (630) 362-7237, send email to ebrown [at] internetcases dot com, or follow him on Twitter @internetcases

Photo courtesy of Flickr user Alex Thomson under this Creative Commons license.

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