CoStar v. LoopNet

Citation: CoStar Group v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004).

Factual Background
LoopNet runs a website that features photographs whose copyrights it does not own. The photos aren’t of celebrities, but of real estate. (Indeed, the site &mdash; www.LoopNet.com &mdash; is an online commercial real estate marketplace.) LoopNet allows its subscribers to post photos directly to LoopNet’s website. Subscribers are required to assure LoopNet that none of the photos infringe copyrights, but sometimes subscribers post infringing photos anyway, and some of those are photos whose copyrights are owned by CoStar. In response, CoStar sued LoopNet for direct and contributory infringement.

Trial Court Decision
At first, CoStar seems to have enjoyed some success. That is, in response to cross-motions for summary judgment, a federal District Court ruled that LoopNet may be liable for contributory infringement, and that LoopNet was not entitled to the “safe harbor” immunity provided by the Digital Millennium Copyright Act. On the other hand, the District Court dismissed CoStar’s claim that LoopNet was liable for its own direct copyright infringement. Then, for reasons not explained by the appellate court, CoStar and LoopNet stipulated to the dismissal of all of CoStar’s claims except its direct infringement claim; and CoStar appealed LoopNet’s victory on that claim.

Appellate Court Decision
At first blush, it looked as though CoStar had the better half of the appeal, for two reasons: (1) because the DMCA contains a specific provision describing what website operators must do in order to be immune from liability for infringements committed by users who post infringing materials; and (2) because LoopNet had not done everything the DMCA required it to do.

On the other hand, even before the DMCA was enacted, the Netcom case held that a passive online service provider was not liable for infringements committed by its users when they posted infringing materials without the service provider’s knowledge.

Thus, the question to be decided by CoStar’s appeal was whether the DMCA supersedes the ruling in Netcom, so that LoopNet had to comply with the DMCA’s requirements to avoid liability, or whether the DMCA simply added a basis for immunity to the doctrine expressed by Netcom.

In an opinion by Judge Niemeyer for a 2-to-1 majority, the Court of Appeals sided with LoopNet and ruled that the DMCA supplemented Netcom, it didn’t supersede it; and that under Netcom, LoopNet was not directly liable for displaying infringing photos from its website that had been posted by its subscribers. Judge Niemeyer based this conclusion on a subsection of the DMCA that says that the failure of a service provider to qualify for immunity under the “safe harbor” provision “shall not bear adversely” on the defense that the service provider is not liable for other reasons.

In addition, Judge Niemeyer noted that whenever CoStar notified LoopNet of an infringing photo, LoopNet removed it and then took special care to be certain that the photo wasn’t posted again later.