Perfect 10 v. CCBill

Citation
Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007) (full-text).

Factual Background
The plaintiff, Perfect 10, is the publisher of an adult entertainment magazine and the owner of the website perfect10.com. The website features around 5,000 images of models that were created by the company, which are accessible to only registered paying members. Perfect 10 holds publicity rights on many of the models in these images. It also has the registered U.S. copyrights for images and owns several related registered trademarks and service marks. Perfect 10 has filed suit against CWIE, a webhosting and connectivity service company and CCBill LLC, a payment service company.

Defendant CWIE provides webhosting and related Internet connectivity service to many different websites. It provides "ping, power and pipe" services by making sure that the server is on, that power is provided to the server, and that the clients are connected to the Internet via a data center connection.

CCBill, the other defendant, provides payment services that allow consumers to use credit cards or checks to pay e-commerce venues.

On August 10, 2001, Perfect 10 asserted that defendants violated copyright, trademark, and state unfair competition, false advertising and right of publicity laws by providing services to websites that posted images stolen from Perfect 10’s magazine and website.

Defendants sought for statutory safe harbors from copyright infringement liability under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. §512, and from liability for state law unfair competition, false advertising claims, and right of publicity based on § 230 of the Communications Decency Act (CDA), 47 U.S.C. § 230(c)(1).

In favor of CCBill and CWIE, the district court found the following: Based on the DMCA, the district court found that CCBill and CWIE qualified for certain statutory safe harbors from copyright infringement liability. The court also found that they are immune from liability for state law unfair competition and false advertising claims under the CDA.

In favor of Perfect 10, the district court found the following: The district court found that the defendants violated Perfect 10’s publicity right. Defendants were ordered to pay for Perfect 10’s costs and attorney’s fees under the Copyright Act.

Appeal to the Court of Appeals: Both parties appealed to the United States Court of Appeals for the Ninth Circuit against the above holdings. The Court of Appeals affirmed in part, reversed in part, and remanded to the District Court.

It held the following: (1) Internet service provider (ISP) “implements” a policy, as required to be eligible for safe harbor under Digital Millennium Copyright Act (DMCA), if it has working notification system, procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications; (2) some empty fields in notice spreadsheet column, labeled “Webmasters [sic] Name,” did not establish that repeat infringer policy had been unreasonably implemented; (3) publisher did not provide effective notice of infringement; (4) notices of infringement by other copyright holders, and continued provision of services for websites that infringed non-party copyrights, were relevant to issue of whether repeat infringer policy had been unreasonably implemented; (5) defendants did not have to determine if photographs actually were legal to benefit from repeat infringer policy safe harbor; (6) hosting of password-hacking websites is not a per se “red flag” of infringement; (7) “red flags” raised by third-parties identifying repeat infringers who were not terminated were relevant to issue of whether repeat infringer policy had been unreasonably implemented; and (8) district court had to determine whether access to website was “standard technical measure.”

ANALYSIS OF COURT’S DECISION:

Safe Harbors: The DMCA established certain safe harbors to “provide protection from liability for: transitory digital network communications; system caching; information residing on systems or networks at the direction of users; and information location tools.” (17 U.S.C §§ 512(a)-(d)). However, Perfect 10 alleged that defendants did not qualify for safe harbor protection for various reasons.

Reasonably Implemented Policy: A service provide must satisfy a series of conditions per 17 U.S.C § 512(i) in order to be eligible for any of the four safe harbors. One such condition requires that it adopt and reasonably implement a policy that will terminate users who are repeat infringers in appropriate circumstances.

“Implementation”: The Court of Appeals affirmed the district court’s decision that CCBill and CWIE did implement a repeat infringer policy. The court found that defendants largely kept track of the webmaster for each website.

“Reasonableness”: 17 U.S.C §§ 512(c)(3) protects service providers from monetary liability if it does not know of infringement, or if it acts “expeditiously to remove, or disable access to, the material” when it has actual knowledge, is aware of facts or circumstances from which infringing activity is apparent, or has received notification of claimed infringement meeting a list of requirements outlining the elements should be included in a notification. Perfect 10 claims that defendants unreasonably implemented their repeat infringer policies by tolerating flagrant and blatant copyright infringement by its users despite notice of infringement from P10, notice of infringement from other copyright holders, and “red flags” of copyright infringement. However, both courts found that plaintiff’s arguments regarding repeat infringer policies and notified infringements were not tenable.

Red Flag Test: A service provide may lose safe harbor immunity if it fails to take action when it is aware of the infringing activity because the activity is apparent (§ 512(c)(1)(A)(ii)).

Perfect 10 asserted that CCBill and CWIE were aware of a number of “red flags” that signaled apparent infringement. Plaintiff claimed that defendants provided services to websites with names like illegal.net and stolencelebritypics.com or disclaimers that suggest apparent infringement.

However, the Court of Appeals found against Perfect 10’s claim, stating that there was no “red flag” of infringement.

Remanded Issues: The Ninth Circuit found that evidence of noticed and “red flags” raised by third parties other than Perfect 10 were relevant. They therefore remanded to the district court the issue of whether CCBill and/or CWIE responded to notices appropriately and whether they implemented its repeat infringer policy in an unreasonable manner in other cases.

Standard Technical Measures: Plaintiff Perfect 10 claimed that CCBill violated standard technical measures by blocking Perfect 10’s access to certain websites in order to prevent Perfect 10 from discovering copyright infringement. Plaintiff also claims that as a result of this interference with standard technical measures, CCBill does not qualify for the safe harbor protection per (§ 512(i)(1)(B).

The Court of Appeals was not able to establish whether this action is a standard technical measure and remanded to the district court.

§ 512(a) – Transitory Digital Network Communications: §512(a) allows safe harbor protection for service providers who offer “the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.” The court states that the information and proof of payment conveyed by CCBill are indeed “digital online communications.”

However, because the Appellate Court could not conclude whether or not CCBill is a service provider under §512(a), it remanded this issue to the district court.

§512(d) – Information Location Tools: § 512(d) states that service providers are protected against copyright infringement by reason of referring or linking users to an online location containing infringing material or infringing activity by using information location tools, including hypertext link. Defendant CCBill argued that it was protected by this safe harbor because it showed a hyperlink to provide access to the user to access the client website at the end of the consumer transaction.

Nonetheless, because most of CCBill’s functions fall outside providing information location services, the court decided that CCBill should not qualify for the §512(d) safe harbor. §512(c) – Information Residing on Systems or Networks at the Direction of Users: §512(c) limits liability for claims of infringement for storage. Here, the court found that defendant CWIE is entitled to safe harbor protection if the district court finds that CWIE meets the threshold requirements stated in §512(i).

Communications Decency Act (CDA): While this act grants federal immunity to providers of interactive computer services (like CWIE), it does not protect against violations of “intellectual property” for federal intellectual property, not state regimes, as is the case here.

The court found that CDA immunity applies to CCBill and CWIE, and there are therefore eligible for CDA immunity for all claims raised against them by Perfect 10.

Direct Copyright Infringement: Perfect 10 asserted that defendant directly infringed its copyright through its website. Even though defendants argued that they did not have an interest in the website, some evidence suggested that they may be involved more deeply.

Therefore, the Court of Appeals remanded the issue to the district court.