Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

In Perfect 10 decision, court may have given support to Google

Posted by Richard Koman - April 13, 2007

Via Denise Howell's Lawgarithms, a recent Ninth Circuit decision may bode well for Google in its suit with Viacom. The decision in Perfect 10 v CCBill (PDF) makes it harder for a copyright owner to sue a service provider for the presence of copyright-infringing material.

The decision speaks to the safe harbor provisions in both the DMCA (Digital Millenium Copyright Act) and the Communications Decency Act Section 230. In this case, porn site Perfect 10 was suing a company which provided webhosting services (CWIE) and subscription billing services (CCBill). Allegedly, some of CWIE's webmaster customers were serving up images swiped from Perfect 10.

CWIE/CCBill naturally asserted the safe harbor protections of the DMCA and CDA and the key point in the decision centered on whether CWIE lost the protection of the safe harbors by "receiving a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity." (DMCA, Section 512(c)(1)(B))

The court ruled that the standard for "direct financial benefit" should be the same as for the common law standard for vicarious copyright liability (which really is what Perfect 10 is asserting). In Ellison v. Robertson (357 F.3d 1072) (PDF), the Ninth Circuit held "direct financial benefit" occurs when "the infringing activity constitutes a draw for subscribers, not just an added benefit" and the infringer has the "right and ability to supervise" infringng activities.

By this standard, the court holds that CWIE did not get a "direct financial benefit" because the ability to host infringing material was not a "draw" to their service. Congress, the court says, was quite explicit that the mere fact that a service provider collects fees from infringing users "would not constitute a financial benefit directly attributable to the infringing activity."

A good chunk of the rest of the decision centers on whether CWIE had set up reasonable mechanisms for responding to take-down notices and removing repeat offenders - and whether Perfect 10 delivered adequate take-down notices. In general the court rules that the take-down notice must meet fairly precise rules and that CWIE didn't get the "red flags" that would have compelled them to act against offenders. All in all, a pretty pro-ISP decision.


So how does this apply to Viacom v Google? First of all that case was filed in New York, not San Francisco so this case isn't directly applicable. It does suggest a line of reasoning that the 2nd Circuit should address, however: that so long as infringing material is not YouTube's primary "draw" but just an "added benefit," Google will be protected under the safe harbors. Will the 2nd Circuit buy this? And if they do, will the Supreme Court buy it? Let's turn to the commentators:

Denise Howell:

The "direct financial benefit" exemption is one of the most crucial legal points at issue in Viacom v. YouTube, and here we have the Ninth Circuit saying that if the presence of infringing material is merely an "added benefit" and not a primary draw, a defendant should be immune under the DMCA from liability for the infringing acts of others. As a practical matter, this requires parties and courts to classify and quantify the role of the infringing material, and thus imports a Sony v. Universal/substantial noninfringing use-esque anlaysis into interpreting and applying the DMCA. Advantage YouTube/Google — though the Second Circuit (where Viacom v. YouTube is pending) is well known for departing from the reasoning of the Ninth.

Jason Schultz:

#4 Perhaps most importantly, the Court found that copyright holders who send DMCA notices must "substantially comply" with all six requirements under Section 512(c)(3)(A) in order to trigger the take-down procedures under the Safe Harbors. In other words, if a DMCA notice fails to substantially comply with the requirements, the ISP/Provider can ignore the notice. This applies to each notice individually and cannot be satisfied by separate notices over time that cobble together all the relevant information.

#5 A great quote for why #4 is important: "Accusation of alleged infringement have drastic consequences: A user could have content removed, or may have his access terminated entirely. If the content infringes, justice has been done. But if it does not, speech protected under the First Amendment could be removed."

Eric Goldman (site may be down):

This Ninth Circuit panel clearly understood the dangers that copyright and publicity rights lawsuits pose to Internet intermediaries, and they took a number of useful steps to push back on a very aggressive plaintiff's novel but expansive theories. Kudos to them. But with two other Perfect 10 cases pending with the Ninth Circuit, I strongly suspect that the most interesting and powerful aspects of this ruling soon will be reshaped by the subsequent opinions.

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