Perfect 10, Inc. v. Ccbill LLC

481 F.3d 751

PERFECT 10, INC., a California corporation, Plaintiff-Appellant, v. CCBILL LLC, a corporation; Cavecreek Wholesale Internet Exchange, a corporation d/b/a CWIE LLC, Defendants-Appellees, and Netpass Systems Inc., a corporation, Defendant.

Perfect 10, Inc., a California corporation, Plaintiff-Appellee, v. CCBill LLC, a corporation; Cavecreek Wholesale Internet Exchange, a corporation d/b/a CWIE LLC, Defendants-Appellants, and Netpass Systems Inc., a corporation, Defendant.

No. 04-57143.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 4, 2006.

Filed March 29, 2007.

Daniel J. Cooper, General Counsel, Perfect 10, Inc., Beverly Hills, CA, and Jeffrey N. Mausner, Berman, Mausner & Resser, A Law Corporation, Los Angeles,

CA, for the plaintiff-appellant/cross-appellee.

Jay M. Spillane, Fox & Spillane, LLP, Los Angeles, CA, and John P. Flynn, Tiffany & Bosco, P.A., Phoenix, AZ, for the defendants-appellees/cross-appellants.

Appeal from the United States District Court for the Central District of California; Lourdes G. Baird, District Judge, Presiding. D.C. No. CV-02-07624-LGB.

Before REINHARDT, KOZINSKI, M. SMITH, JR., Circuit Judges.

MILAN D. SMITH, JR., Circuit Judge.

Perfect 10, the publisher of an adult entertainment magazine and the owner of the subscription website perfect10.com, alleges that CCBill and CWIE 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. Perfect 10 appeals the district court's finding that CCBill and CWIE qualified for certain statutory safe harbors from copyright infringement liability under the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 512, and that CCBill and CWIE were immune from liability for state law unfair competition and false advertising claims based on the Communications Decency Act ("CDA"), 47 U.S.C. § 230(c)(1). CCBill and CWIE cross-appeal, arguing that the district court erred in holding that the CDA does not provide immunity against Perfect 10's right of publicity claims and in denying their requests for costs and attorney's fees under the Copyright Act.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm in part, reverse in part, and remand.

BACKGROUND

Perfect 10 is the publisher of the eponymous adult entertainment magazine and the owner of the website, perfect10.com. Perfect10.com is a subscription site where consumers pay a membership fee in order to gain access to content on the website. Perfect 10 has created approximately 5,000 images of models for display in its website and magazine. Many of the models in these images have signed releases assigning their rights of publicity to Perfect 10. Perfect 10 also holds registered U.S. copyrights for these images and owns several related, registered trademark and service marks.

CWIE provides webhosting and related Internet connectivity services to the owners of various websites. For a fee, CWIE provides "ping, power, and pipe," services to their clients by ensuring the "box" or server is on, ensuring power is provided to the server and connecting the client's service or website to the Internet via a data center connection. CCBill allows consumers to use credit cards or checks to pay for subscriptions or memberships to e-commerce venues.

Beginning August 10, 2001, Perfect 10 sent letters and emails to CCBill and CWIE stating that CCBill and CWIE clients were infringing Perfect 10 copyrights. Perfect 10 directed these communications to Thomas A. Fisher, the designated agent to receive notices of infringement. Fisher is also the Executive Vice-President of both CCBill and CWIE. Representatives of celebrities who are not parties to this lawsuit also sent notices of infringement to CCBill and CWIE. On September 30, 2002, Perfect 10 filed the present action alleging copyright and trademark violations, state law claims of violation of right of publicity, unfair competition, false and misleading advertising, as well as RICO claims.

STANDARDS OF REVIEW

We review a district court's grant of summary judgment de novo. Rossi v. Motion Picture Ass'n of Am. Inc., 391 F.3d 1000, 1002 (9th Cir.2004). "Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Leever v. Carson City, 360 F.3d 1014, 1017 (9th Cir.2004). The district court's interpretations of the Copyright Act, 17 U.S.C. § 101, et seq., are also reviewed de novo. Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004).

We review a district court's decision to grant or deny attorney's fees under the Copyright Act for abuse of discretion. Columbia Pictures Television, Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1197 (9th Cir.2001).

DISCUSSION

I. SECTION 512 SAFE HARBORS

The DMCA established certain safe harbors to "provide protection from liability for: (1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools." Ellison, 357 F.3d at 1076-77 (citing 17 U.S.C. §§ 512(a)-(d)) (footnotes omitted). These safe harbors limit liability but "do not affect the question of ultimate liability under the various doctrines of direct, vicarious, and contributory liability," Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F.Supp.2d 1146, 1174 (C.D.Cal.2002) (citing H.R. Rep. 105-551(II), at 50 (1998) ("H.R.Rep.")),¹ and "nothing in the language of § 512 indicates that the limitation on liability described therein is exclusive." CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 552 (4th Cir.2004).

A. Reasonably Implemented Policy: § 512(i)(1)(A)

To be eligible for any of the four safe harbors at §§ 512(a)-(d), a service provider must first meet the threshold conditions set out in § 512(i), including the requirement that the service provider:

[H]as adopted and reasonably implemented, and informs subscribers and account holders of the service provider's system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers.

Section 512(i)(1)(A); Ellison, 357 F.3d at 1080.

The statute does not define "reasonably implemented." We hold that a service provider "implements" a policy if it has a working notification system, a procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications. Ellison, 357 F.3d at 1080 (working notification system required); Corbis Corp. v. Amazon.com, Inc., 351 F.Supp.2d 1090, 1102-03 (W.D.Wash.2004) (must adopt procedure for dealing with notifications); In re Aimster Copyright Litig., 252 F.Supp.2d 634, 659 (N.D.Ill.2002) (policy not implemented if service provider actively blocks collection of information). The statute permits service providers to implement a variety of procedures, but an implementation is reasonable if, under "appropriate circumstances," the service provider terminates users who repeatedly or blatantly infringe copyright. See 17 U.S.C. § 512(i); Corbis, 351 F.Supp.2d at 1102.

1. "Implementation"

Perfect 10 argues that there is a genuine issue of material fact whether CCBill and CWIE prevented the implementation of their policies by failing to keep track of repeatedly infringing webmasters. The district court found that there was not, and we agree.

In Ellison, Stephen Robertson posted copies of Harlan Ellison's copyrighted short stories on Internet newsgroups available through USENET servers. 357 F.3d at 1075. Ellison asserted that America Online, Inc. ("AOL") had infringed his copyright by providing access to the USENET servers. Id. Based on evidence that AOL changed its contact email address for copyright infringement notices from copyright@aol.com to aolcopyright@ aol.com in the fall of 1999, but neglected to register the change with the U.S. Copyright Office until April 2000, we held that the district court erred in concluding on summary judgment that AOL satisfied the requirements of § 512(i). Id. at 1077. Even though Ellison did not learn of the infringing activity until after AOL had notified the U.S. Copyright Office of the correct email address, we found that "AOL allowed notices of potential copyright infringement to fall into a vacuum and go unheeded; that fact is sufficient for a reasonable jury to conclude that AOL had not reasonably implemented its policy against repeat infringers." Id. at 1080.

Similarly, the Aimster cases hold that a repeat infringer policy is not implemented under § 512(i)(1)(A) if the service provider prevents copyright holders from providing DMCA-compliant notifications. In Aimster, the district court held that Aimster did not reasonably implement its stated repeat infringer policy because "the encryption on Aimster renders it impossible to ascertain which users are transferring which files." 252 F.Supp.2d at 659. The court found that "[a]dopting a repeat infringer policy and then purposely eviscerating any hope that such a policy could ever be carried out is not an `implementation' as required by § 512(i)." Id. The Seventh Circuit affirmed, finding that Aimster did not meet the requirement of § 512(i)(1)(A) because, in part, "by teaching its users how to encrypt their unlawful distribution of copyrighted materials [Aimster] disabled itself from doing anything to prevent infringement." In re Aimster Copyright Litig., 334 F.3d 643, 655 (7th Cir.2003).

Based on Ellison and the Aimster cases, a substantial failure to record webmasters associated with allegedly infringing websites may raise a genuine issue of material fact as to the implementation of the...