Perfect 10, Inc. v. CCBill LLC

Plaintiff Perfect 10, the publisher of an adult entertainment magazine and the owner of the subscription website perfect10.com, asserted that defendants 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. Defendants asserted statutory safe harbors from (1) copyright infringement liability under the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 512, and (2) liability for state law unfair competition, false advertising claims and right of publicity based on Section 230 of the Communications Decency Act, 47 U.S.C. § 230(c)(1).

340 F. Supp. 2d 1077 (C.D. Cal. 2004)

The District Court held that defendants CCBill and CWIE qualified for the safe harbors.

DMCA: The District Court found that that plaintiff Perfect 10 did not provide notice that substantially complied with the requirements of § 512(c)(3), and thus did not raise a genuine issue of material fact as to whether defendants CCBill and CWIE reasonably implemented their repeat infringer policy (as required by § 512(i) as a threshold condition). The court declined to consider evidence of notices provided by any party other than Perfect 10, and held that CWIE was immunized by 512(c). It also held that defendant CCBill was a 512(a) service provider, by virtue of “provid[ing] a connection to the material on its clients’ websites through a system which it operates in order to provide its clients with billing services.”

Section 230: The District Court found that a state law right of publicity was an intellectual property right, and therefore not covered by Section 230.

488 F.3d 1102, Case Nos. 04-57143, 04-57207 (9th Cir. March 29, 2007)

The Ninth Circuit affirmed in part, reversed in part, and remanded back to the district court.[1]. The Court affirmed Section 230 immunity as to the unfair competition and false advertising claims, but reversed the refusal to immunize against the right of publicity claim. It also clarified a number of issues with the interpretation of the DMCA, and remanded to determine:

1. whether access to a website is a “standard technical measure” per § 512(i)(2)(A). and if so, whether CCBill interfered with that access.
2. whether CCBill and/or CWIE implemented its repeat infringer policy in an unreasonable manner with respect to any copyright holder other than Perfect 10.
3. whether third-party notices made CCBill and CWIE aware that it provided services to repeat infringers, and if so, whether they responded appropriately.
4. whether CCBill meets the requirements of § 512(a) (if the payment is a digital communication, transmitted without modification to the content of the material, or transmitted often enough that CCBill is only a transient holder. )
5. whether CCBill and CWIE directly infringed Perfect 10 copyrights by directly operating hornybees.com.

Key Holdings

The Court held that:

1. an OSP reasonably implements a DMCA § 512(i) repeat infringer 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."
2. "To identify and terminate repeat infringers, a service provider need not affirmatively police its users for evidence of repeat infringement." Moreover, "[t]he DMCA notification procedures place the burden of policing copyright infringement—identifying the potentially infringing material and adequately documenting infringement—squarely on the owners of the copyright."
3. Where the plaintiff does "not provide effective notice, knowledge of infringement may not be imputed to [defendants] based on [plaintiff's] communications."
4. "non-party notifications [are] relevant in determining whether [defendants] reasonably implemented their policy against repeat infringers"
5. a "reasonable" DMCA policy requires three things: a working notification system, a procedure for dealing with DMCA complaints, and systems that allow copyright holders to collect the information needed to issue DMCA complaints; a "reasonable" DMCA policy of terminating repeat infringers does not require provider to actively police users or site
6. knowledge of sites like "illegal.net" and "stolencelebritypics.com" and/or sites listing passwords not enough to trigger red flag knowledge
7. "direct financial benefit" should be interpreted consistent with the "similarly-worded common law standard for vicarious copyright liability" and thus the test under the Ninth Circuit's Napster ruling would be whether the infringing conduct is a "draw" for customers of the provider.
8. "Compliance is not “substantial” if the [DMCA] notice provided complies with only some of the requirements of § 512(c)(3)(A)."
9. The term “intellectual property” in Section 230 means only “federal intellectual property," and does not include state right of publicity claims.

Third party analyses are available from Eric Goldman and Jason Schultz.