Notes & Comment
Vol. 2004, No. 6
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Websites and Copyright Infringement
After ten years of evolution (revolution?), one might think a website operator's liability for copyright infringement would be pretty clear under Internet law. Apparently not so according to a new case from the U.S. Court of Appeals for the Fourth Circuit. CoStar Group, Inc. v. LoopNet, Inc., No. 03-1911 (June 21, 2004), available at www.ca4.uscourts.gov (Opinions tab, enter case name or case number). Behind the scenes, the case was the latest battle pitting music and movie giants against large telecommunications and Internet providers.
What did LoopNet do wrong?
CoStar Group, Inc. has one of the largest databases of commercial real estate markets and properties in the US and UK, including copyrighted photographs, and makes its database available to customers over the Internet. LoopNet, Inc., an Internet service provider (ISP), offers a listing service primarily used by real estate brokers on the web. Over the years, CoStar had complained that LoopNet had posted CoStar's copyrighted photographs on its site without permission. In response, LoopNet took certain of those photographs down and established a minimal "screening" procedure designed to help keep third party copyrighted photographs off its site.
After its copyrighted photographs continued to appear on LoopNet's site, CoStar sued for infringement. The trial court granted summary judgment for LoopNet on CoStar's claim of direct copyright infringement, finding that LoopNet was a mere "passive" conduit of information posted by others across the Internet. The parties dropped their other copyright claims to focus on the direct infringement issue, and CoStar appealed. In a 2-1 decision, the Fourth Circuit affirmed.
The Copyright Infringement Issues
The copyright statute (17 U.S.C. §101, et seq .) provides liability for direct infringement, meaning the unauthorized reproduction, distribution, performance or display a copyrighted work, or the preparation of a derivative work based upon it. Under common law, one can also be liable for indirect copyright infringement by contributing to another's direct infringement or by vicariously helping another's direct infringement. Thus, there are three levels of copyright infringement liability: direct and indirect (contributory and vicarious). CoStar Group, Inc. v. LoopNet, Inc. only involved claims of direct copyright infringement by the website.
The trial court had ruled that while LoopNet's site may have included CoStar's copyrighted photographs, it was a passive ISP that did no more than carry information posted by others and was immune from liability for direct copyright infringement. Supported by several music and movie giants, CoStar argued that websites such as LoopNet should not be immune from direct liability under common law as mere “conduits” of copyrighted information. They maintained that the Digital Millennium Copyright Act (DMCA), 17 U.S.C. §512, provided the only immunity for direct infringement that LoopNet could claim. In other words, Congress granted ISPs immunity from direct copyright infringement in certain cases, and a parallel immunity to ISPs under common law is not authorized.
The Fourth Circuit disagreed. Infringement immunity enjoyed by ISPs under the DMCA -- the so-called "safe harbor" provisions for liability related to online material -- are in addition to common law (court made) immunities. When it enacted the DMCA, Congress did not take away common law immunities conferred upon "passive" ISPs in such groundbreaking copyright cases as Religious Technology Center v. Netcom On-Line Communications Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). Indeed, said the court, the DMCA's "safe harbor" for ISPs represents a "floor, not a ceiling" when it comes to defenses against direct copyright infringement liability.
When can an ISP assert common law immunity from direct copyright infringement? A direct infringer, according to CoStar Group, Inc. v. LoopNet, Inc., has been characterized as one who "trespasses" upon the copyright owner's exclusive domain. Direct infringement, therefore, requires volitional conduct by the alleged infringing website: "[t]o establish direct liability [under the copyright act], something more must be shown than mere ownership of a machine used by others to make illegal copies…The ISP in this case [LoopNet] is an analogue to the owner of a traditional copying machine whose customers pay a fixed amount per copy and operate the machine themselves to make copies. When a customer duplicates an infringing work, the owner of the copy machine is not considered a direct infringer. Similarly, an ISP who owns an electronic facility that responds automatically to users' input is not a direct infringer."
The court also held that an otherwise passive ISP's facility does not engage in the type of copying contemplated by the copyright laws: "In this way, [the ISP] functions as does a traditional telephone company when it transmits the contents of its users' conversations." The transmittal of data is too transitory, too temporary to meet the statutory requirement for “copying.”
“Gatekeeper Liability”?
If direct infringement by an ISP requires some volitional conduct, was LoopNet's screening process the type of involvement by an ISP that justified direct infringement liability? Judge Gregory, in his dissent, said that it was.
The majority disagreed. LoopNet required subscribers to twice certify that they were authorized to post photographs. LoopNet personnel then physically reviewed each such "authorized" photograph to see that it depicted commercial real estate and was not an obvious infringement (for example, that it didn't include a third party's copyright notice). Photos that passed this screening were posted on the site; those that didn't were excluded. Indeed, LoopNet began screening photographs partially in response to earlier complaints from CoStar. (In order to qualify for the DMCA's safe harbor defense, an ISP is obligated to "adopt and reasonably implement" a policy designed to exclude repeat infringers. 15 U.S.C. §512(i)(A)). Such a function, the court's majority wrote, "takes only seconds" and "is so cursory as to be insignificant" and actually works to protect others' copyrights: "In performing this gatekeeping function, LoopNet does not attempt to search out or select photographs for duplication; it merely prevents users from duplicating certain photographs." To a degree, said the court, the process was selective of content, but it was not the type of "volitional conduct" that justified imposing direct copyright infringement liability.
Summary and Conclusion
A proxy skirmish in the ongoing war between Big Media and Big Internet over Internet liability issues, CoStar Group, Inc. v. LoopNet, Inc. leaves website operators in a quandary. On the one hand, the case bolsters the common law defense for direct copyright infringement enjoyed by "passive" ISPs and solidifies the infringement defenses available to them. On the other hand, the case offers no guidance to websites about indirect contributory or vicarious copyright infringement. And while the majority applauded the ISP's limited gatekeeper function, one of three judges considered such intervention, however well intentioned (and even arguably required to qualify for DMCA protection), the type of volitional conduct necessary to find direct infringement.
CoStar Group, Inc. v. LoopNet, Inc. embraces the view that common law is still a player when ISP copyright defenses are considered; that the DMCA isn't the only game in town. Common law liability for direct infringement by a website operator requires something more than just supplying the "copy machine." And employing a "cursory" screening process to keep infringing stuff off the site may be OK, but the line separating good ISP citizen from direct ISP infringer remains murky, and the narrow 2-1 decision isn't a ringing endorsement of gatekeeping by websites. As these things go, while the case is a win for Big Internet, Big Media lives to fight another day.
© Matthew Joseph 2004. Law Offices of Matthew Joseph, San Mateo, California, practices in the areas of intellectual property licensing, commercial real estate leasing, and corporate and business transactions. No legal advice is intended by the information provided herein and recipients should independently consult counsel before taking any action related to this subject matter.