Perfect 10, Inc. v. CCBill, LLC
Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, is a U.S. court case between a publisher of an adult entertainment magazine and the webhosting, connectivity, and payment service companies. The plaintiff Perfect 10 asserted that defendants CCBill and CWIE violated copyright, trademark, and state law violation of right of publicity laws, unfair competition, false and misleading advertising by providing services to websites that posted images stolen from Perfect 10's magazine and website. Defendants sought to invoke statutory safe harbor exemptions from copyright infringement liability under the Digital Millennium Copyright Act, 17 U.S.C. § 512, and from 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.
Facts
The plaintiff, Perfect 10, is a publisher of an adult entertainment magazine and the owner of the subscription website perfect10.com. The website features around 5,000 images of models that are created by the company that are accessible to only registered paying members. P10 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.The defendant CWIE provides webhosting and related Internet connectivity service to various websites. In particular, the company provides "ping, power and pipe" services by making sure that the server is on, power is provided to the server, and the clients are connected to the Internet via a data center connection.
The defendant CCBill provide payment services that let consumers use credit cards or checks to pay e-commerce venues.
On August 10, 2001, P10 sent letters and emails to Thomas A. Fisher, the Executive Vice-President and the designated agent to receive notices of infringement of CCBill and CWIE, claiming that the two companies' clients were infringing P10 copyrights.
Case history
On September 30, 2002, P10 filed lawsuit against the defendants alleging copyright and trademark violations, state law violation of right of publicity laws, unfair competition, false and misleading advertising, and Racketeer Influenced and Corrupt Organizations Act claims, because the defendants provided services to websites that posted stolen images from P10's magazine and website. In favor of CCBill and CWIE, based on the Digital Millennium Copyright Act, the district court found that CCBill and CWIE qualified for certain statutory safe harbors from copyright infringement liability, and they are also immune from liability for state law unfair competition and false advertising claims under the Communications Decency Act. In favor of P10, the court found the defendants violated P10's publicity right, and requested defendants to pay for P10's costs and attorney's fees under the Copyright Act.Both sides cross-appealed to the United States [Court of Appeals for the Ninth Circuit] against the above holdings.
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." -)P10 alleged that CCBill and CWIE did not qualify for the safe harbors protection for various reasons.
Reasonably implemented policy
To be eligible for any of the four safe harbors, a service provider must satisfy a series of conditions. One such condition requires the service provider to adopt and reasonably implement a policy that will terminate users who are repeat infringers in appropriate circumstances.In this case, the court further explained 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 complaints. An implementation is reasonable if, under "appropriate circumstances," the service provider terminates users who repeatedly or blatantly infringe copyright.
"Implementation"
P10 referenced a single page from CCBill and CWIE's "DMCA Log," and showed some missing webmaster names in the spreadsheet. P10 argued that CCBill and CWIE failed to keep track of repeatedly infringing webmasters, thereby preventing the implementation of their policies. However, the remainder of the log, which contains email addresses and/or names of webmasters and a chart included in the interrogatory responses, indicated that CCBill and CWIE did largely keep track of the webmaster for each website.The Ninth Circuit upheld the district court's finding that P10 had not proved CCBill's and CWIE's failure to implement a repeat infringer policy.
"Reasonableness"
Section 512 protects service provider from being liable for monetary relief 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 ).P10 claimed that CCBill and CWIE 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.
Notification requirements
The district court found that P10 did not provide notice that substantially complied with the notification requirements. Although P10 claimed that it met the requirements through a combination of sets of documents that it sent to CCBill and CWIE on three different occasions, both the district court and the Ninth Circuit found that service providers could not be expected to piece together information from separate notices. The DMCA specifically indicates that the burden of policing copyright infringement should be placed on the owners of the copyright. Both courts held that knowledge of infringement could not be imputed to CCBill or CWIE. P10's claim that CCBill and CWIE failed to reasonably implement a repeat infringer policy was also not tenable.Red flag test
A service provider may lose immunity if it fails to take action when it is aware of the infringing activity because the activity is apparent ).Perfect 10 alleged that CCBill and CWIE were aware of a number of "red flags" that signaled apparent infringement, claiming CWIE and CCBill provided services to websites with names or disclaimers that suggest apparent infringement. In addition, CWIE also possibly committed contributory infringement by hosting password-hacking websites. In contrary, the court found neither the names nor the disclaimers clearly flagged apparent infringing activity. The court argued that there might be reasons other than announcing the infringement in choosing those names, and the disclaimer in question did not make infringement apparent. In terms of the password-hacking websites, the court decided that the sites themselves did not present apparent infringement without further investigation, and service providers should not be imposed with the responsibility to determine whether the passwords enable infringement.
Remanded issues
The Ninth Circuit disagreed with the district court in declining to consider evidence of notices and "red flags" raised by third parties other than P10. The Ninth Circuit found they are relevant and remanded to the district court the determination of whether CCBill and/or CWIE responded to notices appropriately and implemented its repeat infringer policy in an unreasonable manner in other cases.Standard technical measures
P10 argued that CCBill interfered with "standard technical measures" by blocking P10's access to CCBill affiliated websites to prevent P10 from discovering copyright infringement. P10 claimed that CCBill does not qualify for the safe harbor protection because the law states a service provider that interferes with "standard technical measures" that are used to identify or protect copyrighted works is not entitled to the safe harbor ).CCBill explained that the charge card employed by P10 for the purposes of establishing access to the affiliated web sites had been declined as a matter of policy—not because the pending membership was suspected of being established for the purposes of investigation, but because the credit card account had been implicated in previous chargebacks. According to the defendants, P10's method of identifying infringement involved reversing previous charges for subscriptions, which imposed a substantial cost for CCBill.
The Ninth Circuit was unable to determine whether membership is a standard technical measure, and remanded to the district court for a determination of these claims.