United States District Court,
N.D. California.
RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation; and Bridge
Publications, Inc., a California non-profit corporation, Plaintiffs,
v.
NETCOM ON-LINE COMMUNICATION SERVICES, INC., a Delaware corporation; Dennis
Erlich, an individual; and Tom Klemesrud, an individual, dba Clearwood Data
Services, Defendants.
No. C-95-20091 RMW.
Nov. 21, 1995.
Copyright holders brought infringement action
against operator of computer bulletin board service (BBS) and Internet access
provider, seeking to hold defendants liable for copyright infringement
committed by BBS subscriber. Access provider filed motion for summary judgment,
operator filed motion for judgment on the pleadings, and holders filed motion
for preliminary injunction. The
District Court, Whyte, J., held that: (1) access
provider was not directly liable for copies that were made and stored on its
computer; (2) fact issue as to whether
access provider had knowledge of infringing
activity precluded summary judgment on contributory infringement claim; (3) access provider did not receive direct
financial benefit from infringing activity necessary to hold it vicariously
liable; (4) fact issues precluded
summary judgment on access provider's fair use defense; (5) bulletin board operator could not be held
liable on theories of direct infringement or vicarious liability; (6) holders' allegations were sufficient to
raise issue of contributory infringement on part of operator; and (7) holders were not entitled to preliminary
injunction.
Motions denied.
West Headnotes
[1] Copyrights and Intellectual Property 
51
To
establish claim of copyright infringement, plaintiff must demonstrate ownership
of valid copyright and copying of protectable expression by defendant. 17
U.S.C.A. § 501(a).
[2] Copyrights and Intellectual Property 53(1)
Act of sending message to Usenet newsgroup
which caused reproduction of portions of copyrighted works on computer bulletin
board service (BBS) operator's and Internet access provider's storage devices
created "copies" for purposes of Copyright Act; even though messages remained on operator's
and access provider's systems for at most 11 days, they were sufficiently
"fixed" to constitute recognizable copies under the Act. 17
U.S.C.A. § 101.
[3] Copyrights and Intellectual Property 77
Internet
access provider was not directly liable for unauthorized copies of copyrighted
work that were made and stored on its computer while transmitting computer
bulletin board service's (BBS) Usenet postings to and from the Internet; access provider did not take any affirmative
action that directly resulted in copying other than installing and maintaining
system whereby software automatically forwarded messages received from
subscribers onto Usenet and temporarily stored copies on its system, and its
actions were necessary to having working system for transmitting Usenet
postings to and from the Internet. 17
U.S.C.A. § 101.
[4] Copyrights
and Intellectual Property 53(1)
Storage on
defendant's system of infringing copies and retransmission to other servers is
not direct infringement by computer bulletin board service (BBS) operator of
exclusive right to reproduce work where such copies are uploaded by infringing
user. 17
U.S.C.A. § § 101, 501.
[5] Copyrights and Intellectual Property 53(1)
Internet
access provider did not violate copyright holders' exclusive rights to publicly
display copies of their works by maintaining copies of infringing computer
bulletin board messages on its server for 11 days for access by its subscribers
and Usenet neighbors, where provider did not create or control content of
information available to its subscribers, and merely provided access to
Internet, whose content was controlled by no single entity. 17
U.S.C.A.
[6] Copyrights and Intellectual Property 77
Liability for participation in copyright
infringement will be established where defendant, with knowledge of infringing
activity, induces, causes or materially contributes to infringing conduct of
another. 17
U.S.C.A. § 501.
[7] Copyrights and Intellectual Property 89(2)
Evidence
that Internet access provider, after receiving notice from copyright holders'
counsel indicating that alleged infringer had posted copies of their works on
Usenet newsgroup through the provider's system, continued to allow alleged
infringer to post messages to newsgroup and left allegedly infringing messages
on its system so that its subscribers and other Usenet servers could access
them, raised genuine issue of material fact as to whether provider knew or
should have known that copyrights had been infringed, precluding summary
judgment on claim of contributory infringement.
17
U.S.C.A. § 501(a).
[8] Copyrights and Intellectual Property 77
Internet
access provider could not be held liable for contributory copyright infringement based on infringing messages posted
on Usenet newsgroup before it received notice of infringement from copyright
holders. 17
U.S.C.A. § 501.
[9] Copyrights and Intellectual Property 77
Where
computer bulletin board service (BBS) operator cannot reasonably verify claim
of copyright infringement, either because of possible fair use defense, lack of
copyright notice on copies, or copyright holder's failure to provide necessary
documentation to show that there is likely infringement, operator's
lack of
knowledge will be found reasonable and there will be no liability for
contributory infringement for allowing continued distribution of works on its
system. 17
U.S.C.A. § 501.
[10] Copyrights and Intellectual Property 77
Where
defendant has knowledge of primary copyright infringer's infringing activities,
it will be liable if it induces, causes or materially contributes to infringing
conduct of primary infringer; such
participation must be substantial. 17
U.S.C.A. § 501.
[11] Copyrights and Intellectual Property 77
Assuming
Internet access provider was able to take simple measures to prevent future
damages to copyrighted work posted on Usenet newsgroup, provider could be
liable for contributory copyright infringement where it had knowledge of
infringing postings yet continued to aid in accomplishment of infringer's
purpose of publicly distributing postings.
17
U.S.C.A. § 501.
[12] Copyrights and Intellectual Property 77
Defendant
is liable for vicarious liability for actions of primary copyright infringer
where defendant has right and ability to control infringer's acts and receives
direct financial benefit from the infringement.
17
U.S.C.A. § 501.
[13] Copyrights and Intellectual Property 77
Unlike
contributory copyright infringement, knowledge is not element of vicarious liability. 17
U.S.C.A. § 501.
[14] Copyrights and Intellectual Property 89(2)
Evidence
raised genuine issue of material fact as to whether Internet access provider
had right and ability to exercise control over activities of its subscribers,
precluding summary judgment on vicarious liability claim in copyright
infringement case arising when computer bulletin board service (BBS) subscriber
posted infringing works on Usenet newsgroup;
evidence indicated that under informal rules and customs developed in
the Internet, access providers had duty to prevent copyright violations, and
provider prohibited copyright infringement, required its subscribers to
indemnify it for damage to third parties, and had ability to delete specific
postings. 17
U.S.C.A. § 501.
[15] Copyrights and Intellectual Property 77
Internet
access provider that charged fixed fees did not receive direct financial
benefit from computer bulletin board service (BBS) subscriber's unauthorized posting of copyrighted works on
Usenet newsgroup, and could not be held vicariously liable for copyright
infringement; there was no evidence that
infringement by subscriber in any way enhanced value of provider's services or
attracted new subscribers. 17
U.S.C.A. § 501.
[16] Copyrights and Intellectual Property 77
Holding
Internet access provider contributorily liable under Copyright Act for posting
of infringing messages on Usenet newsgroup would not violate provider's First
Amendment free speech rights. U.S.C.A.
Const.Amend. 1;
17
U.S.C.A. § 501.
[17] Copyrights and Intellectual Property 89(2)
Evidence
raised genuine issue of material fact as to whether Internet access provider's
distribution of infringing works that computer bulletin board
service
(BBS) subscriber had posted on Usenet newsgroup was fair use, precluding
summary judgment in copyright infringement case; although provider received no direct
financial benefit from acts of infringement, it knew that subscriber's use was infringing and had ability
to prevent further distribution, but failed to do so. 17
U.S.C.A. § 107.
[18] Copyrights and Intellectual Property 53.2
Mere fact
that all of work is copied is not determinative of fair use question, where
such total copying is essential given purpose of copying. 17
U.S.C.A. § 107.
[19] Copyrights and Intellectual Property 77
Operator
of computer bulletin board system (BBS) could not be held liable for direct
copyright infringement when subscriber posted infringing works on system
without authorization, absent allegations that operator took any affirmative
steps to cause copies to be made. 17
U.S.C.A. § 501.
[20] Copyrights and Intellectual Property 82
Allegations that operator of computer
bulletin board system (BBS) refused to assist copyright holders in compelling
subscriber to stop infringing postings and refused to stop receiving,
transmitting and publishing the postings after being informed by copyright
holders that such actions constituted infringement were sufficient to state
contributory infringement claim against operator. 17
U.S.C.A. § 501.
[21] Copyrights and Intellectual Property 77
Operator
of computer bulletin board system (BBS) could not be held vicariously liable
for subscriber's copyright infringement, absent claim that operator financially
benefitted from infringing postings. 17
U.S.C.A. § 501.
[22] Injunction 138.1
Party
seeking preliminary injunction may establish its entitlement to equitable
relief by showing either combination of probable success on the merits and
possibility of irreparable injury, or serious questions as to those matters and
balance of hardships tipping sharply in movant's favor; these two tests are not separate, but represent continuum of
equitable discretion whereby the greater the relative hardship to moving party,
less probability of success need be shown.
[23] Injunction 138.3
Primary
purpose of preliminary injunction is to preserve status quo pending trial on
the merits.
[24] Copyrights and Intellectual Property 85
Copyright
holders failed to show they were likely to succeed on merits of their copyright
infringement claims against Internet access provider and operator of computer
bulletin board system (BBS), based on subscriber's alleged infringing postings
on Usenet newsgroup; only viable theory
of infringement was contributory infringement, and there was little evidence
that defendants knew or should have known that subscriber was engaged in
copyright infringement of holders' works and were not entitled to fair use
defense, as they did not receive notice of
alleged infringement until after all but one of postings were completed.
[25] Constitutional Law 1554
(Formerly 92k90.1(1), 92k90(3))
There is
strong presumption against any injunction that could act as prior
restraint
on free speech. U.S.C.A.
Const.Amend. 1.
[26] Copyrights and Intellectual Property 85
First
Amendment concerns precluded grant of preliminary injunction requiring Internet
access provider and computer bulletin board system (BBS) operator to prescreen
postings for possible copyright infringement;
defendants played vital role in speech of their users, and requiring
them to prescreen postings would chill their users' speech. U.S.C.A.
Const.Amend. 1.
*1364
Helena K. Kobrin, North Hollywood, CA, Andrew
H. Wilson,
Wilson, Ryan & Campilongo, San Francisco, CA, Thomas
M. Small, Janet
A. Kobrin, Small, Larkin & Kiddé, Los
Angeles, CA, Elliot J. Abelson, Los Angeles,
CA, for Plaintiffs.
*1365 Randolf
J. Rice, Pillsbury, Madison & Sutro, San
Jose, CA, for Defendant Netcom On-Line Communication Services.
Harold
J. McElhinny, Carla
Oakley, Morrison & Foerster, San Francisco,
CA, for Defendant Dennis Erlich.
Daniel
Leipold, Hagenbaugh & Murphy, Orange, CA, for
Defendant Tom Klemesrud.
ORDER DENYING DEFENDANT NETCOM'S MOTION FOR SUMMARY JUDGMENT; DENYING
DEFENDANT KLEMESRUD'S MOTION FOR JUDGMENT ON THE PLEADINGS; AND DENYING
PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION AGAINST NETCOM AND
KLEMESRUD
WHYTE, District Judge.
This case concerns an issue of first
impression regarding intellectual property rights in cyberspace. [FN1] Specifically, this order addresses whether
the operator of a computer bulletin board service ("BBS"), and the
large Internet [FN2] access provider that allows that BBS to reach the
Internet, should be liable for copyright infringement committed by a subscriber
of the BBS.
FN1. Cyberspace is a
popular term for the world of electronic communications
over computer networks. See
Trotter Hardy, The
Proper Legal Regime for "Cyberspace,"
55 U.PITT.L.REV. 993, 994 (1994).
FN2. "The
Internet today is a worldwide entity whose nature cannot be easily or simply
defined. From a technical definition,
the Internet is the 'set of all interconnected IP networks'--the collection of
several thousand local, regional, and global computer networks interconnected
in real time via the TCP/IP Internetworking Protocol suite...." Daniel P. Dern, THE INTERNET GUIDE FOR NEW USERS
16 (1994).
One article described the Internet as
a collection of thousands of local, regional, and global
Internet Protocol networks. What it
means in practical terms is that millions of computers in schools,
universities, corporations, and other organizations are tied together via
telephone lines. The Internet enables
users to share files, search for information, send electronic mail, and log
onto remote computers. But it isn't a
program or even a particular computer resource. It remains only a means to link computer
users together.
Unlike on-line computer services such as CompuServe and
America On Line, no one runs the Internet....
No one pays for the Internet because the network itself
doesn't exist as a separate entity.
Instead various universities and organizations pay for the dedicated lines linking their
computers. Individual users may pay an
Internet provider for access to the Internet via its server.
David Bruning, Along the InfoBahn, ASTRONOMY, Vol.
23, No. 6, p. 76 (June 1995).
Plaintiffs Religious Technology Center
("RTC") and Bridge Publications, Inc.
("BPI") hold copyrights in the unpublished and published works
of L. Ron Hubbard, the late founder of the Church of Scientology ("the
Church"). Defendant Dennis Erlich ("Erlich") [FN3] is a former minister of Scientology turned vocal critic of
the Church, whose pulpit is now the Usenet newsgroup [FN4]
alt.religion.scientology ("a.r.s."), an on-line forum for discussion
and criticism of Scientology.
Plaintiffs maintain that Erlich infringed their copyrights when he
posted portions of their *1366 works on a.r.s. Erlich gained his access to the Internet
through defendant Thomas Klemesrud's ("Klemesrud's") BBS
"support.com." Klemesrud is
the operator of the BBS, which is run out of his home and has approximately 500
paying users. Klemesrud's BBS is not directly linked to the Internet, but gains
its connection through the facilities of defendant Netcom On-Line
Communications, Inc. ("Netcom"), one of the largest providers of
Internet access in the United States.
FN3. Issues of Erlich's liability were addressed in this
court's order of September 22, 1995.
That order concludes in part that a preliminary injunction against Erlich
is warranted because plaintiffs have shown a likelihood of success on their
copyright infringement claims against him.
Plaintiffs likely own valid copyrights in Hubbard's published and
unpublished works and Erlich's near-verbatim copying of substantial portions of
plaintiffs' works was not likely a fair use.
To the extent that Netcom and Klemesrud argue that plaintiffs'
copyrights are invalid and that Netcom and Klemesrud are not liable because
Erlich had a valid fair use defense, the court previously rejected these
arguments and will not reconsider them here.
FN4. The Usenet has
been described as
a worldwide community of electronic BBSs that is closely
associated with the Internet and with the Internet community. ¶
The messages in Usenet are organized into thousands of topical groups,
or "Newsgroups".... ¶ As a Usenet user, you read and contribute
("post") to your local Usenet site. Each Usenet site distributes its users'
postings to other Usenet sites based on various implicit and explicit
configuration settings, and in turn receives postings from other sites. Usenet traffic typically consists of as much
as 30 to 50 Mbytes of messages per day.
¶ Usenet is read and contributed to on a daily basis by a total
population of millions of people....
¶ There is no specific network
that is the Usenet. Usenet traffic
flows over a wide range of networks, including the Internet and dial-up phone
links.
Dern, supra, at 196-97.
After failing to convince Erlich to stop his
postings, plaintiffs contacted defendants Klemesrud and Netcom. Klemesrud responded to plaintiffs' demands
that Erlich be kept off his system by asking plaintiffs to prove that they
owned the copyrights to the works posted by Erlich. However, plaintiffs refused Klemesrud's
request as unreasonable. Netcom
similarly refused plaintiffs' request that Erlich not be allowed to gain access
to the Internet through its system.
Netcom contended that it would be impossible to prescreen Erlich's
postings and that to kick Erlich off the Internet meant kicking off the
hundreds of users of Klemesrud's BBS.
Consequently, plaintiffs named Klemesrud and Netcom in their suit
against Erlich, although only on the copyright infringement claims. [FN5]
FN5. The First
Amended Complaint ("FAC") contains three claims: (1) copyright infringement of BPI's published
literary works against all defendants;
(2) copyright infringement of RTC's unpublished confidential works against all defendants; and (3) misappropriation of RTC's trade
secrets against defendant Erlich only.
On June 23, 1995, this court heard the
parties' arguments on eight motions, three of which relate to Netcom and
Klemesrud and are discussed in this order:
(1) Netcom's motion for summary judgment; (2) Klemesrud's motion for judgment on the
pleadings; [FN6] and (3) plaintiffs' motion for a preliminary
injunction against Netcom and Klemesrud.
For the reasons set forth below, the court grants in part and denies in
part Netcom's motion for summary judgment and Klemesrud's motion for judgment
on the pleadings and denies plaintiffs' motion for a preliminary injunction.
FN6. Klemesrud
alternatively filed a motion for summary judgment, which will not be considered
at this time because Klemesrud was unavailable to be deposed in time for
plaintiffs' opposition. In a previous
order, the court struck those portions of the motion that referred to matters
outside of the pleadings.
I. NETCOM'S MOTION
FOR SUMMARY JUDGMENT OF NONINFRINGEMENT
A. Summary Judgment Standards
Because the court is looking beyond the
pleadings in examining this motion, it will
be treated as a motion for summary judgment rather than a motion to
dismiss. Grove
v. Mead School District,
753 F.2d 1528, 1532 (9th Cir.1985). Summary judgment is proper when "the
pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment as a matter
of law." Fed.R.Civ.P.
56(c).
There is a "genuine" issue of material fact only when there is
sufficient evidence such that a reasonable juror could find for the party
opposing the motion. Anderson
v. Liberty Lobby, Inc.,
477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986). Entry of summary
judgment is mandated against a party if, after adequate time for discovery and
upon motion, the party fails to make a showing sufficient to establish the
existence of an element essential to that party's case, and on which that party
will bear the burden of proof at trial. Celotex
Corp. v. Catrett,
477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The court,
however, must draw all justifiable inferences in favor of the nonmoving
parties, including questions of credibility and of the weight to be accorded
particular evidence. Masson
v. New Yorker Magazine, Inc.,
501 U.S. 496, 520, 111 S.Ct. 2419, 2434-35, 115 L.Ed.2d 447 (1991).
B. Copyright Infringement
[1] To establish a claim of copyright infringement, a
plaintiff must demonstrate (1) ownership of
a valid copyright and (2) "copying" *1367 [FN7] of
protectable expression by the defendant.
Baxter
v. MCA, Inc.,
812 F.2d 421, 423 (9th Cir.), cert. denied,
484
U.S. 954, 108 S.Ct. 346, 98 L.Ed.2d 372 (1987). Infringement occurs when a defendant
violates one of the exclusive rights of the copyright holder. 17
U.S.C. § 501(a). These rights
include the right to reproduce the copyrighted work, the right to prepare
derivative works, the right to distribute copies to the public, and the right
to publicly display the work. 17
U.S.C. § § 106(1)-(3) & (5). The court has
already determined that plaintiffs have established that they own the
copyrights to all of the Exhibit A and B works, except item 4 of Exhibit A. [FN8] The court also found plaintiffs likely to
succeed on their claim that defendant Erlich copied the Exhibit A and B works
and was not entitled to a fair use defense.
Plaintiffs argue that, although Netcom was not itself the source of any
of the infringing materials on its system, it nonetheless should be liable for
infringement, either directly, contributorily, or vicariously. [FN9] Netcom disputes these theories of
infringement and further argues that it is entitled to its own fair use
defense.
FN7. In this context,
"copying" is "shorthand for the infringing of any of the
copyright owner's five exclusive rights."
S.O.S.,
Inc. v. Payday, Inc.,
886 F.2d 1081, 1085 n. 3 (9th Cir.1989).
FN8. The court has under submission plaintiffs' request to
expand the preliminary injunction against Erlich.
FN9. Plaintiffs have
argued at times during this litigation that Netcom should only be required to
respond after being given notice, which is only relevant to contributory
infringement. Nevertheless, the court
will address all three theories of infringement liability.
1. Direct Infringement
Infringement consists of the unauthorized
exercise of one of the exclusive rights of the copyright holder delineated in section
106. 17
U.S.C. § 501. Direct infringement does not require intent
or any particular state of mind, [FN10] although
willfulness is relevant to the award of statutory damages. 17
U.S.C. § 504(c).
FN10. The strict
liability for copyright infringement is in contrast to another area of
liability affecting online service providers: defamation. Recent decisions have held that where a BBS
exercised little control over the content of the material on its service, it
was more like a "distributor" than a "republisher" and was
thus only liable for defamation on its
system where it knew or should have known of the defamatory statements. Cubby,
Inc. v. CompuServe, Inc.,
776 F.Supp. 135 (S.D.N.Y.1991). By contrast, a New York state court judge
found that Prodigy was a publisher because it held itself out to be controlling
the content of its services and because it used software to automatically
prescreen messages that were offensive or in bad taste. Stratton
Oakmont, Inc. v. Prodigy Services Co.,
1995 WL 323710, THE RECORDER, June 1, 1995, at 7
(excerpting May 24, 1995 Order Granting Partial Summary Judgment to
Plaintiffs).
Many of the facts pertaining to this motion
are undisputed. The court will address
the relevant facts to determine whether a theory of direct infringement can be
supported based on Netcom's alleged reproduction of plaintiffs' works. The
court will look at one controlling Ninth Circuit decision addressing copying in
the context of computers and two district court opinions addressing the
liability of BBS operators for the infringing activities of subscribers. The
court will additionally examine whether Netcom is liable for infringing
plaintiffs' exclusive rights to publicly distribute and display their works.
a. Undisputed Facts
The parties do not dispute the basic processes
that occur when Erlich posts his allegedly infringing messages to a.r.s. Erlich connects to Klemesrud's BBS using a telephone and a modem. Erlich then transmits his messages to
Klemesrud's computer, where they are automatically briefly stored. According to a prearranged pattern
established by Netcom's software, Erlich's initial act of posting a message to
the Usenet results in the automatic copying of Erlich's message from
Klemesrud's computer onto Netcom's computer and onto other computers on the
Usenet. In order to ease transmission
and for the convenience of Usenet users, Usenet servers maintain postings from
newsgroups for a short period of time--eleven days for Netcom's system and
three days for Klemesrud's system. Once
on Netcom's computers, messages are available to Netcom's customers and Usenet
neighbors, who may then download the messages to their *1368 own
computers. Netcom's local server makes
available its postings to a group of Usenet servers, which do the same for
other servers until all Usenet sites worldwide have obtained access to the
postings, which takes a matter of hours.
Francis Decl. ¶ 5.
Unlike some other large on-line service
providers, such as CompuServe, America Online, and Prodigy, Netcom does not
create or control the content of the information available to its subscribers. It also does not monitor messages as they
are posted. It has, however, suspended
the accounts of subscribers who violated its terms and conditions, such as
where they had commercial software in their posted files. Netcom admits that, although not currently
configured to do this, it may be possible to reprogram its system to screen postings containing particular words or
coming from particular individuals.
Netcom, however, took no action after it was told by plaintiffs that
Erlich had posted messages through Netcom's system that violated plaintiffs'
copyrights, instead claiming that it could not shut out Erlich without shutting
out all of the users of Klemesrud's BBS.
b. Creation of Fixed Copies
The Ninth Circuit addressed the question of
what constitutes infringement in the context of storage of digital information
in a computer's random access memory ("RAM"). MAI
Systems Corp. v. Peak Computer, Inc.,
991 F.2d 511, 518 (9th Cir.1993). In MAI, the Ninth Circuit upheld a
finding of copyright infringement where a repair person, who was not authorized
to use the computer owner's licensed operating system software, turned on the
computer, thus loading the operating system into RAM for long enough to check
an "error log." Id. at
518-19. Copyright protection subsists
in original works of authorship "fixed in any tangible medium of
expression, now known or later developed, from which they can be perceived,
reproduced, or otherwise communicated, either directly or with the aid of a
machine or device." 17
U.S.C. § 102
(emphasis added). A work is
"fixed" when its "embodiment in a copy ... is sufficiently
permanent or stable to permit it to be perceived, reproduced, or otherwise
communicated for a period of more than transitory duration." Id. § 101. MAI established that the loading of
data from a storage device into RAM
constitutes copying because that data stays in RAM long enough for it to be
perceived. MAI
Systems,
991 F.2d at 518.
[2] In the present case, there is no question after MAI
that "copies" were created, as Erlich's act of sending a message to
a.r.s. caused reproductions of portions of plaintiffs' works on both
Klemesrud's and Netcom's storage devices.
Even though the messages remained on their systems for at most eleven
days, they were sufficiently "fixed" to constitute recognizable
copies under the Copyright Act. See
Information Infrastructure Task Force, Intellectual Property and the
National Information Infrastructure: The
Report of the Working Group on Intellectual Property Rights 66 (1995)
("IITF Report").
c. Is Netcom Directly Liable for Making the Copies?
[3] Accepting that copies were made, Netcom argues that
Erlich, and not Netcom, is directly liable for the copying. MAI did not address the question
raised in this case: whether possessors
of computers are liable for incidental copies automatically made on their
computers using their software as part of a process initiated by a third
party. Netcom correctly distinguishes MAI
on the ground that Netcom did not take any affirmative action that directly
resulted in copying plaintiffs' works other than by installing and maintaining
a system whereby software automatically forwards messages received from
subscribers onto the Usenet, and temporarily stores copies on its system.
Netcom's actions, to the extent that they created a copy of plaintiffs' works, were necessary to having a working system for
transmitting Usenet postings to and from the Internet. Unlike the defendants in MAI, neither
Netcom nor Klemesrud initiated the copying.
The defendants in MAI turned on their customers' computers
thereby creating temporary copies of the operating system, whereas Netcom's and
Klemesrud's systems can operate without any human intervention. Thus, unlike MAI, the mere fact that
Netcom's system incidentally makes temporary copies *1369 of plaintiffs'
works does not mean Netcom has caused the copying. [FN11] The court believes
that Netcom's act of designing or implementing a system that automatically and
uniformly creates temporary copies of all data sent through it is not unlike
that of the owner of a copying machine who lets the public make copies with it. [FN12] Although some of
the people using the machine may directly infringe copyrights, courts analyze
the machine owner's liability under the rubric of contributory infringement,
not direct infringement. See, e.g., RCA
Records v. All-Fast Systems, Inc.,
594 F.Supp. 335 (S.D.N.Y.1984); 3 Melville B. Nimmer & David Nimmer,
NIMMER ON COPYRIGHT § 12.04[A][2][b], at
12-78 to -79 (1995) ("NIMMER ON COPYRIGHT"); Elkin-Koren, supra, at 363 (arguing
that "contributory infringement is more appropriate for dealing with BBS
liability, first, because it focuses attention on the BBS-users relationship
and the way imposing liability on BBS operators may shape this relationship,
and second because it better addresses the complexity of the relationship
between BBS operators and subscribers"). Plaintiffs' theory would create many
separate acts of infringement and, carried to its natural extreme, would lead
to unreasonable liability. It is not
difficult to conclude that Erlich infringes by copying a protected work onto
his computer and by posting a message to a newsgroup. However, plaintiffs'
theory further implicates a Usenet server that carries Erlich's message to
other servers regardless of whether that server acts without any human
intervention beyond the initial setting up of the system. It would also result in liability for every
single Usenet server in the worldwide link of computers transmitting Erlich's
message to every other computer. These
parties, who are liable under plaintiffs' theory, do no more *1370 than
operate or implement a system that is essential if Usenet messages are to be
widely distributed. There is no need to
construe the Act to make all of these parties infringers. Although copyright is a strict liability
statute, there should still be some element of volition or causation which is
lacking where a defendant's system is merely used to create a copy by a third
party.
FN11. One
commentator addressed the difficulty in translating copyright concepts,
including the public/private dichotomy, to the digitized environment. See Niva Elkin-Koren, Copyright
Law and Social Dialogue on the Information Superhighway: The Case Against Copyright Liability of
Bulletin Board Operators,
13 CARDOZO ARTS & ENT.L.J. 345, 390 (1995). This commentator
noted that one way to characterize a BBS operation is that it "provides
subscribers with access and services.
As such, BBS operators do not create copies, and do not transfer them in
any way. Users post the copies on the
BBS, which other users can then read or download." Id.
at 356.
FN12. Netcom
compares itself to a common carrier that merely acts as a passive conduit for
information. In a sense, a Usenet
server that forwards all messages acts like a common carrier, passively
retransmitting every message that gets sent through it. Netcom would seem no more liable than the
phone company for carrying an infringing facsimile transmission or storing an
infringing audio recording on its voice mail.
As Netcom's counsel argued, holding such a server liable would be like
holding the owner of the highway, or at least the operator of a toll booth,
liable for the criminal activities that occur on its roads. Since other similar carriers of information
are not liable for infringement, there is some basis for exempting Internet
access providers from liability for infringement by their users. The IITF Report concluded that "[i]f an
entity provided only the wires and conduits--such as the telephone company, it
would have a good argument for an exemption if it was truly in the same
position as a common carrier and could not control who or what was on its system."
IITF Report at 122. Here,
perhaps, the analogy is not completely appropriate as Netcom does more than
just "provide the wire and conduits." Further, Internet providers are not natural
monopolies that are bound to carry all the traffic that one wishes to pass
through them, as with the usual common carrier. See id. at 122 n. 392 (citing Federal
Communications Commission v. Midwest Video Corp.,
440 U.S. 689, 701, 99 S.Ct. 1435, 1442, 59 L.Ed.2d 692 (1979)). Section 111 of
the Copyright Act codifies the exemption for passive carriers who are otherwise
liable for a secondary transmission. 3
Melville B. Nimmer & David Nimmer, NIMMER ON COPYRIGHT § 12.04[B][3], at 12-99 (1995). However, the carrier must not have any
direct or indirect control over the content or selection of the primary
transmission. Id.; 17
U.S.C. § 111(a)(3). Cf. infra
part I.B.3.a. In any event, common
carriers are granted statutory exemptions for liability that might otherwise
exist. Here, Netcom does not fall under
this statutory exemption, and thus faces the usual strict liability scheme that
exists for copyright. Whether a new
exemption should be carved out for online service providers is to be resolved
by Congress, not the courts. Compare
Comment, "Online Service Providers and Copyright Law: The Need for Change," 1
SYRACUSE J.LEGIS. & POL'Y 197, 202 (1995)
(citing recommendations of online service providers for amending the Copyright
Act to create liability only where a "provider
has 'actual knowledge that a work that is being or has been transmitted onto,
or stored on, its system is infringing,' and has the 'ability and authority' to
stop the transmission, and has, after a reasonable amount of time, allowed the
infringing activity to continue' ") with IITF Report at 122
(recommending that Congress not exempt service providers from strict liability
for direct infringements).
Plaintiffs point out that the infringing
copies resided for eleven days on Netcom's computer and were sent out from it
onto the "Information Superhighway."
However, under plaintiffs' theory, any storage of a copy that occurs in
the process of sending a message to the Usenet is an infringement. While it is
possible that less "damage" would have been done if Netcom had heeded
plaintiffs' warnings and acted to prevent Erlich's message from being
forwarded, [FN13]
this is not relevant to its direct liability for copying. The same
argument is true of Klemesrud and any Usenet server. Whether a defendant makes a direct copy that
constitutes infringement cannot depend on whether it received a warning to
delete the message. See D.C.
Comics, Inc. v. Mini Gift,
912 F.2d 29, 35 (2d Cir.1990). This distinction may be relevant to
contributory infringement, however, where knowledge is an element. See infra part I.B.2.a.
FN13. The court notes, however, that stopping the distribution
of information once it is on the Internet is not easy. The decentralized network was designed so
that if one link in the chain be closed off, the information will be dynamically
rerouted through another link. This was
meant to allow the system to be used for communication after a catastrophic
event that shuts down part of it.
Francis Decl. ¶ 4.
The court will now consider two district court
opinions that have addressed the liability of BBS operators for infringing
files uploaded by subscribers.
d. Playboy Case
Playboy Enterprises, Inc. v. Frena
involved a suit against the operator of a small BBS whose system contained
files of erotic pictures. 839
F.Supp. 1552, 1554 (M.D.Fla.1993). A subscriber of the defendant's BBS had
uploaded files containing digitized pictures copied from the plaintiff's
copyrighted magazine, which files remained on the BBS for other subscribers to
download. Id. The court did not
conclude, as plaintiffs suggest in this case, that the BBS is itself liable for
the unauthorized reproduction of plaintiffs' work; instead, the court concluded that the BBS
operator was liable for violating the plaintiff's right to publicly distribute
and display copies of its work. Id.
at 1556-57.
[4] In support of their argument that Netcom is directly
liable for copying plaintiffs' works,
plaintiffs cite to the court's conclusion that "[t]here is no dispute that
[the BBS operator] supplied a product containing unauthorized copies of a
copyrighted work. It does not matter
that [the BBS operator] claims he did not make the copies [him]self." Id. at 1556. It is clear from the context of this
discussion [FN14] that the Playboy court was looking only at the
exclusive right to distribute copies to the public, where liability exists
regardless of whether the defendant makes copies. Here, however, plaintiffs do not argue that
Netcom is liable for its public distribution of copies. Instead, they claim that Netcom is liable because
its computers in fact made copies.
Therefore, the above-quoted language has no bearing on the issue of
direct liability for unauthorized reproductions. Notwithstanding Playboy's
holding that a BBS operator may be directly liable for distributing or
displaying to the public copies of protected works, [FN15] this
court holds *1371 that the storage on a defendant's system of infringing
copies and retransmission to other servers is not a direct infringement by the
BBS operator of the exclusive right to reproduce the work where such
copies are uploaded by an infringing user.
Playboy does not hold otherwise. [FN16]
FN14. The paragraph
in Playboy containing the quotation begins with a description of the
right of public distribution. Id. Further, the above
quoted language is followed by a citation to a discussion of the right of
public distribution in Jay Dratler, Jr., INTELLECTUAL PROPERTY LAW: COMMERCIAL, CREATIVE AND INDUSTRIAL PROPERTY
§ 6.01[3], at 6-15 (1991). This treatise states that "the
distribution right may be decisive, if, for example, a distributor supplies
products containing unauthorized copies of a copyrighted work but has not made
the copies itself." Id.
(citing to Williams
Electronics, Inc. v. Artic International, Inc.,
685 F.2d 870, 876 (3d Cir.1982)). In any event, the Williams holding
regarding public distribution was dicta, as the court found that the defendant
had also made copies. Id.
FN15. Given the
ambiguity in plaintiffs' reference to a violation of the right to
"publish" and to Playboy, it is possible that plaintiffs are
also claiming that Netcom infringed their exclusive right to publicly
distribute their works. The court will
address this argument infra.
FN16. The court
further notes that Playboy has been much criticized. See, e.g., L. Rose, NETLAW 91-92
(1995). The finding of direct
infringement was perhaps influenced by the fact that there was some evidence
that defendants in fact knew of the infringing nature of the works, which were
digitized photographs labeled "Playboy" and "Playmate."
A court in this district addressed the issue
of whether a BBS operator is liable for copyright infringement where it
solicited subscribers to upload files containing copyrighted materials to the
BBS that were available for others to download.
Sega
Enterprises Ltd. v. MAPHIA,
857 F.Supp. 679, 683 (N.D.Cal.1994). The defendant's "MAPHIA" BBS
contained copies of plaintiff Sega's video game programs that were uploaded by
users. Id.
at 683.
The defendant solicited the uploading of such programs and received
consideration for the right to download files.
Id. Access was given for a
fee or to those purchasing the defendant's hardware device that allowed Sega
video game cartridges to be copied. Id.
at 683-84. The court granted a
preliminary injunction against the defendant, finding that plaintiffs had shown
a prima facie case of direct and contributory infringement. Id. at 687. The court found that copies were made by unknown
users of the BBS when files were uploaded and downloaded. Id.
Further, the court found that the defendant's knowledge of the
infringing activities, encouragement, direction and provision of the facilities
through his operation of the BBS constituted contributory infringement, even
though the defendant did not know exactly when files were uploaded or
downloaded. Id. at 686-87.
This court is not convinced that Sega
provides support for a finding of direct infringement
where copies are made on a defendant's BBS by users who upload files. Although there is some language in Sega
regarding direct infringement, it is entirely conclusory:
Sega has established a prima facie case of direct
copyright infringement under 17
U.S.C. § 501. Sega has established that unauthorized
copies of its games are made when such games are uploaded to the MAPHIA
bulletin board, here with the knowledge of Defendant Scherman. These games are thereby placed on the
storage media of the electronic bulletin board by unknown users.
Id. at 686 (emphasis added). The court's reference to the "knowledge
of Defendant" indicates that the court was focusing on contributory
infringement, as knowledge is not an element of direct infringement. Perhaps, Sega's references to direct
infringement and that "copies ... are made" are to the direct
liability of the "unknown users," as there can be no contributory
infringement by a defendant without direct infringement by another. See 3 NIMMER ON COPYRIGHT § 12.04[A][3][a], at 12-89. Thus, the court finds that neither Playboy
nor Sega requires finding Netcom liable for direct infringement of
plaintiffs' exclusive right to reproduce their works. [FN17]
FN17. To the extent
that Sega holds that BBS operators are directly liable for copyright
infringement when users upload infringing works to their systems, this court
respectfully disagrees with the court's holding
for the reasons discussed above.
Further, such a holding was dicta, as there was evidence that the
defendant knew of the infringing uploads by users and, in fact, actively
encouraged such activity, thus supporting the contributory infringement
theory. Id. at 683.
f. Public
Distribution and Display?
[5] Plaintiffs allege that Netcom is directly liable for
making copies of their works. See
FAC ¶ 25. They also allege that Netcom violated their
exclusive rights to publicly display copies of their works. FAC ¶ ¶
44, 51. There are no allegations that Netcom violated plaintiffs'
exclusive right to publicly distribute their works. However, in their discussion of direct
infringement, plaintiffs insist that Netcom is liable for "maintain[ing]
copies of [Erlich's] messages on its server for eleven days for access by its
subscribers and 'USENET neighbors' " and they compare this case to the Playboy
case, which discussed *1372 the right of public distribution. Opp'n at 7. Plaintiffs also argued this
theory of infringement at oral argument.
Tr. [FN18] 5:22. Because this
could be an attempt to argue that Netcom has infringed plaintiffs' rights of
public distribution and display, the court will address these arguments.
FN18. References to
"Tr." are to the reporter's transcript of the June 23, 1995 hearing on these motions.
Playboy concluded that the defendant
infringed the plaintiff's exclusive rights to publicly distribute and display
copies of its works. 839
F.Supp. at 1556-57. The court is not entirely convinced that the
mere possession of a digital copy on a BBS that is accessible to some members
of the public constitutes direct infringement by the BBS operator. Such a holding suffers from the same problem
of causation as the reproduction argument.
Only the subscriber should be liable for causing the distribution of
plaintiffs' work, as the contributing actions of the BBS provider are automatic
and indiscriminate. Erlich could have
posted his messages through countless access providers and the outcome would be
the same: anyone with access to Usenet
newsgroups would be able to read his messages. There is no logical reason to draw a line
around Netcom and Klemesrud and say that they are uniquely responsible for
distributing Erlich's messages. Netcom
is not even the first link in the chain of distribution--Erlich had no direct
relationship with Netcom but dealt solely with Klemesrud's BBS, which used
Netcom to gain its Internet access.
Every Usenet server has a role in the distribution, so plaintiffs'
argument would create unreasonable liability.
Where the BBS merely stores and passes along all messages sent by its
subscribers and others, the BBS should not be seen as causing these works to be
publicly distributed or displayed.
Even accepting the Playboy court's
holding, the case is factually distinguishable. Unlike the BBS in that case, Netcom does not
maintain an archive of files for its users.
Thus, it cannot be said to be "suppl[ying] a product." In contrast to some of its larger
competitors, Netcom does not create or control the content of the information
available to its subscribers; it merely provides access to the Internet,
whose content is controlled by no single entity. Although the Internet consists of many
different computers networked together, some of which may contain infringing
files, it does not make sense to hold the operator of each computer liable as
an infringer merely because his or her computer is linked to a computer with an
infringing file. It would be especially inappropriate to hold liable a service
that acts more like a conduit, in other words, one that does not itself keep an
archive of files for more than a short duration. Finding such a service liable would involve
an unreasonably broad construction of public distribution and display
rights. No purpose would be served by
holding liable those who have no ability to control the information to which
their subscribers have access, even though they might be in some sense helping
to achieve the Internet's automatic "public distribution" and the
users' "public" display of files.
g. Conclusion
The court is not persuaded by plaintiffs'
argument that Netcom is directly liable for
the copies that are made and stored on its computer. Where the infringing subscriber is clearly directly
liable for the same act, it does not make sense to adopt a rule that could lead
to the liability of countless parties whose role in the infringement is nothing
more than setting up and operating a system that is necessary for the
functioning of the Internet. Such a
result is unnecessary as there is already a party directly liable for causing
the copies to be made. Plaintiffs
occasionally claim that they only seek to hold liable a party that refuses to
delete infringing files after they have been warned. However, such liability cannot be based on a
theory of direct infringement, where knowledge is irrelevant. The court does not find workable a theory of
infringement that would hold the entire Internet liable for activities that
cannot reasonably be deterred. Billions
of bits of data flow through the Internet and are necessarily stored on servers
throughout the network and it is thus practically impossible *1373 to
screen out infringing bits from noninfringing bits. Because the court cannot see any meaningful
distinction (without regard to knowledge) between what Netcom did and what
every other Usenet server does, the court finds that Netcom cannot be held
liable for direct infringement. Cf.
IITF Report at 69 (noting uncertainty regarding whether BBS operator should be
directly liable for reproduction or distribution of files uploaded by a
subscriber). [FN19]
FN19. Despite that uncertainty, the IITF Report recommends a
strict liability paradigm for BBS operators.
See IITF Report at 122-24.
It recommends that Congress not exempt on-line service providers from
strict liability because this would prematurely deprive the system of an
incentive to get providers to reduce the damage to copyright holders by
reducing the chances that users will infringe by educating them, requiring
indemnification, purchasing insurance, and, where efficient, developing
technological solutions to screening out infringement. Denying strict liability in many cases would
leave copyright owners without an adequate remedy since direct infringers may
act anonymously or pseudonymously or may not have the resources to pay a
judgment. Id.; see also Hardy, supra.
2. Contributory Infringement
[6] Netcom is not free from liability just because it did not
directly infringe plaintiffs' works; it
may still be liable as a contributory infringer. Although there is no statutory rule of
liability for infringement committed by others,
[t]he absence of such express language in the copyright
statute does not preclude the imposition of liability for copyright
infringement on certain parties who have not themselves engaged in the
infringing activity. For vicarious liability
is imposed in virtually all areas of the law, and the concept of contributory infringement is merely
a species of the broader problem of identifying the circumstances in which it
is just to hold one individual accountable for the actions of another.
Sony
Corp. v. Universal City Studios, Inc.,
464 U.S. 417, 435, 104 S.Ct. 774, 785, 78 L.Ed.2d 574 (1984) (footnote omitted).
Liability for participation in the infringement will be established
where the defendant, "with knowledge of the infringing activity, induces,
causes or materially contributes to the infringing conduct of
another." Gershwin
Publishing Corp. v. Columbia Artists Management, Inc.,
443 F.2d 1159, 1162 (2d Cir.1971).
a. Knowledge of Infringing Activity
[7] Plaintiffs insist that Netcom knew that Erlich was
infringing their copyrights at least after receiving notice from plaintiffs'
counsel indicating that Erlich had posted copies of their works onto a.r.s.
through Netcom's system. Despite this
knowledge, Netcom continued to allow Erlich to post messages to a.r.s. and left
the allegedly infringing messages on its system so that Netcom's subscribers
and other Usenet servers could access them.
Netcom argues that it did not possess the necessary type of knowledge
because (1) it did not know of Erlich's planned infringing activities when it
agreed to lease its facilities to Klemesrud, (2) it did not know that Erlich
would infringe prior to any of his postings, (3) it is unable to screen out
infringing postings before they are made, and (4) its knowledge of the
infringing nature of Erlich's postings was
too equivocal given the difficulty in assessing whether the registrations were
valid and whether Erlich's use was fair.
The court will address these arguments in turn.
[8] Netcom cites cases holding that there is no contributory
infringement by the lessors of premises that are later used for infringement
unless the lessor had knowledge of the intended use at the time of the signing
of the lease. See, e.g. Deutsch
v. Arnold,
98 F.2d 686, 688 (2d Cir.1938). [FN20] The contribution to the infringement by the
defendant in Deutsch was merely to lease use of the premises to the
infringer. Here, Netcom not only leases
space but also serves as an access provider, which includes the storage and
transmission of information necessary to facilitate*1374 Erlich's postings
to a.r.s. Unlike a landlord, Netcom
retains some control over the use of its system. See infra part I.B.3.a. Thus, the relevant time frame for knowledge
is not when Netcom entered into an agreement with Klemesrud. It should be when Netcom provided its
services to allow Erlich to infringe plaintiffs' copyrights. Cf. Screen
Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc.,
256 F.Supp. 399, 403 (S.D.N.Y.1966) (analyzing
knowledge at time that defendant rendered its particular service). It is undisputed that Netcom did not know
that Erlich was infringing before it received notice from plaintiffs. Netcom points out that the alleged instances
of infringement occurring on Netcom's system all happened prior to December 29,
1994, the date on which Netcom first
received notice of plaintiffs' infringement claim against Erlich. See Pisani Feb. 8, 1995 Decl., ¶ 6 & Exs. (showing latest posting made on
December 29, 1994); McShane Feb. 8, 1995
Decl.; FAC ¶ ¶ 36-38 & Ex. I. Thus, there is no question of fact as to
whether Netcom knew or should have known of Erlich's infringing activities that
occurred more than 11 days before receipt of the December 28, 1994 letter.
FN20. Adopting such
a rule would relieve a BBS of liability for failing to take steps to remove
infringing works from its system even after being handed a court's order
finding infringement. This would be
undesirable and is inconsistent with Netcom's counsel's admission that Netcom
would have an obligation to act in such circumstances. Tr. 35:25; see also Tr. 42:18-42:20.
However, the evidence reveals a question of
fact as to whether Netcom knew or should have known that Erlich had infringed
plaintiffs' copyrights following receipt of plaintiffs' letter. Because Netcom was arguably participating in
Erlich's public distribution of plaintiffs' works, there is a genuine issue as
to whether Netcom knew of any infringement by Erlich before it was too late to
do anything about it. If plaintiffs can
prove the knowledge element, Netcom will be liable for contributory infringement
since its failure to simply cancel Erlich's
infringing message and thereby stop an infringing copy from being distributed
worldwide constitutes substantial participation in Erlich's public distribution
of the message. Cf. R.T. Nimmer,
THE LAW OF COMPUTER TECHNOLOGY ¶ 15.11B,
at S15-42 (2d ed. 1994) (opining that "where information service is less
directly involved in the enterprise of creating unauthorized copies, a finding
of contributory infringement is not likely").
[9] Netcom argues that its knowledge after receiving notice of
Erlich's alleged infringing activities was too equivocal given the difficulty
in assessing whether registrations are valid and whether use is fair. Although a mere unsupported allegation of
infringement by a copyright owner may not automatically put a defendant on
notice of infringing activity, Netcom's position that liability must be
unequivocal is unsupportable. While
perhaps the typical infringing activities of BBSs will involve copying
software, where BBS operators are better equipped to judge infringement, the
fact that this involves written works should not distinguish it. Where works contain copyright notices within
them, as here, it is difficult to argue that a defendant did not know that the
works were copyrighted. To require
proof of valid registrations would be impractical and would perhaps take too
long to verify, making it impossible for a copyright holder to protect his or
her works in some cases, as works are automatically deleted less than two weeks
after they are posted. The court is
more persuaded by the argument that it is beyond
the ability of a BBS operator to quickly and fairly determine when a use is not
infringement where there is at least a colorable claim of fair use. Where a BBS
operator cannot reasonably verify a claim of infringement, either because of a
possible fair use defense, the lack of copyright notices on the copies, or the
copyright holder's failure to provide the necessary documentation to show that
there is a likely infringement, the operator's lack of knowledge will be found
reasonable and there will be no liability for contributory infringement for
allowing the continued distribution of the works on its system.
Since Netcom was given notice of an
infringement claim before Erlich had completed his infringing activity, there
may be a question of fact as to whether Netcom knew or should have known that
such activities were infringing. Given the context of a dispute between a
former minister and a church he is criticizing, Netcom may be able to show that
its lack of knowledge that Erlich was infringing was reasonable. However, Netcom admits that it did not even
look at the postings once given notice and that had it looked at the copyright
notice and statements *1375 regarding authorship, it would have
triggered an investigation into whether there was infringement. Kobrin June 7, 1995 Decl., Ex. H, Hoffman
Depo. At 125-128. These facts are
sufficient to raise a question as to Netcom's knowledge once it received a
letter from plaintiffs on December 29, 1994. [FN21]
FN21. The court does not see the relevance of plaintiffs'
argument that Netcom's failure to investigate their claims of infringement or
take actions against Erlich was a departure from Netcom's normal
procedure. A policy and practice of
acting to stop postings where there is inadequate knowledge of infringement in
no way creates a higher standard of care under the Copyright Act as to
subsequent claims of user infringement.
b. Substantial
Participation
[10] Where a defendant has knowledge of the primary infringer's
infringing activities, it will be liable if it "induces, causes or
materially contributes to the infringing conduct of" the primary
infringer. Gershwin
Publishing,
443 F.2d at 1162. Such participation must be substantial. Apple
Computer, Inc. v. Microsoft Corp.,
821 F.Supp. 616, 625 (N.D.Cal.1993), aff'd,
35
F.3d 1435 (9th Cir.1994); Demetriades
v. Kaufmann,
690 F.Supp. 289, 294 (S.D.N.Y.1988).
[11] Providing a service that allows for the automatic
distribution of all Usenet postings, infringing and noninfringing, goes well
beyond renting a premises to an infringer.
See Fonovisa,
Inc. v. Cherry Auction, Inc.,
847 F.Supp. 1492, 1496 (E.D.Cal.1994) (finding
that renting space at swap meet to known bootleggers not "substantial
participation" in the infringers' activities). It is more akin to the radio stations that
were found liable for rebroadcasting an infringing broadcast. See, e.g., Select
Theatres Corp. v. Ronzoni Macaroni Corp.,
59 U.S.P.Q. 288, 291 (S.D.N.Y.1943). Netcom allows Erlich's infringing messages
to remain on its system and be further distributed to other Usenet servers
worldwide. It does not completely
relinquish control over how its system is used, unlike a landlord. Thus, it is fair, assuming Netcom is able to
take simple measures to prevent further damage to plaintiffs' copyrighted
works, to hold Netcom liable for contributory infringement where Netcom has
knowledge of Erlich's infringing postings yet continues to aid in the
accomplishment of Erlich's purpose of publicly distributing the postings.
Accordingly, plaintiffs do raise a genuine issue of material fact as to their
theory of contributory infringement as to the postings made after Netcom was on
notice of plaintiffs' infringement claim.
3. Vicarious Liability
[12][13] Even if plaintiffs cannot prove that Netcom is
contributorily liable for its participation in the infringing activity, it may
still seek to prove vicarious infringement based on Netcom's relationship to
Erlich. A defendant is liable for
vicarious liability for the actions of a primary infringer where the defendant
(1) has the right and ability to control the infringer's acts and (2) receives
a direct financial benefit from the infringement. See Shapiro,
Bernstein & Co. v. H.L. Green Co.,
316 F.2d 304,
306 (2d Cir.1963). Unlike contributory infringement, knowledge
is not an element of vicarious liability.
3 NIMMER ON COPYRIGHT §
12.04[A][1], at 12- 70.
a. Right and Ability To Control
[14] The first element of vicarious liability will be met if
plaintiffs can show that Netcom has the right and ability to supervise the
conduct of its subscribers. Netcom
argues that it does not have the right to control its users' postings before
they occur. Plaintiffs dispute this and
argue that Netcom's terms and conditions, to which its subscribers [FN22] must
agree, specify that Netcom reserves the right to take remedial action against
subscribers. See, e.g., Francis
Depo. at 124-126. Plaintiffs argue that
under "netiquette," the informal rules and customs that have
developed on the Internet, violation of copyrights by a user is unacceptable
and the access provider has a duty take measures to prevent this; where the immediate service *1376
provider fails, the next service provider up the transmission stream must
act. See Castleman Decl. ¶
¶ 32-43. Further evidence of Netcom's right to
restrict infringing activity is its prohibition of copyright infringement and
its requirement that its subscribers indemnify it for any damage to third
parties. See Kobrin May 5, 1995
Decl., Ex. G. Plaintiffs have thus
raised a question of fact as to Netcom's right to control Erlich's use of its
services.
FN22. In this case, Netcom is even further removed from Erlich's
activities. Erlich was in a contractual
relationship only with Klemesrud.
Netcom thus dealt directly only with Klemesrud. However, it is not crucial that Erlich does
not obtain access directly through Netcom.
The issue is Netcom's right and ability to control the use of its
system, which it can do indirectly by controlling Klemesrud's use.
Netcom argues that it could not possibly
screen messages before they are posted given the speed and volume of the data
that goes through its system. Netcom
further argues that it has never exercised control over the content of its
users' postings. Plaintiffs' expert
opines otherwise, stating that with an easy software modification Netcom could
identify postings that contain particular words or come from particular
individuals. Castleman Decl. ¶ ¶ 39-43;
see also Francis Depo. at 262-63;
Hoffman Depo. at 173-74, 178. [FN23] Plaintiffs further dispute Netcom's claim
that it could not limit Erlich's access to Usenet without kicking off all 500
subscribers of Klemesrud's BBS. As
evidence that Netcom has in fact exercised its ability to police its users'
conduct, plaintiffs cite evidence that Netcom has acted to suspend subscribers'
accounts on over one thousand occasions.
See Ex. J (listing suspensions of subscribers by Netcom for
commercial advertising, posting obscene materials, and off-topic
postings). Further evidence shows that Netcom can delete specific postings. See Tr. 9:16. Whether such sanctions occurred before or
after the abusive conduct is not material to whether Netcom can exercise
control. The court thus finds that
plaintiffs have raised a genuine issue of fact as to whether Netcom has the
right and ability to exercise control over the activities of its subscribers,
and of Erlich in particular.
FN23. However,
plaintiffs submit no evidence indicating Netcom, or anyone, could design
software that could determine whether a posting is infringing.
b. Direct Financial
Benefit
[15] Plaintiffs must further prove that Netcom receives a
direct financial benefit from the infringing activities of its users. For example, a landlord who has the right
and ability to supervise the tenant's activities is vicariously liable for the
infringements of the tenant where the rental amount is proportional to the
proceeds of the tenant's sales. Shapiro,
Bernstein,
316 F.2d at 306.
However, where a defendant rents space or services on a fixed rental fee
that does not depend on the nature of the activity of the lessee, courts
usually find no vicarious liability because there is no direct financial
benefit from the infringement. See,
e.g., Roy
Export Co. v. Trustees
of Columbia University,
344 F.Supp. 1350, 1353 (S.D.N.Y.1972) (finding no
vicarious liability of university because no financial benefit from allowing
screening of bootlegged films); Fonovisa,
847 F.Supp. at 1496 (finding swap meet operators
did not financially benefit from fixed fee);
see also Kelly Tickle, Comment, The
Vicarious Liability of Electronic Bulletin Board Operators for the Copyright
Infringement Occurring on Their Bulletin Boards,
80 IOWA L.REV. 391, 415 (1995) (arguing that BBS
operators "lease cyberspace" and should thus be treated like
landlords, who are not liable for infringement that occurs on their premises).
Plaintiffs argue that courts will find a
financial benefit despite fixed fees.
In Polygram
International Publishing, Inc. v. Nevada/TIG, Inc.,
855 F.Supp. 1314, 1330-33 (D.Mass.1994), the
court found a trade show organizer vicariously liable for the infringing
performance of an exhibitor because, although the infringement did not affect
the fixed rental fee received by the organizers, the organizers benefitted from
the performances, which helped make the show a financial success. But see Artists
Music, Inc. v. Reed Publishing, Inc.,
31 U.S.P.Q.2d 1623, 1994 WL 191643, at *6 (S.D.N.Y.1994) (finding no vicarious liability for trade show organizers
where revenues not increased because of infringing music performed by
exhibitors). Plaintiffs cite two other cases where, despite fixed fees,
defendants received financial benefits from allowing groups to perform
infringing works over the radio without
having to get an ASCAP license, which minimized the defendants' expenses. See Boz
Scaggs Music v. KND Corp,
491 F.Supp. 908, 913 (D.Conn.1980); *1377Realsongs
v. Gulf Broadcasting Corp.,
824 F.Supp. 89, 92 (M.D.La.1993). Plaintiffs' cases are factually
distinguishable. Plaintiffs cannot provide any evidence of a direct financial
benefit received by Netcom from Erlich's infringing postings. Unlike Shapiro, Bernstein, and like Fonovisa,
Netcom receives a fixed fee. There is
no evidence that infringement by Erlich, or any other user of Netcom's services,
in any way enhances the value of Netcom's services to subscribers or attracts
new subscribers. Plaintiffs argue,
however, that Netcom somehow derives a benefit from its purported "policy
of refusing to take enforcement actions against its subscribers and others who
transmit infringing messages over its computer networks." Opp'n at 18. Plaintiffs point to Netcom's advertisements
that, compared to competitors like CompuServe and America Online, Netcom
provides easy, regulation-free Internet access. Plaintiffs assert that Netcom's policy
attracts copyright infringers to its system, resulting in a direct financial
benefit. The court is not convinced
that such an argument, if true, would constitute a direct financial benefit to
Netcom from Erlich's infringing activities. See Fonovisa,
847 F.Supp. at 1496 (finding no direct financial
benefit despite argument that lessees included many vendors selling counterfeit
goods and that clientele sought "bargain basement prices"). Further, plaintiffs'
argument is not supported by probative evidence. The only "evidence" plaintiffs
cite for their supposition is the declaration of their counsel, Elliot Abelson,
who states that
[o]n April 7, 1995, in a conversation regarding Netcom's
position related to this case, Randolf Rice, attorney for Netcom, informed me
that Netcom's executives are happy about the publicity it is receiving in the
press as a result of this case. Mr.
Rice also told me that Netcom was concerned that it would lose business if it
took action against Erlich or Klemesrud in connection with Erlich's
infringements.
Abelson Decl. ¶ 2.
Netcom objects to this declaration as hearsay and as inadmissible
evidence of statements made in compromise negotiations. Fed.R.Ev.
801, 408. Whether or not
this declaration is admissible, it does not support plaintiffs' argument that
Netcom either has a policy of not enforcing violations of copyright laws by its
subscribers or, assuming such a policy exists, that Netcom's policy directly
financially benefits Netcom, such as by attracting new subscribers. Because plaintiffs have failed to raise a
question of fact on this vital element, their claim of vicarious liability
fails. See Roy
Export,
344 F.Supp. at 1353.
4. First Amendment Argument
[16] Netcom argues that plaintiffs' theory of liability
contravenes the first amendment, as it would chill the use of the Internet
because every access provider or user would
be subject to liability when a user posts an infringing work to a Usenet
newsgroup. While the court agrees that
an overbroad injunction might implicate the First Amendment, see In
re Capital Cities/ABC, Inc.,
918 F.2d 140, 144 (11th Cir.1990), [FN24] imposing liability for infringement where it is
otherwise appropriate does not necessarily raise a First Amendment issue. The copyright concepts of the idea/expression
dichotomy and the fair use defense balance the important First Amendment rights
with the constitutional authority for "promot[ing] the progress of science
and useful arts," U.S.
Const. art. I, § 8, cl. 8; 1 Nimmer on
Copyright § 1.10[B], at 1-71 to
-83. Netcom argues that liability here
would force Usenet servers to perform the impossible--screening all the
information that comes through their systems.
However, the court is not convinced that Usenet servers are directly
liable for causing a copy to be made, and absent evidence of knowledge and
participation or control and direct profit, they will not be contributorily or
vicariously liable. If Usenet servers
were responsible for screening all messages coming through their systems, this
could have a serious chilling effect on what some say may turn out to be the
best public forum for free speech yet *1378 devised. See Jerry Berman & Daniel J.
Weitzner, Abundance
and User Control: Renewing the
Democratic Heart of the First Amendment in the Age of Interactive Media,
104 Yale L.J. 1619, 1624 (1995) (praising
decentralized networks for opening access to
all with no entity stifling independent sources of speech); Rose, supra, at 4. [FN25] Finally, Netcom admits
that its First Amendment argument is merely a consideration in the fair use
argument, which the court will now address.
See Reply at 24.
FN24. For example,
plaintiffs' demand that the court order Netcom to terminate Klemesrud's BBS's
access to the Internet, thus depriving all 500 of his subscribers, would be
overbroad, as it would unnecessarily keep hundreds of users, against whom there
are no allegations of copyright infringement, from accessing a means of
speech. The overbroadness is even more
evident if, as plaintiffs contend, there is a way to restrict only Erlich's
access to a.r.s.
FN25. Netcom
additionally argues that plaintiffs' theory of liability would have a chilling
effect on users, who would be liable for merely browsing infringing works. Browsing technically causes an infringing
copy of the digital information to be made in the screen memory. MAI holds that such a copy is fixed
even when information is temporarily placed in RAM, such as the screen
RAM. The temporary copying involved in
browsing is only necessary because humans cannot otherwise perceive digital
information. It is the functional
equivalent of reading, which does not implicate
the copyright laws and may be done by anyone in a library without the
permission of the copyright owner.
However, it can be argued that the effects of digital browsing are
different because millions can browse a single copy of a work in cyberspace,
while only one can read a library's copy at a time.
Absent a commercial or profit-depriving use, digital
browsing is probably a fair use; there
could hardly be a market for licensing the temporary copying of digital works
onto computer screens to allow browsing.
Unless such a use is commercial, such as where someone reads a
copyrighted work online and therefore decides not to purchase a copy from the
copyright owner, fair use is likely.
Until reading a work online becomes as easy and convenient as reading a
paperback, copyright owners do not have much to fear from digital browsing and
there will not likely be much market effect.
Additionally, unless a user has reason to know, such as
from the title of a message, that the message contains copyrighted materials,
the browser will be protected by the innocent infringer doctrine, which allows
the court to award no damages in appropriate circumstances. In any event, users should hardly worry
about a finding of direct infringement;
it seems highly unlikely from a practical matter that a copyright owner
could prove such infringement or would want to sue such an individual.
[17] Assuming plaintiffs can prove a violation of one of the
exclusive rights guaranteed in section
106, there is no infringement if the defendant's
use is fair under section 108. The
proper focus here is on whether Netcom's actions qualify as fair use, not on
whether Erlich himself engaged in fair use;
the court has already found that Erlich was not likely entitled to his
own fair use defense, as his postings contained large portions of plaintiffs'
published and unpublished works quoted verbatim with little added commentary.
Although the author has the exclusive rights
to reproduce, publicly distribute, and publicly display a copyrighted work
under section
106, these rights are limited by the defense of
"fair use." 17
U.S.C. § 107. The defense "permits and requires
courts to avoid rigid application of the copyright statute when, on occasion,
it would stifle the very creativity which that law is designed to
foster." Campbell
v. Acuff-Rose Music, Inc.,
--- U.S. ----, ----, 114 S.Ct. 1164, 1170, 127 L.Ed.2d 500 (1994) (citation omitted).
Congress has set out four nonexclusive factors to be considered in
determining the availability of the fair use defense:
(1) the purpose and character of the use, including whether
such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in
relation to the copyrighted work as a whole;
and
(4) the effect of the use upon the potential market for or
value of the copyrighted work.
17
U.S.C. § 107.
The fair use doctrine calls for a
case-by-case analysis. Campbell,
510 U.S. at ----, 114 S.Ct. at 1170. All of the factors "are to be explored,
and the results weighed together, in light of the purposes of
copyright." Id.
at ---- - ----, 114 S.Ct. at 1170-71.
a. First Factor: Purpose
and Character of the Use
The first statutory factor looks to the
purpose and character of the defendant's use.
Netcom's use of plaintiffs' works is to carry out its commercial
function as an Internet access provider.
Such a use, regardless of *1379 the underlying uses made by
Netcom's subscribers, is clearly commercial.
Netcom's use, though commercial, also benefits the public in allowing
for the functioning of the Internet and the dissemination of other creative
works, a goal of the Copyright Act. See
Sega
v. Accolade,
977 F.2d 1510, 1523 (9th Cir.1992) (holding that
intermediate copying to accomplish reverse engineering of software fair use
despite commercial nature of activity;
considering public benefit of use).
The Campbell Court emphasized that a commercial use does not
dictate against a finding of fair use, as most of the uses listed in the
statute are "generally conducted for profit
in this country." 510
U.S. at ----, 114 S.Ct. at 1174. Although Netcom gains financially from its
distribution of messages to the Internet, its financial incentive is unrelated
to the infringing activity and the defendant receives no direct financial
benefit from the acts of infringement.
Therefore, the commercial nature of the defendant's activity should not
be dispositive. Moreover, there is no easy way for a defendant like Netcom to
secure a license for carrying every possible type of copyrighted work onto the
Internet. Thus, it should not be seen
as "profit[ing] from the exploitation of the copyrighted work without
paying the customary prices." Harper
& Row, Publishers, Inc. v. Nation Enterprises,
471 U.S. 539, 562, 105 S.Ct. 2218, 2231, 85 L.Ed.2d 588 (1985). It is undisputed
that, unlike the defendants in Playboy and Sega, Netcom does not
directly gain anything from the content of the information available to its
subscribers on the Internet. See
supra part I.B.3.b. Because it does not itself provide the files or solicit
infringing works, its purpose is different from that of the defendants in Playboy
and Sega. Because Netcom's use of copyrighted materials served a
completely different function than that of the plaintiffs, this factor weighs
in Netcom's favor, see Hustler
Magazine, Inc. v. Moral Majority, Inc.,
606 F.Supp. 1526, 1535 (C.D.Cal.1985), aff'd,
796
F.2d 1148 (9th Cir.1986), notwithstanding the
otherwise commercial nature of Netcom's use.
b. Second Factor: Nature
of the Copyrighted Work
The
second factor focuses on two different aspects of the copyrighted work: whether it is published or unpublished and
whether it is informational or creative. [FN26] Plaintiffs rely on
the fact that some of the works transmitted by Netcom were unpublished and some
were arguably highly creative and original.
However, because Netcom's use of the works was merely to facilitate
their posting to the Usenet, which is an entirely different purpose than
plaintiffs' use (or, for that matter, Erlich's use), the precise nature of
those works is not important to the fair use determination. See Campbell,
510 U.S. at ----, 114 S.Ct. at 1175 (finding
creative nature of work copied irrelevant where copying for purposes of
parody); Hustler
Magazine,
606 F.Supp. at 1537; 3 NIMMER ON COPYRIGHT § 13.05[A][2][a], at 13-177 ("It is
sometimes necessary, in calibrating the fair use defense, to advert to the
defendant's usage simultaneously with the nature of the plaintiff's
work.").
FN26. A recent
report noted that a third aspect of the nature of the work may be
relevant: whether it is in digital or
analog form. IITF Report at 78. Although the copyright laws were developed
before digital works existed, they have certainly evolved to include such
works, and this court can see no reason why works should deserve less
protection because they are in digital form, especially where, as here, they
were not put in such form by plaintiffs.
c. Third Factor: Amount and
Substantiality of the Portion Used
The third factor concerns both the percentage
of the original work that was copied and whether that portion constitutes the
"heart" of the copyrighted work.
Harper
& Row,
471 U.S. at 564-65, 105 S.Ct. at 2232-33. Generally, no more of a work may be copied
than is necessary for the particular use.
See Supermarket
of Homes v. San Fernando Valley Board of Realtors,
786 F.2d 1400, 1409 (9th Cir.1986). The copying of an entire work will
ordinarily militate against a finding of fair use, although this is not a per
se rule. Sony,
464 U.S. at 449-450, 104 S.Ct. at 792-793.
[18] Plaintiffs have shown that Erlich's postings copied
substantial amounts of the originals or, in some cases, the entire works. Netcom, of course, made available to the *1380
Usenet exactly what was posted by Erlich.
As the court found in Sony, the mere fact that all of a work is
copied is not determinative of the fair use question, where such total copying
is essential given the purpose of the copying.
Id. (allowing total copying in context of time-shifting
copyrighted television shows by home viewers).
For example, where total copying was necessary to carry out the
defendants' beneficial purpose of reverse engineering software to get at the
ideas found in the source code, the court found fair use. Sega
v. Accolade,
977 F.2d at 1526-27. Here, Netcom copied no more of plaintiffs'
works than necessary to function as a Usenet
server. Like the defendant in Sega
v. Accolade, Netcom had no practical alternative way to carry out its
socially useful purpose; a Usenet server
must copy all files, since the prescreening of postings for potential copyright
infringement is not feasible. 977
F.2d at 1526.
Accordingly, this factor should not defeat an otherwise valid defense.
d. Fourth Factor: Effect
of the Use upon the Potential Market for the Work
The fourth and final statutory factor concerns
"the extent of market harm caused by the particular actions of the alleged
infringer" and " 'whether unrestricted and widespread conduct of the
sort engaged in by the defendant ... would result in a substantially adverse
impact on the potential market' for the original." Campbell,
510 U.S. at ----, 114 S.Ct. at 1177 (quoting 3
NIMMER ON COPYRIGHT § 13.05[A][4] )
(remanding for consideration of this factor). Although the results of all four
factors must be weighed together, id.
at ----, 114 S.Ct. at 1171, the fourth factor is
the most important consideration, 3 NIMMER ON COPYRIGHT § 13.05[A][4], at 13-188 to -189 (citing Harper
& Row,
471 U.S. at 566, 105 S.Ct. at 2233), 13-207
(observing that fourth factor explains results in recent Supreme Court cases).
Netcom argues that there is no evidence that
making accessible plaintiffs' works, which consist of religious scriptures and
policy letters, will harm the market for these works by preventing someone from
participating in the Scientology religion because they can view the works on
the Internet instead. Further, Netcom notes that the relevant
question is whether the postings fulfill the demand of an individual who seeks
to follow the religion's teachings, and not whether they suppress the desire of
an individual who is affected by the criticism posted by Erlich. Netcom argues that the court must focus on
the "normal market" for the copyrighted work, which in this case is
through a Scientology-based organization.
Plaintiffs respond that the Internet's extremely widespread
distribution--where more than 25 million people worldwide have
access--multiplies the effects of market substitution. In support of its motion for a preliminary
injunction against Erlich, plaintiffs submitted declarations regarding the
potential effect of making the Church's secret scriptures available over the
Internet. Plaintiffs point out that,
although the Church currently faces no competition, groups in the past have
used stolen copies of the Church's scriptures in charging for Scientology-like
religious training. See, e.g., Bridge
Publications, Inc. v. Vien,
827 F.Supp. 629, 633-34 (S.D.Cal.1993); Religious
Technology Center v. Wollersheim,
796 F.2d 1076, 1078-79 (9th Cir.1986), cert.
denied, 479
U.S. 1103, 107 S.Ct. 1336, 94 L.Ed.2d 187 (1987). This evidence raises a genuine issue as to the
possibility that Erlich's postings, made available over the Internet by Netcom,
could hurt the market for plaintiffs' works.
e. Equitable Balancing
In balancing the various factors, the court
finds that there is a question of fact as to
whether there is a valid fair use defense.
Netcom has not justified its copying plaintiffs' works to the extent
necessary to establish entitlement to summary judgment in light of evidence
that it knew that Erlich's use was infringing and had the ability to prevent
its further distribution. While copying all or most of a work will often
preclude fair use, courts have recognized the fair use defense where the
purpose of the use is beneficial to society, complete copying is necessary
given the type of use, the purpose of the use is completely different than the
purpose of the original, and there is no evidence that the use will
significantly harm the market for the original. This case is distinguishable
from those cases recognizing fair use *1381 despite total copying. In Sony, the home viewers' use was
not commercial and the viewers were allowed to watch the entire shows for free.
In Sega v. Accolade, the complete copying was necessitated to access the
unprotectable idea in the original.
Here, plaintiffs never gave either Erlich or Netcom permission to view
or copy their works. Netcom's use has
some commercial aspects. Further,
Netcom's copying is not for the purpose of getting to the unprotected idea
behind plaintiffs' works. Although
plaintiffs may ultimately lose on their infringement claims if, among other
things, they cannot prove that posting their copyrighted works will harm the
market for these works, see Religious
Technology Center v. Lerma,
897 F.Supp. 260, 263 (E.D.Va.1995) (finding fair
use defense exists where no separate market for works
because Scientologists cannot effectively use them without the Church's supervision); Religious
Technology Center v. F.A.C.T.NET, Inc.,
901 F.Supp. 1519, 1522-26 (D.Colo. September 15, 1995) (finding no showing of a potential effect on the market
for plaintiffs' works), fair use presents a factual question on which
plaintiffs have at least raised a genuine issue of fact. Accordingly, the court
does not find that Netcom's use was fair as a matter of law.
C. Conclusion
The court finds that plaintiffs have raised a
genuine issue of fact regarding whether Netcom should have known that Erlich
was infringing their copyrights after receiving a letter from plaintiffs,
whether Netcom substantially participated in the infringement, and whether
Netcom has a valid fair use defense.
Accordingly, Netcom is not entitled to summary judgment on plaintiffs'
claim of contributory copyright infringement.
However, plaintiffs' claims of direct and vicarious infringement fail.
II. KLEMESRUD'S MOTION FOR JUDGMENT ON THE PLEADINGS
A. Standards for Judgment on the Pleadings
A motion for judgment on the pleadings
pursuant to Federal
Rule of Civil Procedure 12(c) is directed at the
legal sufficiency of a party's allegations. A judgment on the pleadings is
proper when there are no issues of material fact, and the moving party is
entitled to judgment as a matter of law. General
Conference Corp. v. Seventh Day Adventist Church,
887 F.2d 228, 230 (9th Cir.1989), cert.
denied, 493
U.S. 1079, 110 S.Ct. 1134, 107 L.Ed.2d 1039 (1990); Hal
Roach Studios v. Richard Feiner & Co.,
896 F.2d 1542, 1550 (9th Cir.1989). In ruling on a motion for judgment on the
pleadings, district courts must accept all material allegations of fact alleged
in the complaint as true, and resolve all doubts in favor of the nonmoving
party. Id. The court need not
accept as true conclusory allegations or legal characterizations. Western
Mining Council v. Watt,
643 F.2d 618, 624 (9th Cir.1981). Materials submitted with the complaint may
be considered. Hal
Roach Studios,
896 F.2d at 1555. All affirmative defenses must clearly appear
on the face of the complaint. McCalden
v. California Library Ass'n,
955 F.2d 1214, 1219 (9th Cir.1990).
B. Copyright Infringement
1. Direct Infringement
[19] First, plaintiffs allege that Klemesrud directly infringed
their copyrights by "reproduc[ing] and publish[ing] plaintiffs'
works." FAC ¶ 35. The complaint alleges that "Erlich
... caused copies of [plaintiffs' works] to be published, without
authorization, on the BBS computer maintained by Klemesrud" and that
"Klemesrud's BBS computer, after receiving and storing for some period of
time the copies of the Works sent to it from Erlich, created additional copies
of the works and sent these copies to Netcom's computer." FAC ¶
34. The allegations against
Klemesrud fail for the same reason the court found that Netcom was entitled to
judgment as a matter of law on the direct infringement claim. There are no allegations that Klemesrud took
any affirmative steps to cause the copies to be made. The allegations, in fact, merely say that
"Erlich ... caused" the copies to be made and that Klemesrud's computer,
not Klemesrud himself, created additional copies. There are *1382 no allegations in the
complaint to overcome the missing volitional or causal elements necessary to
hold a BBS operator directly liable for copying that is automatic and caused by
a subscriber. See supra part
I.B.1.
2. Contributory Infringement
[20] Second, the complaint alleges that Klemesrud is
contributorily liable. FAC ¶ 35.
It further alleges that plaintiffs repeatedly objected to Klemesrud's
actions and informed him that Erlich's (and his) actions constituted
infringement. FAC ¶ 36. A
letter attached to the complaint indicates that such notice was first sent to
Klemesrud on December 30, 1994. FAC, Ex. I.
Despite the warnings, Klemesrud allegedly refused to assist plaintiffs
in compelling Erlich to stop his postings and refused to stop receiving,
copying, transmitting and publishing the postings. FAC ¶
38. To state a claim for
contributory infringement, plaintiffs must allege that Klemesrud knew or should
have known of Erlich's infringing actions at the time they occurred and yet substantially
participated by "induc[ing], caus[ing] or materially
contribut[ing] to the infringing conduct" of Erlich. Gershwin,
443 F.2d at 1162. For the reasons discussed in connection with
Netcom's motion, the court finds plaintiffs' pleadings sufficient to raise an
issue of contributory infringement.
3. Vicarious Liability
[21] The third theory of liability argued by plaintiffs,
vicarious liability, is not specifically mentioned in the complaint. Nonetheless, this theory fails as a matter
of law because there are insufficient factual allegations to support it. Plaintiffs must show that Klemesrud had the
right and ability to control Erlich's activities and that Klemesrud had a
direct financial interest in Erlich's infringement. Shapiro,
Bernstein,
316 F.2d at 306.
A letter from Klemesrud to plaintiffs' counsel states that Klemesrud
would comply with plaintiffs' request to take actions against Erlich by
deleting the infringing postings from his BBS if plaintiffs mailed him the
original copyrighted work and he found that they matched the allegedly
infringing posting. FAC, Ex. J. Plaintiffs argue that this letter indicates
Klemesrud's ability and right to control Erlich's activities on his BBS. The court finds that this letter, construed
in the light most favorable to plaintiffs, raises a question as to whether
plaintiffs can show that Klemesrud, in the operation of his BBS, could control
Erlich's activities, such as by deleting infringing postings. However, plaintiffs' failure to allege a financial benefit is fatal to their claim for
vicarious liability.
The complaint alleges that Klemesrud is in the
business of operating a BBS for subscribers for a fee. The complaint does not say how the fee is
collected, but there are no allegations that Klemesrud's fee, or any other
direct financial benefit received by Klemesrud, varies in any way with the
content of Erlich's postings. Nothing
in or attached to the complaint states that Klemesrud in any way profits from
allowing Erlich to infringe copyrights. Plaintiffs are given 30 days leave in
which to amend to cure this pleadings deficiency if they can do so in good
faith.
III. PRELIMINARY INJUNCTION AGAINST NETCOM AND KLEMESRUD
A. Legal Standards for a Preliminary Injunction
[22][23] A party seeking a preliminary injunction may establish its
entitlement to equitable relief by showing either (1) a combination of probable
success on the merits and the possibility of irreparable injury, or (2) serious
questions as to these matters and the balance of hardships tipping sharply in
the movant's favor. First
Brands Corp. v. Fred Meyer, Inc.,
809 F.2d 1378, 1381 (9th Cir.1987). These two tests are not separate, but
represent a "continuum" of equitable discretion whereby the greater
the relative hardship to the moving party, the less probability of success need
be shown. Regents
of University of California v. American Broadcasting Cos.,
747 F.2d 511, 515 (9th Cir.1984). The primary purpose of a preliminary injunction is to preserve the status quo
pending a trial on the merits. Los
Angeles Memorial Coliseum Commission v. National Football League,
634 F.2d 1197, 1200 (9th Cir.1980).
*1383 B. Likelihood of Success
[24] The court finds that plaintiffs have not met their burden
of showing a likelihood of success on the merits as to either Netcom or
Klemesrud. The only viable theory of
infringement is contributory infringement, and there is little evidence that
Netcom or Klemesrud knew or should have known that Erlich was engaged in
copyright infringement of plaintiffs' works and was not entitled to a fair use
defense, especially as they did not receive notice of the alleged infringement
until after all but one of the postings were completed. Further, their participation in the
infringement was not substantial.
Accordingly, plaintiffs will not likely prevail on their claims.
C. Irreparable Injury
The court will presume irreparable harm for
the copyright claim where plaintiffs have shown a likelihood of success on
their claims of infringement. Johnson
Controls, Inc. v. Phoenix Control Systems, Inc.,
886 F.2d 1173, 1174 (9th Cir.1989). Here, however, plaintiffs have not made an
adequate showing of likelihood of success.
More importantly, plaintiffs have not shown that the current preliminary
injunction prohibiting Erlich from infringing plaintiffs' copyrights will not
be sufficient to avoid any harm to plaintiffs'
intellectual property rights.
D. First Amendment Concerns
[25][26] There is a strong presumption against any injunction that
could act as a "prior restraint" on free speech, citing CBS,
Inc. v. Davis,
510 U.S. 1315, ---- - ----, 114 S.Ct. 912, 913-14, 127 L.Ed.2d 358 (1994) (Justice Blackmun, as Circuit Justice, staying a
preliminary injunction prohibiting CBS from airing footage of inside of meat
packing plant). Because plaintiffs seek
injunctive relief that is broader than necessary to prevent Erlich from committing
copyright infringement, there is a valid First Amendment question raised
here. Netcom and Klemesrud play a vital
role in the speech of their users.
Requiring them to prescreen postings for possible infringement would
chill their users' speech. Cf. In
re Capital Cities/ABC, Inc,
918 F.2d at 144.
E. Conclusion
Plaintiffs have not shown a likelihood of
success on the merits of their copyright claims nor irreparable harm absent an
injunction against defendants Netcom and Klemesrud. Accordingly, plaintiffs are not entitled to
a preliminary injunction.
IV. ORDER
The court denies Netcom's motion for summary
judgment and Klemesrud's motion for judgment on the pleadings, as a triable
issue of fact exists on the claim of
contributory infringement. The court
also gives plaintiffs 30 days leave in which to amend to state a claim for
vicarious liability against defendant Klemesrud, if they can do so in good
faith. Plaintiffs' application for a
preliminary injunction against defendants Netcom and Klemesrud is denied.
The parties shall appear for a case management
conference at 10:30 a.m. on Friday, January 19, 1996. The deadline for completing required
disclosures is January 5, 1996. The
joint case management conference statement must be filed by January 12, 1996.
907 F.Supp. 1361, 64 USLW 2370, 1995
Copr.L.Dec. P 27,500, 37 U.S.P.Q.2d 1545, 24 Media L. Rep. 1097
END OF
DOCUMENT