Canada: Court Finds Fung And Isohunt Liable For Inducing Copyright Infringement

A California District Court recently granted members of the Motion Pictures Association of America summary judgment in a copyright infringement action against Gary Fung and four websites operated by him, including Isohunt, one of Canada's largest BitTorrent sites.

BitTorrent is a popular Internet protocol that enables users to quickly share large software and media files. To download files using the BitTorrent protocol, users first visit an indexing site (such as Isohunt) to obtain a small pointer-file corresponding to the content they want to download. All users who have obtained the same pointer-file are then connected to a central BitTorrent tracker, which coordinates the sharing of pieces of the content files between all users until each user has a complete copy of the work.

In this case, the plaintiffs alleged that the users of Fung's websites had infringed the plaintiffs' copyright by downloading copyrighted content free of charge and without the plaintiffs' authorization. The plaintiffs contended that the defendants had facilitated their users' infringement and were liable under three secondary liability theories: inducement to infringe, material contribution to infringement, and vicarious liability. The district court premised the defendants' liability on the inducement doctrine because the "[d]efendants' inducement liability is overwhelming clear." Consequently, the court found it unnecessary to consider the other two theories.

As part of its secondary liability analysis, the court determined that it must first find direct infringement by a third party. Fung argued that, in order to establish violations of US copyright law, the plaintiffs had to provide evidence that both the transferor and the transferee were located in the US. However, the court rejected this contention, holding that the "acts of uploading and downloading are each independent grounds of copyright infringement and thus, liability." Accordingly, the plaintiffs only needed to prove that a copyrighted work was either uploaded or downloaded in the US. The court found that there was overwhelming evidence of acts of direct infringement in the US.

One interesting issue in the case was whether the US court had subject matter jurisdiction over the infringement given that Fung's four websites were hosted in Canada. The court held that it had jurisdiction based on the well-established principle in US law that, in the context of secondary liability, an actor may be liable for activity undertaken abroad that knowingly induces infringement within the US. Once a plaintiff has established that an act of infringement has taken place within the US, defendants may be held liable for conduct that constitutes inducement, material contribution, or vicarious infringement, even if the defendants' conduct took place abroad.

Addressing inducement to infringe, the district court quoted US Supreme Court Justice Souter, who said in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster that "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps to taken to foster infringement, is liable for the resulting act of infringement by other parties."

The district court went on to say that "liability may attach even if the defendant does not induce specific acts of infringement." Instead, the court can "infer [...] a patently illegal objective from statements and actions showing what [the defendant's] objective was."

In finding inducement, the court looked to the defendant's message to users, the defendant's assistance to users engaging in infringement, and the defendants' implementation of technical features promoting infringement. The court also found that the defendants' business model depended on infringing uses of copyrighted materials.

The defendants attempted, unsuccessfully, to rely on safe harbour provisions in the Digital Millennium Copyright Act (DMCA) to exclude their liability (e.g., for providers of information location tools). The court held that to rely on these defences, the defendants must satisfy three conjunctive elements:

  1. The defendant must not know or have reason to know of infringing activities or does not remove infringing materials upon receipt of such knowledge.
  2. The defendant does not profit from infringement where it has the power to control infringement.
  3. The defendant must, upon receiving notice (in the statutorily prescribed manner) from the copyright holder, remove the infringing materials.

In holding that the safe harbour provisions did not apply in this case, the court observed that:

  • The plaintiffs had established that the defendants had reason to know of their users' infringing activities and the defendants did not show otherwise.
  • The defendants did not introduce evidence that they had moved to expeditiously remove the infringing materials.
  • Fung himself engaged in unauthorized downloads of copyrighted materials, and therefore should have been aware that infringing materials were available on his websites.
  • Fung's sites contained features that displayed the top user searches, which listed numerous copyrighted works.

The court also noted that safe harbour defences "are based on passive good faith conduct aimed at a legitimate Internet business." They are not available to parties who actively induce infringement.

McCarthy Tétrault Notes:

The Isohunt case should be of particular interest to Canadians as we assess the amendments needed to our laws to enable Canadians to stem online infringements facilitated by unauthorized Canadian file-sharing sites and services. It is apparent from the court's decision that key legal doctrines played a major role in the findings of infringement. In particular, the following factors were central to the court's findings of liability:

  1. Liability for direct infringement based upon acts of uploading (e.g., making files available for distribution such as required by the World Intellectual Property Organization's (WIPO) Copyright Treaty (WCT) and Performances and Phonographs Treaty (WPPT) making-available and distribution rights), and downloading (e.g., creating reproductions of files).
  2. The existence of robust doctrines of secondary liability such as inducement.
  3. Service-provider safe harbours that (a) are narrowly tailored, (b) protect only legitimate innocent intermediaries (e.g., ISPs that do not participate in or induce infringement by users of their services), and (c) do not apply unless the service providers act responsibly and do what they can reasonably be asked to do to prevent the use of their service by repeat infringers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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