The U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the district court’s rulings relating to whether defendants qualified for statutory safe harbors from copyright infringement liability under the Digital Millennium Copyright Act (DMCA). Perfect 10, Inc. v. CCBill, LLC, CWIE LLC and Netpass Systems, Inc., Case Nos. 04-57143, 57207 (9th Cir., Mar. 29, 2007) (Smith, J.).
Perfect 10, the publisher of an adult entertainment magazine and the owner of the subscription website perfect10.com, alleged that defendants violated their copyrights by providing services to websites that posted images stolen from Perfect 10’s magazine and website. Defendants provide web hosting and related Internet connectivity services to various website owners. The district court held that defendants were immune from copyright infringement liability under the DMCA safe harbor provisions.
To be eligible for any of the four safe harbors under 17 U.S.C. § 512(a) through (d), a service provider must first meet the threshold condition that it has adopted and reasonably implemented a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers. In ruling for the defendants, the district court held that a service provider "implements" a policy if it has a working notification system, a procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications. An implementation is reasonable, the district court held, if under appropriate circumstances, the service provider terminates users who repeatedly or blatantly infringe copyrights.
On appeal, Perfect 10 argued that there was a genuine issue of fact as to whether defendants prevented implementation of their policies by failing to keep track of repeatedly infringing webmasters. The only evidence offered by Perfect 10 was a single page from defendants’ DMCA log, which showed some empty fields in the column labeled "Webmasters [sic] Name." The Ninth Circuit rejected Perfect 10’s argument, finding that defendants routinely recorded most of the e-mail addresses and/or names of the webmasters in their DMCA log.
Perfect 10 also argued that defendants unreasonably implemented their repeat infringer policy by tolerating flagrant copyright infringement by its users despite notice of infringement from Perfect 10. The Court held that a service provider need not affirmatively police its users for evidence of repeat infringement and is not liable if it does not know of the infringement. A service provider is also not liable if it acts expeditiously to remove or disable access to the material after it has received notification of claimed infringement meeting the requirements of § 512 (c) (3). The Court affirmed the district court’s finding that Perfect 10 failed to provide notice that substantially complied with the requirements of the statute its "notices" did not contain a good-faith statement under penalty of perjury that the use constituted infringement. The Court further held that to comply with the statute, a notice must be a single written communication. The statute does not permit the copyright holder to post hoc cobble together an allegation of notice compliance from a series of separately defective notices.
Finally, Perfect 10 argued that defendants were aware of a number of "red flags" for infringement. Under the so-called "red flag" test, a service provider loses immunity by failing to take action when it is aware of facts or circumstances from which infringing activity is apparent. Specifically, Perfect 10 argued that the password hacking website hosted by defendants obviously infringes or contributes to infringement. The Court concluded that there was no way for a service provider to conclude that the passwords enabled infringement without trying the passwords and verifying that they enabled illegal access to copyrighted material. The Court declined to shift this burden from the copyright owner to the service provider. The Court did, however, remand for a determination of whether there were "red flags" raised by third parties that identified to defendants repeat infringers who were not terminated.
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