Troubling Ruling Against Web Hosting Firm: Your Liability Just Went Up

from the not-good dept

Mon, Mar 22nd 2010 8:28pm — Mike Masnick

Last year, we wrote about a troubling ruling against a web hosting firm, Akanoc, that was sued by Louis Vuitton for hosting some sites offering up counterfeit goods. We had trouble with the idea that a web host should be liable for what its users were doing, but some of the details that came out in the comment suggested that the hosting firm may have brought it upon itself by not responding to various takedown notices. Even so, the precedents set in this case are going to be applied to situations where the webhost wasn't such a bad actor, and the latest ruling in that case is especially troubling on a variety of points (you can read the full ruling as well). While the common saying is that "hard cases make bad law," at times easy cases can make bad law as well. That's because in a case like this, where it seems clear that the web host was a "bad player" it's easy to pile on the punishments, without realizing how those may get applied in other cases, with players who aren't nearly as bad.

Among the troubling aspects of this ruling, called out in Eric Goldman's analysis above, followed by my own commentary:

posting photos of counterfeit goods constitutes direct copyright infringement

Reading through the actual ruling, what happened here isn't entirely clear, but it does seem troubling. The relevant part of the ruling states:
Further, the Court rejects Defedants' contention that the digital pictures of the counterfeit goods cannot constitute "copies" under the Copyright Act because Plaintiff's copyright covers only physical goods... The Court finds no support for Defendants' position in the language of the Copyright Act, which requires only that copies of a copyrighted work be "fixed by any method now known or later developed, and from which the work can be perceived reporduced, or otherwise communicated, either directly or with the aid of a machine or device."... The digital pictures stored on Defendants' servers fall squarelty within the statutory language. To find otherwise would render protection of a copyright meaningless by permitting, for example, unauthorized digital copies of a paper photograph to be noninfringing simply because the copy is embodied in a different medium than the original work. Thus, the Court finds that the evidence was sufficient to support the jury's finding of direct copyright infringement.
But, that "example" at the end seems to be quite different. From the basic description, this isn't just a photograph of the official object, but a photograph of the counterfeit. Now, I could see how the counterfeit could be breaking trademark law, but why should a photograph of the counterfeit also be copyright infringement?
it's become vogue to challenge copyright statutory damages on constitutional grounds, but this court rejects a due process challenge against both copyright and trademark statutory damages. A Gore challenge to the ratio of actual to "punitive" damages was inapplicable to statutory damages.

Both the Jammie Thomas-Rasset case and the Joel Tenenbaum case have argued that the statutory copyright damages are unconstitutional on these grounds, using the Gore case as an example. Now the RIAA has a case to point to that says the Gore ruling isn't applicable for statutory damages. This doesn't mean that the unconstitutional claims won't fly, but the lawyers making those arguments are going to have to dig deeper to make their case.
the defendant's sole officer was personally liable for the infringements because he "had nearly complete control over Defendants' operations. He was the general manager and sole owner of the corporate Defendants....He also held the principal decision-making authority as to responding to infringement notices, and he instructed his part-time employee regarding how to respond to such notices....Moreover, he was the designated agent under the DMCA for receiving infringement notices and decided whether or not to terminate offending customers." Does this ruling imply that the person designated as the 512 agent for notice has an increased risk of personal liability...?

Indeed, this is the most troubling part of the ruling. It basically could make the designated DMCA agent for any company potentially personally liable if he screws up in dealing with DMCA takedown notices. As Goldman notes later in his post: "What sucker will agree to be a 512 agent in the future?" It might not be that bad, because the court also seems to be saying that the fact that this guy ran the company by himself was part of the issue, but even that's troubling. There's a reason that people set up corporations, and that's to protect the individuals from personal liability, even if it's just a one-person company.

Now, it may be clear that Akanoc did a number of questionable things here, but it's resulted in a bad situation where a court can make rulings applying to a likely "bad actor" that will undoubtedly be mentioned in future cases relating to actors who weren't necessarily so bad, and we may all suffer the consequences for it.

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Filed Under: copyright, dmca, liability, web hosts
Companies: akonic, louis vuitton

12 Comments

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Zaphod (profile), 22 Mar 2010 @ 8:56pm

Swap Meet Louie
Wow, busted for sellin' da swap meet louie on line.
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vilain (profile), 22 Mar 2010 @ 9:13pm

I've complained to sites selling spammer's crap
I used to complain to ISPs that hosted spammer's web sites that they were hosting this crap. Most ignored me. Some replied "So what? We (the isp) didn't spam you. And these are legitimate paying customers."

Maybe now when I email ISPs and apprize them of the risk of hosting spammer's content, they'll listen and take it down. Suing the ISP for hosting the crap is going to far. But, if you shoot 1 politician a month for being a crook, maybe the others will find another line of work or, wonder of wonders, actually be honest politician.
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Vlad (Small Business Blog), 22 Mar 2010 @ 9:15pm

Did he or he didn't?
I think the truth is in the small print:
The evidence shows that Defendants' actions of storing and distributing Plaintiff's copyrighted works on its servers on behalf of its customers are designed solely for Defendants' and its customers' financial gains.

I.e. by using the copyrighted works for their own financial gains they effectively sailed out of the safe harbor.

Of course one can never be too sure, but I guess if host operator can prove that he had no direct financial interest in operations than he is relatively safe from this kind of trouble. But, I am not a lawyer, so it's just my 2 cents.
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NAMELESS.ONE, 23 Mar 2010 @ 1:58am

haha on americans
this ruling definately dont apply in canada
we had twice a judge rule its up to a user for what he/she clicks on

ya know like crossing a street when you see loads a cars coming doesn't make much sense.

THIS just drives more web hosting out of america.
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Anonymous Coward, 23 Mar 2010 @ 5:02am

Re: Did he or he didn't?
i am sure youtubes lawyers are not liking this ruling. out of the harbor and into rough seas.
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Anonymous Coward, 23 Mar 2010 @ 5:06am

@Vlad
"I.e. by using the copyrighted works for their own financial gains they effectively sailed out of the safe harbor."

Um, I think the point is, the "copyrighted works" (photographs) were not of LouisVui products, but of the counterfeit products. So the question is, how can the counterfeiters using a photograph of their own products be copyright violation?

As Mike says, there is definitely a trademark case here, but the copyright case says that if I make red, white, and blue color-blocked shirt and take a photo of it and post it online, I'm violating Tommy Hilfiger's copyright.

For that matter, I can see the fashionista equivalent of the RIAA saying that if I take a photograph of myself wearing a Tommy Hilfiger shirt that I bought at the store without Tommy's permission, I'm violating copyright. (There was actually a case a while back about some designer having a hissy fit because the fashion press had taken pictures of his clothes at a show and was publishing them without his permission.)

So, all photographs of people must be taken without clothes against a plain white background.
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Richard (profile), 23 Mar 2010 @ 5:33am

Further, the Court rejects Defedants' contention that the digital pictures of the counterfeit goods cannot constitute "copies" under the Copyright Act because Plaintiff's copyright covers only physical goods... The Court finds no support for Defendants' position in the language of the Copyright Act, which requires only that copies of a copyrighted work be "fixed by any method now known or later developed, and from which the work can be perceived reporduced, or otherwise communicated, either directly or with the aid of a machine or device."... The digital pictures stored on Defendants' servers fall squarelty within the statutory language

On that basis photography is illegal - since just about everything you photograph is in copyright somehow or other.
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Richard (profile), 23 Mar 2010 @ 5:43am

They missed the point
Further, the Court rejects Defedants' contention that the digital pictures of the counterfeit goods cannot constitute "copies" under the Copyright Act because Plaintiff's copyright covers only physical goods... The Court finds no support for Defendants' position in the language of the Copyright Act, which requires only that copies of a copyrighted work be "fixed by any method now known or later developed, and from which the work can be perceived reporduced, or otherwise communicated, either directly or with the aid of a machine or device."... The digital pictures stored on Defendants' servers fall squarelty within the statutory language

Actually it looks like they missed the point here. Copyright only applies when the infringing item is in some sense a substitute for the original.

Now how a photograph of a Louis Vitton bag is a substitute for the original beats me.

So I guess using this argument this part of the ruling could be overturned.
a substitute for the original
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Vic, 23 Mar 2010 @ 9:23am

PICTURES of counterfeit are infringing???
I am having real big problem with that first point. posting photos of counterfeit goods constitutes direct copyright infringement? That is one ugly decision! From my experience of buying on eBay, where you can find counterfeits sold exactly AS SUCH, with pictures attached to the listings. Is that now going to be a copyright violation too?
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Kirk (profile), 23 Mar 2010 @ 11:14am

New credentialing for Judges
I propose a new Technological Aptitude Test (TAT for short). If a court filing has anything to do with the Internet, software, DRM, video games, any electronically stored information, or E-voting, the pool of selectable judges shrinks to the subset of those who understand technology. Wisdom comes with age, but so can confusion. We need to identify the wise AND Savvy.
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Managed hosting, 12 Jul 2010 @ 5:56pm

alarming
this is something that needs to be taken seriously, considering that almost everything you need is already up in the www and a lot of people have been involving themselves with it.
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techandfugly, 18 Aug 2010 @ 12:23pm

Why don't you post the photos of all the ugly rejects on this web site? Techs are so gawd-awful fuggling ugly! Why are every last one of you only 3 feet tall, bald and smelly? I vote for Eric Goldman as the absolute ugliest of the bunch! Seriously, all commenters post your photos now so we can see how your ugly faces match your ugly comments!
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