Perfect 10 Loses Yet Another Copyright Lawsuit, Once Again Losing To Giganews

from the keep-setting-good-precedents dept

As we've noted in the past, Perfect 10 appears to be a company who's entire reason for being is to set good precedents in copyright law, by filing ridiculous lawsuits and losing. So many important copyright precedents have come out of Perfect 10 cases, including ones on fair use and secondary liability. Some have argued (with fairly detailed explanations) how Perfect 10 is not a porn publisher at all, but rather a pure copyright troll that makes a living off of suing. While it seems to always lose in court, the problem is that some companies just pay up rather than fight. Back in 2011, we noted that Perfect 10 had sued Usenet provider Giganews. Earlier this year, the court smacked down Perfect 10 on a number of issues. And now, the court has done so again, handing a complete and total victory to Giganews.

First up, the claims of direct copyright infringement. Since Giganews is an intermediary, no luck there. The judge, not surprisingly, relies heavily on the famous Netcom case, which said that a bulletin board/usenet system isn't liable for "incidental copies" made automatically by the computers as part of an effort done by a third party. Here, the court notes that nothing in what Giganews does makes it directly liable. Furthermore, the judge notes that, as is all too typical of Perfect 10, even though its arguments had been rejected earlier in court, the company just repeated the same wrong argument again this time. Not surprisingly, it didn't work. The company then tried a new theory, and it didn't work either, because it just turned into Perfect 10 repeating the same already rejected arguments:

Turning to the undisputed evidence before the Court, Defendants have met their burden to establish that Perfect 10 cannot prove causation for direct infringement as a matter of law. Indeed, on identical facts (then presented as allegations, now with evidence), Judge Matz and Judge Collins already so held....

[....]

Again, a claim for direct liability requires evidence that the Defendants directly or actively caused the infringement. Perfect 10’s continued insistence that Defendants allowed its subscribers to upload, download, and view infringing material is the stuff of indirect or secondary liability, not direct liability.

Four months after Judge Matz rejected each of the arguments Perfect 10 advances in opposition to this motion, Judge Collins reaffirmed that the evidence before the Court does not support a claim for direct infringement as a matter of law.... Faced with the same allegations discussed above and now set forth in the evidence before the Court, Judge Collins again held that such allegations were insufficient as a matter of law to support a finding of direct infringement because such facts fail to support a finding of direct causation.... However, Judge Collins permitted Perfect 10’s claim for direct infringement against Giganews to proceed solely on the newly alleged theory that Giganews “plac[ed] copies of copyrighted material from various internet locations onto its own servers, and not at the request of customers ... .” ...Judge Collins expressly rejected each of Perfect 10’s other theories of direct liability.

Although Perfect 10 repeats the arguments Judge Matz and Judge Collins already rejected, the record is devoid of any evidence to support the only theory of direct liability as to Giganews that survived the pleading stage. In the operative First Amended Complaint, Plaintiff alleged on information and belief that Giganews itself, by way of its employees, had uploaded infringing Perfect 10 images to the Usenet generally or Giganews’ servers specifically.... Though Judge Collins noted this was “not the strongest set of allegations,” Judge Collins held that it was at least sufficiently plausible to pass the pleading stage in light of the fact that another website, megaupload.com, had previously been found in criminal proceedings to have uploaded massive quantities of copyrighted materials to its own servers. ... After considerable discovery, there is simply no evidence to bear out that unlikely allegation.

Rather than point to any evidence that Giganews’ employees or agents themselves uploaded, downloaded, otherwise copied, displayed, or modified any work to which Perfect 10 holds a copyright, Perfect 10 rehashes arguments already considered and rejected. Namely, Perfect 10 once again argues that Giganews personally violated Perfect 10’s copyrights by allowing users to upload content to its servers and by obtaining and sending content to other Usenet servers through the peering process. But the conduct of third party Usenet subscribers does not support a claim of direct liability as to Giganews. The conduct of third parties is relevant, if at all, to a claim of secondary infringement (contributory or vicarious), not direct infringement. And Perfect 10 fails to articulate any meaningful difference between the evidence before the Court and its allegations that Giganews “program[s] [its] servers to distribute and download infringing conduct” and that Giganews “control[s] which materials are distributed to and copied from other third party servers,” which Judge Matz held insufficient as a matter of law to support a claim of direct infringement.

Okay, moving on to the question of indirect infringement. Once again, Perfect 10's argument is a complete and total flop. The court recognizes an important distinction that is almost always ignored by copyright maximalists looking to blame any platform that has some copyright infringement happening on its platforms: that you have to show that the platform is getting a benefit from that specific infringement, not from "people using the service in general for infringement." Perfect 10, not surprisingly, fails to persuade the court here:

Although the scope “draw” need not be substantial, Perfect 10 must still prove a direct causal link between the infringing activities at issue in this case and a direct financial benefit to Giganews. This action is a specific lawsuit by a specific plaintiff against a specific defendant about specific copyrighted images; it is not a lawsuit against copyright infringement in general on the Usenet. That is to say, the “direct financial benefit” requirement demands more than evidence that customers were “drawn” to Giganews to obtain access to infringing material in general. Perfect 10 must prove with competent evidence that at least some of Giganews’ customers were “drawn” to Giganews’ services, in part, to obtain access to infringing Perfect 10 material. Despite extensive discovery (which is now closed) the record lacks (and Perfect 10 does not identify) a single piece of evidence to that effect. Even if the scope of causation is expanded to the broader category of erotic images, there is no evidence that any customer was ever “drawn” to Giganews’ Usenet offerings to obtain access to erotic images. “There is no evidence that indicates that [Giganews’] customers either subscribed because of the available infringing [Perfect 10] material or canceled subscriptions because it was no longer available. While a causal relationship might exist between [Giganews’] profits from subscriptions and the infringing activity taking place on its USENET servers, [Perfect 10] has not offered enough evidence for a reasonable juror so to conclude.”

Instead, Perfect 10 points to evidence that there is a lot of copyrighted material on the Usenet and concludes that the availability of copyrighted material in general constitutes a draw. If anything, however, Perfect 10’s evidence that the Usenet is awash in copyrighted material only supports the conclusion no reasonable juror could find a direct causal connection between infringing Perfect 10 content and Giganews’ profits. For example, if as Perfect 10 asserts, “staggering amounts of copyrighted works owned by move producers and television networks are available” on Giganews’ servers ..., what evidence is there that any Giganews subscriber purchased Giganews’ services in part because of the relatively miniscule number of Perfect 10 images available on Giganews’ servers? In short, there is none. But if the universe of infringing material on the Usenet is as broad and diverse as Perfect 10 suggests, any conclusion that subscribers were “drawn” to Giganews’ services as a result of the availability of Perfect 10 content would be pure speculation. Speculation is not evidence of causation.

Also, here's a tip: don't misrepresent the rulings of other judges in your case. Courts don't fall for it, and they don't like it:

Perfect 10 also argues that Judge Matz and Judge Collins “have already ruled that the monthly fee charged by Giganews to its users to access allegedly infringing material constituted a direct financial benefit.” ... Neither Judge Matz nor Judge Collins so held. In his order on Defendants’ first motion to dismiss, Judge Matz emphasized the importance of the procedural posture of the in holding that Perfect 10 had adequately alleged a claim for vicarious infringement.... Indeed, Judge Matz distinguished the motion to dismiss from Ellison v. Robertson, supra, and Netcom, supra, both of which involved summary judgment after an ample opportunity for discovery.... In fact, Judge Matz correctly observed that the operative question is whether there is a “causal relationship” between Perfect 10’s infringing content and Giganews’ subscription revenues.... Judge Collins adopted Judge Matz’ analysis and found that the same allegations were sufficient to advance the action past the pleadings stage. However, after full discovery, the evidence does not bear out Perfect 10’s allegations that the availability of its copyrighted content is a draw for Giganews’ customers, and summary judgment in Giganews’ favor is consistent with Judge Matz’ and Judge Collins’ liberal assessment of the sufficiency of the pleadings.

The court also (as others have before) notes that Perfect 10 seems to prefer sending confusing and incomplete DMCA notices that are not valid under the law. In fact, they often appear to be designed on purpose to make it difficult to comply, thus giving the company a reason to file a lawsuit. In this case, this harms Perfect 10 because it takes away any claim of Giganews having actual knowledge of infringing files.

As Judge Collins already observed, however, Perfect 10’s practice of sending Giganews screenshots of a newsreader window along with instructions “to conduct searches of specific names within certain newsgroups” and instructing Giganews “that all of the messages yielded by those searches on a certain date contained infringing material” ... fails to substantially comply with the requirements for a DMCA takedown notice. In order to comply with the DMCA (and therefore confer actual knowledge on the recipient), a takedown notice must identify “the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate the material.”.... (emphasis added). “The goal of this provision is to provide the service provider with adequate information to find and address the allegedly infringing material expeditiously.” ....

Perfect 10’s takedown notices, which “point[] to a list of search results, not to any material in particular,” ... obstruct this goal. As Judge Collins observed, “the material accessible through the Usenet is in a constant state of flux. As such, there is no certainty that any particular search will yield the exact same results at different times. Searches moments apart could yield different results.” .... But even if the results of such searches were consistent, Perfect 10’s search-screenshot takedown notices “requires a Usenet provider to compare its search results to Plaintiff’s search results in an onerous side-by-side, line-by-line manner” ... defeating the service provider’s ability to “find and address the allegedly infringing material expeditiously.” Viacom Int’l, Inc. v. YouTube, Inc., 940 F.Supp.2d at 115. This is particularly true where, as here, Perfect 10’s voluminous takedown notices would require a manual, line-by-line comparison of countless individual search results for each notice. And even Perfect 10’s evidence revealed that their own search-criteria method “yielded some messages that were non-infringing.” ... These aspects of Perfect 10’s takedown notices are particularly problematic because a takedown notice under the DMCA must also include “a statement that the complaining party has a good faith belief that the use of the material in the manner complaint of is not authorized by the copyright owner, its agent, or the law.”... But in the absence of any assurance that Giganews’ search results would yield results consistent with Perfect 10’s search, or that Perfect 10’s search results were limited to infringing material, it would be impossible to make that necessary representation in good faith.

In fact, the court highlights that Perfect 10's CEO Norman Zada more or less admits that he could provide Giganews with actual details of infringing content very easily, but has chosen not to.

In fact, Perfect 10’s CEO, Norma Zada recently declared under oath that, using the Message-ID extraction feature, he was able to extract the Message-IDs for 19 pages of search results.... Using that same method, Zada estimated it would take less than 15 minutes to extract the Message-ID’s for “more than 90% of the infringing Perfect 10 content that Perfect 10 is aware of on Defendant’s servers.” ... And in deposition, Zada testified it is “actually very easy for Perfect 10 to collect message IDs to put into a DMCA notice” and that Perfect 10 has now extracted Message IDs for “approximately 54,000 Perfect 10 messages,” but Perfect 10 refuses to submit a DMCA takedown notice using that information

Rather, the court notes that whenever Giganews does get Message IDs, it does, in fact, remove that content quickly, as is required. In fact, this becomes clear from Perfect 10's own evidence in the case.

So we get another Perfect 10 loss in court, and another good ruling for intermediaries not responsible for either direct or indirect infringement. I doubt it will get Perfect 10 to stop suing others, but hopefully others won't be so quick to settle when they see how frequently the company loses.

Filed Under: copyright, direct infringement, indirect infringement, nathan zada, secondary liability
Companies: giganews, perfect 10

Supreme Court Unanimously Smacks Down CAFC Two More Times

from the because-cafc-is-a-joke dept

What do you know? The Supreme Court has completely shot down two more decisions from the "patent appeals court," which is supposed to be an expert in patent law. The court of appeals for the Federal Circuit (CAFC), which was set up explicitly to cover "complicated" patent cases, has been getting shot down by the Supreme Court left and right over the past few years, often unanimously. It happened a month ago on fee shifting and it happened twice more today on key patent cases: Limelight v. Akamai and Nautilus v. Biosig.

In the Limelight case, CAFC had made the somewhat ridiculous ruling that companies can be guilty of inducing infringement even if there is no direct infringement. Basically, everyone agreed that at no point did Limelight actually infringe on Akamai's patents, because part of the steps are actually completed by Limelight's users, rather than Limelight itself. The CAFC felt that was good enough, and even though at no point does Limelight do everything in Akamai's patent, it still infringed. The Surpeme Court, thankfully, found this ruling to be nonsensical. And, once again, the Supreme Court smacks around the CAFC in its ruling:

Neither the Federal Circuit... nor respondents... dispute the proposition that liability for inducement must be predicated on direct infringement. This is for good reason, as our case law leaves no doubt that inducement liability may arise “if, but only if, [there is] . . . direct infringement.”...

One might think that this simple truth is enough to dispose of this appeal. But the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct infringement within the terms of §271(a) (or any other provision of the patent laws), because direct infringement can exist independently of a violation of these statutory provisions...

The Federal Circuit's analysis fundamentally misunderstands what it means to infringe a method patent.

Yes, the Supreme Court is saying that the CAFC -- which is supposed to be the expert in understanding patents and patent law -- fundamentally misunderstands what it means to infringe on a patent. Ouch.

The ruling by Justice Alito goes on to point out that the CAFC seems to be trying to set up an entirely new concept of inducing infringement where there is no direct infringement -- and that's clearly not what the law allows. As the ruling notes, if Congress wanted that to be the law, it could write that into the law. But it has not. The Supreme Court further notes (importantly) that "inducement" is different than the criminal standards of "aiding and abetting" (this is an issue we've discussed repeatedly in copyright law -- so everyone insisting that inducing and aiding & abetting are equivalent may want to read carefully what SCOTUS has to say here).

The Nautilus case involved "ambiguous" patent claims -- a major problem in the patent world today. Once again, CAFC took a rather patent maximalist view of things, allowing many ambiguous claims, but the Supreme Court unanimously rejects that as ridiculous:

We conclude that the Federal Circuit’s formulation, which tolerates some ambiguous claims but not others, does not satisfy the statute’s definiteness requirement.

The CAFC standard was that you could reject the claim only if it was "insolubly ambiguous" -- in other words, only if a court couldn't work through multiple interpretations to pick a reasonable one. But, as noted above, the Supreme Court says that goes against the very basic idea of patent law. As the ruling (by Justice Ginsburg) notes:

It cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging “zone of uncertainty,” ... against which this Court has warned.

Rather than choose a different standard, however, the Supreme Court punts the case back to CAFC to see if it can try again, this time with a better standard that maybe, just maybe, the Supreme Court will accept next time around.

Between these recent decisions and the current ethics scandal at CAFC, at what point will we finally consider just putting the court out of its misery. It has never served any purpose other than to massively expand patent law way outside of what the law is supposed to do. It's great that the Supreme Court has finally been putting it back in line, but it seems like there must be a more effective way of doing this than having CAFC hand down so many bad decisions.

Filed Under: ambiguous claims, cafc, claims, direct infringement, indirect infringement, inducement, insolubly ambiguous, patent trolls, patents, supreme court
Companies: akamai, biosig, limelight, nautilus

First HADOPI Victim Convicted, Not For His Own Infringement, But Because His Wife Downloaded Songs

from the soon-to-be-ex-wife dept

Well, here's a nice contrast: just when a judge in the US has ruled that users there have no obligation to lock down their wifi connections, a court in France decides the exact opposite. What makes the story even more significant is that the individual concerned is the first person to be convicted under France's 3-strikes law, generally known as HADOPI.

Not all of the facts of the case have been released, but we do know that he received and apparently ignored the statutory three warnings from HADOPI, and then was summoned to court, where things started to get interesting. As TorrentFreak reports:

the man told the court today that he is incapable of downloading and did not commit the infringements. Supporting his claims he brought into court the person actually responsible for the file-sharing.

That person turned out to be his wife (actually, soon to be ex-wife), who admitted that she had downloaded some Rihanna songs. But as Guillaume Champeau of Numerama pointed out to TorrentFreak, ironically this did not get him off the hook -- on the contrary:

"By saying he knew she was downloading infringing content, but didn’t prevent her from doing so, he self-incriminated."

That's because under the HADOPI law, it is the owner of the Internet connection who is held responsible for any infringement committed with it, so it's the husband, not the (ex-)wife who has ended up being fined 150 euros (about $200) for negligence. That's admittedly less than the 300 euros ($400), with 150 euros suspended, that the French prosecution wanted, and far less than the maximum possible 1,500 euros ($2000) fine. But it's still a stiff price to pay for something he didn't do.

Indeed, he seems to have taken the judgment hard: Guillaume Champeau points out that HADOPI's first victim has now said that he intends to cancel his Internet subscription completely (original story in French). It's hard to see how this kind of result is going to help the growth of digital music in France, and the whole episode is a neat encapsulation of all that is wrong with HADOPI's approach.

Moreover, this case must reinforce the view that HADOPI is a colossal waste of money. In two years of existence, HADOPI has sent out 1.15 million first warnings, 102,854 second notices, and 340 "third strikes". And yet all French government has to show for the 12 million euros it costs to run HADOPI each year is the conviction of one innocent man.

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Filed Under: france, hadopi, indirect infringement, secondary infringement, three strikes, wifi

Appeals Court Says Companies Can Be Guilty Of Inducing Infringement... Even If There Is No Direct Infringement

from the going-off-the-reservation dept

Another day, another troubling ruling out of the Federal Circuit court (CAFC) which handles patent appeals. We wrote about this a little over a year ago. It actually involved CAFC reviewing two separate, but similar cases, concerning whether or not companies could be found liable for inducing infringement if no single party actually violates the patent, but a group of different parties, combined, serve to infringe on all the claims of the patent. This is tricky for a variety of reasons. In one case, involving Akamai suing Limelight, Limelight doesn't directly infringe on all of the claims of Akamai's patents, because some of the steps are completed by Limelight users, rather than by Limelight itself. Similarly, in the case of McKesson v. Epic Systems, Epic doesn't infringe on any of the claims of McKesson's patent -- but in combination, its users may do so, though none do so individually.

So here's where it gets tricky. The lower court had found that since no single party infringes on a patent, then there's no direct infringement. And if there's no direct infringement then there's no infringement that the defendants could "induce." This seems reasonable. The fear, with these cases, was that CAFC would say that multiple different parties, each doing different pieces that are covered by claims, could be lumped together into direct infringers, even if none of them fully infringes. That could create massive liability for purely innocent bystanders who do a minor link in a chain.

Thankfully, CAFC does not go that far in its ruling (though one dissenting judge felt it should). Instead, it just basically wipes out the concept that you can't have inducement without direct infringement, arguing that inducement is apparently something entirely separate from direct infringement. That's... troubling. You can see the reasoning (and it's worth reading the whole thing), in that they're saying if multiple parties, through their separate actions, combine to infringe -- and all those actions are directed by a third party -- then isn't it reasonable to assume that that party is still "inducing" infringement? But, as the dissenters note, that seems to be making up a wholly new interpretation of inducement, far from the one that Congress or the courts has allowed in the past. As one of the dissents notes:

The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Su-preme Court concerning the proper interpretation of those acts.

In other words, CAFC's majority ruling here has gone off the reservation in a big way to fashion a ruling of how it thinks the world should work, but not in accordance with what the law actually says.

It also opens up a huge can of worms. Because even if no one party is actually infringing, suddenly third parties can be liable for inducing infringement. Infringement that... um... didn't occur. So that seems like a problem. Of course, it would have been even worse if they had gone with the plan that cobbled together direct infringement by all the separate players, even those who were doing very minor things (such as tagging content, in the Akamai case).

Either way, it seems likely that some of the parties here will ask the Supreme Court to weigh in, and hopefully they'll clarify that without someone infringing directly, there is no infringement to "induce."

Filed Under: cafc, direct infringement, indirect infringement, inducement, infringement, patents
Companies: akamai, epic systems, limelight, mckesson