DMCA 512 may have some bite for copyright owners - but very small

 

  Section 512 and the interpretation courts have given it have shifted too much of the burden to the rights owners. Every little step back to a better balance is welcome. In that spirit, the court’s decision in   Columbia Pictures Industries, Inc. v. Fung, 710 F3d. 1020 (9th Cir.  2013) is welcome.

 

 

In Fung, the Ninth Circuit restated it approach to the concept of when a “direct financial benefit” occurs due to infringing conduct, but seemingly loosened the approach to when an online provider has the ability to control third parties who place content on its site. The case involved an online provider that had been found to have induced infringement by third parties posting and downloading digital copies of motion pictures. The site contained various elements that encouraged (induced) subscribers to post and download digital motion picture files, including files of motion pictures that were still in first release. Virtually all of the files on the site were infringing and there was no doubt that the infringements constituted a substantial draw for subscribers, rather than an incidental benefit of the service. In fact, the infringing content was virtually the entire draw or value of the subscription service.  

 

The site obtained its revenue from advertising, with rates based on the number of users who saw the ads and clicked on them. The court held that the ad revenue constituted a direct financial benefit from the draw that infringement produced since this contributed to the user traffic on the site. Although this extends the idea of direct benefit slightly from cases where fees are paid for the service itself, the extension is appropriate where advertisement rates so closely are connected to traffic on the site. In fact, there was evidence that Fung referred to the content (obviously infringing) in selling advertising. A more direct connection can hardly be imagined.  

 

            As to whether Fung had the “right and ability to control” the infringing conduct, the court reiterated the conclusion that it and the Second Circuit have adopted: this standard is not met by mere proof that the site operator could locate and remove infringing files or block infringing conduct. Instead, the court described a more holistic test requiring a showing of more actual involvement or influence by the site operator. The test is:

With respect to the second prong of § 512(c)(1)(B), we recently explained in UMG that the “right and ability to control” infringing activity involves “something more” than “merely having the general ability to locate infringing material and terminate users' access.” … As we held in UMG, the § 512(c)(1)(B) “right and ability to control” requirement does not depend only upon the ability to remove known or apparent infringing material. Instead, there must also be substantial influence on the infringing activities of users, indicating that it is the overall Fung unquestionably had the ability to locate infringing material and terminate users' access. In addition to being able to locate material identified in valid DMCA notices, Fung organized torrent files on his sites using a program that matches file names and content with specific search terms describing material likely to be infringing, such as “screener” or “PPV.” And when users could not find certain material likely to be infringing on his sites, Fung personally assisted them in locating the files. Fung also personally removed “fake[ ], infected, or otherwise bad or abusive torrents” in order to “protect[ ] the integrity of [his websites'] search index[es].” … Crucially, Fung's ability to control infringing activity on his websites went well beyond merely locating and terminating users' access to infringing material. As noted, there is overwhelming evidence that Fung engaged in culpable, inducing activity like that in Grokster III. Although Fung's inducement actions do not categorically remove him from protection under § 512(c), they demonstrate the substantial influence Fung exerted over his users' infringing activities, and thereby supply one essential component of the financial benefit/right to control exception to the § 512(c) safe harbor.

The court was not correctly stating its holding in UMG, but the Second Circuit in Viacom did refer to this “something more” test, and Fung brings the two Circuits in line. In any event, if one assumes that as a matter of policy under Section 512 operators have no standalone duty to monitor their service, the “something more” holistic standard for determining whether there was a right and ability to control is appropriate since it gives life to a rule that would otherwise be immaterial. 

 

            In Fung, there were numerous illustrations in which Fung and his systems were actively involved in encouraging users’ infringing behavior. This constituted a substantial influence on the infringing activities and, thus, a right and ability to control. Importantly, this control did not exclude the safe harbor only with respect to particular files, but with respect to the entire site (i.e., all infringing material on the site).