F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

M A V R I X P H O T O G R

A P H S , L L C, a California limited liability company , Plaintiff-Appellant

,

v.

L I V E J O U

R N A L , I N C ., Defendant-Appellee. No. 14-56596

D.C. No. 8:13-cv-00517-CJ C-J PR

OPI N I ON

A ppeal from the United States District Court for the Central District of California Cormac J . Carney , District J udg e, Presiding

Arg ued Submitted October 7, 2016 Pasadena, California

F iled April 7, 2017

B efore: Harry Preg erson, Richard A. Paez

, and Morg an Christen, Circuit J udg es.

Opinion by J udg e PaezM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 2

SUMMARY *

Digital Millennium Copyright Act

The panel (1) reversed the district cou r t ’ s h olding

, on summary judg ment, that the defend a n t was p rotected by the safe h a rbor o f t h e Dig ital Millennium Copy rig ht A ct from liability for posting the plaintiff’s photogr ap h s online a nd (2) vacated a discovery

order.

The panel held that the safe harbor set forth in 17 U .S.C. § 512(c) would apply if the photog r aphs were posted a t t h e direction of users. T h e d efendant, a social media p latform, posted the photog raphs a fter a team of volunteer moderators, led by a n e mploy ee of the defendant, reviewed and approved them. The panel held that whether the p hotog r aphs were posted at the direction of users depended on whether the acts of the moderators could be attributed to the defe n d a n t. Disag reeing w ith the district court, the panel he l d t h at the

common law of ag ency applied to the defe n d a nt’s safe harbor defense. B e c a

use there were g enuine factual disputes
reg arding whether the moderators were the defendant’s
ag ents, the panel r eversed the district court’s summary judg ment and remanded the case for trial.

Th e panel also discussed the remaining elements of the safe h arbor affir m a t i v e defense. I f an internet service provider shows that the infring ing m a t erial was posted “at the direction of the u ser,” it mu s t t h en also show that (1) it lacked act u al or red flag knowledg e of the infring ing

* T h is su m m ary co n stitu

tes n o p art o f th e o pin io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

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material; and (2) it d id not financially benefit f r o m infring ements that it h ad the rig ht and ability to control. The
p a nel held that to fully assess actual knowledg e, the f a ct finder must c onsider not only whether the copy rig ht ho lder has g iven notice of the infring ement, b ut also the se r v i ce provider’s subjective k n o wledg e of the infring ing nature o f the p o sts. The panel held that to determine whether the defendant had red f

lag knowledg e, the fact finder w ould need
to assess whether it would be objectively obvious to a reasonable person that material bearing a g eneric watermark

or a w a termark referring to the plaintiff’s website was infring ing

. W hen asse s s i n g the service provider’s r ig ht a nd ability to c ontro l t h e infring ements, the fact finder should consider the service provider’s procedures that ex isted at the time of the infring ements a n d whether the service provider had “something more” than the a b ility to remove or block access to posted materials.

Fi n ally

, the panel vacated the district court’s order deny ing discovery o f the moderators’ identities.

COUNSEL

Peter Afrasiabi (arg

ued), Christopher W

. A rledg e , and J ohn Tehranian, One L L P, Newport B e ach, California, for Plaintiff-Appellant.

W a y ne Mitchell Ba rs k y (arg

ued), B laine H. Evanson, a nd B randon J

. S t o k er, Gibson Dunn & Crutcher L L P, L os Ang eles, California, for Defendant-Appellee.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

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OP INION

PAEZ , Circuit J udg e:

Plaintiff Mavrix Photog raphs (“Mavrix ”) appea l s the district court’s summary judg men t i n favor of Defendant L iveJ ournal. Mavrix sued L iveJ ournal f or posting twenty o f its copy rig hted photog raphs online. The d i s t r i ct court h eld that the Dig ital Millennium Copy r ig ht Act’s (“DMCA”) § 5 12(c) safe harbor protecte d L i veJ o urnal from liability because Mavrix ’s photog raphs were posted at the direction o f the user. 17 U.S.C. § 512(c).

To be eli gible at the threshold for the § 512(c) safe harbor, L iveJ o urnal mu s t show that the photog r aphs were posted at the direction of the user. Althoug h users submitted Mavrix ’s photog raphs to L iveJ ournal, L iveJ ournal posted the photog raphs after a team o f volunteer moderators led by a L iveJ ournal employ ee re v i e wed and a pproved them. W h ether these photog raphs were truly “posted at the direction of the user,” or instead whether L iveJ ournal itself p osted the photog raphs, depends on whether the acts of the moderators

can be attributed to L iveJ ournal. The issue we must decide is whether the common law of ag ency applies t o L iveJ ournal’s saf

e h a rbor defense. The district court ruled that the common law of a g ency does not apply to this analy sis. W e disag r ee a

nd c o nclude that it does. As there a re g enuine factual disputes reg arding whether the m o d e rators

are L iveJ o urnal’s ag ents, w e r everse the distric t court’s
summary judg ment and remand for trial.

B e cause the district court ruled on the remaining elements of the safe harbor, we also proceed to d iscuss those elements in order to p rovide g u idance to the d istrict court an d p a r tiesM A V R I X P H O T O G R

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on remand. F inally

, we vacate the district court’s order deny ing discovery of the moderator s ’ identities because the
ag ency determination may

affect this analy sis.

I.

LiveJournal 1

L iveJ o urnal is a social media platform. Among other services, it all o w s u sers to create and run thematic “c o m munities” in which they post and c omment on c ontent related to the theme. L iveJ our n a l communities c an c reate their own rules for submitting and commenting on posts.

L iveJ ournal set up t hree ty pes of u npaid administrator roles to run its communities. “M o derators” review posts submitted by users to ensure compliance w i t h the rules. 2 “Maintainers” review and delete posts and have the authority
to remove moderators a

nd users from the community

. Each community also has one “owner” who h as the authority of a maintainer, but can also remove maintainers.

L iveJ ournal protects ag ainst copy rig ht infring ement in its communities th ro u g h various mechanisms. L iveJ ournal follows the f

ormal notice and takedown procedures outlined in the DMCA by desig n ating an ag ent and fo rm to report infring ement, and by promptly removing infring ing posts a nd prohibiting repeat abusers from the community

. 17 U .S.C.

1 T h e f acts are u n d isp u ted u n l ess o th erw ise n o ted

.

2 Becau se m o d erato rs, m ain tain ers, an d o w n ers all can rev iew p o sts,

w e ref er to all t h r e e a s m o d erato rs w

h en d i scu ssin g th e act of rev i ew in g p o sts.M A V R I X P H O T O G R

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§ 512(c)(1)(C). L iv e J o u rnal’s Terms of Service instructs

users n ot to “[ u] pload, post or otherwise transmit any Content that infring es any patent, trademark, trade secret, copy rig ht o r other proprietary

rig hts.”

Oh No They Didn’t! ( “ONTD”)

ONTD is a popular L iveJ ournal community which features up-to-date celebrity news. Users subm it posts

c ontaining photog raphs, videos, links, and g ossip ab o u t celebrities’ li v e s

. ONTD moderators review a nd publicly post some of the submissions. Other u s e r s e n g a g e in

conve r sations about the celebrity news in the c omments section o f each post. F or ex ample, one of the ONTD posts at issue contained photogr ap hs that Mavrix had taken which appeared to show that super-celebrity B ey oncé was p reg nant. Users speculated in the comments section o f that post that B ey oncé was indeed preg nant. 3

L ike o ther L iveJ ournal communities, ONTD created rules for submitting and c o mmenting o n posts. ONTD’s rules pertain to both potential copy r ig ht infring e m e n t a

nd substantive g uidance f

o r users. F o r ex ample, one rule instructs users to “[ i] nclude the article and picture(s) in y our post, do not simply refer us off to a nother site for the g oods.” Another rule provides “Keep it recent. W e don’t need a post in 2010 about B ritney Spear s s h a v ing h er h ead.” ONTD’s

3 In a m o re recen t p o st a b o u t Bey o n cé, a u ser sp ecu lated th at sh e

w o u ld p erf

o rm h er so n g “ Fo rm atio n ” at th e 2 0 16 Su p er B o w l. O th er u sers

co m m en ted o n th e p o st, d eb atin g h o w B ey o n cé m ig h t in co rp o rate f em in ist

an d racial j u s tice th em es in to h er p erfo rm an ce. XOXOB L ISS, Beyo n cé Is Perfo rmin g Fo rma tio n a t t he S u p er Bo wl + Celeb rities Rea ct to F o r m a t i o n , O N T D ( F e b

. 6
, 2 0 1 6
, 0 5 : 4 9 P M )

, h ttp ://o h n o th ey d id n t .liv ej o u rn al.co m /1 0 01 7 9 0 9 6 .h tm l.M A V R I X P H O T O G R

A P H S V

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rules a lso includ e a list of sources from which users should
not copy material. The sources on t he list have informally requested that O N TD stop posting infring ing material. ONTD has also automatically b locked a ll material from o ne source that sent ONTD a cease and desist letter.

ONTD ha s nine moderators, six maintainers, and o ne

owner. ONTD users submit proposed posts c ontaining celebrity new s t o an internal queue. Moderators r eview the submissions a n d publicly post approx imately one-third o f them. Moderators review for substance, approving only those submissions releva n t to new and ex citing celebrity news. Moderators also r eview for copy rig ht infring eme n t , pornog raphy , and harassment.

W h en ONTD was cre a t e d

, like other L iveJ ournal communities, it was operated e x clusi v e l y by volunteer moderators. L iveJ ournal was not involved in the day -to-day operation of the site. ONTD, h owever, g rew in p opularity to 52 million p ag e views per month in 2010 and attracted L iveJ ournal’s attention. B y a sig n ificant marg in, ONTD is L iveJ ournal’s most popular community and is t h e o nly community

with a “ household name.” I n 2010, L iveJ ournal
soug h t to ex ercise more control over ONTD so that it could
ge n erate a dvertising revenue from the p opular community

. L iveJ ournal hired a then active m o d e r ator, B rendan Delz er, to serve as the co m m unity ’s full time “primary leader.” B y hiring Del z er, L iveJ ournal intended to “take o ver” ONTD,
g row the site, and run ads on it. 4

4 W h en Delzer w as h ired in 20 1 0
, L iv eJ o u rn al h ad n o t y et created th e

o w n er ad m in istrato r p o s i tio n

. In 2 0 11
, w h en L iv eJ o u rn al created th e

o w n er p o sitio n , Delzer w as elected b y th e co m m u n ity an d becam e th eM A V R I X P H O T O G R

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As the “primary leade r, ” Delz er instructs ONTD moderators o n the con t e n t they should approve and selects and removes moderators o n the basis of their performance. Delz e r also c ontinues to perform moderator work, reviewing and approving posts along side the other moderators whom he

oversees. W hile D elz er i s paid and e x pected to work full tim e , t h e other moderators are “free to leave and g o a nd volunteer their time in any way they see fit.” I n his deposition, Mark F errell, t he General Manag er o f L iveJ ournal’s U .S. o ffice, ex p lained that Delz er “acts in some capacities as a sort of head m a i n tainer” and serves in an “elevated status” to the other moderators. Delz er, on the other h and, testified at his deposition that he does not serve a s head moderator and that ONTD has no “primary leader.”

Mavrix

Mavrix is a c elebrity photog r aphy compan y specializ ing in c a ndid photog raphs of celebrities in tropical locations. The
company se l l s its photog raphs to celebrity mag az ines. According to Mavrix

, infring ement of its p h otog raphs is particularly d e v a stating to its business model. Since Mavrix ’s photog raphs b r ea k celebrity news, such as the
preg n ancy of B ey oncé, infring ing posts on s i t es like ONTD prevent Mavrix from profiti n g from the sale of the photog raphs to celebrity

mag az ines.

Procedural History

Mavrix filed an action for damag e s and injunctive relief
ag ainst L iveJ ournal a lleg in g c opy rig ht infring ement on the

o w n er. A f ter th is law su it w as f

iled

, L iv eJ o u rn al’ s p aren t co m p an y b ecam e th e o w

n er.M A V R I X P H O T O G R

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basis of twenty M a v r i x photog r aphs posted on ONTD. ONTD p o s t ed the photog raphs in seven separate posts between 2010 and 2014. So m e of these photog raphs contained either a g eneric watermark o r a specific watermark featuring Mavrix ’s website “Mavrix online.com.” To the best of his recollection, Delz er did n ot personally appro v e t h e

seven posts. L iveJ ournal has no tech n o l o gical means o f determining which moderator approved any g iven p ost. Mavrix di d not utiliz e L iveJ ournal’s notice a nd takedown procedure to notify L iveJ ournal o f the infring e ments. W h en Mavrix filed this lawsuit, L iveJ ournal removed the posts. 5

D u ring discovery

, Mavrix filed two motions to com p el
responses to i t s interrog atories seeking the identity of the ONTD moderators. T he m a gi strate judg e denied the first motion, finding that Mavrix had not met and conferred with L iveJ ournal in g o o d faith. The mag istrate judg e d e n i e d the second motion to compel because Mavrix failed to notify the
anony mous parties of the pending motion. Mavrix moved the district court for review o f the mag is t r a t e judg e’s order, which the district court denied on the basis of the moderators’ F irst Amendment rig ht to anony mous internet speech.

L iveJ ournal moved for summary judg ment on the basis o f th e § 5 12(c) safe harbor. T he d istrict court g ranted L iveJ ournal’s motion a

nd denied Mavrix ’s cross-motion for partial summary judg ment, concluding that the § 512(c) safe harbor shi e l ded L iveJ ournal from liability for copy rig ht infring ement. Mavrix timely appealed.

5 Becau se L iv eJ o u rn al rem o v ed th e p o sts, Mav ri x ’ s req u est f or in j u n ctiv e relief

is lik ely m o o t.M A V R I X P H O T O G R

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II.

W e review de nov o a district court’s g rant of summary judg ment. Curley v. City of N. Las Vegas
, 772 F .3d 6 29, 631 (9th Cir. 2014) (citing S m ith v. Clark Cnty. Sch. Dist.
, 727 F .3d 9 5 0
, 954 (9th Cir.2013)). W e must determine, “viewing the evidence in the lig ht most favorable to the

nonmov i n g p a

rty , whether there a

re any g enuine issues o f material fact and whether the d istrict court correctly a pplied the substantive law.” Id.

The dis t r i c t court’s denial of a motion to reconsider a mag istrate judg e’s p retrial disc o very o rder under F ederal Rule of Civil Procedure 72(a) will be reversed only if “ clearly

erroneous or contra ry t o l aw.” Rivera v. NIBCO, Inc.
, 364 F .3d 1057, 1063 (9th Ci r

. 2 0 0 4 ) (citing Osband v

. W oodford , 290 F .3d 1036, 1041 (9th Cir.2002)).

III.

A.

The DMCA strikes a balan ce between the interests o f “copy rig h t holders in b enefitting from thei r labor;

. . . entrepreneurs in having the l a t itude to invent new technolog ies without f

e a r o f being held liable if their innovations are used by others in unintended infring ing way s; and those of th e p u b l i c i n having access [ to] both

. . . . ” Columbia Pictures Indus., Inc. v. Fung
, 7 10 F .3d 1 020, 1037 (9th Cir. 2013). T h e D MCA balances these interests b y requiring service providers to take down infring ing materials when copy

rig ht holders not i f

y them of the infring ement a nd by limiting service provi d e r s ’ liability for unintentionalM A V R I X P H O T O G R

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infring ement throug h several safe harbors. Ellison v

. Robertson , 357 F .3d 1072, 1076 (9th Cir. 2004).

The DMCA est a b l i shed four safe h arbors to “provide protection from liability for: ( 1 ) transitory dig ital network

c o m m u n i c a tions; (2) sy stem caching ; (3) information r e s i d i n g

o n s y stems or networks at the direction of users; a n d (4) in f o r mation location tools.” Id. at 1076–77 (citing 17 U .S.C. § 5 12(a)–(d)). L iveJ ournal claimed protection f r o m damag es u nder the § 512(c) safe harbor f o r “i n f r i ng e ment of copy

r ig ht by r eason of the storag e [ o f

ma t e r i a l ] a t the d irection of a user.” 17 U.S.C. § 512(c)(1). To be elig ible at the threshold for the § 5 12(c) safe harbor, a

s e r v ice provider must show that the infring ing material w a s posted “at the direction of the user.” 17 U.S.C. § 512(c)(1). 6

6 Sectio n 5 1 2 (c)(1 ) p ro v i d es in

relev an t p art:

A s e r v i c e p ro v id er sh all n o t b e liab le

. . . f or in f rin g em en t o f co p y

rig h t b y r e aso n o f th e sto rag e at th e d irectio n of a u ser o f m aterial th at resid es o n a sy s tem o r n etw o rk

co n tro lled o r o p erated b y o r f o r th e

serv ice p ro v i d er, if

th e serv ice p ro v id er–

(A )(i) d o es n o t h av e actu al k n o w le d g e th at th e

m aterial o r an act i v ity u s i n g th e m aterial o n th e sy s tem o r n etw o rk

is in f rin g in g ;

(ii) in t h e ab sen ce o f su ch actu al k n o w led g e, is n o t aw are of f

acts o r circu m stan ces f

ro m

w h ich in f rin g in g activ i ty

is ap p aren t; o r

(iii) u po n ob tain in g s u ch k

n o w led g e or

aw aren ess, acts ex p ed itio u sly to rem o v e, or d isab le access to , th e m aterial;M A V R I X P H O T O G R

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I f it meets that t h r eshold requirement, the service provider
must then show that (1) it lacked actual or red flag knowledg e of the infring ing material; and (2) it did not r e c e i v e a “financial benefit directly attributable to the infrin gi ng activity

, in a case in w hich the service provider has the rig ht and ability to control such activity .” Id. 7 B ecause the § 512(c) safe harbo r i s an affirmative defense, L iveJ ournal
must establish “bey ond controversy every essential element,” and failure to d o so will render L iveJ ournal inelig ible f or the § 512(c) safe harbor’s protection. See S. Cal. Gas Co. v. City of Santa Ana
, 336 F

. 3d 885, 8 8 8 ( 9 t h C i r. 2003); see also UMG Recordings, Inc. v. Shelter Capital Part n e r s LLC
, 718 F .3d 1006, 1013 (9th Cir. 2013).

B.

1.

L i veJ ournal must make a threshold showing t h a t M a v r i x ’ s photog raphs were posted on ONTD at the directio n o f t he

user. The district court h eld that althoug h moderat o rs

(B ) d o es n o t re c e i v e a f in an cial b en ef

it d irectly attrib u tab le to th e in f

rin g in g activ ity

, in a case in

w h ich th e serv ice p ro v id er h as th e rig h t an d ab ility
to co n tro l su ch activ i ty ; an d

(C) u p o n n otif icatio n o f claim ed in f

rin g em en t

. . . , resp o n d s ex ped itio u s l y to rem o v e, o r d i sab le

acces s to , th e m aterial th at is claim ed to b e in f rin g in g

. . . .

1 7 U.S.C. § 5 1 2 (c)(1 ).

7 L i v eJ ou rn al m

u s t also sh o w th at i t co m

p lied w i th § 5 1 2 (c)’ s n otice

an d tak ed o w

n p ro ced u re, b u

t th at issu e is n o t co n tested in th is case.M A V R I X P H O T O G R

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screened a

nd publicly posted all of the ONTD p osts, the posts

were at the direction of the u s e r

. The district court focused

on the users’ su b m ission of infring ing photog raphs to L iveJ o urnal rather than L iveJ ournal’s screening and pu b l i c posting of the photog r aphs. A d ifferent safe h arbor, § 512(a), protects service providers from liability for the passiv e role the y p lay when users submit infring ing material to them. 17 U.S.C. § 5 12(a); see, e.g. , Perfect 10, Inc. v. CCBill LLC
, 488 F .3d 1102, 1116 (9th Cir. 2007) (describing i n fr ing ing material p assively and temporarily placed on a compu ter

server as within the § 512(a) safe harbor). The § 5 12(c) safe harbor, however, f

ocuses on the service provid e r ’ s r o le in publicly posting infring ing material on its site. S e e S h el t e r Capital

, 718 F .3d at 1018; S. Rep. No. 105-190, at 43–44 (1998). Contrary to the d istrict cou r t ’ s view, posting rather than submission is the c r itical inquiry

. See Perfect 10, Inc. v

. Giganews, Inc.
, 847 F .3d 657, 668–69 (9th C i r

. 2 017) (disting uishing between the service provider’ s passive role when users “upload[ ] infring ing content onto [ ] servers” a nd “any sort o f active role” on the basis o f who “caused the imag es to be display ed”). I n the con t e x t o f this case, that inquiry turns on the role of the moderators in screening a nd posting users’ submissions and whether their a cts may be attributed to L iveJ ournal.

2.

Mavrix

, rely ing o n the common law of a gency , arg ues that the moderators are L iveJ o urnal’s ag e nts, making L iveJ ournal liable f

or the moderators’ acts. The district court erred in rejecting

this arg ument.

“[ S] tatutes are presumed not to d isturb the common law, ‘unless the lang uag e of a statute [is] clear and ex plicit for thisM A V R I X P H O T O G R

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p u r p o s e.’” State Eng’r of Nev. v. S. Fork Band of Te-Moa k Tribe of W

. Shoshone Indians of

Nev.
, 339 F .3d 804, 814 (9th Cir. 2003) (quoting Norfolk R edevelopment & Hous. Auth. v

. Chesapeake & Potomac Tel. Co. of Va.
, 464 U.S. 30, 35 (1983)). Pursuant to thi s p rinciple, the Supreme Court a nd this c ourt have applied c ommon law in c ases i nvolving federal copy

rig ht law, including the D MCA. The Supreme Court has applied the common law of ag ency in interpreting the Copy rig ht Act. Cmty. for Creative Non-Violence v

. Reid

, 490 U.S. 730, 751–52 (1989). W e have a pplied the common law of vicarious liability

in analy z ing the DMCA, reasoning
t h a t Cong ress intended that the DMCA’s “limitations o f liability ” be interpreted “under ex i s t i ng principles of law.” Ellison

, 357 F .3d at 1076–77 (quoting S. Rep. 105-190, at 19 (1998)). We have also applied the common law o f ag e ncy to determine a service p rovider’s intent to infring e u n d e r t he DMCA. Fung , 710 F .3d at 1038.

A long with other courts, we have applied ag ency l a w t o questions much like the question of L iveJ ournal’s liability for the moderators’ acts. We applied ag e n c y l a w to determine whether a service provider was responsible under the DMCA for copy rig ht infring ement by its employ ees

. F ung , 710 F .3d at 1038. The Tenth Circuit applied a g ency law to determine whether a service provider was responsible under the DMCA for copy rig ht infring e m e n t by its contractors. See BW P Media USA, Inc. v. Clarity Dig. Grp., LLC
, 820 F. 3 d 1175, 11 8 0 ( 1 0 t h Cir. 2016). 8 F inally

, a district court a pplied

8 T h e T en th Circu it h eld th at th e serv ice p ro v id er’ s co n tracto rs w ere

“ u sers” rath er th an ag en ts u n d er th e DMCA

. BW P
, 8 2 0 F.3 d at 1 1 8 0

. T h e

co u rt also h eld th at ev en if t h e co n tracto rs w ere ag en ts, th ey w e r e n o t

em p l o y ees. Id

. at 1 1 8 1

. Fin ally

, th e co u rt h eld th at ev en if th e co n tracto rs

w ere em p lo y ees, th ey co u ld still b e u sers. Id

. T o th e ex ten t th at BW P ’ sM A V R I X P H O T O G R

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N A L 15

ag ency law to determine wheth er a service provider was responsible under the DMCA f or the a c ts of moderators. Columbia Pictures Indus., Inc. v. F u ng , No. C V 06-5578 SVW ( J Cx )

, 2009 W L 6355911, at *13 n .21 (C.D. Cal. Dec. 21, 2009), aff’d in part , 710 F .3d 1020 ( 9th Cir. 2013). 9 W e therefore have little difficulty holding that common law
ag ency principles a

pply to the analy sis o f whet h e r a s ervice provider like L iveJ ournal is liable for th e acts of the ONTD moderators.

3.

I n lig ht of the summary judg ment record, we conclude that there are g enuine issues of material f act as to whether the moderat o rs are L iveJ ournal’s ag ents. The factual d ispute is evident when we apply common law a g ency principles to the evidentiary

record.

h o ld in g co n trad icts o u r case law th at co m m o n law p rin cip l es o f ag en cy ap p ly to th e D MCA su ch th at a serv ice p ro v id er is liab le f o r th e acts o f its
ag en ts, in clu d in g its em

p lo y ees, w e rej ect i t. S

ee, e.g

. , Fu ng , 71 0 F.3 d at 1 0 3 8 (“ W h en d ealin g w ith co rp o rate o r en tity def en d an ts,

. . . th e relev an t in ten t m u st b e th at o f th e en tity itself

, as d ef in ed by trad itio n al ag en cy law
p rin cip les . . . .”).

9 A lth o u g h th e d istrict co u rt’ s o rd er d o es n o t sp ecif y w h eth er th e

m o d erato rs w e r e p a id

, th e parties’ f i lin g s b ef o re th e d istrict co u

rt m ak e clear th at th e m o d erato rs w ere u n p aid

. See Def

en d an t’ s Mem o ran du m of P o in ts an d A u th o rities in Op p o s i t io n to P lain tif f ’ s Mo tio n f

or Su m m ary J u d g m en t on L iab ility at 2
, Co lu m b ia P ictu res In d u s., In c. v

. F u n g , No

. CV 0 6

- 5 5 78 SVW (J Cx ) (C.D. Cal. Dec. 2 1, 2 0 0 9 ), 20 0 9 W L 6 3 55 9 11 ; P lain tif f ’ s Rep ly Statem en t o f U n co n tro v erted Facts i n Su p p ort of P l a in tif f ’ s Mo tio n f

o r S u m m ary J u d g m en t o n L iab ility at 6
, Co lu m b ia P ictu res In d u s., In c. v

. Fu

n g , No

. CV 06

- 5 5 7 8 SVW (J Cx ) (C.D. Cal. Dec. 2 1 , 2 0 0 9 ), 2 0 09 W L 6 3 5 5 9 1 1

.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 16

“Ag ency is the fiduciary relationship that arises when o ne person ( a ‘principal’) manifests assent to another person (an ‘ag ent’) that the ag ent shall act on the principal’s behalf and subject to the principal’s c o n t r o l, a nd the ag ent manifests
assent or o therwise consents so to act.” Restatement (Third) Of Ag ency § 1.01 (Am. L aw I n st. 2006). F or an ag ency relationship to ex ist, an a g ent must have authority to act on behalf of the pr i n cipal a

nd “[ t] he person represented [ must have] a rig ht to control the actions of the ag ent.” Restatement (Third) Of Ag e ncy

§ 1.01, cmt. c (Am. L aw I nst. 2006).

An ag ency relationship may be created throug h actual or apparent authority

. Gomez v. Campbell-Ewald Co
., 768 F .3d 871, 878 (9th Cir

. 2014) (citing Restatement ( Third) o f Ag ency §§ 2.01, 2.03, 4

. 0 1 ( Am. L aw I nst. 2006)), cert. granted

, 1 35 S. Ct. 2 311, (2015), and aff’d

, 136 S. Ct. 663 (2016). Actual authority arises thr o u gh “the principal’s

a s s ent that the ag ent take action on the principal’s behalf.” Restatement ( Third) of Ag ency § 3 .01 (Am. L aw I n st. 2006). L iveJ ournal arg ues that it did not asse n t to the moderators acting on its behalf. Mavrix

, however, presented evidence that L iveJ o urnal g ave its moderators ex pl i c it and vary ing levels of authority to screen p osts

. A l thoug h L iveJ ournal calls the moderators “volunteers,” the moderators performed

a vital f u nction in L iveJ ournal’s business model. 1 0 There is evidence in the record that L iveJ ournal g ave moderators

ex p ress directions about their screening functions, including criteria for accepting or rejecting posts. U n l i k e other sites

10 A g en ts n eed n o t receiv e p ay m en t f ro m th eir p rin cip al to b e ag en ts. R e s t a t em en t (T h ird ) o f A g en cy § 1.0 1 cm t. d (A m

. L aw In st. 2 0 0 6 ) (“ Man y ag en ts act o r p ro m ise t o act g ratu ito u sly .”); Mo d el Civ

. J u ry In str. 9 th Cir. 4 .4 (2 0 0 7 ) (“ On e m ay b e an ag en t w ith o u t receiv in g

co m pen satio n f o r serv ices.”).M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 17

where users may independently post content, L iveJ ournal relies o n moderators as a n integ ral part of its scr e e n i n g a nd posting b usiness model. L iveJ ournal also provi d e s three different levels of a

ut hority : moderators review posts to

ensure they contain celeb r i t y gossip and not pornog raphy o r harassm e n t, maintainers delete posts and can remove moderators, and owners can remove mai n t a iners. Genuine issues of m a t e rial fact therefore ex ist reg arding whether the moderators had actual authority

. Apparent authority arises by “ a person’s mani f e s t ation that a nother has authority

to act with leg al consequences for the person w ho makes the manifestation, when a third party reasonably believes the acto r to be a uthoriz ed and the belief is traceable to the manifestation.” Restatement (Third) o f Ag ency § 3.03 (Am. L aw I nst

. 2006); see also Hawaiian Paradise Park Corp. v. Friendly B roa d

. Co.
, 414 F .2d 750, 756 ( 9th Cir. 1969). “The principal’s manifestation s gi v i ng rise to apparent authority may consist o f direct statements to
t he third person, directions to the a g ent to tell some t h i n g t o the third person, or the g r anting of permission to the ag ent to perform acts

. . . under c ircums tances which create in him a reputation of authority

. . . .” Hawaiian Paradise P a rk

, 414 F .2d at 756.

L iveJ ournal selected moderators and provided them with specific directions. Mavrix presented evidence t h at L iveJ ournal u sers may have reaso n ably believed that the moderators had authority to a ct f or L iveJ ournal. One user whose post was r emoved pursuant to a DMCA notice

com p l a i n ed to L iveJ ournal “I ’m sure my entry d oes not violate any sort of copy

rig ht law.

. . . I f

o l l o w e d [ O NTD’s] f o r matting standards and the moderators checked a nd approved my post.” The user relied on the m o derators’M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 18

approva l a s a manifestation that the post complied with
copy ri gh t law, and the user appeared to believe the moderators acted on behalf of L iveJ ournal. Such reliance is likely traceable to L iveJ ournal’s policy of providing ex plicit roles and authority

to the moderators. According ly

, g enuine issues of material fact ex ist r eg a rding whether ther e was an apparent authority

relationship.

W h ether an ag ency relationship ex ists also depends on the level of con t r o l a principal ex erts o ver the a g ent. See Ho l l i ngsworth v. P erry , 133 S. Ct. 2652, 2657–58 (2013) (referring to control as one of “ the basic features of an ag ency relationship”); United States v. Bonds

, 608 F .3d 4 95, 505 (9th Cir. 2 010) ( e x p l a ining that the “the ex tent of control

ex e r cised by the employ er” is the “essential ing redien t ” in determining an ag ency r elation s h i p ) (quoting NLRB v

. Friendly Cab Co.
, 5 12 F .3d 1090, 1 0 9 6 ( 9 th Cir. 2008). Evidence p resented by Mavrix shows that L iveJ ournal maintains sig nificant control over ONTD and its moderators. Delz e r g ives the moderators substantive supervi s i o n a nd selects and removes moderators on t he basis of their performance, thus demonstrat i n g control. Delz er also

ex e r cises control over the moderato r s ’ w ork schedule. F o r

ex a mple, he a d d e d a moderator from Europe so that there would be a moderator who could work while other moderators slept. F urther demonstrating L iveJ ournal’s control over the moderators, the moderators’ scre e n i n g criteria derive from rules ratified by L iveJ ournal. 1 1

11 Liv eJ o u rn al ratif

ied t h e O NT D ru les w

h en Ferrell d iscu ssed ch an g in g th e ru l es w ith Delzer an d d eclin ed to d o so

. S ee U n i ted S ta tes

v

. Ala ska S.S

. Co

. , 4 9 1 F.2 d 1 1 47
, 1 15 5 (9 t h Cir.1 9 74 ) (“ Ratif

icatio n i s th e af f irm an ce b y a p erso n o f a p rio r act w h i ch d id n o t b in d h im bu t w h ich

w as d on e o r p ro f

essed ly d o n e o n h is acco u n t.

. . .”) (q u o tin g Restatem en tM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 19

O n t he other hand, ONTD moderators “are free to lea v e and g o a nd volunteer their time in any way they see fi t

. ” I n addition, the moderators can r ej ect submissions f or reasons other than those provided by the rules, which call s i nto question the level of c ontrol that L iveJ ournal ex erts over their conduct. This evidence raises g e nuine issues of material fact
reg arding the level of control L iveJ ournal ex ercised o ver the moderators. F rom the evidence currently i n t h e record, reasonable jurors could conclude that a n ag ency relationship

ex isted.

4.

W e turn briefly to a related issue that the fact finder must resolve in the e vent there is a finding that the moderators a re ag ents o f L iveJ o urnal. I n that event, the fact fin d e r m ust

assess w hether Mavrix ’s photog raphs were indeed p osted at the direct i on of the users in lig h t of the moderators’ role in screening and posting the photog r aphs. Posts a re at the direction of the user if the service provider play ed no role in posting them on its site or if the service provider carried out activities that were “narrowly direc ted” towards enhancing the accessibility of the po s t s

. See UMG Recordings, Inc. v

. Veoh Networks, Inc.
, 620 F

. Supp. 2d 1 081, 1092 (C.D. Cal. 2008); see also Shelter Cap ital

, 718 F .3d a t 1018. A c c e s s i b i l i t y

- e n h a n c i n g a c t i v i t i e s i n c l u d e a u t o m a t i c processes, for ex ample, to reformat posts or p e r f o r m some technolog i c al chang e

. Shelter Capital

, 718 F .3d at 1020 (referring to accessibility -enhancing activities as those where the service prov i d e r d id “not a ctively participate in o r supervise file uploading ”). Some manual service p r ovider

(Seco n d ) o f A g en cy § 8 2 (A m

. Law In st. 1 95 8 )); see a lso Go mez , 7 6 8 F.3 d at 8 78

.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 20

activities that screen for infring ement o r other harmful material like pornog raphy can al s o be accessibility

enhancing

. Id. at 1012 n.2. I ndeed, § 512(m) of the DMCA provides tha t n o l i ability will arise from “a service provider monitoring its service or affirmatively seeking facts indicating infring ing activity

. ” Id. at 1022 (quoting 1 7 U .S.C. § 512(m)). 1 2

The O NTD moderators manually review submissions a nd publicly post only a

bout one-third of submissions. The moderators review the substance o f posts; only t h o s e posts rele v a nt to new and ex citing c elebrity g ossip are approved. T he q uestion for the fact finder is whether the moderators’
acts w ere merely accessibility -enhancing activ i t i e s o r w h ether instead their ex tensive, manual, and substantive activ i t i e s

12 T h e district co u rt d id n ot assess w h eth er t h e m o d erato rs’ rev iew of
p o s t s e x ceed ed accessib ility

- en h an cin g activ ities b ecau se it f o cu sed on

su b m issio n rath er th an p o stin g an d d i d n o t d eterm in e w h eth er th e

m o d erato rs w ere ag en ts. In S h elter Ca

p i ta l

, w e su g g ested th at accessib ility

- en h an cin g activ ities h av e a lim it w h en w e ap p ro v ed s o f

tw are

“ pro cesses th at au to m atically occu r w h en a u ser u

p lo ad s” m ater i a l s as

w ith in accessib ility

- en h an cin g activ ities. 7 1 8 F.3 d at 1 0 1 6
, 1 0 20

. Oth er circu its h av e m o re sq u arely f aced th e o u ter ed g e s o f th is lim it. T h e Seco n d Circu i t f

o u n d it a clo s e c a l l a n d rem an d ed w h en Yo u T u

b e

m an u ally sel e c t e d v id eo s f o r f ro n t p ag e sy

n dicatio n o n th e b asis of

su b stan ce. Via co m In t’l, In c. v. Yo u Tu b e, In c. , 6 7 6 F.3 d 1 9
, 4 0 (2 d Cir. 2 0 1 2 )

. T h e d istrict co u rt on rem an d h eld th at o n ly th o se p ro cesses

“ w ith o u t m an u al i n terv en tio n ” satisf

ied th e § 5 1 2(c) saf

e h arb o r. Via co m In t’ l I n c

. v. Yo u Tu b e, In c. , 9 4 0 F. Su p p

. 2 d 1 1 0
, 1 2 3 (S.D.N.Y. 2 0 1 3 ). T h e Fo u rth Circu it ex ten d ed accessib ility

- en h an cin g activ ities to in clu d e

a real estate w eb site’ s “ cu rso ry ” m an u al screen in g to d eterm in e w h eth er p h o to g rap h s in d e e d d ep icted real estate. Co S ta r Grp

., In c. v. L o op Net, In c. , 3 7 3 F.3 d 5 4 4
, 5 5 6 (4 th Cir. 2 00 4 ). T h e f act f in d er sh o u ld d eterm in e

w h eth er L i v eJ o u rn al’ s m an u al, su bstan tiv e rev i ew p ro cess w en t b ey o n d th e au to m atic p ro cesses w e h a v e ap p ro v ed as accessib ility

- en h an cin g activ ities su ch th at th e p o sts w ere still at th e d irectio n o f th e u ser.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 21

went bey ond the automatic and limited manual activities we have approved as accessibility

- enhancing

.

* * *

B e cause the dist ri c t court focused on the users’ submission of Mavrix ’s photog raphs rather than on ONTD’s posting of those photog raphs and rejected Mavrix ’s arg ument that unpaid moderators c ould be ag ents of L iveJ ou r n a l

, the district court e r r e d in g r anting summary judg ment to L iveJ ournal. Genuine issues o f m a t e rial fact ex ist as to whether the moderators were L ive J o urnal’s ag e nts. A c c o rding ly

, r e m a n d i s w a r r a n t e d

. I n a s s e s s i n g L iveJ ournal’s threshold elig ibili ty for the § 512(c) safe harbor, the f

act f inder mus t resolve the factual dispute
reg arding the moderators’ status as L iveJ ournal’s a g ents a nd in lig ht of that determination, whether L iveJ ournal showed that Mavrix ’s photog raphs were posted at the direction of the

users.

C.

Once the district c ourt concluded tha t the moderators

were not L iveJ o urnal’s a g ent s (ex cept for its employ ee Delz e r), it proceeded to a ddress the two remaining disputed requirements for establishing the § 512(c) safe harbor defense–lack of knowledg e of infring e ments and lack o f any financial benefit from infring ement that it had the rig ht a nd ability to control. B ecause these issues may be contested on remand, we proceed to address them to provide g u i d a n c e to the district court.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 22

1.

I f L ive J ournal shows that it meets the threshold

re quirement for the § 5 12(c) safe harbor because the photog raphs were posted at the dir e c t ion of the user, L iveJ ournal must then show that it lacked both actual and red flag knowledg e of th e i n fring ements. See 1 7 U .S.C. § 5 12(c)(1)(A). Actual knowledg e refers t o whether the service p r o v ider had subjective knowledg e while r ed flag knowledg e turns o n w h e ther a r easonable person would objectively kno w of the infring ements. S helter Capital

, 718 F .3d at 1025 (quoting Y ouTu be, Inc.
, 676 F .3d at 3 1). B oth actual and red flag k nowledg e r efer to k

n owledg e of the specific infring ement alleg ed. Id. at 1023, 1025.

On remand, the fact finder m u st f irst determine whether L iveJ ournal had actual knowledg e o f the infring ements. A
copy rig ht holder’s failure to notify the service pro v i d e r o f infring ement throug h the notice a n d takedown procedure, a s Mavrix failed to do h ere, “strip[ s] it o f t h e m ost powerful evidence o f [ actual] knowledg e.” I d. a t 1020 (quoting Corbis Corp. v. Amazon.com, Inc.
, 3 5 1 F

. Supp. 2d 1090, 1107 (W .D. W a sh. 2004)). Such evidence is powerful, b ut not conclusive, towards showing that a s ervice provider lacked actual knowl e d ge

. Id. at 1021. The district court held that L iveJ ournal lacked actual k nowledg e of the infring ing nature of Mavrix ’s photog raphs sol e l y on the basis of Mavrix ’s failure to notify L iveJ ournal of the infring ements. T h is was

an incomplete assessment of the issue. To fully assess actual knowledg e, the fact finder should a lso ass e s s a service provider’s subjective knowledg e of the infringi n g nature o f the posts. See, e.g. , i d

. a t 1025 ( continuing to assess knowledg e). Althoug h Delz er does not remember approving the p osts and for this reaso n c an be said to lack actualM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 23

knowledg e, Mavrix has not had the opportunity to depose the moderators t o determine their subjective k nowledg e. On remand, t h e fact finder should determine whether L iveJ ournal, throug h its ag ents, had actual knowledg e of the infring ing nature of the posts.

I n t he event the f

act finder determines that L iveJ ournal lacked a ctual knowledg e of the infring e ments, it m u st then

assess whether L iveJ ournal lacked red flag knowledg e. Red flag knowledg e arises w hen a service p r ovider is “aware o f facts that would have made t h e s pecific infring ement ‘objectively ’ obvious to a reasonable person

. ” Fung
, 710 F .3d at 1043 (quoting Y ouTube

, 676 F .3d at 3 1); see also UMG Recordings, Inc. v

. V e o h N e tworks Inc.
, 665 F

. Supp. 2d 1099, 1111 (C.D. Ca l

. 2 0 0 9) (describing r ed flag knowledg e as a “hig h bar”). T he infring ement must be immediately a

pparent to a n o n-ex p er t. See Veoh Networks Inc.
, 665 F

. Supp. 2d at 1108; H.R. Rep. 105-551, pt. 2 a t 58 (1998) (ex plaining that infring ements must b e “ apparent from even a brief a

nd c a s u a l v iewing ”). Some of the photog raphs at issue in this case c on t ained either a g eneric watermark 1 3 or a watermark containing M a v rix ’s website, “Mavrix o nline.com.” 1 4 To determine whet h e r L iveJ ournal

13 Co n g ress ex plain ed t

h at r ed f lag k n o w led g e in clu d es “ cu sto m ary in d icia

. . . su ch as a stan d ard an d accep ted dig i tal w aterm ark .” H.R. Rep

. 1 0 5

- 5 5, p t. 1
, at 2 5 (1 9 98 ). Bu t see Veo h Netwo r ks In c. , 6 65 F. S u

p p

. 2 d
at 1 1 1 5 (d eclin in g to rely o n th is rep o rt b ecau se i t ad d ressed a “ v ersio n of th e DMCA th at is sig n if

ican tly d if

f eren t in its tex t an d stru ctu re th an th e

v ersio n th at Co n g ress u ltim ately

ad o p ted ”).

14 T h e d istrict co u rt stated th at Delzer w as u n aw are th at Mav rix h ad

a w eb site so p h oto g rap h s co n tain in g a “ Mav rix o n lin e.co m ” w ater m ark did

n o t d if f er f ro m th e o th er ph o to g rap h s w ith a m o re g en eric w aterm ark

. T o th e ex ten t th at t

h e d istrict co u rt relied o n D e l z e r ’ s p u rp o rted lack ofM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 24

had red f lag knowledg e, the f

act find e r s h ould assess if it would b e objectively o bvious to a reasonable p e r s on that material bearing a g en e ric watermark or a watermark referring to a service provider’s website was infring ing

.

2.

F inally

, if the fact finder d etermines that L iveJ ournal met the § 512(c) safe harbor thre s h o l d r e q u irement (i.e., that the photog raphs were posted at th e direction of the user, see 17 U.S.C. § 512(c)(1) )

, a nd that L iveJ ournal lacked k n o w l e d g e o f t h e i n f r i n g e m e n t s ( s e e 1 7 U

. S

. C

. § 512 ( c ) (1)(A)), then the fact finder should determine whether L iveJ ournal showed that it did not financially benefit from infring ements that it had the r ig ht and ability to c ontrol. See 17 U.S.C. § 512(c)(1)(B )

.

W e ag ree with the district court in Io Group, Inc. v. Veoh Networks, Inc. that the fact finder should consider the service provider’s p r o c edures that ex isted at the time of the infring ements w hen assessing the service provider’s rig ht a nd ability to control the infring em e n t s

. 5 86 F

. Supp. 2d 1132, 1153 (N.D. Cal. 2008). The fa c t f inder should consider the service provider’s g eneral p ractic e s , not its conduct with

k n o w l ed g e th at Mav rix h ad a w eb site to su g g est th at D e l z er lack ed k n o w l e d ge o f th e i n f

rin g em en ts, th is w as erro r. T h e ex isten ce o f a

w aterm ark

, an d particu larly th i s w ate rm ark w ith a co m p an y n am e, is relev an t to th e k

n o w led g e in q u iry

.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 25

r e s p ec t to the specific infring e ments. 1 5 See Shelter Capital

, 718 F .3d at 1023, 1030.

“Rig h t a nd ability to control” involves “something more than the ability to r emove or block access to materials p osted

on a service provider’s website.” I d

. (quoting Y

ouTube, Inc.
, 676 F

. 3d at 38). The service p rovider does “something more” when it ex erts “ hig h levels o f control over activities of users.” Id. The service p rovider ex e r t s “hig h levels of control,” for

ex a mple, when it, “prescreens s i tes, g ives them ex tensive advice, prohibits the p roliferation of identical sites,” provides

“ d e t ai l e d i n s t r u c tions r eg ard[ ing ] iss u e s o f l a y o u t , appearance, and content,” and ensures “that celebrity imag e s do not oversaturate the content.” Perfect 10, Inc. v. Cybernet Ventures, Inc.
, 213 F . Supp. 2d 1146, 1173, 1182 (C.D. Cal. 2002); see also Shelter Capital

, 718 F .3d at 1030, cited with approval in Perfect 10 , 213 F

. Supp. 2d 1146. 1 6

The district court concluded that L iveJ ournal did n ot have hig h levels of control such that it had “ something more” than the rig ht and ability to remove or b l ock access to material posted on ONTD. L iveJ ournal’s rules i n s t ruct users on the substance and infring e ment o f their p o sts. The moderators

15 T h is in qu iry is d if

f eren t f ro m b o th t h e th resh o ld d eterm in atio n (i.e.,

w h eth er th e in f

rin g in g m aterial w as po sted at th e d irectio n o f th e u ser, see 1 7 U.S.C. § 5 12 (c)(1 )), an d th e k n o w led g e s h o w in g (i.e., w h eth er th e

serv ice p ro v i d er h ad k

n o w l ed g e o f t

h e in f rin g in g m aterial, see 1 7 U.S.C. § 5 1 2 (c)(1 )(A )), w

h ere th e f

act f i n d er sh o u ld f

o cu s o n th e sp ecif

ic in f rin g em en ts, rath er t

h an o n th e serv ice p ro v id er’ s g en eral p ractices an d
p ro ced u res.

16 “ R ig h t an d ab ility to co n tro l” m ay also b e sh o w n b y in ten tio n al in d u cem en t o f i n f

ri n g e m e nt, b u

t w e ag ree w ith th e d istrict co u rt th at in d u cem en t is n ot at issu e h ere. S h elter Ca p ita l , 7 1 8 F.3 d at 1 0 3 0

.M A V R I X P H O T O G R

A P H S V

. L I V E J O U R

N A L 26

screen for content a

nd other g uidelines such as infring ement. Nearly two-t h i rds of submitted posts are rejected, including

on substantive g rounds

. ONTD maintains a list of sources that have complained a

bout infring ement from which u s e rs should n ot submit posts. L iveJ ournal went so far as to use a tool to a utomatically block any posts from one sourc e

. I n determining whether L iveJ ournal h ad the rig ht and ability to control infring ements, the fact finder must assess whether L iveJ ournal’s e x tensive revie w p r o c e s s , i n f r i n g e ment list, a

nd blocker tool constituted hig h levels of control to s h ow “something more.”

L iveJ ournal must also show that it did not d e ri v e a financial benefit from infring ement that it had the rig ht a nd ability to control. S

e e 1 7 U.S.C. § 512(c)(1)(B ). “I n determining whether the financial benefit criterion is satisfied, courts should take a common-sense, fact-based approach, n ot a formalistic one.” S. Rep. No. 105-190, a t 44 (1998). The financial benefit n eed not be s ubstantial or a larg e proportion of the service p rovider’s reve n ue. Ellison

, 357 F .3d at 1 079. I n F

ung , we held that a financial benefit

was shown when “ there was a v a s t amount of infring ing material on [ the service pr o vider’s] websites

. . . supporting

an inference that [ the service provider’s] revenue stream is predicated on the broad availability of infring ing materials for [ its] users, thereby a ttracting advertisers.” 710 F .3d at 1045. O n the other hand, the service provider in that c a s e “promoted a dvertising by pointing to infring ing activity ” a nd “attracted p r i m arily visitors who were seeking to eng ag e in infring ing activity

, as that is mostly w hat occurred o n [ the service provider’s] sites.” Id.

L iveJ ournal derives r e v enue f rom advertising based on the number of views ONTD r eceives. Mavrix presentedM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

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evidence showing that approx imately 84% of posts on ONTD contain infring ing material, altho u gh L iveJ ournal contested the validity of this e vidence. The fact fi nder should determine whether L iveJ o urnal financially benefitted from infring ement that it had the rig ht and ability to control.

D.

Mavrix also challeng es the denial of its motio n s t o compel r esponses to interrog atories seeking the identiti es o f the moderators. The mag ist r a t e judg e denied both o f Mavrix ’s motions, and on review, the district court upheld the denial, reasoning that the moderators had a F irst A mendment interest in internet anony

mi t y

. W hen a district court denies reconsideration of a pretrial discovery o rder under F e d e ra l Rules of Civil Procedure 72(a), o ur review i s d e ferential. Upon review o f such a ruling we will d isturb it o n l y i f t h e complaining party shows clear leg al e rror and actual a nd substantial prejudice. See A rizona v. City of Tucson
, 7 61 F .3d 1 005, 1009 n.2 (9th Cir. 2014); In re Anonymous Online Speakers

, 6 61 F .3d 1168, 1177 (9th Cir. 2011) (describing the standard as “hig hly deferential”). I n d etermining whether F ir s t Amendment protections for anony mous speech outweig h the need for discovery

, we have applied a multifactor balancing test. See, e.g. , In re Ano n y mous Online Speak e r s , 6 61 F .3d at 1174–76 (describing balancing factors).

No t withstanding the deferential standard of r eview a nd complex issu e s of law that g overn this discovery r uling

, we vacate the distr i c t c o urt’s order deny ing the motion a nd remand f or further consideration. Whether the mod e r at ors

a re ag ents should inform the district court’s analy s i s o f

w h ether Mavrix ’s need f or discovery outweig h s t h e moderators’ interest in anony mous internet speech. Given theM A V R I X P H O T O G R

A P H S V

. L I V E J O U R

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importance of the ag ency analy sis to the ultimate outcome o f the case, and the importance o f discovering the moderators’ roles to that ag ency a

n aly sis, the district c o u r t s hould also consider alternative me a n s by which Mavrix could formally notify or serve the moder a tors with process requesting that they appear for their deposition at a date and time certain.

IV.

F or the foreg oing reasons, we reverse the district court’s
g rant of summary judg ment to L iveJ ournal, vacat e i t s order deny ing discovery

, and remand for further p r oceeding s consistent with this opinion.

REVERSED, VACATED and REMANDED.