Source: https://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-zillow.htm
Timestamp: 2019-04-19 11:19:47+00:00

Document:
On March 15, 2019, in VHT v. Zillow Group Inc., 2:15-cv-01096, the U.S. Court of Appeals for the Ninth Circuit issued a significant copyright decision, ruling, among other things, that Zillow's online service did not directly infringe real estate photos uploaded to its site by users merely by hosting those photos and making them available to others. With respect to Zillow's arrangement and cataloging of such photos, however, the appellate court found Zillow liable for direct infringement, rejecting the company's attempt to analogize itself to a search engine and its claim for protection under the fair use doctrine. The case is of particular importance for online service providers that host, organize, and manipulate user-submitted content. Wilson Sonsini Goodrich & Rosati filed an amicus curiae brief in the case on behalf of the Internet Association and the Computer and Communications Industry Association.
Zillow's online real estate platform hosts photos of real estate, most of which are uploaded by users. VHT sued Zillow, claiming that users had uploaded VHT's photos to Zillow without VHT's permission and that Zillow was liable for both direct and secondary copyright infringement for making the photos available to others through its service. Consistent with a long line precedent, the U.S. District Court for the Western District of Washington granted partial summary judgment in favor of Zillow on direct infringement of certain photos uploaded by users to Zillow's service because Zillow lacked the requisite "volitional conduct." The volitional conduct requirement mandates that, to state a claim for direct infringement, there must be "some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party."1 Because Zillow played no active role in the selection or curation of the photos uploaded by users, the court held that Zillow could not be held liable for direct infringement.
But the district court found that Zillow had engaged in volitional conduct regarding those user-uploaded photos that it selected, curated, and tagged for search functionality, and allowed VHT's direct infringement and secondary infringement claims to proceed to trial. At trial, a jury awarded VHT $8.27 million in damages for direct and secondary infringement of those photos. After trial, the district court partially granted Zillow's motion for judgment notwithstanding the verdict on secondary infringement, and reduced the damages to approximately $4 million. The parties cross appealed to the Ninth Circuit.
The Ninth Circuit's opinion delves deeply into the nuances of Zillow's operations, but the court's analysis on two issues are of particular importance for platforms that host user-submitted content: (1) the volitional conduct rule for direct infringement; and (2) the fair use analysis in the context of tagging and searching images.
Courts around the country have made clear that a party is only liable for direct copyright infringement if the party has engaged in "volitional conduct"—that is, "[t]here must be actual infringing conduct witha nexus sufficiently close and causal to the illegal copying that one could conclude that the machine owner himself trespassed on the exclusive domain of the copyright owner."2 As the Ninth Circuit explained in Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657, 666 (9th Cir. 2017), the requirement of volitional conduct is simply a restatement of the law of proximate cause. In other words, parties that do not act volitionally with respect to making or distributing unauthorized copies of a work do not proximately cause the infringement of that work.
The Ninth Circuit's Zillow opinion reaffirms the vitality of the volitional conduct doctrine for online services that host and make available user-supplied content.
First, the court restated the doctrine making clear that for online services, "the distinction between 'active and passive participation' in the alleged infringement is 'central' to the legal analysis."3 According to the panel, "direct copyright liability for website owners" only "arises when they are actively involved in the infringement."
Next, the court held that Zillow could not be held liable for direct infringement for the automatic storage and caching of images uploaded to its web service, as those activities are "insufficiently volitional to establish that Zillow directly infringed VHT's reproduction and adaptation rights." The court rejected VHT's argument that Zillow's automatic background processes, which trim and pad images to make them easier to process and display, amounted to volitional conduct. Nor, the court held, could Zillow be held liable for "instigating" user copying by simply promoting its service and encouraging users to upload photos.
Third, the court held that Zillow did not engage in volitional conduct by refusing to remove the photos after VHT sent Zillow a deficient notice of claimed infringement. VHT contended that Zillow's failure to act should be deemed volitional conduct because Zillow was "turning a blind eye to the alleged infringement." The court rejected that argument, noting that Zillow did not simply ignore VHT's notice and instead had requested more information from VHT. More generally, the court recognized that Zillow's "reasonable response to VHT's single formal inquiry can hardly be characterized as rising to the level of volitional conduct or turning a blind eye."
Zillow selected, cataloged, and tagged certain photos for search functionality. Before trial, the district court determined as a matter of law that that activity was not fair use, and the jury therefore concluded that Zillow had engaged in the requisite volitional conduct and was liable for direct infringement of those particular photos. On appeal, the Ninth Circuit affirmed.
Zillow had analogized that part of its service to a search engine, seeking to invoke prior decisions that had shielded search engine operations as fair uses.4 The Ninth Circuit disagreed with Zillow and noted that "the label 'search engine' is not a talismanic term that serves as an on-off switch as to fair use." Instead, the court stressed "the importance of considering the details and function of a website's operation in making a fair use determination."
The court focused on two distinctions between Zillow's search functionality and that of other "internet-wide search engines" that had been previously deemed fair use. First, it pointed out that Zillow offered only a "closed-universe search engine" that linked only to "other pages within Zillow's website." The court held that making the images searchable in that closed universe "does not fundamentally change their original purpose when produced by VHT: to artfully depict rooms and properties." Second, Zillow's search engine displayed the entirety of the images as opposed to merely thumbnails of those images that functioned as pointers to the full photos elsewhere online. According to the court, the use of the full images more readily substituted for the originals and thereby undermined a fair use claim.
Determining whether a use will qualify as fair can be a highly fact-specific analysis. The Ninth Circuit's ruling underscores that companies using or interacting with user-submitted content should design their services with fair use considerations in mind.
WSGR's internet strategy and litigation practice has unparalleled expertise in handling copyright infringement claims, especially those involving user generated content and online platforms. If you have questions about this area of the law, please contact David Kramer, Brian Willen, or any other member of the practice.
1 Religious Tech. Ctr. v. Netcom On-Line Comm. Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995).
2 CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544, 550 (4th Cir. 2004).
3 Citing Giganews, 847 F.3d at 667 (quoting Fox Broad. Co. v. Dish Network LLC, 160 F. Supp. 3d 1139, 1160 (C.D. Cal. 2015)).
4 See, e.g. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1154 (9th Cir. 2007) (holding that Google's image search function was a fair use); Kelly v. Arriba Soft Corp., 336 F.3d 811, 818-20 (9th Cir. 2003) (use of thumbnail images in a search engine was transformative because their purpose was completely different from their original use as fine art).

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