Opinion ID: 1425915
Heading Depth: 1
Heading Rank: 4

Heading: discussion secondary liability under federal copyright and trademark law

Text: Perfect 10 alleges that numerous websites based in several countriesand their paying customershave directly infringed its rights under the Copyright Act, 17 U.S.C. § 101, et seq. [1] In the present suit, however, Perfect 10 has sued Defendants, not the direct infringers, claiming contributory and vicarious copyright infringement because Defendants process credit card charges incurred by customers to acquire the infringing images. We evaluate Perfect 10's claims with an awareness that credit cards serve as the primary engine of electronic commerce and that Congress has determined it to be the policy of the United States(1) to promote the continued development of the Internet and other interactive computer services and other interactive media [and] (2) to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation. 47 U.S.C. §§ 230(b)(1), (2). [2]
Contributory copyright infringement is a form of secondary liability with roots in the tort-law concepts of enterprise liability and imputed intent. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir.1996); Perfect 10, Inc. v. Amazon.com, Inc. et al., 487 F.3d 701 (9th Cir.2007). This court and the United States Supreme Court (Supreme Court) have announced various formulations of the same basic test for such liability. We have found that a defendant is a contributory infringer if it (1) has knowledge of a third party's infringing activity, and (2) induces, causes, or materially contributes to the infringing conduct. Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004) (citing Gershwin Publ'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir.1971)). In an Internet context, we have found contributory liability when the defendant engages in personal conduct that encourages or assists the infringement. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019 (9th Cir.2001) (internal citations omitted). In Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., the Supreme Court adopted from patent law the concept of inducement and found that [o]ne infringes contributorily by intentionally inducing or encouraging direct infringement. 545 U.S. 913, 930, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005). [3] Most recently, in a case also brought by Perfect 10, we found that an actor may be contributorily liable [under Grokster ] for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct infringement. Amazon.com, 487 F.3d at 727. We understand these several criteria to be non-contradictory variations on the same basic test, i.e., that one contributorily infringes when he (1) has knowledge of another's infringement and (2) either (a) materially contributes to or (b) induces that infringement. Viewed in isolation, the language of the tests described is quite broad, but when one reviews the details of the actual cases and controversies before the relevant court in each of the testdefining cases and the actual holdings in those cases, it is clear that the factual circumstances in this case are not analogous. To find that Defendants' activities fall within the scope of such tests would require a radical and inappropriate expansion of existing principles of secondary liability and would violate the public policy of the United States.
Because we find that Perfect 10 has not pled facts sufficient to establish that Defendants induce or materially contribute to the infringing activity, Perfect 10's contributory copyright infringement claim fails and we need not address the Defendants' knowledge of the infringing activity. [4]
To state a claim of contributory infringement, Perfect 10 must allege facts showing that Defendants induce, cause, or materially contribute to the infringing conduct. See, e.g., Ellison, 357 F.3d at 1076. Three key cases found defendants contributorily liable under this standard: Fonovisa, 76 F.3d 259; Napster, 239 F.3d 1004; and Grokster, 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781. In Fonovisa, we held a swap meet operator contributorily liable for the sale of pirated works at the swap meet. In Napster, we held the operator of an electronic file sharing system liable when users of that system employed it to exchange massive quantities of copyrighted music. In Grokster, the Supreme Court found liability for the substantially similar act of distributing software that enabled exchange of copyrighted music on a peer-to-peer, rather than a centralized basis. [5] Perfect 10 argues that by continuing to process credit card payments to the infringing websites despite having knowledge of ongoing infringement, Defendants induce, enable and contribute to the infringing activity in the same way the defendants did in Fonovisa, Napster and Grokster. We disagree.