ALS Scan Inc. v. Remarq Communities Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ALS SCAN, INCORPORATED,

Plaintiff‑Appellant,

REMARQ COMMUNITIES,

INCORPORATED,

Defendant‑Appellee.

No. 00‑1351

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

J. Frederick Motz, Chief District Judge.

(CA‑99‑2594‑JFM)

Argued: November 1, 2000

Decided: February 6, 2001

Before WIDENER, WILKINS, and NIEMEYER, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opin‑

ion. Judge Niemeyer wrote the opinion, in which Judge Widener and

Judge Wilkins joined.

COUNSEL

ARGUED: Harry Brett Siegel, LAW OFFICE OF JOEL MARC

ABRAMSON, Columbia, Maryland, for Appellant. Robert R. Vieth,

COOLEY GODWARD, L.L.P., Reston, Virginia, for Appellee. ON

BRIEF: Robert T. Cahill, COOLEY GODWARD, L.L.P., Reston,

Virginia, for Appellee.

OPINION

NIEMEYER, Circuit Judge:

We are presented with an issue of first impression‑‑ whether an

Internet service provider enjoys a safe harbor from copyright infringe‑

ment liability as provided by Title II of the Digital Millennium Copy‑

right Act ("DMCA") when it is put on notice of infringement activity

on its system by an imperfect notice. Because we conclude that the

service provider was provided with a notice of infringing activity that

substantially complied with the Act, it may not rely on a claim of

defective notice to maintain the immunity defense provided by the

safe harbor. Accordingly, we reverse the ruling of the district court

that found the notice fatally defective, and affirm its remaining rul‑

ings.

ALS Scan, Inc., a Maryland corporation, is engaged in the business

of creating and marketing "adult" photographs. It displays these pic‑

tures on the Internet to paying subscribers and also sells them through

the media of CD ROMs and videotapes. ALS Scan is holder of the

copyrights for all of these photographs.

RemarQ Communities, Inc., a Delaware corporation, is an online

Internet service provider that provides access to its subscribing mem‑

bers. It has approximately 24,000 subscribers to its newsgroup base

and provides access to over 30,000 newsgroups which cover thou‑

sands of subjects. These newsgroups, organized by topic, enable sub‑

scribers to participate in discussions on virtually any topic, such as

fine arts, politics, religion, social issues, sports, and entertainment.

For example, RemarQ provides access to a newsgroup entitled "Balti‑

more Orioles," in which users share observations or materials about

the Orioles. It claims that users post over one million articles a day

in these newsgroups, which RemarQ removes after about 8‑10 days

to accommodate its limited server capacity. In providing access to

newsgroups, RemarQ does not monitor, regulate, or censor the con‑

tent of articles posted in the newsgroup by subscribing members. It

does, however, have the ability to filter information contained in the

newsgroups and to screen its members from logging onto certain

newsgroups, such as those containing pornographic material.

Two of the newsgroups to which RemarQ provides its subscribers

access contain ALS Scan's name in the titles. These newsgroups ‑‑

"alt.als" and "alt.binaries.pictures.erotica.als" ‑‑ contain hundreds of

postings that infringe ALS Scan's copyrights. These postings are

placed in these newsgroups by RemarQ's subscribers.

Upon discovering that RemarQ databases contained material that

infringed ALS Scan's copyrights, ALS Scan sent a letter, dated

August 2, 1999, to RemarQ, stating:

Both of these newsgroups ["alt.als" and

"alt.binaries.pictures.erotica.als"] were created for the sole

purpose of violating our Federally filed Copyrights and

Tradename. These newsgroups contain virtually all Feder‑

ally Copyrighted images. . . . Your servers provide access

to these illegally posted images and enable the illegal trans‑

mission of these images across state lines.

This is a cease and desist letter. You are hereby ordered

to cease carrying these newsgroups within twenty‑four (24)

hours upon receipt of this correspondence . . . .

America Online, Erol's, Mindspring, and others have all

complied with our cease and desist order and no longer

carry these newsgroups.

* * *

Our ALS Scan models can be identified at

http://www.alsscan.com/modlinf2.html[.] Our copyright

information can be reviewed at http://www.alsscan.com/

copyrite.html[.]

RemarQ responded by refusing to comply with ALS Scan's demand

but advising ALS Scan that RemarQ would eliminate individual

infringing items from these newsgroups if ALS Scan identified them

"with sufficient specificity." ALS Scan answered that RemarQ had

included over 10,000 copyrighted images belonging to ALS Scan in

its newsgroups over the period of several months and that

[t]hese newsgroups have apparently been created by individ‑

uals for the express sole purpose of illegally posting, trans‑

ferring and disseminating photographs that have been

copyrighted by my client through both its websites and its

CD‑ROMs. The newsgroups, on their face from reviewing

messages posted thereon, serve no other purpose.

When correspondence between the parties progressed no further to

resolution of the dispute, ALS Scan commenced this action, alleging

violations of the Copyright Act and Title II of the DMCA, as well as

unfair competition. In its complaint, ALS Scan alleged that RemarQ

possessed actual knowledge that the newsgroups contained infringing

material but had "steadfastly refused to remove or block access to the

material." ALS Scan also alleged that RemarQ was put on notice by

ALS Scan of the infringing material contained in its database. In addi‑

tion to injunctive relief, ALS Scan demanded actual and statutory

damages, as well as attorneys fees. It attached to its complaint affida‑

vits establishing the essential elements of its claims.

In response, RemarQ filed a motion to dismiss the complaint or, in

the alternative, for summary judgment, and also attached affidavits,

stating that RemarQ was prepared to remove articles posted in its

newsgroups if the allegedly infringing articles were specifically iden‑

tified. It contended that because it is a provider of access to news‑

groups, ALS Scan's failure to comply with the DMCA notice require‑

ments provided it with a defense to ALS Scan's copyright infringe‑

ment claim.

The district court ruled on RemarQ's motion, stating, "[RemarQ's]

motion to dismiss or for summary judgment is treated as one to dis‑

miss and, as such, is granted." In making this ruling, the district court

held: (1) that RemarQ could not be held liable for direct copyright

infringement merely because it provided access to a newsgroup con‑

taining infringing material; and (2) that RemarQ could not be held lia‑

ble for contributory infringement because ALS Scan failed to comply

with the notice requirements set forth in the DMCA, 17 U.S.C.

' 512(c)(3)(A). This appeal followed.

ALS Scan contends first that the district court erred in dismissing

its direct copyright infringement claim. It contends that it stated a

cause of action for copyright infringement when it alleged (1) the

"ownership of valid copyrights," and (2) RemarQ's violation of its

copyrights "by allowing its members access to newsgroups containing

infringing material."1 See generally Keeler Brass Co. v. Continental

Brass Co., 862 F.2d 1063, 1065 (4th Cir. 1988) (describing the

requirements of a direct infringement claim). In rejecting ALS Scan's

direct infringement claim, the district court relied on the decision in

Religious Technology Center v. Netcom On‑Line Communication Ser‑

vices, Inc., 907 F. Supp. 1361, 1368‑73 (N.D. Cal. 1995), which con‑

cluded that when an Internet provider serves, without human

intervention, as a passive conduit for copyrighted material, it is not

liable as a direct infringer. The Netcom court reasoned that "it does

not make sense to adopt a rule that could lead to liability of countless

parties whose role in the infringement is nothing more than setting up

and operating a system that is necessary for the functioning of the

Internet." Id. at 1372. That court observed that it would not be work‑

able to hold "the entire Internet liable for activities that cannot reason‑

ably be deterred." Id.; see also Marobie‑FL, Inc. v. National Ass'n of

Fire Equip. Distribs., 983 F. Supp. 1167, 1176‑79 (N.D. Ill. 1997)

(agreeing with Netcom's reasoning). ALS Scan argues, however, that

the better reasoned position, contrary to that held in Netcom, is pres‑

ented in Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552, 1555‑

59 (M.D. Fla. 1993), which held a computer bulletin board service

provider liable for the copyright infringement when it failed to pre‑

vent the placement of plaintiff's copyrighted photographs in its sys‑

tem, despite any proof that the provider had any knowledge of the

infringing activities.

Although we find the Netcom court reasoning more persuasive, the

ultimate conclusion on this point is controlled by Congress' codifica‑

tion of the Netcom principles in Title II of the DMCA. As the House

Report for that Act states,

The bill distinguishes between direct infringement and

secondary liability, treating each separately. This structure

is consistent with evolving case law, and appropriate in light

of the different legal bases for and policies behind the differ‑

ent forms of liability.

As to direct infringement, liability is ruled out for passive,

automatic acts engaged in through a technological process

initiated by another. Thus the bill essentially codifies the

result in the leading and most thoughtful judicial decision to

date: Religious Technology Center v. Netcom On‑Line Com‑

munications Services, Inc., 907 F. Supp. 1361 (N.D. Cal.

1995). In doing so, it overrules these aspects of Playboy

Enterprises, Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla.

1993), insofar as that case suggests that such acts by service

providers could constitute direct infringement, and provides

certainty that Netcom and its progeny, so far only a few dis‑

trict court cases, will be the law of the land.

H.R. Rep. No. 105‑551(I), at 11 (1998). Accordingly, we address only

ALS Scan's claims brought under the DMCA itself.

III

For its principal argument, ALS Scan contends that it substantially

complied with the notification requirements of the DMCA and

thereby denied RemarQ the "safe harbor" from copyright infringe‑

ment liability granted by that Act. See 17 U.S.C. ' 512(c)(3)(A) (set‑

ting forth notification requirements). It asserts that because its

notification was sufficient to put RemarQ on notice of its infringe‑

ment activities, RemarQ lost its service‑provider immunity from

infringement liability. It argues that the district court's application of

the DMCA was overly strict and that Congress did not intend to per‑

mit Internet providers to avoid copyright infringement liability

"merely because a cease and desist notice failed to technically comply

with the DMCA."

RemarQ argues in response that it did not have "knowledge of the

infringing activity as a matter of law," stating that the DMCA protects

it from liability because "ALS Scan failed to identify the infringing

works in compliance with the Act, and RemarQ falls within the `safe

harbor' provisions of the Act." It notes that ALS Scan never provided

RemarQ or the district court with the identity of the pictures forming

the basis of its copyright infringement claim.

These contentions of the parties present the issue of whether ALS

Scan complied with the notification requirements of the DMCA so as

to deny RemarQ the safe‑harbor defense to copyright infringement

liability afforded by that Act.

Title II of the DMCA, designated the "Online Copyright Infringe‑

ment Limitation Act," DMCA, ' 201, Pub. L. 105‑304, 112 Stat. 2877

(1998) (codified at 17 U.S.C. ' 101 note), defines limitations of liabil‑

ity for copyright infringement to which Internet service providers

might otherwise be exposed. The Act defines a service provider

broadly to include any provider of "online services or network access,

or the operator of facilities therefor," including any entity providing

"digital online communications, between or among points specified

by user, of material of the user's choosing, without modification to

the content of the material as sent or received." 17 U.S.C. ' 512(k).

Neither party to this case suggests that RemarQ is not an Internet ser‑

vice provider for purposes of the Act.

The liability‑limiting provision applicable here, 17 U.S.C. ' 512(c),

gives Internet service providers a safe harbor from liability for "in‑

fringement of copyright by reason of the storage at the direction of

a user of material that resides on a system or network controlled or

operated by or for the service provider" as long as the service pro‑

vider can show that: (1) it has neither actual knowledge that its system

contains infringing materials nor an awareness of facts or circum‑

stances from which infringement is apparent, or it has expeditiously

removed or disabled access to infringing material upon obtaining

actual knowledge of infringement; (2) it receives no financial benefit

directly attributable to infringing activity; and (3) it responded expe‑

ditiously to remove or disable access to material claimed to be

infringing after receiving from the copyright holder a notification

conforming with requirements of ' 512(c)(3).Id. ' 512(c)(1).2 Thus,

to qualify for this safe harbor protection, the Internet service provider

must demonstrate that it has met all three of the safe harbor require‑

ments, and a showing under the first prong ‑‑ the lack of actual or

constructive knowledge ‑‑ is prior to and separate from the showings

that must be made under the second and third prongs.

In this case, the district court evaluated the adequacy given to

RemarQ under the third prong only. Despite the fact the district court

stated it was treating RemarQ's motion as a motion to dismiss, rather

than as a motion for summary judgment, the court's memorandum

opinion fails to mention the allegation made in ALS Scan's complaint

that RemarQ had actual knowledge of the infringing nature of the two

subject newsgroups even before being contacted by ALS Scan, an

allegation denied by RemarQ. Clearly, had the court truly been evalu‑

ating ALS Scan's complaint under a 12(b)(6) standard of review, it

would necessarily have had to accept ALS Scan's allegation as

proven for purposes of testing the adequacy of the complaint, see

Eastern Shore Markets, Inc. v. J.D. Assoc. Ltd. P'ship, 213 F.3d 175,

180 (4th Cir. 2000), and consequently been required to rule in favor

of ALS Scan under the first prong.

Even if we were to treat the district court's order as disposing of

a motion for summary judgment, and not a motion to dismiss, the

court still could not, as a matter of law, have resolved the conflicting

affidavits about actual knowledge. Resolving whether the court actu‑

ally treated the motion as one to dismiss or for summary judgment is

not necessary, however, because we conclude that ALS Scan substan‑

tially complied with the third prong, thereby denying RemarQ its safe

harbor defense.

In evaluating the third prong, requiring RemarQ to remove materi‑

als following "notification," the district court concluded that ALS

Scan's notice was defective in failing to comply strictly with two of

the six requirements of a notification ‑‑ (1) that ALS Scan's notice

include "a list of [infringing] works" contained on the RemarQ site

and (2) that the notice identify the infringing works in sufficient detail

to enable RemarQ to locate and disable them. 17 U.S.C.

' 512(c)(3)(A)(ii), (iii).3

In support of the district court's conclusion, RemarQ points to the

fact that ALS Scan never provided it with a "representative list" of the

infringing photographs, as required by ' 512(c)(3)(A)(ii), nor did it

identify those photographs with sufficient detail to enable RemarQ to

locate and disable them, as required by ' 512(c)(3)(A)(iii). RemarQ

buttresses its contention with the observation that not all materials at

the offending sites contained material to which ALS Scan held the

copyrights. RemarQ's affidavit states in this regard:

Some, but not all, of the pictures users have posted on these

sites appear to be ALS Scan pictures. It also appears that

users have posted other non‑ALS Scan's erotic images on

these newsgroups. The articles in these newsgroups also

contain text messages, many of which discuss the adult

images posted on the newsgroups.

ALS Scan responds that the two sites in question‑‑ "alt.als" and

"alt.binaries.pictures.erotica.als" ‑‑ were created solely for the pur‑

pose of publishing and exchanging ALS Scan's copyrighted images.

It points out that the address of the newsgroup is defined by ALS

Scan's name. As one of its affidavits states:

[RemarQ's] subscribers going onto the two offending news‑

groups for the purpose of violating [ALS Scan's] copy‑

rights, are actually aware of the copyrighted status of [ALS

Scan's] material because (1) each newsgroup has"als" as

part of its title, and (2) each photograph belonging to [ALS

* * *

(ii) Identification of the copyrighted work claimed to have

been infringed, or, if multiple copyrighted works at a single

online site are covered by a single notification, a representa‑

tive list of such works at that site.

(iii) Identification of 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 pro‑

vider to locate the material.

Scan] has [ALS Scan's] name and/or the copyright symbol

next to it.

Each of these two newsgroups was created by unknown

persons for the illegal purpose of trading the copyrighted

pictures of [ALS Scan] to one another without the need for

paying to either (1) become members of [ALS Scan's] web

site(s) or (2) purchasing the CD‑ROMs produced by[ALS

Scan].

ALS Scan presses the contention that these two sites serve no other

purpose than to distribute ALS Scan's copyrighted materials and

therefore, by directing RemarQ to these sites, it has directed RemarQ

to a representative list of infringing materials.

The DMCA was enacted both to preserve copyright enforcement

on the Internet and to provide immunity to service providers from

which a service provider's system engages through a technological

process initiated by another without the knowledge of the service pro‑

vider. H.R. Conf. Rep. No. 105‑796, at 72 (1998), reprinted in 1998

U.S.C.C.A.N. 649; H.R. Rep. No. 105‑551(I), at 11 (1998). This

immunity, however, is not presumptive, but granted only to "inno‑

cent" service providers who can prove they do not have actual or con‑

structive knowledge of the infringement, as defined under any of the

three prongs of 17 U.S.C. ' 512(c)(1). The DMCA's protection of an

innocent service provider disappears at the moment the service pro‑

vider loses its innocence, i.e., at the moment it becomes aware that

a third party is using its system to infringe. At that point, the Act

shifts responsibility to the service provider to disable the infringing

matter, "preserv[ing] the strong incentives for service providers and

infringements that take place in the digital networked environment."

H.R. Conf. Rep. No. 105‑796, at 72 (1998), reprinted in 1998

U.S.C.C.A.N. 649. In the spirit of achieving a balance between the

responsibilities of the service provider and the copyright owner, the

DMCA requires that a copyright owner put the service provider on

notice in a detailed manner but allows notice by means that comport

with the prescribed format only "substantially," rather than perfectly.

The Act states: "To be effective under this subsection, a notification

of claimed infringement must be a written communication provided

to the designated agent of a service provider that includes substan‑

tially the following . . . ." 17 U.S.C. ' 512(c)(3)(A) (emphasis added).

In addition to substantial compliance, the notification requirements

are relaxed to the extent that, with respect to multiple works, not all

must be identified ‑‑ only a "representative" list. See id.

' 512(c)(3)(A)(ii). And with respect to location information, the

cient" to permit the service provider to "locate" this material. Id.

' 512(c)(3)(A)(iii) (emphasis added). This subsection specifying the

requirements of a notification does not seek to burden copyright hold‑

ers with the responsibility of identifying every infringing work ‑‑ or

even most of them ‑‑ when multiple copyrights are involved. Instead,

the requirements are written so as to reduce the burden of holders of

multiple copyrights who face extensive infringement of their works.

Thus, when a letter provides notice equivalent to a list of representa‑

tive works that can be easily identified by the service provider, the

notice substantially complies with the notification requirements.

In this case, ALS Scan provided RemarQ with information that (1)

identified two sites created for the sole purpose of publishing ALS

Scan's copyrighted works, (2) asserted that virtually all the images at

the two sites were its copyrighted material, and (3) referred RemarQ

to two web addresses where RemarQ could find pictures of ALS

Scan's models and obtain ALS Scan's copyright information. In addi‑

tion, it noted that material at the site could be identified as ALS

Scan's material because the material included ALS Scan's "name

and/or copyright symbol next to it." We believe that with this infor‑

mation, ALS Scan substantially complied with the notification

requirement of providing a representative list of infringing material as

well as information reasonably sufficient to enable RemarQ to locate

the infringing material. To the extent that ALS Scan's claims about

infringing materials prove to be false, RemarQ has remedies for any

injury it suffers as a result of removing or disabling noninfringing

material. See 17 U.S.C. ' 512(f), (g).

Accordingly, we reverse the district court's ruling granting sum‑

mary judgment in favor of RemarQ on the basis of ALS Scan's non‑

compliance with the notification provisions of 17 U.S.C.

' 512(c)(3)(A)(ii) and (iii). Because our ruling only removes the safe

harbor defense, we remand for further proceedings on ALS Scan's

RemarQ may have.

ALS Scan also appeals the district court's decision not to enter

summary judgment on its behalf with respect to its infringement

claim. Because there is a dispute as to several material facts, however,

we affirm the district court's ruling on ALS Scan's motion for sum‑

mary judgment. If ALS Scan is able to prove that in fact the offending

newsgroups' "sole purpose" is infringement of ALS Scan's copy‑

rights, it may be entitled to a remedy. However, because it is con‑

tested both that such is, in fact, the "sole" purpose of the newsgroups,

and that "virtually all" the images posted in the newsgroups are

infringing, we are unable to come to any legal conclusions. Final dis‑

position must await further development of the record and further pro‑

ceedings.

Accordingly, for the reasons given, we reverse the district court's

decision to grant summary judgment in favor of RemarQ, affirm the

district court's decision not to grant summary judgment in favor of

ALS Scan, and remand this case for further proceedings consistent

with this opinion.

AFFIRMED IN PART, REVERSED

IN PART, AND REMANDED

Footnotes

1 It would appear that ALS Scan's allegations amount more to a claim

of contributory infringement in which a defendant,"with knowledge of

the infringing activity, induces, causes or materially contributes to the

infringing conduct of another," Gershwin Publ'g Corp. v. Columbia Art‑

ists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971), than to a claim of

direct infringement.

2 Section 512(c)(1) provides in full:

users.‑‑

(1) In general.‑‑A service provider shall not be liable for mon‑

etary relief, or, except as provided in subsection (j), for

injunctive or other equitable relief, for infringement of

of material that resides on a system or network controlled

or operated by or for the service provider, if the service

provider‑‑

(A)(i) does not have actual knowledge that the material

or an activity using the material on the system or network

is infringing;

(ii) in the absence of such actual knowledge, is not aware

of facts or circumstances from which infringing activity is

apparent; or

(iii) upon obtaining such knowledge or awareness, acts

expeditiously to remove, or disable access to, the material;

(B) does not receive a financial benefit directly attribut‑

able to the infringing activity, in a case in which the service

provider has the right and ability to control such activity;

and

described in paragraph (3), responds expeditiously to

remove, or disable access to, the material that is claimed to

be infringing or to be the subject of infringing activity.

3 Section 512(c)(3)(A)(ii), (iii) provides:

(3) Elements of notification.‑‑

(A) To be effective under this subsection, a notification of

claimed infringement must be a written communication provided

to the designated agent of a service provider that includes sub‑

stantially the following: