UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
PERFECT 10, INC. ,
Plaintiff,
v.
CYBERNET VENTURES, INC., et al.,
Defendants
CV 01-2595 LGB (SHx)
ORDER GRANTING
PERFECT 10’S MOTION FOR
PRELIMINARY INJUNCTION
I. INTRODUCTION
This action springs from Perfect 10, Inc.’s
(“Perfect 10”) allegations that defendant Cybernet Ventures, Inc. (“Cybernet’),
a corporation running a web-service called “Adult Check,” and other defendants
infringe Perfect 10’s copyrights, violate perfect 10’s trademark rights and
otherwise engage in rampant unfair business practices.
Currently before the Court is Perfect 10’s Request
for a Preliminary Injunction, which requests relief against a variety of
defendants. The Court has received Perfect 10’s motion, defendants Cybernet and
Laith Alsarraf’s oppositions, and Perfect 10’s reply. These briefs are
supported by voluminous supporting papers (and the accompanying evidentiary
objections).
II. INITIAL EVIDENTIARY 0BJECTIONS
In support of its motion for preliminary injunction,
Perfect 10 submitted 117 exhibits attached to the declaration of Norman Zadeh,
Ph.D. (“Zadeh Decl.”), 16 exhibits attached to the declaration of Daniel Farmer
(“Farmer Decl.”) and 13 exhibits attached to the declaration of Jeffrey Mausner
(“Mausner Decl.”) . Perfect 10 supplemented these declarations with several
others. Cybernet basically objects to every exhibit attached to the Zadeh and
Farmer declarations, as well as two exhibits attached to the Mausner declaration.
In addition Cybernet has raised objections to portions of declarations filed by
Zadeh, Farmer, Mausner, Laurence Rudolph (“Rudolph Decl.”), Selma Rubin (“Rubin
Decl.”) and John Baruck (“Baruck Decl.”).
Perfect 10 has also raised objections to evidence submitted
by Cybernet. Perfect 10 objects to a single paragraph in the declaration of
Timothy Umbreit (“Umbreit Decl.”) and to ten paragraphs in the declaration of
Frederick Lane III (“Lane Decl.”). Before the Court makes its findings of fact
under Federal Rule of Procedure 65, it will address these objections. It will
do so, however, only in broad strokes.
A. AUTHENTICATION OBJECTIONS
The great bulk of Cybernet’s objections center on
Perfect 10’s exhibits printed off of the internet. See Cybernet Evidentiary
Objections (“Def. Obj .”) at 1-5. Cybernet argues these exhibits are
insufficiently authenticated. See, e.g., id. at 1. In support, Cybernet
points to two cases, United States v. Jackson, 208 F.3d 633, 637 (7th
Cir. 2000), cert. denied, 531 U.S. 973 (2000), and St. Clair v.
Johnny’s Oyster & Shrimp, Inc., 76 F.Supp.2d 773, 774 (S.D. Tex. 1999).
The Jackson court upheld the exclusion of
certain web postings attributed to white supremacist groups because they were
insufficiently authenticated. 208 F.3d at 638. As the court viewed the
situation, the criminal defendant in the case had to show that the postings, in
which these groups appeared to claim responsibility for a series of racist
mailings, actually were posted by the groups, as opposed to being slipped on
the groups’ web sites by the defendant, who was a skilled computer user. Id.
The St. Clair court took a more extreme view
over the admissibility of data taken from the United States Coast Guard’s online
vessel database concerning the ownership of a vessel. 76 F.Supp.2d at 774. The
court viewed the internet as “one large catalyst for rumor, innuendo, and
misinformation,” stated that there was “no way” the plaintiff could overcome
“the presumption that the information . . . discovered on the Internet is
inherently untrustworthy.” Id. The court then excluded the information
as hearsay, rather than “relying on the voodoo information taken from the
Internet.” Id.
Although
these out-of-circuit cases are informative concerning the potential pitfalls of
internet-based documents, this Court must look to the Ninth Circuit for
guidance. In United States v. Tank, 200 F.3d 627, 630 (9th Cir. 2000),
the Ninth Circuit
addressed the admissibility of certain chat room logs. In Tank, the
government initiated a prosecution against a child pornography suspect after a
search of another suspect’s computer files revealed “recorded” online chat room
discussions among members of an internet club focused on discussing, trading,
and producing child pornography. 200 F.3d at 629. The recorder of these chat
room discussions had deleted from his computer nonsexual conversations and
extraneous material, such as date and time stamps. Id.
The Tank court observed that the foundational
requirement of authentication is satisfied by evidence sufficient to support a
finding that the matter in question is what its proponent claims. See
200 F.3d at 630 (citing Fed. R. Evid. 901(a)). This burden is met when
“sufficient proof has been introduced so that a reasonable juror could find in
favor of authenticity.” Id. (citations omitted). This burden was
met where the producer of the logs explained how he created the logs with his
computer and stated that the printouts appeared to be accurate representations.
Id. Additionally, the government established the connection between Tank
and the chat room log printouts. Id.
The Court finds that Zadeh’s declaration adequately
establishes the prima facie case for admissibility in claiming the exhibits
attached to his declaration were either:
1) true and correct copies of documents
produced by Cybernet in discovery (identified by a CV prefix);
2) true and correct copies of pictures from
Perfect 10 Magazine or from Perfect 10’s website; or
3) true and correct copies of pages printed
from the Internet that were printed by Zadeh or under his direction.
Zadeh
Decl. ¶7. Those webpages that fall under category (3) contain the internet
domain address from which the image was printed and the date on which it was
printed. Id. ¶8.
The first category is covered by Maljack Prods.,
Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 889 n.12
(9th Cir. 1996) (discovery documents deemed authentic when offered by
party-opponent). See also Orr v. Bank of America, NT & SA, - F.3d.
-, 2002 WL 507525 *1, *6 n.20 (9th Cir. 2002) (citing to same). The
second and third categories have met the prima facie burden because the
declarations, particularly in combination with circumstantial indicia of
authenticity (such as the dates and web addresses), would support a
reasonable juror in the belief that the documents are what Perfect 10 says they
are. See Tank, 200 F.3d at 630. Moreover, because computer printouts are
the only practical method by which the allegations of the complaint can be
brought before the Court and there is generally a reduced evidentiary standard
in preliminary injunction motions,1 the Court finds that, as a general rule,
Zadeh’s declaration is sufficient to establish the exhibits’
authenticity.2
This is particularly true with regard to e-mail
communications attributed to Brad Estes. Mr. Estes’s deposition testimony
establishes that it is part of his duties to respond to posts in Adult Check’s
“webmasters lounge” and that he
responds to e-mails from webmasters concerning aspects of Cybernet’s “Adult
Check” program. Mausner Decl., Ex. C at 94-97.
B.
E-MAILS BETWEEN CYBERNET EMPLOYEES AND THIRD PARTIES
Cybernet
does not object to the Court’s consideration of the communications purportedly
made by Cybernet’s employees “if the Court were to accept Plaintiff’s scanty
authentication” but does object to consideration of the communications
attributed to third parties on hearsay grounds. See Evid. Obj. at 3. The
Court treats the communications attributable to Cybernet employees as party
admissions and will accept the third party communications only insofar as they
indicate notice of infringing or potentially infringing activity.3 See Fed.R.Evid. 801.
Cybernet objects to the printouts from third-party
websites as a violation of the rule against hearsay. See Fed.R.Evid.
801. To the extent these images and text are being introduced to show the
images and text found on the websites, they are not statements at all—and
thus fall outside the ambit of the hearsay rule.4 To the extent that Perfect 10 relies on
directories and the like as assertions that the links provided actually connect
to the subject matter claimed in the link, the Court finds the hearsay issue to
be a closer question. The Court will deal with this issue, should it arise, on
a case-by-case basis. As for any asserted connection between those sites and
Adult Check (Cybernet), the Court finds the evidence of Cybernet’s business structure
and the workings of Adult Check’s age verification program combined with
statements identifying the individual websites as Adult Check sites are enough
to establish the sites’ membership in the Adult Check program. This takes the
various printouts outside the definition of hearsay, for this purpose. See Fed.
R. Evid. 801(d) (2) (D).
D. OBJECTION TO CHART
Perfect 10 has prepared a chart (“Chart 1”)
outlining examples of infringing conduct it claims has been or can be found on
websites affiliated with “Adult Check.” Zadeh Decl., Chart 1. Cybernet argues
that the Zadeh declaration has failed to adequately establish how the chart was
compiled, fails to lay an adequate foundation and that its descriptions of
exhibits are confusing or inaccurate. Evid. Obj. at 5. The Court finds these
objections, as a general matter, to be without merit.
The chart simply reiterates information found
elsewhere, including the website where the information was found, the
date of download, Perfect 10’s claimed infringement, a brief description, which
copyright registration covers the claimed Perfect 10 images, and an assertion
concerning rights of publicity. To the extent this information is found on the
face of each exhibit it is unobjectionable. Further, any errors in describing
the contents are easily confirmed by visual inspection of the exhibits.
Finally, Perfect 10 has provided information supporting its claimed copyrights
and rights of publicity. The Court finds no reason to exclude Chart 1 and has
found it a helpful reference in its review of the voluminous documents
provided.
E. REPLY EVIDENCE
Perfect 10 has supplied the Court with a significant
volume of reply evidence. Perfect 10 claims most of this evidence is directed
at arguments made by Cybernet that this motion should be barred by
laches or the doctrine of “unclean hands,” challenges
to Perfect 10’s claims of copyright ownership, and Cybernet’s claims to be
effectively policing the websites making use of the “Adult Check” brand.
Cybernet moved ex parte for an order striking all this evidence,
which the Court denied in a previous minute order. Nevertheless, for reasons
that will become clear the Court has felt no need to consider any of this
proposed rebuttal evidence, although isolated exceptions to this general rule
will be noted as they appear.
F. OBJECTIONS TO CYBERNET’S DECLARATIONS
The Court sustains Cybernet’s objections to the
Lane Declaration’s ¶¶70, 71, and 81, except to the extent they may be used as
party admissions.
III.
FINDINGS OF FACT
Pursuant to Fed. Rule of Procedure 52(a), the Court
makes the followings findings of fact:
1. Plaintiff Perfect 10, Inc. (“Perfect 10”)
was formed in 1996 by Norman Zadeh, who has occupied the post of Chief
Executive Officer (“CEO”) since Perfect 10’s formation. Zadeh Decl., ¶2.
2. Mr. Zadeh received his Ph.D. in Operations Research in 1972, spent
some time working in IBM’s computer research department, and has taught applied
mathematics as a visiting professor at Stanford, UCLA, U.C. Irvine, and
Columbia Universities. Id., ¶¶ 3,4.
3. Armed with a single idea—that there was a market for “classy”
pictures of nude women without breast implants, cosmetic surgery, or the
like—Perfect 10 was formed. Jenal Decl., Ex. L at 94.
4. Although Mr. Zadeh did not prepare a formal business plan before
launching Perfect 10, he had some idea of the costs involved and an idea of how
the magazine would develop. Id. at 93; Request for Judicial Notice, Ex. 1 (“Bacon’s
article”) at 4.5
5. Since Perfect 10’s formation, it has built its circulation up to
approximately 90,000 issues.6 Zadeh
Decl., ¶ 9.
6. Perfect 10 created a website, Perfectl0.com, in 1996. Id.
7. Perfect10.com receives about 100,000 visitors each month. Id. There
is no indication how many paid subscribers Perfect10.com has attracted.
8. Perfect 10’s first magazine was published in 1997. Jenal
Decl., Ex. L at 97.
9. Since Perfect 10’s inception it has created approximately 3,000
photographic images. Zadeh Decl., ¶12.
10. Perfect 10 sells memberships allowing access to Perfect10.com at a
rate of $25.50 per month to persons 18 years and older. Id,. ¶ 13.
11. Despite Perfect 10’s costs per individual picture rising into the
thousands of dollars, Perfect 10 has not been profitable. See Jenal Decl., Ex.
L at 97-101. The company is now losing approximately $4 to $5 million per year.
Id. at 101.
12. Some of this loss was anticipated by the CEO, Mr. Zadeh, although
in retrospect those estimates were low. Id. at 95; Bacon’s Article
at 4-5. In an August 1997 interview, Mr. Zadeh, said that he planned to publish
the magazine six times a year at $6.95 per issue. Bacon’s Article at 5. For the
interview, he stated that he’d be happy losing $500,000 a year, but that he
felt he could expect to break even with a few issues. Id. At the time,
he felt that the magazine would begin attracting advertisers when circulation
reached 150,000 to 200,000 copies. Id.
13. Perfect 10 lost an estimated $700,000 per issue for the two issues
it published in 1997. Jenal Decl., Ex. L at 99. In 1998, Perfect 10 published
four issues and estimates losses around $500,000 per issue. Id. at 100.
14. In addition to its website
and magazine, Perfect 10 has also produced calendars and model of the year
videotapes. Id. at 101.
Age Verification Services
15. The online-pornographic
industry faces the constant threat of litigation and regulation stemming from a
variety of fears, including access by under-age users and violations of obscenity
laws, including those against child
pornography, bestiality and other such subjects that the government identifies
and chooses to regulate. See, e.g., Lane Decl. ¶¶25, 44.
16 Age verification services (“AVS”) are meant to provide some level of reassurance to all
involved.
17. An AVS places a computer script on individual webpages or
websites. Farmer Decl., ¶15. When a visitor hits a page containing the script,
it provides a prompt before allowing the visitor to view the page or
other pages on the site. Id. AVS services sell passwords to consumers so
they can gain access to materials on participating websites. Lane Decl., ¶47;
Farmer Decl., ¶13.
18. Although not a perfect screen, the credit card is a relatively strong proxy for identifying those who are 18 or older. Lane Decl., ¶46.
AVS and Credit Card Billing
19. The growth of the online-pornographic business has been a boon
to credit card companies. Lane Decl. ¶32. At the same time, credit card
companies have had problems with a phenomenon called chargebacks as they relate
to online adult businesses. Id. ¶¶51, 52.
20. Chargebacks are requests for reversals of
credit card charges and are often tied to customer complaints. Id. ¶51.
Mastercard and Visa have established strict limits on the percentages of
chargebacks they will tolerate from any one account. Id. ¶52. Merchants
exceeding those limits are heavily fined and may lose their merchant processing
accounts. Id.
Cybernet Ventures, Inc.
21. Cybernet Ventures, Inc. (“Cybernet”) runs an AVS called “Adult
Check.” Lane Decl., ¶46. Cybernet, through its Adult Check brand, bills itself
as the leading AVS on the Internet. Id. ¶48. Adult Check claims to have
approximately 300,000 “regular” sites and 14,000 “Gold” sites using its
service. Umbreit Decl., ¶24.
22. Based on Adult Check’s image requirements, it estimates that
there are over 20 million images available on participating web sites. Id. On
an average day, Cybernet authenticates an average of 1.9 million Adult Check
IDs. Id. ¶12.
23.
Individual “webmasters” run the websites that make up the Adult Check
“network.”7 See,
e.g., Lane Decl., ¶58. These webmasters are not charged to use the Adult
Check service. Umbreit Decl., ¶7.
24.Each webmaster
is responsible for running the website, including creating the site’s content,
finding a server to host the site and other technical details, as well as
promoting the site. Lane Decl., ¶¶34-36.
25. When a new user visits one of these sites, they are directed
to Cybernet’s site on adultcheck.com to register with Adult Check. Farmer
Decl., ¶14; Umbreit Decl. ¶¶9, 10.
26. Cybernet has two tiers of membership
available, a “regular” membership and an “Adult Check Gold” membership. See,
e.g., Umbreit ¶24. For $19.95 every three months, a regular member receives
access to all sites using the AVS, except for the Gold sites. Zadeh Decl., Ex.
1 at 2. The Gold sites contain more images, more diversity, and generally meet
more criteria aimed at ensuring these sites are higher-quality
than those available to “regular” members. See, e.g., Zadeh Decl., Ex. 1
at 19-20 (contrasting requirements); Umbreit Decl., ¶22. The Gold
memberships are more expensive and provide access to all the websites
classified as Adult Check Gold (approximately 14,000 sites) for a price of
$19.95 per month. Zadeh Decl., Ex. 4.
27. All fees paid by these members go
directly to Cybernet. On a semi-monthly basis Cybernet then pays each
individual webmaster a commission attributed to the site where the member
originally signed up for his or her Adult Check membership. Umbreit Decl., ¶13;
Zadeh Decl., Ex. 1 at 8-10.
28. There are two main factors driving an AVS
service’s success, the quantity of images available on the participating
websites and their quality. See Lane Decl., ¶54; Umbreit Decl. ¶22. There is
also a need to prevent a redundancy of similar sites because this dilutes the
experience of viewers, increasing dissatisfaction with a service and increasing
the likelihood of users leaving the service or requesting chargebacks. Lane
Decl., ¶57; Zadeh Decl., Ex. 1 at 21.
29. Adult
Check has a financial incentive to insure that the participating websites are
numerous, somewhat distinctive and contain images that attract users. As a
result Adult Check has adopted a variety of guidelines concerning the
content provided by the websites using its name and services. Zadeh Decl, Ex. 1
at 15-24.
30. Adult Check has divided up its websites
into six tiers. They are as follows:
Tier 1. Adult Check
exclusive sites with only Adult Check ads or no ads at all;
Tier 2. Adult Check
exclusive sites with both Adult Check ads and non-Adult Check ads;
Tier 3. Adult Check
Exclusive sites with non-Adult Check ads.
Tier 4. Non-exclusive sites
with only Adult Check ads or no adds ad all;
Tier 6. Non-exclusive
sites with non-Adult Check ads.
Each tier involves
greater value for users along a spectrum defined by greater commitment to the
Adult Check brand.
See Zadeh
Decl., Ex. 1 at 16.
31. Cybernet views sites and assigns keywords
to further efficiency of an internal search engine that it provides as a
service to consumers. Zadeh Decl., Ex. 12 at 63.
32. Part of Cybernet’s Adult Check service is
a linking service found on adultcheck.com. Cybernet provides links to
various webpages organized by category, including categories devoted to
celebrity sites. See, e.g., Zadeh Decl., Exs. 72 & 81.
33. Adult Check also provides a search
function that searches for content within the Adult Check affiliated websites
and webpages. Umbreit Decl., ¶17.
Adult
Check Policies
34.
Adult Check has also endorsed a number of “General Policies,” including:
1) Any unlawful activities or activities
that, within the sole and absolute discretion of Adult Check may be or are harmful to its
reputation, image, goodwill (including but not limited to inappropriate Usenet
postings or spamming) will result in immediate termination;
2)
Illegal content is strictly prohibited. Illegal content includes, but is not
limited to: minors, rape and bestiality;
3) Fraud, illegal
activities, unfair or deceptive trade practices or violation of the Adult Check
Policies will result in immediate termination of your account; and
4) Violation of the Adult
Check limited use license of trademarks and copyrighted materials is
prohibited.
Zadeh Decl., Ex. 1 at 13.
35. Adult Check also has a policy related to
its Links Page, which leads Adult Check users to various sites and webpages by
providing a directory organized by category. In order to be listed on
the Links Pages:
1) A site may not display, publish, link to
or provide access to any images, pictures, stories, video clips or any other
media portraying any content that is deemed illegal in the United States. Any
site containing content deemed illegal in the United States will be removed
from the Links Page and the account will be deactivated;
2) Each Adult Check Site must contain unique,
quality and adequate content. The quality, uniqueness and adequacy of the
content is solely within the discretion of AC, but generally means at least 30
pictures of sufficient quality to provide value to the Adult Check customer.
These guidelines are loose and subjective to insure that there is a definite
benefit for the Adult Check customers without requiring them to pay extra fees;
3) A participating site must be placed in the
appropriate category of the Links Pages and the description of the site must be
accurate. Any deceptive information is grounds for removing the site from the
Links Page.
4) Site names and site descriptions must not
be false, misleading or deceptive.
5) Multiple sites owned by the same person or
entity must be designed as individual sites and may not be listed more than
once.
6) Feeder sites, must also comply with the
minimal standards.
7) Membership sites, requiring further membership
fees must provide content before an Adult Check customer is required to pay any
fees.
8) The webmaster is responsible for providing
all content. Cybernet disclaims any responsibility for content.
9) All sites are reviewed and monitored for continued
compliance.
10) Each site submitted must be unique.
Templated sites will not be accepted for placement on the links page. Templated
sites are defined as two or more sites that are created or appear to the viewer
as substantially identical, despite minor variations such as site title.
11) The use of any registered trademark,
trade name, copyright or exclusive publicity right without proper authority or
written consent of the owner, will not be permitted on any Adult check site.
violation of this policy will, among other things, result in the removal of the
violating site from the Links pages and the termination of the website’s
affiliation with Adult Check.
Zadeh Decl., Ex. 1 at 15, 16.
36. Adult Check also has a Child Pornography
policy. Adult Check classifies its Child Pornography policy as “zero
tolerance.” This policy is enforced anywhere images, words or inferences
relating to child pornography are used in conjunction with the Adult Check
system. Adult Check explicitly states: “This is not limited to sites linked to
from our links pages,” thus implying it applies to all content accessed through
the use of Adult Check passwords. When this policy is violated, the site will
be closed, removed from the Adult Check system without warning, the limited use
license for the Adult Check script will be revoked and the offender must remove
all links and references to Adult Check from the offender’s sites, presumably
going beyond the single webpage or site where the offending material appears.
Zadeh Decl., Ex. 1 at 14, 15 (emphasis added to quote).
37. Prior to August 8, 2001,
Cybernet’s policy on copyright and trademark violations was
self-characterized as “neutral.” In an email, one employee put it this way:
If Webmaster A contacts us and says that Webmaster
B is violating his or her copyrights or trademarks we will do one thing and one
thing only. Adult Check will forward an email from Webmaster A to Webmaster B.
It is then Webmaster B’s responsibility to reply to Webmaster A and solve the
matter.
It would never be a good idea for Adult Check
to take any other stance in these matters. Doing so would open a huge amount of
legal liability due to the possibility of error. Webmaster A could be lying and
Webmaster B could have designed the site first and it could have actually been
Webmaster A who copied it! This is why we stay neutral.
Zadeh
Decl., Ex. 20 at 240; see also Mausner Decl., Ex. C at 97.
38. Since August 8, 2001, Cybernet has
promulgated a copyright policy labeled “Digital Millennium Copyright Act
(“DMCA”) policy”. Under this policy, a notice of infringement sent to Cybernet
must include:
1)
A physical or electronic signature of the owner or a person authorized to act
on behalf of the owner;
2)
An identification of the copyrighted work and if it is located on a web page,
the specific address of the web page should be provided;
3)
ID of the material that is claimed to be infringing or the subject of
infringing activity;
4)
statement of good faith belief that use of the material is not authorized by
the copyright owner, its agent or the law;
According
to Cybernet’s “DMCA Policy”, upon receipt of a written notification meeting all
of its criteria, Cybernet will:
1)
Act expeditiously to remove links or disable access to the allegedly infringing
material;
2)
Take reasonable steps to promptly notify the accused subscriber; and
3)
forward a copy of the written notification to the accused subscriber.
This
policy then provides for a counter notification procedure to be used by
webmasters accused of infringement.
Finally, “in appropriate circumstances where [Cybernet] receives
multiple notices, subscribers to [its] age verification services will be
terminated.”
Zadeh
Decl., Ex. 1 at 21-24.
39. There
is no credible evidence that Cybernet actively enforces its “DMCA policy”, Rather there is evidence that four months
after the policy became effective and well after this action had begun, clearly
infringing pictures were on websites identified by Perfect 10 in its Second
Amended Complaint, see Zadeh Decl., Ex. 76, as well as blatantly
infringing pictures on sites listed in the Third Amended Complaint, see Zadeh
Decl., Ex. 31.
Conduct by Adult Check Affiliated Websites
40. Sites
affiliated with Adult Check have engaged in a range of conduct, of which a
representative sample includes:
41. On
August 6, 2001, a website affiliated with Adult Check, named FemCelebs and
located at animald.com, contained identical copies of at least three
Perfect 10 magazine covers. Zadeh Decl., Ex. 8. Perfect 10 was assigned rights
of publicity by the pictured models. Zadeh Decl., Ex. 117
42. On
December 19, 2001, another Adult Check affiliated website, Celebrities Online,
located at www.celebs-online.com, displayed
identical copies of several photographs containing pictures derived from the
Perfect 10 magazine and Perfect 10’s website. The pictured model had assigned
her rights of publicity to Perfect 10. Several of the pictures
contained the words Perfect 10 as well as a Perfect 10 copyright notice. Zadeh
Decl., Ex. 31.
43. On
December 20, 2001, another site affiliated with Adult Check, Before &
After, located at joebosco.com, displayed identical pictures derived from
Perfect 10’s magazine and containing models who had assigned their rights of
publicity to Perfect 10. Zadeh Decl., Ex. 38.
44. On
December 22, 2001, fredd38.com, part of the websites owned by defendants FTV,
fry.net, Vic Toria, and AEI Productions (collectively, “the FTV
defendants”), and affiliated with Adult Check, displayed a picture purporting
to be Christina Aguilera posing topless, but actually contained a photograph of
a Perfect 10 model found on its website, altered by adding Ms.
Agui!era’s head. Zadeh Decl., Ex. 46. This model had assigned her rights of
publicity to Perfect 10.
45. On December 11, 2001, the website located at celeblust.com,
also owned by the FTV defendants displayed a picture purporting to be a topless
Faith Hill, but actually contained a digitally altered image of a Perfect 10
model. Zadeh Decl., Ex. 57
46. These
examples are not isolated and Perfect 10 has found more than 10,000 copies of
Perfect 10 images on approximately 900 websites affiliated with Adult Check.8 Zadeh Decl., ¶46.
Defaults Entered
47. Sean Devine has had a default entered against him based on
Perfect 10 images and models displayed on the website
BabesofBablyon.com. See Zadeh Decl., Ex.115.
48. Default has been
entered against defendants Funet, Inc. and
AEI Productions, Inc., supported by Zadeh Decl., Ex. 116 & Ex. 114.
Extent of Problematic
Images and Sites
49. A significant number of the images found on websites
affiliated with Adult Check consist of images:
1) containing
celebrities who have not consented to the use of such images;
2) contain the heads
of celebrities superimposed on other models, including Perfect 10 models;
3) identical to those
protected by Perfect 10’s copyrights;
4) displaying Perfect
10’s trademarks;
5) displaying copies
of Perfect 10’s images with another identifying mark placed on the image; and
6) containing images
of models who have assigned their rights of publicity to Perfect 10.
50 Celebrity websites make up approximately 4,000 of the 314,000
websites affiliated with Adult Check. They may make up as many as 2,000,000 of
the images found on the Adult Check affiliated sites. Umbreit Decl. ¶19.
51. Some of these websites identify themselves as “fake.” Zadeh
Decl., Ex. 107.
52. Some of these websites portray graphic scenes and create the
impression that the celebrities mentioned are affiliated with the action
presented.
53. Cybernet chooses which websites are placed in the celebrity
category.
Notice to Cybernet of
Problems on Affiliated Sites
54. Cybernet was provided with notice of 18 celebrities that
objected to usage of their identities and/or images on Adult Check affiliated
sites back in November 27, 2000. Zadeh Reply Decl. (“Zadeh Decl. II”), Ex. 19
at 267.9
55. On January 7, 2002, Perfect 10 provided a
number of declarations to the Court from celebrities, generally providing:
I have not licensed
any pornographic website or any affiliate of such website to sue or exploit my
name, likeness or identity. In general, I do not want any entity to use
or exploit my name, likeness or identity, without my express written
permission, or the permission of my manager or someone with the authority to
act on my behalf.
Aguilera Decl.
56. In order for a site to be accepted into the Adult Check
system, Cybernet reviews the site. Zadeh Decl., Ex. 30 at 287a.
57. Among the considerations in reviewing
these sites, Cybernet looks for potentially underage images and overuse of
celebrity images. Id. at 287b
58. On February 27, 2001, three months after a group of
celebrities provided Adult Check with direct notice that use of their images
was not allowed, an Adult Check employee refused to accept a site because,
among other reasons:
Please make sure that your site does not have any of the following
models in its principal content [incl. models listed in request] . . . . This
content cannot be allowed since it would continue to oversaturate our links
page.
Zadeh Decl., Ex. 30 at 287b.
59. Generally,
Cybernet considers an image to be oversaturated if it appears 7 to 10 times. Id.,
Ex. 1 at 21; Ex. 30 at 287b,
60. Cybernet has a staff of twelve that reviews
sites when they initially join Adult Check, with a goal of doing monthly
reviews, and the staff also does spot checking. Mausner Decl., Ex. C at 102,
114.
61. Cybernet actively reviews and directs affiliated
webmasters on the appearance and content of their sites. Zadeh Decl., Ex. 30.
62.
Cybernet provides Adult Check webmasters with a variety of tools to help them
develop their websites. See, e.g., Zadeh Decl., Exs. l, 18.
63.
Adult Check’s Knowledge Base does not discuss protection of copyrights,
trademarks or publicity rights. See Zadeh Decl., Ex. 18.
1. There is not a serious question on the merits
concerning Cybernet’s liability for direct copyright infringement of Perfect
10’s copyrights.
2. There is a strong likelihood of success for
Perfect 10’s contributory copyright infringement claims against Cybernet.
3. There is a strong likelihood of success for Perfect 10’s vicarious
copyright infringement claims against Cybernet.
4. There is a substantial question whether or not Cybernet is a
provider of online services under the Digital Millennium Copyright Act (“DMCA”).
5. If Cybernet qualifies as an online service provider under the DMCA
there is little likelihood that any DMCA “safe harbor” will apply.
6. There is not a strong likelihood of success on Perfect 10’s direct
liability claims against Cybernet for violating the models’ publicity rights
assigned to Perfect 10.
7. There is a strong likelihood of success on
Perfect 10’s claims of aiding and abetting liability for Cybernet’s role in the
violations of the publicity rights assigned to Perfect 10.
8. Perfect 10 has standing to assert as an unfair business practice the
abuse of publicity rights for those persons who have provided Cybernet
with actual notice that use of their images is not authorized.
9. There is a strong likelihood of success on Perfect 10’s claim that
Cybernet has violated California’s unfair business practices act by violating
the rights of publicity for those persons who have provided Cybernet with
actual notice that use of their images is not authorized.
10. There is not a strong likelihood of success on Perfect 10’s claims
that Cybernet is liable for contributory trademark infringement of Perfect 10’s
trademark rights.
11. Cybernet has not made a good faith effort to root out illegal
conduct among its webmasters and gains direct financial gains as a
result.
11.
Cybernet is a competitor of Perfect 10’s.
12. There is a strong likelihood that Perfect 10
will prevail on its claim that Cybernet’s practices are “unfair” under the
unfair business practices act.
13. The unclean hands and laches doctrines are not
applicable to this motion.
14. Harm is presumed for unfair competition,
violations of copyright, and for trademark infringement.
15. Perfect
10 has shown a strong likelihood that it will suffer irreparable harm if the
unfair business practices, copyright violations, and trademark violations are
not enjoined.
16. Enjoining these practices is consistent with
the public interest.
17. Enjoining these
practices will not result in an inequitable burden on Cybernet.
18. The
balance of hardships tips in favor of Perfect 10.
In the Ninth Circuit, two interrelated tests exist for
determining the propriety of the issuance of a preliminary injunction. Under
the first test, the Court may not issue a preliminary injunction unless” (1)
the moving party has established a strong likelihood of success on the merits;
(2) the moving party will suffer irreparable injury and has no adequate remedy
at law if injunctive relief is not granted; (3) the balance of hardships tips
in favor of the movant; and (4) granting the injunction is in the public
interest. See Martin Int’l Olympic
Comm., 740 F.2d 670, 674-75 (1984); Greene v. Bowen, 639 F.Supp 554,
558 (E.D. Cal. 1986). Under the alternative test, a plaintiff must show either
(i) a combination of probable success on the merits and. the possibility of
irreparable injury; or (2) that a serious question exists going to the merits
and that the balance of hardships tip, sharply in the plaintiff’s favor. See
First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378, 1381 (9th Cir. 1987)
.
The two tests represent “a continuum of equitable
discretion whereby the greater the relative hardship to the moving party, the
less probability of success must be shown.” Regents of Univ. of Calif. v.
ABC, Inc., 747 F.2d 511, 515 (9th Cir. 1984). See also Benda v. Grand
Lodge of Int’l Ass’n of Machinists, 584 F.2d 308, 315 (9th Cir. 1978).
A. COPYRIGHT INFRINGEMENT
1. Direct Infringement
To prove copyright infringement, a plaintiff must
prove two elements: (1) ownership of a valid copyright, and (2) copying of
protectable expression by the defendant. Baxter v. MCA, Inc., 812 F.2d
421, 423 (9th Cir. 1987). Infringement occurs when a defendant violates one of
the exclusive rights of the copyright holder. 17 U.S.C. §501(a). Direct
infringement does not require intent or any particular state of mind, although
willfulness is relevant to the award of statutory damages. 17 U.S.C. §504(c).
a. Does Perfect 10’s Registered Copyright In
Its Magazines Cover The Individual Pictures Involved Here?
Cybernet’s first line of defense is to challenge the
adequacy of Perfect 10’s showing of copyright protection for its claimed
images. Opp’n at 18. Cybernet contends that the copyright registrations
produced in this motion involve collective works, the Perfect 10 magazines and
the Internet site, but the registrations do not establish copyrights in the
individual pictures. Opp’n at 18. Cybernet’s only authority is a quote to 15
U.S.C. §103(b) which provides”
The copyright in a compilations or derivative
work extends only to the material contributed by the author of such work and
distinguished from the preexisting material employed in the work and does not
imply an exclusive right in the preexisting material. The copyright in such
work is independent of, and does not alter or enlarge the scope,
duration, ownership, subsistence of, any copyright protection in the
preexisting material.
15 U.S.C. §103(b).
It is unclear exactly
what Cybernet is challenging—7Perfect 10’s ability to bring suit under the
Copyright Act, the scope of the registrations, the entitlement to the
presumption of prima facie validity as to the copyright registration, or
directly challenging Perfect 10’s claimed copyright in these images.
As an initial matter,
where the owner of a copyright for a collective work also owns the copyright
for a constituent part of that work, registration of the collective work is
sufficient to permit an infringement action under 15 U.S.C. §411(a).10
Moreover, the Court finds that Perfect 10 is entitled to treat the
copyright registrations as prima facie evidence that the individual
pictures are copyrighted. See Autoskill, Inc. v. National Educ. Support
Sys., Inc., 994 F.2d 1476, 1487-88 (10th Cir. 1993), disagreed with on
other grounds, Parker v. Bain, 68 F.3d 1131, 1136 n.8 (9th Cir. 1995); cf.
17 U.S.C. §404 (similar principle with regard to reach of copyright notice in
collective work). Perfect 10’s copyright registrations for the
magazine issues indicate that they are collective works where contributions to
the work were works “made for hire.” See, e.g., Mausner Decl., Ex. A at
9. The website registration recognizes that the two-dimensional text and
photographs on the site include contributions made for hire and incorporate
photographs published in the Perfect 10 magazine. Id. at 7-8. The Court
concludes this is sufficient to raise the presumption of validity,
particularly where Cybernet has made no sustained argument to the contrary.11
Perfect 10 has shown a strong likelihood that it owns a valid copyright in the
asserted images.
b.
Has Cybernet Violated Any of Perfect 10’s Rights Under the Copyright Act?
Cybernet’s other argument
fares better. Cybernet contends
<missing pages 39 thru 41>
Inc., 982 F.Supp. 503, 512
(N.D. Ohio 1997), a district court found direct infringement despite its
agreement with the rationale of Religious Technology. The Hardenburgh
court stressed that a direct infringer must “actually engage” in one of the
activities reserved to copyright owners. Id. In Hardenburgh, the
court found that the defendant BBS providers engaged in two of the activities
exclusively reserved for copyright owners. Id. at 513.
First, the court found
the defendants had distributed and displayed copies of Playboy photographs. Id.
This finding hinged on the defendant’s policy of encouraging subscribers to
upload files onto its system, viewing the files in the upload file, and then
moving the uploaded files into files generally available to subscribers. Id.
This transformed the defendants from passive providers of a space to active
participants in the process of copyright infringement. The moving of the files,
accomplished by employees constituted the distribution, and the display of
those copes after the BBS’s employees placed the files there violated
the right of display. Id.
The
principle distilled from these cases is a requirement that defendants must
actively engage in one of the activities recognized in the Copyright
Act.13 Based on the evidence before the Court it appears that
Cybernet does not use its hardware to either store the infringing images or move them from
one location to another for display. This technical separation between its
facilities and those of its webmasters prevents Cybernet from engaging in
reproduction or distribution, and makes it doubtful that Cybernet publicly
displays the works. Further, there is currently no evidence that Cybernet has
prepared works based upon Perfect 10’s copyrighted material. The Court therefore
concludes that there is little likelihood that Perfect 10 will succeed on its
direct infringement theory.
2.
Contributory Infringement
Liability for
contributory copyright infringement attaches when “one who, with knowledge of the
infringing activity, induces, causes or materially contributes to the
infringing conduct of another.” A&M Records, Inc. v. Napster,
Inc., 239 F.3d 1004, 1019 (9th Cir. 2001) (“Napster II”)” Put
differently, liability exists if the defendant engages in personal conduct that
encourages or assists the infringement. Id. The standard for the
knowledge requirement is objective, and is satisfied where the defendant knows
or has reason to know of the infringing activity. Gershwin Publishing Corp.
v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971).
a. Cybernet’s Knowledge
Cybernet’s only argument
against Perfect 10’s contributory infringement theory is that Cybernet lacks
the requisite knowledge to be held liable. Opp’n at 20. Cybernet relies heavily
on Perfect 10’s failure to contact Cybernet with its claims before beginning
the present litigation. Id. According to Cybernet, although it employs
twelve site reviewers, even if they had seen Perfect 10 copyright notices on
various sites, they would not necessarily know Perfect 10’s copyrights were
infringed because they might be licensed. Id. at 20-21.
In contrast, there is
evidence that Steven Easton of the Association for the Protection of Internet
Copyright contacted Cybernet with approximately 2,000 e-mails, beginning in
1996 or 1997, notifying Cybernet of alleged copyright infringement on its
system.14 Easton Decl. ¶2. Perfect 10 has also brought forward
evidence that Cybernet was notified of generic potential copyright infringement
by users in 2001. Zadeh Decl., Ex. 102. Additionally, Cybernet’s site reviewers
review every site before allowing the sites to utilize the Adult Check system,
and attempt to review other sites monthly. Mausner Decl., Ex. C at 102, 114;
Zadeh Decl., Ex. 30. Although they might not detect every copyright violation,
there is evidence that many sites contain disclaimers to the effect, “we do not
hold copyrights for these works.” Farmer Depo. at 121:19-21. Finally, Perfect
10’s Second Amended Complaint, filed on June 15, 2001, contained notice of
Perfect 10’s allegations concerning potential infringement on different
websites.
This evidence of notice
compares favorably with the allegations of notice in Fonovisa, Inc. v.
Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996). In Fonovisa, the
Fresno County Sheriff’s Department seized 38,000 counterfeit tapes (copyright
holders unstated) from a swap meet approximately a year and a half before the
plaintiff filed suit. See Fonovisa, Inc. v. Cherry Auction, Inc., 847 F.
Supp. 1492, 1494 (E.D. Cal. 1994) rev’d 76 F.3d 259 (9th Cir. 1996) (“Fonovisa
I”). Additionally, the swap meet had received a letter six months before
the suit from a police officer who “observed that several casual vendors of
Latin audio music tapes had abandoned their booths upon his arrival.” Id.
at 1494. Finally, three months before the suit an investigator for the
plaintiff witnessed infringing sales of counterfeit goods. Id. After the
First Amended Complaint was served, investigators then revisited the swap meet
where they found many vendors selling “counterfeits at tellingly low prices.” Id.
at 1495. On appeal from the district court’s dismissal of the claim, the Ninth
Circuit stated “There is no question that plaintiff adequately alleged the
element of knowledge
in this case.” Fonovisa, 76 F.3d at 264.
Perfect 10 has raised at least a serious question on the issue of
knowledge. The Court finds that there is a strong likelihood of success in
proving general knowledge of copyright infringement prior to Perfect 10’s
filing of the complaint. There are also serious questions as to Cybernet’s
constructive knowledge of infringement of Perfect 10’s copyrights prior to
the complaint raised by this general knowledge, Cybernet’s review of sites
containing Perfect 10 images and the likelihood of those sites containing
copyright disclaimers. Further, there appears to be little question that
Cybernet has been provided with actual notice of a large number of alleged
infringements since June 2001.15 The
Court thus finds there is a strong likelihood of success that Perfect 10 will
satisfy the knowledge requirement for contributory liability.
b. Cybernet’s Material Contribution to
Infringing Activity
The Court also finds that there is a strong likelihood that Perfect 10
will succeed in establishing Cybernet’s material contributions to the
infringing activity. Cybernet markets the Adult Check brand through
advertising, it pays webmasters commissions directly based upon the number of
Adult Check users that register through the site, it provides technical and
content advice, it reviews sites, and it attempts to control the quality of the
“product” it presents to consumers as a unified brand. Cybernet’s entire
business model is premised on harnessing the competitive pressures between
individual webmasters into a cooperative system that benefits the webmasters by
increasing the overall value to consumers. Cybernet’s role in this system is
crucial, and it profits accordingly, only paying out approximately 1/2 of each
subscriber’s payments to the participating websites for each of its users, who
access the system close to 2 million times daily.
In Fonovisa the Ninth Circuit had “little difficulty” in holding
the allegations directed at a swap meet, where the vendors were selling
counterfeit goods, sufficient to show material contribution. 76 F.3d at 263. As
the court observed, “it would be difficult for the infringing activity to take
place in the massive quantities alleged without the support services provided
by the swap meet,” including the provision of space, utilities, parking,
advertising, plumbing and customers. Id. Similarly, Cybernet’s hand in
Adult Check, and in particular its steady payments to infringing sites along
with its advertising, materially contribute to the growth and proliferation of
any infringement. This conclusion comports with both Napster decisions
and with Religious Technology.16 The Court finds the evidence before it supports the conclusion
that Perfect 10 has a strong likelihood of establishing material contribution
by Cybernet to activity that infringes Perfect 10’s copyrights.
c. Contributory Infringement—Conclusion
The Court therefore finds that there is at least a serious question on
the merits of Perfect 10’s contributory infringement claim against Cybernet
prior to the filing of the present suit and a strong likelihood of success on
its claims stemming from Cybernet’s post-filing conduct.
3. Vicarious Copyright Infringement
Courts have extended vicarious liability in the copyright context to
defendants that have (1) the right and ability to exercise control over a
directly infringing party and its activities and (2) obtained a direct
financial benefit from the infringing activities. Fonovisa, 76
F.3d at 262.
a. Direct Financial Interest
Cybernet argues that it does not have a sufficiently direct financial
interest to be held liable for vicarious copyright infringement. Opp’n at
22-23. The Court strongly disagrees. Cybernet markets the Adult Check brand
based on both the number of images and their quality. Zadeh Decl., Ex. 4; Lane
Decl. ¶¶54, 57.
Perfect 10
has brought forward evidence that it has sunk significant resources into
developing high-quality adult images. Taking Perfect 10’s allegations of 10,000
infringing images at face value, as Cybernet does for
purposes of this test, see Opp’n at 22, Cybernet benefits from the draw
posed by the existence of these works provided at a cost far below that
provided by the copyright owner. See Fonovisa, 76 F.3d at 263-64;
Lane Decl. ¶81; see also Napster II, 239 F.3d at 1023 (“Ample
evidence supports the district court’s finding that Napster’s future revenue is
directly dependent upon ‘increases in user base.’ More users register with the
Napster system as the quality and quantity of available music increases.”)
Cybernet benefits directly from these infringing sites to the extent that they
have brought in new users because the new customers pay Cybernet directly. In
addition, there is the ancillary benefit brought in by the incremental
additional value these sites pose to consumers, who gain access to all sites by
paying the Adult Check membership fee. Cf. Religious Technology, 907
F.Supp. at 1377 (granting defendant summary judgment where no evidence “that
Netcom’s policy directly financially benefits Netcom, such as by
attracting new subscribers.”) Moreover, the Court finds that there is a strong
likelihood that Perfect 10 will establish a “symbiotic interest” between
Cybernet and the infringing websites based on the close interrelationship
between Cybernet and its affiliated websites, a relationship that appears to
outside consumers as if Adult Check constitutes a single brand. See
Adobe Systems, Inc. v. Canus Productions, Inc., 173 F.Supp.2d 1044,
1051 (C.D. Cal. 2001) (discussing “symbiotic interest”). It should be noted
that all the money associated with these websites flows directly to
Cybernet before some of it is returned to the individual site
owners as “commissions.” The Court concludes that this evidence creates a
strong likelihood Perfect 10 will establish this direct financial
interest.
Cybernet relies on
Adobe Systems, 173 F.Supp.2d at 1052, to argue otherwise. Adobe
Systems involves a copyright action against the proprietor of weekly
computer fairs where approximately one hundred pirated copies of Adobe Systems
software were located at shows that averaged up to 15,000 attendees per
weekend. Id. at 1047. On plaintiff’s motion for summary judgment
the court discussed Fonovisa and its requirement of direct financial benefit.
Id. at 1050-53.
The Adobe
Systems court read into Fonovisa’s discussion of vicarious liability
a requirement to show “a direct financial benefit to the defendant from the
‘draw’ of the infringing products.” Id. at 1050. At different points in
the opinion this idea was expressed in language such as:
• “the sale of the
counterfeit products must in fact be the ‘draw’ for customers to the
venue.” Id. at 1050 (emphasis added).
• “Plaintiffs must
show that the vendor’s infringement constitutes a draw to the
venue to the extent that the economic interests of the direct infringer and
those of the landlord become closely intertwined.” Id. at 1051.
• “[P]laintiff bears
the burden of demonstrating a direct financial benefit to the landlord from
‘customers seeking to purchase infringing recordings’ and profits which ‘flow
directly from customers who want to buy the counterfeit recordings.’“ Id. at
1050.
• “Without the requirement
that the counterfeit goods provide the main customer draw, Fonovisa would
“provide essentially for the limitless expansion of vicarious liability into
spheres wholly unintended by the court.” Id. at 1051 (emphasis
added).
• “Fonovisa found
a symbiotic relationship existed between the infringing vendors and the
landlord because ‘the very success of the landlord’s venture depends on the
counterfeiting activity (and thus the landlord has every incentive to allow
the activity to continue).’“ Id. at 1051.
The Adobe
Systems court then concluded that on the facts of the case, where both the
number of infringements and the apparent impact of these infringements was
small, there was not a symbiotic relationship and that there were triable
issues of fact remaining as to whether the infringing products constituted a
draw. Id. at 1052.
Similarly in Religious
Technology, the court found no evidence of direct financial benefit for Netcom
where it received a fixed fee. 907 F.Supp. at 1376-77. The court also found
that there was no evidence that infringement by Netcom users enhanced the value
of Netcom’s services to subscribers or attracted new subscribers. Id. at
1377.
This case is unlike Religious Technology
because Cybernet receives more than a fixed fee. The income derived from each
website is directly based on the site’s initial popularity. The more consumers
appreciate the content of a page, the more money Cybernet receives. Cybernet’s
income stream pays no regard to a site’s respect for copyright or lack thereof.
Additionally, Cybernet (and Adult Check) depends on content to attract
consumers. Cybernet has given no reason to believe that these pages do not
attract consumers, thereby creating a financial benefit to Cybernet.17
In comparison to Adobe Systems, the present
facts pose a closer question, however. Cybernet attempts to hide behind the
sheer volume of images on its sites to argue that even 10,000 infringing images
does not establish a sufficiently direct financial interest or relationship.
Opp’n at 22. The Court disagrees. In Adobe Systems, the court implied
that the small number of infringing articles was insufficient to support a
conclusion that these items provided “a significant draw” bringing consumers to
the fairs. 173 F.Supp.2d at 1053. In contrast, the Court concludes that there
is a strong likelihood Perfect 10 will establish a large number of
infringing sites. Cf. Playboy v. Webbworld, 968 F.Supp. 1171, 1177
(finding sufficient financial interest where defendants received a percentage
of fixed fee and there were sixty-seven infringing images on site). The Court
also concludes that the fortunes of these sites and Cybernet are sufficiently
tied to create the requisite direct financial benefit. See Napster II,
239 F.3d at 1023. The Court therefore concludes that Perfect 10 has shown a
strong likelihood of success as to the direct financial interest element of
vicarious liability.
b. Right or Ability to Control
Cybernet argues that it lacks the right and ability to
control the websites because it cannot “affirmatively work as some sort of
Internet ‘hall monitor,’ policing an unruly class of webmasters and responding
instantaneously when any copyright infringement occurs. Opp’n at 23. In making
this argument, it invokes the protection of the Digital Millennium Copyright
Act’s “notice and taken-down” provision, which will be dealt with below rather
than addressed in, this section. Its argument attempts to distinguish the Adult
Check system from Napster’s system because the images used in the Adult Check
system do not pass through Cybernet’s hardware. Opp’n at 25. Further, Cybernet
argues that it is constrained in its right and ability to control by
requirements of actual notice. Id.
The notice
argument is not relevant as it does not address Cybernet’s control abilities.
Rather it addresses when those abilities should be exercised. Focusing on the
ability to control the sites found in its system, the Court concludes that
Perfect 10 has established a strong likelihood of success. As mentioned
earlier, Cybernet has a monitoring program in place. Under this program,
participating sites receive detailed instructions regard issues of layout,
appearance, and content. Cybernet has refused to allow sites to use its system
until they comply with its dictates. Most importantly, it monitors images to
make sure that celebrity images do not oversaturate the content found within
the sites that make up Adult Check. Zadeh Decl., Ex. 30. It forbids certain types
of images. This ability to control other types of images belies any attempt to
argue that Cybernet does not exercise sufficient control over its webmasters to
monitor and influence their conduct or to deny copyright offenders the benefits
of its service. See Religious Technology, 907 F.Supp. at 1375 (right and
ability to control where “police” powers exercised in past); see also
Napster I, 114 F.Supp.2d at 920-21 (online services improved methods of
blocking users “tantamount to an admission that defendant can, and sometimes
does, police its service”)
Cybernet, like the swap meet in Fonovisa,
not only has the right to terminate webmasters at will, it controls consumer
access, and promotes its services. See Fonovisa, 76 F.3d at 262; Napster
I, 144 F.Supp.2d at 920. Combined with its detailed policing of sites,
these activities are sufficient to establish a strong likelihood of success for Perfect 10’s argument that Cybernet
has the right and ability to control the participating websites.
c. Vicarious Liability—Conclusion
Because
Perfect 10 has shown a strong likelihood of establishing a direct financial
benefit and the right and ability to control websites that engage in infringing
activity, the Court finds there is a strong likelihood of success on Perfect
10’s claims for vicarious copyright infringement liability.
4.
DMCA
In
1998 Congress passed Title II of the Digital Millennium Copyright Act (“DMCA”),
Pub. L. 105-304, Title II, §202(a), 112 stat. 2877 (1998) (codified at 17
U.S.C. §512). The DMCA marked Congress’ entry into the online copyright fray.
The DMCA created a series of four “safe harbors” to protect “providers of
online services” from liability, primarily monetary, based on claims of
copyright infringement attributable to the actions of users. See 17
U.S.C. §§512(a)-(d), (j). In order to qualify for these safe harbors, a
provider of online services must:
1)
adopt a policy that provides for the termination in appropriate circumstances
of subscribers and account holders of the service provider’s system or network
who are repeat infringers;
2)
reasonably implement the policy; and
3) inform subscribers and account holders of the service
provider’s system or network about the policy.
See 17 U.S.C. §512(i). The service
provider and its policy must also not interfere with “standard technical
measures” used by copyright owners to protect copyrighted works.18 See 17 U.S.C. §512 (i)(1)(B).
These
“safe harbors” do not affect the question of ultimate liability under the
various doctrines of direct, vicarious, and contributory liability. See
H.R. Rep. 105-551(II), at 50 (July 22, 1998); S. Rep. 105-190, at 19 (May 11,
1998). Rather they limit the relief available against service providers that
fall within these safe harbors. See 17 U.S.C. §§512(a), (b) (1), (c)
(1), (d), & (j).
Of
these “safe harbors,” Cybernet only invokes the harbors provided by section
512(c), governing information residing on the systems or networks at the
direction of users, and section 512(d), governing information location tools
(“web browsers”). Moreover, these “safe harbors” could not apply prior to
August 8, 2001, the date Cybernet adopted its policy it claims is aimed at
compliance with the DMCA. See Costar Group, Inc. v. Loopnet, Inc., 164
F.Supp.2d 688, 698 n.4 (D. Md. 2001).
a. Is Cybernet A “Service Provider”?
Cybernet
devotes a single sentence to arguing that it is a “service provider” as the
term is defined in section 512(k)(1)(B). Opp’n at 25. This section defines a
service provider as a “provider of online services or network access, or the
operator of facilities therefore,” and includes entities “offering the
transmission, routing, or providing of connections for digital online
communications, between or among points specified by a 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). Section 512(k)(1)(B)’s definition has been
interpreted broadly. See ALS Scan, Inc. v. RemarQ Communities, Inc., 239
F.3d 619, 623 (4th Cir. 2001); Hendrickson v. eBay, 165 F.Supp.2d 1082,
1087 (“eBay clearly meets the DMCA’s broad definition of online “service
provider”). Although there appears to be uniform agreement that the definition
is broad, or at least broader than the definition of 512(k)(1)(A) concerning
conduit-type services, the Court has found no discussion of this definition’s
limits.
Perfect 10 argues that section 512(c) was
drafted with the limited purpose of protecting Internet infrastructure services
in mind. Reply at 18. It contends that the definition for a provider of online
services or network access does not include services that “participate in the
selection or screening of that data or take an interest in the content of that
data.” Id. at 18 n.19. The inclusion of section 512(d) which creates a
“safe harbor” for copyright infringement resulting from the use of information
location tools by service providers, which include directories, indexes,
references, pointers and hypertext links, strongly suggests that the definition
of service provider is meant to include services that only provide location
service tools, as well as services providing internet access and such
tools. See H.R.Rep. 105-551(II), at 58 (identifying Yahoo! as an
example); cf. also 47 U.S.C. §231(b)(3) (reach of Child Online
Protection Act defined by similar categories). The Court adopts that reading
and will not use Perfect 10’s proposed interpretation to evaluate Cybernet’s
ability to invoke the protection of section 512’s safe harbors.
Nevertheless, Cybernet has made this a more
complicated issue than it probably should be by its insistence that it does not
host any infringing images and no image files pass through any of its
computers. 0pp’n at 21. This appears to be part of an overall strategy to deny
that Cybernet is anything more than an age verification service, somehow beyond
the reach of copyright law, with no responsibility for the actions taken on the
sites of the
individual webmasters. It may be a close question whether such a service
qualifies as a “provider of online services.”19 For the moment,
however, the Court will assume that Cybernet is a “provider of online services”
as defined in section 512(k).
b. Does Cybernet Meet the
Minimal Qualifications of Section 512(i)?
The initial hurdle Cybernet must meet in order to qualify for section
512(k)’s restrictions on injunctive relief is found in section 512(i). These
provisions require an online service provider to develop, promulgate and
reasonably implement a policy providing for termination in appropriate
circumstances of repeat copyright infringers. 17 U.S.C. §512(i). In crafting
these policies, Congress has given a vague indication of what constitutes
“appropriate” circumstances.
In the House and Senate Reports considering this subsection, both used
identical language. See Ellison v. Robertson, - F.Supp.2d -, 2002 WL
407696 *1, *12 (C.D. Cal. 2002). The Committees each “recognize[d] that there
are different degrees of on-line copyright infringement, from the inadvertent and
noncommercial, to the willful and commercial.” H.R. Rep. 105-551(II), at
61; S. Rep. 105-190, at 62. The Committees also stated that the provision was
not intended to undermine principles governing knowledge of infringement and
protection of privacy rights “by suggesting that a provider must investigate
possible infringements, monitor its service, or make difficult
judgments as to whether conduct is or is not infringing.” H.R. Rep.
105-551(II), at 61 (emphasis added); S.Rep. 105-190, at 62 (same). The Committees
than appeared to immediately qualify these statements by stating: “However,
those who repeatedly or flagrantly abuse their access to the Internet through
disrespect for the intellectual property rights of others should know that
there is a realistic threat of losing that access.” H.R. Rep.
105-551(II), at 61 (emphasis added); S. Rep. 105-190, at 62 (emphasis added).
Although
the last sentence appears directed at the instigators of infringement, each
Committee also noted that the DMCA preserves “strong incentives” for
“qualifying” service providers to cooperate with copyright holders. H.R. Rep.
105-551(II), at 49; S.Rep. 105-190, at 20. The Court shares concerns expressed
by Nimmer and a sister court in this district in recognizing the language of
the statute and the legislative history of this section are less than models of
clarity. See Ellison, - F.Supp.2d at -, 2002 WL 406796 at “13 n.15
(treating section 512(i) as a mere threat based on language and history); 3 Nimmer
on Copyright §12B.02[B] [2], at 12B-25 & 12B-26 (identifying questions left
open by statute). Nevertheless, the Court reads section 512(i) to imply some
substantive responsibilities for service providers, particularly if the statute
is to be read with the apparently broad reach advocated by the other courts
that have considered this section.
The legislative history does provide some
guidelines as to what a section 512(i) policy might look like. The service
provider might not need to provide for active investigation of possible infringement.20
No court in construing these requirements should make the knowledge
standards more demanding than those found in section 512(c). See H.R.
Rep. 105-551(II), at 61. The service provider might not need to take action for
isolated infringing acts by single users. See 17 U.S.C. §512(i)
(referring to repeat infringers). The service provider need not act or address
difficult infringement issues. See H.R. Rep. 105-551(II), at 61. It may
not require the service provider to actively monitor for copyright
infringement. See id.
When confronted with “appropriate circumstances,”
however, such service providers should reasonably implement termination. See
17 U.S.C. §512(i). These circumstances would appear to cover, at a minimum,
instances where a service provider is given sufficient evidence to create
actual knowledge of blatant, repeat infringement by particular users,
particularly infringement of a willful and commercial nature. See H.R.
Rep. 105-551(II), at 61. An evaluation of any such policy would be informed by
an awareness of the service provider’s function, existing technology, and the
expressed Congressional desire not to undermine the privacy and knowledge
requirements of the statute, while leaving the law in its “evolving state.” See
S. Rep. 105-190, at 18.
This interpretation tracks that of the Costar court,
which found that there were material issues of fact whether a provider of real
estate services on the web implemented a “reasonable” termination policy, as
well as whether it acted expeditiously in taking down access to infringing
material under section 512(c). See 164 F.Supp.2d at 704. Under this
reading, section 512(i) is focused on infringing users, whereas 512(c) is
focused primarily on the infringing material itself. This line of reasoning
becomes particularly forceful when one considers the limitations on injunctive
relief found in section 512(1).21
Making the entrance into the safe harbor too wide
would allow service providers acting in complicity with infringers to approach
copyright infringement on an image by image basis without ever targeting the
source of these images. See 17 U.S.C. §512(c)(1)(C) (only requiring
service providers to remove or disable access to the infringing material). It
would encourage a risk-taking approach, whereby service providers could allow
repeat infringers to flood the web with infringing images knowing the service
providers’ ignorance of new infringements and the limited relief under 512(1)
would prevent anything more than token action and no financial exposure, while
the service provider continues to profit on a “non-discriminatory” basis. The
incentives for such action were eloquently phrased by Cybernet in support of
its arguments why they should not be held accountable for copyright
infringement under the Adult Check brand: “a webmaster will quickly switch from
one [AVS] to another if he or she feels the AVS is attempting to exert too much
control over the content of the participating sites.” Lane Decl. ¶62.
The Court does not read section 512 to endorse
business practices that would encourage content providers to turn a blind eye
to the source of massive copyright infringement while continuing
to knowingly profit, indirectly or not, from every single one of these same
sources until a court orders the provider to terminate each individual account.22 Cf. Costar, 164 F.Supp.2d at 705
(restricting application of section 512’s “financial benefit” test). The Court
does recognize that section 512(1) allows for court orders terminating user
accounts, but it also recognizes that online service providers are meant to
have strong incentives to work with copyright holders. The possible loss
of the safe harbor provides that incentive and furthers a regulatory scheme in
which courts are meant to play a secondary role to self-regulation. See,
e.g., 17 U.S.C. §512(i)(2)(A). The Court thus views 512(i) as creating room
for enforcement policies less stringent or formal than the “notice and
take-down” provisions of section 512(c), but still subject to 512(i)’s
“reasonably implemented” requirement. It therefore respectfully parts ways with
the interpretation of 512(i) in Ellison, in order to maintain the
“strong incentives” for service providers to prevent their services from
becoming safe havens or conduits for known repeat copyright infringers, at the very
least.23
The allegations against Cybernet and the evidence
before the Court is consistent with just such a jaded view of Cybernet’s
activities. Even in opposition, right after pointing out that “some number of
webmasters have switched to other AVS vendors and some have even encouraged
Cybernet’s customers to cancel their subscriptions,” Cybernet disclaims any
intent to impose “impossible affirmative duties upon itself.” Opp’n at 24. In
the context of this litigation, the Court sees this as an implicit argument
that rooting out repeat infringers imposes such “impossible” duties and finds
it runs against Cybernet’s argument that it is actually trying to cope with
repeat infringers.
In opposition to the present motion, Cybernet does
assert that it has taken action against individual webmasters as well as
against infringing sites. Umbreit Decl. ¶¶26-31. Cybernet has not, however,
submitted any documentary evidence to support these assertions. Perfect 10’s
moving papers included examples of infringing conduct on sites that have been
identified since the beginning of this litigation. Significantly, in its
Opposition Cybernet maintains it does “what it has the power to do—namely,
remove from the Cybernet search engine and links page any website about
which it has received a notice of infringement,” without addressing its power
to stop providing its AVS service to known infringers. Opp’n at 12. The Court
finds this lone declaration, unsupported by any documentary evidence, contradicted
by evidence in the record, and flying in the face of Cybernet’s consistent
resistance to the proposition that it could, would or should exercise any
control over its webmasters, simply not credible. The record supports the
conclusion that Cybernet has taken great pains to avoid shouldering the burdens
of the copyright regime, all the while profiting from pirates.24
Because the Court finds
that there is a strong likelihood that Cybernet cannot establish that it has
“reasonably implemented” a policy directed at terminating repeat
infringers, even in “appropriate circumstances,” there is little likelihood
that it can avail itself of section 512’s safe harbors.
c. Could
Cybernet qualify for the safe harbors if it is a “service provider” and has “reasonably
implemented” a repeat infringer policy?
Even
assuming Cybernet could somehow bring itself over the section 512(k) and (i)
hurdles to have its conduct evaluated under sections 512(c) and (d), the Court
finds that there is a strong likelihood Perfect 10 will prevail on its
copyright claims. First the Court notes that Cybernet’s assertion that these
sections could “exempt” Cybernet from liability is without merit. Section 512 does not
affect the elements of copyright liability. Instead, it affects the remedies
available for any infringement which might be found. The Court will
nevertheless address why it believes Cybernet does not comply with the explicit
substantive requirements of the DMCA or qualify for either the section 512(c)
(“information storage”) or (d) (“information location tool”) safe harbors.
1. Deficiencies In Notice
Procedures
Both the section 512(c) and (d) safe harbors
governing information storage and connecting activity, such as link and search
engines, respectively, contain parallel notification and counter-notification
requirements in an attempt to balance the duties of service providers, the
rights of copyright owners and the rights of other users. In general outline,
the notice and take-down provisions work as follows:
1) A copyright owner must
contact the service provider and provide written notice meeting certain
criteria, see 17 U.S.C. §512(c)(3);
2) If the notice fails to
fully comply with the stated notice requirements, but substantially complies
with three requirements aimed at identifying infringing sites, works and users,
the service provider must promptly attempt to contact the person complaining or
takes other reasonable steps to assist in the receipt of notification that
complies with the requirements,25 see 17 U.S.C.
§512(c)(3)(B);
3) Once notice is received,
the service provider must expeditiously remove or disable access to the
material and must notify the affected user promptly, see 17 U.S.C.
§512(c)(1)(B);
4) The affected user may then
submit a counter-notification consisting of a statement, under penalty of
perjury, that the user had a good faith belief that the material was removed as
a result of a mistake or misidentification of the material, see 17
U.S.C. §512(g)(3); and
5) Upon receiving a
counter-notification, the service provider has 10-14 days to replace the
material unless the provider’s designated agent receives notice that the
complaining party has filed a court action, see 17 U.S.C. §512(2)(C).
a. Deviations From Notice
Requirements
Cybernet’s procedures depart from this
statutory scheme in several quite significant ways. First,
Cybernet’s policy states that it requires a complaint to meet all its stated
notice requirements and there is no indication that Cybernet tries to work with
parties whose notice falls within the statute’s notice-saving clause, section
512(c)(3)(B)(ii). Second, and even more problematic, Cybernet has altered the
notice requirements themselves. Whereas section 512 states “if multiple
copyrighted works at a single online site are covered by a single notification,
a representative list of such works at that site” must be provided, 17 U.S.C.
§512(c)(3)(A), Cybernet does not appear to allow such a representative list,
and it requests only the specific web page at which a given work is located,
rather than the site. These apparently small differences might seem innocent
enough, but in the framework of this litigation it appears to be an intent to
upset the Congressionally apportioned burden between copyright holder and
service provider by placing the entire burden on the copyright owner. These
differences, combined with the failure to show any flexibility on its policy
that a notification meet all of Cybernet’s standards, leads the Court to
conclude that Cybernet has failed to structure a notice system that complies
with section 512.
b.
Deviation From Counter-Notification Requirements
The
conclusion above is reinforced by Cybernet’s counter-notification requirements.
The DMCA’s counter-notification statement, with its good-faith
requirement stated under penalty of perjury, separates good-faith infringers
and innocent users from those who
knowingly infringe copyrights. See 17 U.S.C. §512(g)(3). This
requirement implicates the “reasonably implemented” policy of §512(i) because
there is an implication that a party who cannot sign the required statement is
a knowing infringer. Thus, the counter-notification procedures appear to serve
the generally self-policing policy that section 512 reflects. Cybernet’s
counter-notification procedures allow knowing infringers to sidestep this
requirement.
By
stating under penalty of perjury that they removed the named infringing
material, a knowing infringer will be reestablished on the Adult Check system. See
Zadeh Decl., Ex. 1 at 23. On the one hand, this makes sense to the extent that
Adult Check can only disable individual pages or sites because it cannot
directly access the content. On the other hand, this also allows Cybernet to
reinstate an infringer without the Congressionally-required statement and
provides cover for Cybernet to water down its termination policy by treating
these minimalist take-down statements as neither an admission nor a
denial of the copyright infringement allegations, regardless of how blatant the
infringement might be. Although there is no evidence on this issue, the record
before the Court provides substantial evidence of resistance on Cybernet’s part
towards addressing copyright violations by its “unruly” webmasters. The DMCA is
a carefully-balanced, although sometimes unclear, piece of legislation. See
Ellison,—F.Supp. 2d—, 2002 WL 407696 at *15 n.16.26 Cybernet’s
DMCA “variant” appears to upset that balance.
2. Direct Financial Benefit and Right and Ability to Control
Both
relevant sections exclude from the safe harbor service providers that “receive
a benefit directly attributable to the infringing activity, in a case in which
the service provider has the right and ability to control such activity.” 17
U.S.C. §512(c)(1)(B), (d)(2). Here, there is significant evidence that Cybernet
receives a direct financial benefit. See supra.
In Costar
Group, 164 F.Supp.2d at 704-05, the district court found that a real estate
website, which charged the same price to infringing and non-infringing users and
did not charge for the service where the infringement was found, did not
receive a sufficiently direct benefit to fall within the statute. Id. In
so concluding, the Court distinguished the Fonovisa line of cases
discussed previously by looking to the slightly different language of the
statute (“does not receive a financial benefit directly attributable to the
infringing activity”) and, once again, the legislative history of the
DMCA. See id. at 705
This
legislative history states:
In determining
whether the financial benefit criterion is satisfied, courts should take
a common-sense, fact-based approach, not a formalistic one. In general, a
service provider conducting a legitimate business would not be considered to
receive a “financial benefit directly attributable to the infringing activity”
where the infringer makes the same kind of payment as non-infringing users of
the provider’s service. . . . It would however, include any such fees where the
value of the service lies in providing access to infringing material.
H.R Rep. 105-551(II), at 54.
The Costar court looked at
the fact that neither infringing nor non-infringing users paid anything for the
service and concluded that the direct financial benefit was lacking. Id.
at 705. The Court expresses no opinion on the question whether the “directly
attributable” language is narrower or equivalent to the general vicarious infringement requirements. Rather, the direct flow of
income to Cybernet based on the number of new Adult Check users that sign up to
Adult Check from infringing sites establishes that direct relationship. See
supra. The more new visitors an infringing site attracts, the more money
Cybernet makes. This is quite different from the situation in Costar where
the site made money on other services it offered, which were not directly tied
to the infringing activity. See 174 F.Supp.2d at 704. Applying the
common-sense, fact-based approach, the Court finds that the financial benefit
is highly likely to be sufficiently direct to work against Cybernet’s reliance
on the safe harbor.
Similarly,
with regard to the right and ability to control, the Court agrees with the Hendrickson
and Costar courts that closing the safe harbor based on the mere
ability to exclude users from the system is inconsistent with the statutory
scheme. See Hendrickson, 165 F.Supp.2d at 1093-94; Costar,
164 F.Supp. 2d at 704. As mentioned earlier, section 512 is meant to
encourage some level of copyright enforcement activity by service providers,
not to punish it. In the parlance of contributory patent infringement cases
dealing with the intent requirement for contributory liability of
trademark licensors, there must be “something more.”27 Here Cybernet prescreens sites, gives them
extensive advice, prohibits the proliferation of identical sites, and in the
variety of ways mentioned earlier exhibits precisely this slightly difficult to
define “something more.”
This
combination of financial benefit and ability to control makes it highly
unlikely that Cybernet may avail itself of the DMCA safe harbor provisions.
3. Failure
to Provide Evidence of Expeditious Removal
Additionally,
there is no credible evidence presented to the Court that Cybernet has
ever expeditiously removed infringing material from its system, disabled
links, or altered its search engine under its variant of the DMCA policy. Thus,
this lack of evidence also defeats Cybernet’s likelihood of success in trying to
fit into the safe harbor.
4. Conclusions Relevant to Both Safe Harbors
The Court
therefore finds that there is little likelihood that Cybernet will
qualify for either the information location tool or information storage safe
harbors.
5. Copyright Infringement Conclusion
Based on the
previous discussion, the Court concludes that Perfect 10 has established a
strong likelihood of success for its claims that Cybernet is liable for
contributory and vicarious copyright infringement, and has a strong likelihood
of showing Cybernet cannot avail itself of section 512’s safe harbors. There
is, however, a residual chance that Cybernet will qualify for 17 U.S.C.
§512(d)’s safe harbor for search engines, but not links.
B. Likelihood of Success on Unfair
Competition Claims
Perfect 10’s
unfair competition claims under California Business & Professions Code
§17200 (“section 17200”) primarily descend from allegations concerning various
rights of publicity. Perfect 10 argues these claims implicate both the
“unlawful” and “unfair” prongs of section 17200.28 See Cel-Tech Communications, Inc. v. Los
Angeles Cellular Telephone Co., 20 Cal.4th 163, 181 (1999)
(discussing various prongs of unfair competition statute). These rights of
publicity claims are asserted on behalf of two groups, Perfect 10 models who
have assigned their publicity rights to Perfect 10, and other unaffiliated
persons, primarily celebrities.
1. Rights of
Publicity—Perfect 10 Models
California
recognizes two causes of action based on rights of publicity. The first is a
common law right that has been recognized since 1931. Gionfriddo v. Major
League Baseball, 94 Cal.App.4th 400, 408 (Cal. App. 2001). The elements of
this right are:
1) the defendant’s use of the plaintiff’s
identity;
2) the appropriation of plaintiff’s name or
likeness to defendant’s advantage, commercially or otherwise;
3) lack of consent; and
4) resulting injury.
Id. at 409. The common law right also requires that this
right “be balanced against the public interest in the dissemination of news and
information consistent with the democratic processes under the constitutional
guaranties of freedom of speech and of the press.” Id. (citations
omitted).
In addition,
California has a statutory right, codified at California Civil Code §3344
(“section 3344”). Section 3344 provides:
Any
person who knowingly uses another’s name . . . photograph, or likeness,
in any manner, on or in products, merchandise, or goods, . . . without such
person’s prior consent, . . . shall be liable for any damages sustained by the
person or persons injured as a result thereof.
Cal.Civ. Code §3344. For
purposes of the statute, a use of a name, image and likeness in connection with
any news or public affairs broadcast does not constitute a use for which
consent is required. Cal.Civ. Code §3344(d). Additionally, the section does not
apply to the owners or employees of any medium used for advertising, unless the
owners or employees have knowledge of an unauthorized use. Cal.Civ. Code
§3344(f).
Neither party contests
that third parties operating under the Adult Check name have infringed the rights
of publicity assigned to Perfect 10 by a number of models. Nor does either
party suggest that direct liability would not be appropriate against those
third-parties under either theory. Similarly, Perfect 10 does not assert any
direct liability theory against Cybernet. The likelihood of success thus boils
down to a question of “aiding and abetting.”
a. Could Aiding and Abetting Liability Exist?
California has adopted
the joint liability principle laid out in the Restatement (Second) of Torts
§876.29 Under the Restatement,
For harm resulting to
a third person from the tortious conduct of another, one is subject to
liability if he:
a) does a tortious act in concert with the other in pursuit to a
common design with him, or
b) knows that the other’s conduct constitutes
a breach of duty and gives substantial assistance or encouragement so to
conduct himself, or
c) gives substantial assistance to the other
in accomplishing a tortious result and his own conduct, separately considered,
constitutes a breach of duty to the third person.
Restatement (Second) of
Torts §876.
Cybernet argues that
there is no case directly recognizing the applicability of this doctrine to the
right of publicity torts. Opp’n at 28. The Court finds this argument
unpersuasive, as the Restatement provides a background principle for all tort
liability in the state of California. See Saunders, 27
Cal.App.4th at 846.
Nor does the Court
find convincing Cybernet’s argument that the right of publicity itself contains
an actual knowledge requirement. Opp’n at 28. Cybernet’s citations refer to the
requirement that broadcasters of advertisements must have actual knowledge
before they can be held liable. See Cal.Civ. Code §3344(f). Cybernet
does not claim to be a medium used for advertising, and the Court only focuses
on rights of publicity infringements located on the websites, not infringements
associated with webmaster banner ads. Rather, Cybernet argues that the
knowledge requirement of section 3344(f) is a requirement for “aider and abettor”
liability under the statute.
The Court concludes
otherwise. Although section 3344(f) provides clear evidence that secondary liability can
be imposed for violations of publicity rights, it also provides evidence that
the California legislature created a heightened knowledge requirement limited
to broadcasters of advertisements. See, e.g., TRW, Inc. v. Andrews, 534
U.S. 19 (2001) (applying the “expressio unius est exclusio alterius” canon).
The California legislature has not extended this requirement to defendants
like Cybernet. Cf. Newcombe v. Adolf Coors Co., 157 F.3d 686, 694 (9th
Cir. 1998) (allowing claim to proceed against company and ad agency where
another artist created work). The Court therefore defaults to the background
assumption that secondary liability exists and it is found in conformance to
the requirements established in the Restatement.
b. Is Secondary Liability Likely to Exist?
Perfect 10 has primarily focused its secondary theory of
liability on the second branch of the Restatement, requiring actual knowledge
of the tortious conduct and substantial participation. Mot. at 32-35.
The Court agrees with Perfect 10 that there is a serious question on the merits
of the substantial participation prong. As it stands, in the absence of
argument to the contrary, the Court looks to the contributory infringement
framework of copyright trademark law, where it has already found just such
participation, thus leading the Court to conclude Perfect 10 has established a
strong likelihood of success with regard to Cybernet’s substantial
participation. See supra. The Court recognizes, however, that the
substantial participation requirement has not been a particular subject
of discussion among the California courts, and the parties have not done more
than refer to the issue in passing.30
Perfect 10 also points to the notification it provided Cybernet
covering rights of publicity being violated by websites in the Adult Check
network. Mot. at 35. In response Cybernet argues perfunctorily that Perfect 10
has not shown that the owners of Cybernet had knowledge of the
unauthorized use of Perfect 10 model images. Opp’n at 28. The Court fails to
grasp the significance of the owners’ knowledge absent an assertion that
Cybernet is an advertising medium, an assertion that the present record would
not support. As to Perfect 10 carrying its burden to show actual knowledge, the
Court finds that the notification provided Cybernet by the Second Amended
Complaint, especially when supplemented by the physical examples of alleged
violations provided in a July 12, 2001 letter to Cybernet’s counsel, see Mausner
Decl., Ex. 47, filed In Support of Pl. Opp’n to Mot. to Dismiss, Aug. 9, 2001,
is enough to create a strong likelihood that Perfect 10 will prevail in showing
actual knowledge on Cybernet’s part.
The Court finds the likelihood of success with regard to both elements
of the Restatement test creates a strong likelihood that Perfect 10 will
succeed on its unfair competition claim to the extent it predicates liability on
an aiding and abetting theory for the violation’s of Perfect 10’s rights of
publicity.
2. Secondary Liability for
Violating the Rights of Publicity of Other Celebrities
Perfect 10 has also argued that Cybernet violates the publicity
rights of third-party celebrities by tolerating the presence of fake nude
pictures that either claim to be actual pictures of these celebrities or that
advertise themselves as “fakes.” Mot. at 31.
a. Standing
In an earlier order, the Court found that Perfect 10 had adequately
plead constitutional standing to assert these rights under the unfair
competition statute. See Perfect 10, Inc. v. Cybernet Ventures, Inc.,
167 F.Supp.2d 1114, 1125 (C.D. Cal. 2001). Then in a subsequent order, the
Court addressed the prudential limitations on standing by reading Perfect 10’s
complaint as one directed primarily at protecting its own interests and not
necessarily vindicating the rights of third-parties. See Motion Granting
in Part and Denying in Part Second Motion to Dismiss at 21 (“2d MTD Order”).
This running battle over standing continues in the present motion.
Cybernet argues that Perfect 10 lacks standing because it is not a
competitor of Adult Check. Opp’n at 32. Cybernet makes this argument by
mischaracterizing the plain language of Perfect 10’s contentions in a state
court action. See Jenal Decl., Ex. A at 7 (state court brief). This
parallel case concerned Perfect 10’s access to former Cybernet employees,
presumably contacted for purposes of investigating the facts underlying this
action. Cybernet does not quote the relevant language in full in its papers,
but it does assert that “As a factual matter, Perfect 10 admits it is not
Cybernet’s competitor.” Opp’n at 32. The Court finds that, as a factual
matter, this is simply incorrect.
The unquoted portion of the brief states:
The fact that Perfect 10 does not compete against Cybernet for the
purpose of trade secret law does not mean that Cybernet cannot be sued by
Perfect 10 in the federal action for unfair competition[.] Cybernet
permits and assists its Adult Check Websites to steal photos and images from
Perfect 10 magazine and www.perfect10.com. and unlawfully display those photos
and images. It also provides consumer access to that stolen property for a fee.
Jenal
Decl., Ex. A at 7 (emphasis added).
The Court finds this mischaracterization to be fairly blatant and it
plays into the Court’s concerns over the credibility of Cybernet’s declarants.31 Moreover, the Court has concerns
about Cybernet playing “fast and loose” with its assertions, and warns Cybernet
that judicial estoppel is a doctrine that may not work to its benefit.
Turning to the merits, Cybernet and Perfect 10 both compete for
consumers’ adult entertainment viewing dollars. They both peddle images on the web
in an industry where, by Cybernet’s own admission, price counts. The Court
finds this is a strong indication of competition, particularly where Adult
Check webmasters attract consumers using Perfect 10’s own material. Cf.
Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174
F.3d 1036, 1063-65 (9th Cir. 1999) (discussing initial interest
confusion). Because the record supports a finding of competition and Cybernet
has raised no other arguments, the Court finds that Perfect 10 has met Cybernet’s
current standing challenge.
b. Likelihood of Success—Third Party Rights
As this again disposes of the standing issues raised by the parties,
the Court then turns to the question of Perfect 10’s likelihood of success when
it comes to third-party rights of publicity. There are two relevant classes of
celebrities—those that have complained to Cybernet and those that have not.
Mindful of the prudential limitations on standing despite Perfect 10’s status
as Cybernet’s competitor, see Viceroy Gold Corp. v. Aubry, 75 F.3d 482,
488 (9th Cir. 1995), the Court concludes that Perfect 10 only stands a
likelihood of success on its claims of unfair competition for those celebrities
who have already complained to Cybernet about unauthorized uses of their
publicity rights.32
The Court
finds that there are indeed celebrities who have complained to Cybernet about
uses of their images. See Milano Decl. Cybernet has not made any
argument that it has taken any actions to remove these offending images or sites
from its service. This combination of actual knowledge, acceptance of the
benefits from these sites, and lack of action, if proved at trial, which the
Court finds likely, would expose Cybernet to aiding and abetting liability for
these celebrity images as well. See supra. Limited to those celebrities
who have complained about use of their images and identities,
the Court therefore finds a strong likelihood that Perfect 10 will succeed on
its claim against Cybernet based on the violations of third-party celebrities’
publicity rights. This predicate act also provides a strong likelihood of
success for Perfect 10’s unfair competition claim.
3. Ultimate Likelihood of Success on Unfair Competition Claim
The Court
concludes that the likelihood of success on these right of publicity claims
creates a high likelihood of success on both the “unlawful” and “unfair” prongs
of California’s unfair competition statute, section 17200. See Sun
Microsystems, Inc. v. Microsoft, Inc., 87 F.Supp.2d 992, 999 (N.D. Cal. 2000)
(discussing similar competitive injury sufficient to meet “unfair” prong as
“incipient violation of antitrust laws”); Cel-Tech, 20 Cal. 4th at 180
(discussing “unlawful” prong).
The Court
recognizes that application of secondary liability principles is particularly
applicable for claims of unfair competition, as the California Supreme Court
recognized as far back as 1935: “When a scheme is evolved which on its face
violates the fundamental rules of honesty and fair dealing, a court of equity
is not impotent to frustrate the consummation because the scheme is an original
one.” American Philatelic Soc’y v. Claibourne, 3 Cal.2d 689, 698-99
(1935).
In American
Philatelic, a purveyor of stamps altered his normal stamps to resemble rare
perforated stamps. Id. at 692. He then sold these stamps to stamp
dealers with clear notice that the stamps were not of the rare variety. Id.
at 694. Nevertheless, his sales brochures and pricing established that he both
anticipated and effectively encouraged these dealers to sell the stamps to the
public as rare stamps. Id. The California Supreme Court had no problem
finding these claims stated a claim under the unfair competition law. Id.
at 697. Saunders, American Philatelic, and Cel-Tech’s quotation
of American Philatelic’s equity language reinforce the Court’s
conclusion that Perfect 10’s theory of aiding and abetting liability for
Cybernet based on third-party violations of various rights of publicity has a
strong likelihood of success.33
1. Elements of Trademark Infringement
In order for
Perfect to prevail on its trademark claim Perfect 10 must show:
1) that a mark is owned and associated with Perfect 10; and
2) the defendants’ use of the mark is likely to cause confusion or
mistake among the general public.
Sega Enterprises,
Ltd. v. MAPHIA, 948 F.Supp. at 936.
2. Perfect 10’s
Trademark and Service Mark
Perfect 10 has
brought forward its trademark and service mark registration certificates.
Mausner Decl., Ex. B at 59, 62. This is prima facie evidence of the
validity of the trademark, Perfect 10’s ownership of the mark, and its
exclusive right to use the mark. 15 U.S.C. §1057(b). At the same time, Perfect
10 has asserted that it has trademark rights in the names of its models, but has
not adequately established this fact.34 See Mot. at 10. The Court therefore restricts its
discussion to the “Perfect 10” trademark.
3. Direct
Infringement—Standards
Perfect 10 advances two theories of trademark
infringement that it claims are widespread on the Adult Check websites:
unauthorized usage of its actual trademark and reverse palming off. Mot. at 39.
Section 1114 of the Lanham Act prohibits the use of “any
reproduction, counterfeit, copy or colorable imitation of a registered mark in
connection with the sale, offering for sale, distribution, or advertising of
any good for services or in connection with such use [when such use] is likely
to cause confusion.” The statute is intended to protect consumers against deceptive designations of
the origin of goods, as well as preventing the duplication of trademarks. Westinghouse
Elec. Corp. v. General Circuit Breaker & Elec. Supply, Inc., 106
F.3d 894, 899 (9th Cir. 1997). Direct usage of a mark by unauthorized users can
lead to the public’s belief that the mark’s owner sponsors or otherwise
approves of the use of the trademark. Dallas Cowboy Cheerleaders, Inc. v.
Pussycat Cinema, Ltd., 604 F.2d. 200, 204 (2d Cir. 1979). This can
satisfy the likelihood of confusion and can justify a court granting injunctive
relief. See id. at 204-205.
Reverse passing off occurs when someone markets a product as their own,
although the product was created by someone else. See Summit Machine,
7 F.3d at 1437, 1441. This doctrine has been limited to situations of
bodily appropriation. Shaw v. Lindheim, 919 F.2d 1353, 1364 (9th Cir.
1990).35 Bodily
appropriation is defined in the copyright context as “copying or unauthorized
use of substantially the entire item.” See Cleary v. News Corp., 30
F.3d 1255, 1261 (9th Cir. 1994). In the context of reverse palming off, this
definition is useful because it recognizes that slight modifications of a
product might cause customer confusion, while products which are merely
generally similar will not. Id.
4. Direct Infringement—Likelihood of Success
Perfect 10 has brought forward evidence that a number of Adult Check
webmasters engage in both forms of trademark infringement. The Court therefore
finds that there is a strong likelihood that Perfect 10 will establish
direct infringement by individual Adult Check webmasters.
5. Contributory Infringement
Perfect 10 does not maintain that Cybernet has directly infringed its
trademark. Rather, it relies on a theory of contributory liability. Contributory
liability may be imposed where the defendant: (1) intentionally induces another
to infringe on a trademark or (2) continues to supply a product knowing that
the recipient is using the product to engage in trademark infringement. Fonovisa,
76 F.3d at 264. Perfect 10 does not argue that Cybernet intentionally
induced the infringement and Cybernet correctly points out there is no evidence
of such intentional inducement. Opp’n at 29. This brings the Court to the
second method of establishing contributory infringement.
The Ninth Circuit has recognized that courts must consider the extent
of control exercised by a defendant over a third-party’s means of infringement
when dealing with the second test and the fact pattern does not fit well
into the “product” mold. Lockheed Martin Corp. v. Network Solutions, Inc.,
194 F.3d 980, 984 (9th Cir. 1999). Thus direct control and monitoring of
the instrumentality used by a third-party to infringe the plaintiff’s mark can
lead to liability. Id. These considerations are similar, if not
completely equivalent, to the principles applicable in the copyright context. See
Fonovisa, 76 F.3d at 265.
Although trademark liability is more narrowly circumscribed than
copyright liability, similar principles underlie contributory trademark
infringement. See Fonovisa, 76 F.3d at 265. This second test can
be met where one knows or has reason to know of the infringing activity, and it
specifically covers those who are “willfully blind” to such activity. Id.
Cybernet maintains that there is no evidence that Cybernet had
knowledge of the trademark infringement. Although the evidence is not as clear
cut as Cybernet maintains, Perfect 10 does not contest the point. The Court
therefore declines to express a view on the strength of Perfect 10’s evidence
with regard to contributory trademark infringement.
6. Trademark Conclusion
Because Perfect 10 has insufficiently asserted its argument against
Cybernet for trademark infringement, the Court declines to find a strong
likelihood of success at this point.
D. CONCLUSIONS—LIKELIHOOD OF SUCCESS
Perfect 10 has:
1) not established a strong
likelihood of success on its direct copyright infringement claims
against Cybernet;
2) established a strong
likelihood of success on its contributory infringement claims against Cybernet;
3) established a
strong likelihood of success on its vicarious infringement claims against
Cybernet;
4) established a strong
likelihood of success on its unfair competition claims against Cybernet based
on rights of publicity assigned to
Perfect 10;
5) established a strong likelihood of success
on its unfair competition claims against Cybernet based on violations of
third-party rights of publicity where those third-parties have complained to
Cybernet about use of their images or identities by affiliated Adult Check
webmasters;
6) has not established a likelihood of
success on its trademark claims against Cybernet.
VII.
UNCLEAN HANDS?
Cybernet
contends that even if the Court could find that Perfect 10 has raised
serious issues or a strong likelihood of success over its various claims, the
Court should deny injunctive relief because of Perfect 10’s “unclean hands.”
Opp’n at 38-39. The unclean hands doctrine may apply when the alleged
misconduct occurs in a transaction directly related to the matter before the
court and the conduct affects the equitable relationship between the litigants.
Newman v. Checkrite Cal., Inc., 912 F.Supp. 1354, 1376 (E.D. Cal. 1995).
Cybernet
points to two websites, www.celebshop.com and www.celebritypictures.com, which
contain Perfect 10 advertising banners. Opp’n at 38-39. Both websites, true to
their names, contain the same type of pictures that Perfect 10 has fought
against so vociferously in this action. Perfect 10, apparently realizing the
awkward appearance, confesses that it entered into settlement agreements with
several websites after complaining about infringements of Perfect 10
copyrights. Reply at 13; Zadeh Decl. II ¶13; Mausner Decl. II ¶¶8-14. According
to these agreements, the sites would provide for banner advertising as part of
the settlement terms. At the time, Perfect 10 claims it did not realize the
unfair competitive advantage these types of sites had over its operation. Zadeh
Depo. at 310-11.
The
Court finds Perfect 10’s basic explanation credible. Although these agreements
do tarnish Perfect 10’s crusading stance, they do not alter the strength of its
arguments. Moreover, Cybernet’s argument implies that the best solution to
illicit behavior in an industry that appears to be rife with it, is to ignore
it when the plaintiff appears sullied, too. The Court finds that there
is a strong public interest in protecting intellectual property rights, and
that the better solution is to bring parties into conformance with the law’s
dictates. The Court is also quite cognizant of the harms being inflicted on
other third parties when policies that encourage pirating behavior of this kind
are left unchecked. Although Perfect 10’s hands are not “clean as snow,” the
Court finds the strength of their case and the public interest make this
issue one better left to trial and finds it insufficient to justify denying
injunctive relief. See Goto.com v. Walt Disney Co., 202 F.3d 1199,
1209-10 (9th Cir. 2000); EEOC v. Recruit U.S.A., Inc., 939 F.2d 746, 753
(9th Cir. 1991).
VIII. IRREPARABLE
HARM
Cybernet
makes three major arguments attacking Perfect 10’s showing on the issue of
irreparable harm. First, Cybernet invokes . the doctrine of laches and argues
that this defeats any inference of irreparable harm. Opp’n at 16-17.
Additionally, Cybernet maintains that Perfect 10 has failed to establish a
sufficient likelihood of success on its claims to entitle it to the presumption
of irreparable harm granted to those who make a strong showing of copyright
infringement or unfair business practices. Id. at 16. Finally, Cybernet
contends Perfect 10 has failed to show irreparable harm. Id. at 17. The
Court will address each contention.
A.
LACHES
Perfect 10 filed its complaint on March 20, 2001,
served Cybernet in May, 2001 and filed the present motion on January 7, 2002.
Cybernet argues that the nine month period from March until January defeats any
inference of irreparable harm. Opp’n at 16-17. The Court does not agree.
Perfect 10 points to the need for discovery and the stonewalling of Cybernet as
reasons for the delay. Reply at 20-21. The Court find these explanations to be
adequately supported by the record. They are strengthened by the constant
stream of motions in the case, including three motions to dismiss and the
multiplicity of theories in the case, which may have reasonably delayed the
proceedings. See Tough Traveler, Ltd. v. Outbound Prod., 60
F.3d 964, 968 (2d Cir. 1995). Further, there is no harm to plaintiff from the
delay. Cf. Ocean Garden Inc. v. Markettrade Co., Inc., 953 F.2d 500, 508
(9th Cir. 1991) (six months, no laches, no harm to plaintiff). If anything, the
gap should have provided Cybernet with sufficient time to evaluate its systems,
and put in place a program designed to adequately address its potential
liability. The Court thus finds the nine month delay between the filing of the
complaint and the filing of this motion is not sufficient to raise the laches
bar. Cf. Napster I, 114 F.Supp.2d at 900 (granting preliminary
injunction nine months from the date complaint filed).
B. PERFECT 10’S FAILURE TO SHOW A SUFFICIENT
LIKELIHOOD OF SUCCESS
In
copyright and unfair competition cases, irreparable harm is presumed if once a
sufficient likelihood of success is raised. See Micro Star v. Formgen, Inc.,
154 F.3d 1107, 1109 (9th Cir. 1998) (copyright); Vision Sports, Inc. v.
Melville Corp., 888 F.2d 609, 612 n.3 (9th Cir. 1989) (unfair competition).
Cybernet’s contention that Perfect 10 has failed to show a sufficient likelihood
of success to raise this presumption must fall as to the claims for which the
Court has already concluded otherwise. Thus, irreparable harm may be presumed.
C. EVIDENCE OF PERFECT 10’S IRREPARABLE HARM
The
Court need not rest on the presumption of irreparable harm, however.
Cybernet argues that Perfect 10 has failed to provide any evidence of harm, see
Opp’n at 17-18, but the Court finds the record justifies the conclusion that
Perfect 10 will suffer irreparable harm. Perfect 10 and Adult Check are
competitors. Adult Check is the largest AVS on the web and services
approximately 2 million users each day. A significant number of the sites that
attract these users and their funds utilize Perfect 10’s copyrighted works, the
images of celebrities who have complained about the use of their likenesses, or
a combination of both, superimposing celebrities onto the bodies of Perfect
10’s models. These sites charge less than Perfect 10, and Adult Check appears
to contain more of Perfect 10’s images than it owns itself. Cybernet’s efforts
to show the poor success of Perfect 10 reinforce this. Perfect 10 loses
approximately $4 million to $5 million dollars per year. Just a small shift in
the viewing habits of Adult Check’s millions of users would have a significant
effect on Perfect 10’s bottom line. All told, the large losses being sustained
by Perfect 10, suffered in this competitive context, justify a finding of
irreparable harm.
D.
BALANCE OF HARDSHIPS
The
Court finds that the balance of hardships weighs significantly in favor of
plaintiff, further justifying a grant of injunctive relief. Based on the
evidence before the Court it appears that Cybernet profits from the infringing
and unlawful activities of its webmasters without shouldering any of the
undesired burdens associated with protection of intellectual property rights.
The Court finds this willful blindness harms Perfect 10, defeats the rights of
third-parties who find themselves displayed on these sites against their
will, and skews the online adult market. Perfect 10 has already spent an
inordinate amount of time researching these infringements, forced to pay a
competitor in order to discover the infringing images on the Adult Check
system.36 Cybernet is not
only in position to exercise its ability to control the content of the
system—it already does when it suits its financial interests. Moreover, the
tolerance of pirating behavior by the country’s largest AVS system harms the
public by rewarding illicit behavior. The balance of hardships favors Perfect
10 and favors injunctive relief.
The
Court will therefore GRANT Perfect 10’s motion for a Preliminary Injunction.
The Court does not, however, agree with Perfect 10’s proposed terms.
X. TERMS OF THE INJUNCTION
Although the Court has concluded that Perfect
10 is entitled to injunctive relief, there are goals that must be kept in mind
in crafting the scope of relief:
1) preventing future infringement;
2) preventing continuing infringement;
3) encouraging the cooperative system
envisioned by Congress;
4) consistency with the statutory framework
discussed above; and
5) striking the right balance between
protecting intellectual property rights and avoiding unduly burdensome
requirements on Cybernet and its users.
Evaluated
against these goals, Perfect 10’s proposed order suffers from some
shortcomings. The Court therefore has modified the proposed injunction. At the
hearing, both parties had questions and concerns over the Court’s proposed injunction.
The Court addresses the most salient points now.
During
the hearing, Cybernet requested clarification on the scope of the first
paragraph. This first paragraph covers websites directly operated by the
defendants.
Additionally,
Cybernet raised several objections to the Court’s imposition of affirmative
duties to search through its system for infringing material. First, Cybernet
argued that these duties require more than the bare minimums of the DMCA. The
injunction does require more than the bare minimum of the DMCA, but these
affirmative duties are justified by the Court’s scepticism that Cybernet can
ever qualify for the DMCA’s safe harbor provisions because of the DMCA’s
vicarious liability provisions.37
Moreover, assuming Cybernet may eventually be entitled to take advantage
of the safe-harbor provisions, the affirmative requirements of the injunction
ensure that its prior disregard of copyrights is cured.
Second,
Cybernet also objected that the injunction overall is too burdensome. The Court
disagrees. The injunction simply requires Cybernet to utilize its
current site review function to a) remedy past tolerance of infringing activity
and b) prevent infringers from joining the Adult Check family. The injunction
orders Cybernet to treat copyright protection and respect for rights of
publicity as elements of its business model that are equally as important to
Cybernet as currently are the color, layout, prevention of certain content, and
prevention of over-saturating use of celebrities. It is no more burdensome than
the injunction granted in Napster, and falls significantly short of the
shut-down order the Ninth Circuit recently upheld. See Napster III, 2001
WL 227081 at *1; Napster IV,—F.3d at—, 2002 WL 449550 at *4.
Cybernet’s
argument, however, does have validity in light of Perfect 10’s apparent belief that
the injunction’s terms create a strict liability for any infringing
images found on the Adult Check sites. Perfect 10’s reading of the injunction
is incorrect. Cybernet has an affirmative duty as set out in the injunction,
but the Court recognizes that not every violation of copyright or rights of
publicity will be caught.
Instead,
the injunction requires Cybernet’s reviewing staff to take action against sites
containing images which a well-trained site reviewer should catch. The
adoption of a DMCA-compliant plan is meant to ensure the removal of infringing
images that make it through the reviewers’ initial screening of websites. The
knowledge requirement goes beyond the DMCA’s “red flag” test, however, because
previous enforcement efforts suggest a strong tendency on Cybernet’s part to
enforce no more than it perceives to be the minimal requirements imposed upon
it. The Court may revisit this issue if substantial questions of compliance with
the injunction or burden issues arise, but it must be stressed that the
injunction, like the DMCA, create a framework where all but the most difficult
issues should be resolvable without the Court’s intervention.
Third, Cybernet requested a multi-million dollar
bond, but the Court concludes that a $600,000 bond is sufficient. The only
requirements of the injunction beyond the DMCA’s requirements or Cybernet’s
current practice of reviewing sites are the imposition of a single, thorough
review of the Adult Check Gold sites, periodic review of infringing sites, and
the training costs for Cybernet’s review staff. Assuming a doubling of
Cybernet’s twelve-employee site review staff coupled with proper training, the
Court concludes that such a bond will be sufficient to meet Cybernet’s
increased costs. The parties should keep in mind that the terms of this
preliminary injunction may differ significantly from the terms of any permanent
injunction, should Perfect 10 succeed on its claims. The scope of this order is
meant to address the situation as it now stands, not as it might be after a
trial of the issues.
Finally, the Court has applied uniform standards in
addressing the copyright and right of publicity concerns, despite the differing
sources of the rights, because the Court recognizes the similar natures of the
two rights insofar as technological limits and notice difficulties inhere in
policing their use on the internet.
XI. CONCLUSION
For the reasons above, Perfect
10’s motion for a preliminary injunction is GRANTED.
It is hereby ordered that during the pendency of
this action and until final judgment is entered, defendants Cybernet
Ventures, Inc. (“Cybernet”), AEI Productions, Inc., Sean Devine, Funet, Inc., F-T-V
Corp., F-T-V.net and Vic Toria and their agents, servants, directors, officers,
principals, employees, representatives, subsidiary and affiliated companies,
assigns, and those acting in concert with them or at their direction
(collectively, “Defendants”) are enjoined as follows:
1. Defendants shall not do any of the following on
or in connection with any websites individually operated by them: (a) invoke or
display the name, likeness or identity of any of the “Identified Celebrities
and Models” (as defined in paragraph 9 below); or (b) display, copy or
distribute any “Perfect 10 Works” as defined in paragraph 11 below) or images
substantially similar thereto (collectively, the “Prohibited Content”).
2. Cybernet shall not include in its search engine or
any database any of the Prohibited Content and Cybernet shall not produce any
search results of any kind in which the names or identities of the Identified
Celebrities and Models are invoked in search requests or queries on its search
engine.
3. Cybernet shall not permit access to any “Identified Website” (as hereafter defined) via links on Cybernet’s website or through the use of an Adult Check ID, nor shall Cybernet otherwise permit an Identified Website to use any of Cybernet’s computer facilities unless the Identified Website’s owner, operator, or agent registered with Cybernet has complied with counter-notification procedures no less stringent than those found in 17 U.S.C. §512(g) and the website owner is not an appropriately terminated user under a policy complying with 17 U.S.C. §512(i). Cybernet shall use an identical counter-notification standard for alleged copyright and right of publicity violations. “Identified Website” shall mean any of the following:
(a) Any Adult Check website that Cybernet knows or has reason to know contains any Prohibited Content (as defined in Paragraph 10 below), unless the website operator produces Rights Documentation for all Prohibited Content or a counter-notification meeting standards no less stringent than those found in 17 U.S.C. §512(g).
(b) Any
Adult Check website identified in Exhibit B to the Third Amended Complaint,
unless the website operator produces Rights Documentation for all Prohibited
Content or a counter-notification meeting standards no less stringent than
those found in 17 U.S.C. §512(g).
(c) Any
Adult Check website that Cybernet is given or has been given adequate notice
that it contains Prohibited Content, unless the website operator produces
Rights Documentation for alleged Perfect 10 Works and any content concerning
the Identified Celebrities and Models or a counter-notification meeting
standards no less stringent than those found in 17 U.S.C. §512(g).
4. Prior to their addition to the Adult Check
network, Cybernet shall review the content of websites to determine whether
they contain any Prohibited Content; if the website contains such content and
such content is reasonably apparent, or the website specifically disclaims
copyright ownership or permission for those images protected by the right of
publicity, then it shall not be added to the Adult Check network, unless the website operator produces
Rights Documentation for such content.
5. Cybernet shall review on a monthly basis the
content of any website that has, at any time, removed content based on right of
publicity or copyright allegations without submitting a statement to Cybernet
containing at least the information identified in 17 U.S.C. §512(g), or is
operated by a webmaster Cybernet knows or has reason to know has
operated a website as described immediately above, in order to determine
whether there exists any reasonably identifiable Prohibited Content on
that website.
6. Within 90 days of entry of this Order, Cybernet
shall review the content of each Gold website in order to determine whether
there exists on the website any reasonably identifiable Prohibited Content.
7. Within 90 days of the entry of this Order,
Cybernet shall require that each Adult Check Website in Cybernet’s celebrity
category produce for Cybernet’s inspection, a copy of which shall be served on
Perfect 10, Rights Documentation establishing its right to display the images
of any person who has lodged a complaint with Cybernet about the use of his or
her image on Adult Check affiliated websites. Cybernet shall treat any website
as an Identified Website if it fails to produce such documentation for all such
content.
8. Cybernet shall not include on its website or in
promotional materials any statements that the Adult Check websites include images
or “fake” images of celebrities for which Cybernet has received notice that the
celebrity objects to the use of his or her image unless the reference
reasonably reflects content on the websites for which Cybernet can produce
Rights Documentation.
9. As used
here, “Identified Celebrities and Models” shall mean any person who has
assigned to Perfect 10 their right of publicity or any person who has
complained to Cybernet about use of their images on Adult Check affiliated
websites, in so far as these persons are identified in the Third Amended
Complaint in this action, or any content concerning such persons, unless
Cybernet can produce Rights Documentation that the particular content is
authorized. “Identified Celebrities and Models” also shall include any person
identified by Perfect 10 in a written statement delivered to Cybernet’s
designated agent, such written statement for right of publicity allegations
directly asserted by Perfect 10 meeting the substantive requirements of 17
U.S.C. §512. “Identified Celebrities and Models” shall also include any new
person complaining to Cybernet about the use of his or her images on Adult
Check affiliated websites. Cybernet shall make publicly accessible a list of
all “Identified Celebrities and Models,” identifying their objection to the use
of their images on Adult Check affiliated websites.
10. As used herein, “Rights Documentation” shall
consist of a written license agreement or consent statement, signed by the
person or persons whose images or identity is invoked or the person or persons’
authorized agent, authorizing the display of the image on Adult Check websites,
or a statement, under penalty of perjury, declaring why the website operator
believes the display is authorized.
11.
As
used herein, “Perfect 10 Works” shall mean any copyrighted image or work of
Perfect 10, or any part thereof.
12. Within ten (10) business days of the date of
this Order, each of the Defendants shall serve upon plaintiff and file with the
Court a report of compliance identifying the steps each has taken to comply
with this Order. One hundred days following the date of this Order, Cybernet
shall serve upon the plaintiff and file with the Court a further report of
compliance identifying the steps it has taken to comply with Paragraphs 6 &
7 of this Order.
This Order shall be effective upon the filing of a
bond in the amount of Six Hundred Thousand Dollars ($600,000) by plaintiff.
IT IS SO ORDERED.
Dated: April 22, 2002
United States District Judge
1 See, e.g., Asseo v. Pan-America Grain Co.,
Inc., 805
F.2d 23, 26 (1st Cir. 1986) (“affidavits and other hearsay materials
are often received in preliminary injunction proceedings”).
2 Perfect 10 has attempted to further elaborate on the
authentication issue in its Reply to Evidentiary Objections (“Evid. Reply”) and
in Norman Zadeh’s Second Declaration (“Zadeh Decl. II”) ¶¶3-7, but the Court
did not consider this information. Despite the general admissibility of
these exhibits, there are individual exhibits that are insufficiently
authenticated, see, e.g., Zadeh Decl, Ex. 17, and the Court does not
rely on them in its findings of fact. Because of the sheer volume of
evidentiary objections, the Court’s discussion must be held at a certain level
of generality. Where either party’s arguments on admissibility are persuasive,
the Court simply disregards the problematic piece of evidence. The findings of
fact that follow rest on evidence the Court finds admissible or proper for
consideration in the context of this motion.
3 There are several exhibits attributable to employees
other than Brad Estes. These are authenticated through the discovery process,
but the Court also finds that they should be appropriately considered because
there is no indication that any of these employees have been deposed as of yet.
4 When used for this purpose, the Court assumes they
are subject to the best evidence rule, Fed. R. Evid. 1001. The Court finds that
these printouts meet the Rule, for present purposes.
5Perfect 10 has not objected to Cybernet’s request
for judicial notice of this newspaper article.
6For purposes of this motion, the Court finds that
Zadeh’s role as CEO and familiarity with all aspects of Perfect 10’s business
lays an adequate foundation for information related to Perfect 10’s market
position, particularly as the Court finds the majority of Zadeh’s testimony and
declaration credible.
7”Webmasters” are the operators of the individual
websites that can be accessed using in an Adult Check ID.
8The Court
finds Mr. Zadeh’s testimony on this count to be credible and Cybernet has
advanced no information to dispute it.
9The Court utilizes this
evidence because it is consistent with a declaration submitted by Lin Milano to
the Court in August 22, 2001. That declaration provides evidence of notice and
the e-mail meets Cybernet’s previous objection that Ms. Milano’s declaration
does not meet the best evidence rule. See Evid. Obj. to Decl. of Lin
Milano, filed Aug. 23, 2001.
10Morris
v. Business Concepts, Inc., 259 F.3d 65, 68 (2d Cir. 2001); see
also 37 C.F.R. 202.3(b)(3) (2001) (“the following shall be considered a
single work: . . . all copyrightable elements that are otherwise recognizable
as self-contained works, that are included in a single unit of publication and
in which the copyright claimant is the same.”); Hilliard v. Mac’s Place,
Inc., 1994 WL 323961 *1 (W.D. Wash. 1994).
11The
Court finds the case of Cooling Systems & Flexibles, Inc. v. Stuart
Radiator, Inc., 777 F.2d 485, 490 (9th Cir. 1985) abrogated on other
grounds by Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), distinguishable.
There the Ninth Circuit refused to allow the plaintiff to use the presumption
of validity to defeat the district court’s finding that preexisting works did
not bear a copyright notice. Id. This result was consistent with the
discretion afforded a district court in considering the evidentiary weight to
be accorded a certificate of registration, see 17 U.S.C. §410(c).
Additionally, evidence was brought in contradicting the presumption of validity
and it was conceded the copyright covered a derivative work. 777 F.2d at
489-90. Cybernet has not made an argument to establish similar points, nor
addressed the Court’s discretion under §410(c). In this case, the Court will therefore
favor the presumption of validity over Cybernet’s attempt to reverse this
presumption for collective works by assuming that they are merely derivative
works. Although Perfect 10 refers to the registered works as a “compilation” in
its Reply, see Reply at 15, the Court notes that the certificates claim
to cover “collective works.”
13See
also Kelly v. Arriba Software Corp., 280 F.3d 934, 946 (9th
Cir. 2002) (holding company that designed search engine, which trolled web,
found images and then inline linked and framed those images on its sites, was
liable for direct infringement).
14This declaration is being used
for the limited purpose as evidence of notice. The Court finds the declaration
credible and interprets Mr. Easton’s claim that he began notifying Cybernet of
“violations of copyright under the DMCA” in 1996 or 1997, to be a claim that he
began notifying Cybernet of alleged copyright violations at that time. The
Court pauses to reflect on Cybernet’s earlier objection tot his declaration because
[it] “is simply making prejudicial and defamatory allegations against Cybernet,
which can no longer be permitted, let alone as evidence for this Court to
consider,” Evid. Obj. to Portions of decls., filed December 17, 2001, in light
of Cybernet’s current evidence that “many of the notices sent by Steven Easton
were deficient and thus, Cybernet could not act on them.” Umbreit Decl.
¶26 (emphasis added). This is just another instance where Cybernet’s prior
invective undercuts its claims to be honestly working to address potential
problems with its affiliated sites.
15Neither party addressed the role of post-filing
conduct, but the Court notes that in Fonovisa I, 847 F.Supp. at
1495, and A&M Records, Inc. v. Napster,
Inc., 114 F.Supp.2d 896, 918 (N.D. Cal. 2000) aff’d in part,
rev’d in part, 239 F.3d 1004 (9th Cir. 2001) (“Napster I”), the courts relied
to some extent upon allegations in the complaint and post-filing conduct.
16See Napster II, 239 F.3d at 1022
(agreeing Napster provides “the site and facilities” for direct infringement
because without its services users could not find what they wanted with the
“ease of which defendant boasts”); Napster I, 114 F.Supp.2d at
919-20; Religious Technology, 907 F.Supp. at 1375 (denying
defendant’s motion for summary judgment on this issue).
17Additionally, the participating websites actually
pay no fees to Cybernet. Instead they are paid by Cybernet.
18 The definition of standard technical measures
includes a requirement that they be “developed pursuant to a broad consensus of
copyright owners and service providers in an open, fair, voluntary,
multi-industry standards process.” 17 U.S.C. §512(i)(2)(A). There is no
indication that the “strong urging” of both the House and Senate committees
reporting on this bill has led to “all of the affected parties expeditiously
[commencing] voluntary, inter-industry discussions to agree upon and implement
the best technological solutions available to achieve these goals.” H.R. Rep.
105-551(II), at 61; S. Rep. at 52. It thus appears to be an open question if any
conduct or policy could interfere with “standard technical measures.” See
3 Nimmer on Copyright §12B.02[B] [3], at 12B-29 (“Given the incentives
of the various parties whose consensus is required before any such technical
measures can win adoption, it seems unlikely . . . that the need for any such
monitoring will eventuate.”)
19Because
Cybernet does run a web-page, adultcheck.com and maintains computers to govern access
to the Adult Check family’s websites there is good reason to believe that it is
an “online service provider” under 512(k)(1)(B). Cf. 47 U.S.C. 231(e)
(mentioning broad range of online services that an “Internet access service”
could also provide); ALS Scan, 239 F.3d at 623; Hendrickson, 165
F.Supp.2d at 1087. At the same time the fact that no images pass through
Cybernet’s hardware makes Cybernet a poor fit for the categories established by
the DMCA, see 17 U.S.C. §§512(a)-(d), and Cybernet’s service appears to
fall outside the parallel definitions of 47 U.S.C. 231(b).
20See
H.R.Rep. 105-551(II), at 61. The statement above is qualified by the “standard
technical measures” language in section 512(i), which may require such
action. See H.R.Rep. 105-551(II), at 53 (“a service provider need not monitor
its service or affirmatively seek facts indicating infringing activity (except
to the extent consistent with a standard technical measure complying with new
subsection [i])”). A failure to impose an affirmative duty on service providers
to hunt out infringers does not mean, however, that copyright holders cannot
investigate potentially infringing activities and notify providers under a
“reasonably implemented” section 512(i) policy.
21Section 512(1) provides that a service provider
under subsection (a) may only be restrained from providing access to an
infringer by terminating the account or from providing access to a specific,
identified online location outside the United States. See 17 U.S.C.
512(1)(B). There is no ability to order such a provider to take down material,
presumably because such material is no longer on the system. See 17
U.S.C. 512(a)(4) (limiting time copy may reside on system to that “reasonably
necessary for the transmission, routing, or provision of connections”). In
contrast, service providers, as the term is defined for the other three safe
harbor provisions may be restrained from providing access to the material,
providing system access to the infringer, or such other injunctive relief as
may be considered necessary to restrain infringement at a particular location,
if it is the least burdensome form of relief available to the service provider.
See 17 U.S.C. §512(1)(A).
22In response to the
unstated premise of Cybernet’s arguments that enforcement of the Copyright Act
would hurt its business, but not address the ultimate source of the
infringement, the Court finds itself sympathetic to the observation in Playboy
v. Webbworld: “If a business cannot be operated within the bounds of the
Copyright Act, then perhaps the question of its legitimate existence needs to
be addressed.” 968 F.Supp. at 1175. see also Napster II, 239 F.3d at 926
(“Although even a narrow injunction may so fully eviscerate Napster, Inc. as to
destroy its user base . . . the business interests of an infringer do not trump
a rights holder’s entitlement to copyright protection.”)
23This case appears to offer an example of such behavior. In Perfect 10’s
Third Amended Complaint, it identified a site, www.celebpics.com, as one of the
problematic Adult Check sites. In its preliminary injunction papers, Perfect 10
now complains about the website www.newcelebpics.com. See Zadeh Decl.,
Ex. 79. Although issues of ownership are unclear at this point, the inference
of repeat activity is difficult to avoid.
24This
conclusion, formed on the basis of Perfect 10’s initial evidence and Cybernet’s
opposition, obviated any need to consider Perfect 10’s reply exhibits.
25The Court is inclined to
read this “or” in the non-exclusive sense.
26The differences between 512(a) and (c), particularly
section 512(a)’s lack of any take-down requirement and its limitation of
injunctive relief to banning users may be traceable to its language limiting
the safe harbor to those situations where “no such copy is maintained on the
system or network in a manner ordinarily accessible to such anticipated
recipients for a longer period than is reasonably necessary for the
transmission, routing or provision of connections.” Cf. Religious
Technology, 907 F.Supp. at 1370, 1375 (rejecting direct liability theory
based on eleven day storage, but allowing contributory liability theory to go
to jury); cf. also 17 U.S.C. §512(n) (“Subsections (a), (b), (c),
and (d) describe separate and distinct functions” but failure to qualify for one safe harbor “shall not affect a
determination of whether that service provider qualifies for the limitations”
under other categories). Thus, (a) and (c) might be read as the difference
between basic infrastructure transmission functions and storage functions, with
some service providers engaging in both at the same time. But see Ellison,—F.Supp.
2d—, 2002 WL 407696 at *14 (C.D. Cal. 2002) (adopting different
interpretation).
27See
LA Gear, Inc. v. E.S. Originals, Inc., 859 F.Supp. 1294, 1301
(C.D. Cal. 1994). Although the Court recognizes the contexts are very different
- one dealing with intent, one with
control - this indefinite language trying to identify when there is sufficient
involvement to infer either, adequately captures the nature of the inquiry.
28In
light of its conclusions below, the Court need not address the “fraudulent” arm
of the statute.
29See Pasadena Unified School Dist. v. Pasadena Fed. of
Teachers, 72 Cal.App.3d 100,
113 (1977), overruled on other grounds, City & County of San Francisco
v. United Ass’n of Journeyman & Apprentices, 42 Cal.3d 810, 812
(1986) (as general principle for intentional torts); Saunders v. Superior
Court, 27 Cal.App. 4th 832, 846 (1994) (as principle for unfair
competition claims).
30The
Court thus reserves the right to revisit this issue at a later time.
31In the interest of fairness, the Court notes that
Perfect 10 has also on occasion been known to adopt strained readings in
support of its position. See Mot. at 22 (reading Cybernet’s instructions
to webmasters to “sell sizzle, not steak” as advice to show improper pictures
to prospective customers before they log onto Adult Check). Nevertheless,
Cybernet has shown a much greater tendency to make assertions that simply cross
the line of credulity. Compare First Mot. to Dismiss at 13 (“Quite
frankly, given the nature of the entertainment business, it would seem that
there is no such thing as bad publicity for these kinds of people [referring to
celebrities.]”) with Rudolph Decl., Ex. A, filed Dec. 3, 2001 at 9-10
(graphic depiction of pop star in digitally-altered “action shot”).
32The Court finds the differences in proof between
those who have complained and those who have not will strongly effect the likelihood
of success. Further, this ensures that there is a sufficient unity of interest
and that the use of any image is truly “unfair” and/or “unlawful.” See
Viceroy Gold, 75 F.3d at 488 (goal of third-party standing is to
avoid adjudicating rights a third-party might not wish to assert and to ensure
effective advocacy). To the extent third-party standing is implicated, both
goals recognized in Viceroy are met once a person has complained about
use of their image. Although the relationship between Perfect 10 and those who
have complained is not close, based on the evidence before the Court, their
interests align and the ability of these third-parties to assert their rights
is severely hindered by the architecture of Cybernet and the internet. This is
evidenced by the large investment of time and resources devoted by Perfect 10
to identifying individual images and sites for this litigation.
33The
Court finds Emery v. Visa Int’l Serv. Assoc., 95 Cal.App. 4th 952
(2002), is not applicable to the present situation. In Visa the alleged
unfair practice involved a duty to investigate the truth of statements made by
others—a duty specifically defeated by California case law, Visa’s lack of
control, and an alleged unlawful act that involved a violation of California’s Penal
Code. Cybernet’s power to police extends much farther than the policing of
one’s mark referred to in Visa and the predicate acts are based on civil
doctrines of liability.
34Perfect
10 has produced assignments of “any” trademark rights owned by the models, but
has failed to present any evidence that they had trademark rights to give.
35The considerations under California state law for
reverse palming off are the same as they are for reverse palming off under the
Lanham Act. See Summit Machine, 7 F.3d at 1441-42.
36The Court observes that
the operations of the Adult Check system, with Cybernet’s service
understandably preventing unfettered access, also works to prevent various
intellectual property rights holders from effectively protecting their rights.
This situation poses a difficult challenge to section 512’s accommodation of
“standard technical measures” where it is unclear that any such standard has
been developed.
37See supra; A & M
Records, Inc. v. Napster, Inc., 2001 WL 227083 *1 (N.D. Cal. 2001)
(requiring Napster to use “reasonable measures” to identify variations
in file names) (“Napster III”); see also A & M Records, Inc. v.
Napster, Inc.,—F.3d—, 2002 WL 449550 *I, *4 (9th Cir. 2002) (affirming
shut-down order where Napster “failed to prevent infringement of all of
plaintiffs’ noticed copyrighted works” because “more could be done to maximize
the effectiveness of the new filtering mechanism”) (“Napster IV”).