The Anchor Plate : Intellectual Property Lawyers & Attorneys : BrickHouse Law Group : Open-Price Lawyering, Hourly Billing : St. Louis, Missouri

Both cases feature plaintiffs who are major players in their fields—Tiffany in high-end jewelry, Viacom in entertainment—and defendants who are dominant forces on the Internet—eBay and YouTube. And both cases involve an attempt to halt massive infringement by seeking to hold the Internet hosting site liable for the actions of the infringers using the site. And finally, both cases require judges to grapple with principles of contributory infringement developed decades ago in the context of flea markets.

In Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010), the jeweler sued after discovering that thousands of vendors were selling counterfeit Tiffany merchandise on eBay. It claimed eBay was liable for contributory infringement because it was enabling the infringing conduct of others.

In Viacom International, Inc. v. YouTube, Inc., now awaiting oral argument on appeal (Case 10-3042-cv), several other entertainment companies sued YouTube for contributory copyright infringement, claiming that YouTube should be held liable for allowing its users to upload tens of thousands of copyrighted works (including hundreds of SpongeBob videos) that have been viewed millions of times.

In the pre-Internet era, the principal venue for the purchase and sale of counterfeit jewelry and bootleg recordings was the local flea market or swap meet. And because the bad guys were hard to identify, harder to sue, and impossible to collect damages from, the copyright and trademark owners instead targeted the landlord or operator of the flea market, alleging vicarious or contributory liability. The courts of that era developed a series of factors for determining the operator’s liability, including actual knowledge of the infringing activities, the right and ability to supervise to vendors, the financial benefit to hosting the infringing conduct, and the degree to which the operator contributed to the illegal activity. See, e.g., Fonovisia, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9^th Cir. 1996) (operator of a swap meet where vendors sold counterfeit music recordings).

But now the swap meet has moved onto the Web.

In both the Tiffany and Viacom cases, the district courts granted summary judgment in favor of the Internet service provider (“ISP”), applying the law developed in the flea market cases, as augmented by more recent Internet case law and statutes, including the Digital Millennium Copyright Act (“DMCA”).

On appeal of the Tiffany decision earlier this year, the Second Circuit affirmed the grant of summary judgment, holding that a finding of vicarious or contributory liability required that the ISP have more than “a general knowledge or reason to know that its service is being used to sell counterfeit goods.” Tiffany, 600 F.3d at 107. Instead, there must be a showing that eBay had “some contemporary knowledge of which particular listings are infringing.” Id. There was ample evidence that eBay did take strong action when it was notified of infringing conduct, but it did not police its website for potential infringers. The court held it was not obligated to do so.

In Viacom, the district court had to construe the limits of the “safe harbor” created for ISPs under § 512 of the Copyright Act, as amended by the DMCA. There was no dispute that YouTube had acted promptly and in accordance with the requirements of the DMCA, which grants a “safe harbor” to ISPs who receive notice of infringing content being posted on their site and act promptly to remove or disable the content. Instead, Viacom argued that YouTube’s generalized knowledge of the existence of massive copyright infringement voided the “safe harbor.”

The district court in Viacom rejected Viacom’s argument that “generalized knowledge” of infringement was sufficient basis for denying “safe harbor” protection. Instead, the judge concluded that the standard required either actual knowledge of specific instances of infringing activity or an awareness of facts from which specific instances of infringing activity is apparent. In the process, however, it rejected Viacom’s contention that certain facts known to YouTube were “red flags” of infringement that YouTube should not have ignored.

The two related issues on appeal in Viacom are thus (1) what constitutes “actual knowledge of infringing activity” sufficient to subject an ISP to liability for copyright infringement?, and (2) what constitutes a “red flag” that would obligate an ISP to do further investigation?

The Second Circuit’s ruling in Viacom, expected this Spring, should help clarify the measures available to companies seeking to protect their intellectual property online.