Secondary Liability Under U.S. Copyright Law Paula Pinha, Attorney-Advisor U.S. Copyright Office East Africa Regional Seminar on: Copyright Enforcement in the Internet Era May 2009, Nairobi

Why is Secondary Liability Important? Users will police themselves if they know they can be liable for the actions of others Important tool in fighting Internet piracy

What is Secondary Liability? Liability that is placed on a person who did not directly infringe the copyright but who helped the infringer or benefited from the infringer For secondary liability, there must be primary liability – there must be a direct infringement by someone else, such as…

Exclusive Rights Section 106 of the U.S. Copyright Law: the owner of a copyright has the exclusive right to do and to authorize: –Reproduction –Preparation of derivative works –Distribution of copies to the public –Public performance for some types of works –Public display for some types of works

What happens when someone is not infringing the work directly, but is profiting from the infringement indirectly?

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building.

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works.

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording.

A bazaar has a stall that is selling infringing recordings.

To address these problems, judges in the U.S. created the following rules:

Vicarious Liability To punish one who unfairly reaps the benefits of anothers infringing activity. –Artists Music, Inc. v. Reed Publishing, Inc., 31 USPQ 2d 1623 (S.D.N.Y. 1994) Factors: –Right and ability to control the infringement –Direct financial interest in the infringement Note: no knowledge requirement

Vicarious Liability Right and ability to control infringing activity –Must be actual control, not legal or theoretical Direct financial interest in the infringement –Financial interest must come from infringing activity Attracting customers Revenue from incidental sales NOT from a fixed rent payment

Vicarious Liability Fonovista, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996) –Defendant operated a market that rented space for vendors. Vendors sold musical recordings that infringed plaintiffs copyrights. –Vicarious liability because: defendant had the right to supervise vendors and terminate vendors for any reason. defendant made money from incidental sales (parking and admission fees, refreshments) and, as the court concluded, the infringing activities enhance the attractiveness of the venue to potential customers.

Contributory Liability Whether the defendant, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another Factors: –Knowledge of infringing activity –Material (substantial) contribution to the infringing activity

Contributory Liability Knowledge of infringing activity –Knowledge is a key element –Often in cases where one party actively encourages another to infringe Material (substantial) contribution to the infringing activity –Defendant must have provided the infringer with the means to infringe

Contributory Liability Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (2d Cir. 1971) –Defendants local branch organized concert in which infringing works were performed –Vicarious liability because local branch depended on defendant for direction, so it could exercise control over branch, and it received direct financial benefit from concert –Contributory liability because defendant knew the works performed were copyrighted and was essential in the organization and formation of the event

The Knowledge Element Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) –Universal sued Sony for contributory infringement claiming that the Betamax allowed users to make infringing copies of their TV shows. –No contributory infringement because the Betamax was capable of commercially significant noninfringing uses. It was impossible for Sony to know whether any particular machine will in fact be used for infringing purpose.

The Knowledge Element Compare to MGM v. Grokster (2005) –Defendants engineered their P2P software avoid contributory and vicarious liability by removing centralized listing that would meet the knowledge requirement –However, the court created Inducement Liability and held them liable: One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. Where there is inducement to infringe, the court will impute there is knowledge of the infringing activity

Lets apply these rules to our examples:

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building.

Vicarious Liability? Right and ability to control the infringement? Direct financial interest in the infringement?

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building. Vicarious Liability? Right and ability to control the infringement? –NO Direct financial interest in the infringement?

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building. Vicarious Liability? Right and ability to control the infringement? –NO Direct financial interest in the infringement? –NO

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building. Contributory Liability? Knowledge of infringing activity? Material (substantial) contribution to the infringing activity?

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building. Contributory Liability? Knowledge of infringing activity? –NO Material (substantial) contribution to the infringing activity?

A landlord leases a building to a tenant for a fixed rate and without any right to supervise the tenant. The tenant commits the infringement in the building. Contributory Liability? Knowledge of infringing activity? –NO Material (substantial) contribution to the infringing activity? –NO

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works.

Vicarious Liability? Right and ability to control the infringement? Direct financial interest in the infringement?

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement?

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement? – YES

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works. Contributory Liability? Knowledge of infringing activity? Material (substantial) contribution to the infringing activity?

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works. Contributory Liability? Knowledge of infringing activity? –Maybe Material (substantial) contribution to the infringing activity?

A restaurant, dance hall, or club hires musicians to play. The musicians infringe the copyright of musical works. Contributory Liability? Knowledge of infringing activity? –Maybe, likely Material (substantial) contribution to the infringing activity? –Yes

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording.

Vicarious Liability? Right and ability to control the infringement? Direct financial interest in the infringement?

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement?

A large store that sells a variety of products, including records, has a record consignment. One of the records in the stores record concession is an infringing recording. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement? –YES

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording. Contributory Liability? Knowledge of infringing activity? Material (substantial) contribution to the infringing activity?

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording. Contributory Liability? Knowledge of infringing activity? –Maybe Material (substantial) contribution to the infringing activity?

A large store that sells a variety of products, including records, has a record concession. One of the records in the stores record concession is an infringing recording. Contributory Liability? Knowledge of infringing activity? –Maybe Material (substantial) contribution to the infringing activity? –Yes

A bazaar has a stall that is selling infringing recordings.

Vicarious Liability? Right and ability to control the infringement? Direct financial interest in the infringement?

A bazaar has a stall that is selling infringing recordings. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement?

A bazaar has a stall that is selling infringing recordings. Vicarious Liability? Right and ability to control the infringement? –YES Direct financial interest in the infringement? –YES

A bazaar has a stall that is selling infringing recordings. Contributory Liability? Knowledge of infringing activity? Material (substantial) contribution to the infringing activity?

A bazaar has a stall that is selling infringing recordings. Contributory Liability? Knowledge of infringing activity? –MAYBE Material (substantial) contribution to the infringing activity?

A bazaar has a stall that is selling infringing recordings. Contributory Liability? Knowledge of infringing activity? –MAYBE Material (substantial) contribution to the infringing activity? –Yes

How do these apply on the Internet?

RTC v. Netcom (1995) Defendant posted plaintiffs copyrighted works on an online bulletin board and charged a monthly fee for user access The defendant merely set up the equipment used by others to infringe, and there was no intention that others infringe, so was there secondary liability?

RTC v. Netcom (cont.) Vicarious liability? –Right and ability to control? Yes, but defendant removed infringing content once it had notice of the infringement. –Direct financial benefit? No Contributory liability? –Knowledge of infringing activity? Only after it received a notice from the copyright owner, but they removed the material right after receiving notice. –Material contribution to infringing activity? Yes

Napster (2001) Defendant operated a P2P service where it maintained and supervised the infringing activities of its users Napster had a central listing of the works being offered in its service, but did not make or distribute copies of the works directly

Napster (cont.) Vicarious liability? –Right and ability to control? Yes –Direct financial benefit? Yes, the availability of copyrighted works drew consumers in, increasing their ad revenue. Contributory liability? –Knowledge of infringing activity? Yes –Material contribution to infringing activity? Yes, court rejected defendants argument that Napster was capable of substantially noninfringing uses.

What is missing from these Internet-related cases? ISP liability!! Are Internet Service Providers secondarily liable for the infringement of their users on the Internet? To be continued…

Questions??