BWP Media USA, Inc. v. T & S Software Associates., Inc. , 852 F.3d 436 ( 2017 )


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  •      Case: 16-10510   Document: 00513928012     Page: 1   Date Filed: 03/27/2017
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT  United States Court of Appeals
    Fifth Circuit
    FILED
    March 27, 2017
    No. 16-10510
    Lyle W. Cayce
    Clerk
    BWP MEDIA USA, INCORPORATED, doing business as Pacific Coast News;
    NATIONAL PHOTO GROUP, L.L.C.,
    Plaintiffs - Appellants
    v.
    T & S SOFTWARE ASSOCIATES, INCORPORATED,
    Defendant - Appellee
    Appeal from the United States District Court
    for the Northern District of Texas
    Before SMITH, CLEMENT, and SOUTHWICK, Circuit Judges.
    LESLIE H. SOUTHWICK, Circuit Judge:
    This appeal is about whether “volitional conduct” is required to establish
    a claim for direct copyright infringement. Defendant T&S Software Associates,
    an internet service provider, hosted an internet forum on which third-party
    users posted images that infringed copyrights owned by plaintiffs BWP Media
    USA and National Photo Group.          The plaintiffs sued T&S for direct and
    secondary copyright infringement.       The district court granted summary
    judgment in favor of T&S. The plaintiffs appeal the district court’s direct-
    infringement holding. We AFFIRM.
    Case: 16-10510     Document: 00513928012     Page: 2   Date Filed: 03/27/2017
    No. 16-10510
    FACTUAL AND PROCEDURAL BACKGROUND
    T&S hosts a website that includes a public forum called “HairTalk.”
    Users of the forum may post content, share comments, ask questions, and
    engage in online interactions with other users on a range of topics including
    hair, beauty, and celebrities. Use of HairTalk is governed by terms of service
    providing that “any photo containing . . . celebrities . . . or any copyrighted
    image (unless you own the copyright) is not permitted.” Every time someone
    logs on to HairTalk, the user must agree to these terms. Also, each page of the
    website includes a “contact us” link, which allows anyone to contact the website
    to report objectionable content. During the relevant time period, T&S did not
    have an agent designated to receive notices of content that should be removed
    as required to qualify for the statutory safe harbor of the Digital Millennium
    Copyright Act (“DMCA”). The specific section on the protections arising from
    naming an agent is 17 U.S.C. § 512(c).
    Plaintiffs BWP Media USA and National Photo Group (collectively,
    “BWP”) are registered owners of various celebrity photographs.             Three
    photographs owned by BWP were posted by third-party users on HairTalk
    without BWP’s permission. They depicted Ke$ha, Julianne Hough, and Ashlee
    Simpson. BWP sued for copyright infringement. The suit claimed that T&S
    was liable for its users’ infringement because it failed to designate a registered
    agent under Section 512.          T&S learned of the photographs upon
    commencement of this suit and promptly removed them. The district court
    granted summary judgment in favor of T&S as to both direct and secondary
    infringement. BWP appeals the district court’s judgment only as to T&S’s
    direct-infringement liability.
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    DISCUSSION
    We review a grant of summary judgment de novo, applying the same
    standard as the district court. Ibe v. Jones, 
    836 F.3d 516
    , 526 (5th Cir. 2016).
    Summary judgment is appropriate “if the movant shows that there is no
    genuine dispute as to any material fact and the movant is entitled to judgment
    as a matter of law.” FED. R. CIV. P. 56(a). Here, there is no factual dispute; the
    case turns on the proper interpretation of the Copyright Act. We review the
    district court’s interpretation of the Act de novo. Comput. Mgmt. Assistance
    Co. v. Robert F. DeCastro, Inc., 
    220 F.3d 396
    , 399–400 (5th Cir. 2000).
    The determinative issue on appeal is whether volitional conduct is
    required to prove a claim of direct infringement. Our answer starts with the
    text of the Copyright Act. The Act gives a copyright owner “the exclusive
    right[]” to “reproduce the copyrighted work” and “display” it “publicly.” 17
    U.S.C. § 106(1), (5). “Anyone who violates any of the exclusive rights of the
    copyright owner as provided by section[] 106 . . . is an infringer . . . .” 
    Id. § 501(a).
    Thus, a plaintiff generally must prove two elements to establish
    infringement: “(1) ownership of a valid copyright, and (2) copying of constituent
    elements of the work that are original.” Feist Publ’ns, Inc. v. Rural Tel. Serv.
    Co., 
    499 U.S. 340
    , 361 (1991).
    When there is a question as to who infringed, the analysis can turn on
    whether the type of infringement is direct or secondary. Direct liability is
    imposed on those who “trespass[] into [the copyright owner’s] exclusive domain
    by using or authorizing the use of the copyrighted work . . . .” Sony Corp. of
    America v. Universal City Studios, Inc., 
    464 U.S. 417
    , 433 (1984). Secondary
    infringement involves liability for actions of third parties. See Metro-Goldwyn-
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    Mayer Studios Inc. v. Grokster, Ltd., 
    545 U.S. 913
    , 930 (2005). Only direct
    infringement is at issue on this appeal.
    In direct-infringement cases, courts have trended toward requiring
    volitional conduct. This requirement first came to the fore in 1995 when a
    California district court held that an ISP serving as a passive conduit for
    copyrighted material was not liable for direct infringement. See Religious
    Tech. Ctr. v. Netcom On-Line Commc’n Servs., 
    907 F. Supp. 1361
    (N.D. Cal.
    1995). There, a user posted copyrighted works to an online bulletin board. 
    Id. at 1365.
      The owners of the copyrighted works, seeking compensation for
    infringement, sued the operator of the bulletin-board service and the ISP that
    the operator used to access the internet.        
    Id. The court
    reasoned that
    “[a]lthough copyright is a strict liability statute, there should still be some
    element of volition or causation which is lacking where a defendant’s system is
    merely used to create a copy by a third party.” 
    Id. at 1370.
          Accordingly, the court rejected the plaintiffs’ argument that the ISP
    stored and thereby copied the copyrighted works: “Where the infringing
    subscriber is clearly directly liable for the same act, it [would] not make sense
    to adopt a rule that could lead to the liability of countless parties whose role in
    the infringement [was] nothing more than setting up and operating a system
    that is necessary for the functioning of the Internet.” 
    Id. at 1372.
    The court
    did “not find workable a theory” that would hold online parties, such as ISPs,
    liable “for activities that cannot reasonably be deterred.” 
    Id. Thus, because
    the Netcom plaintiffs could not show that either the ISP or bulletin-board
    service was actively involved in the infringement, the court held neither was
    liable as a direct infringer. 
    Id. at 1372–73,
    1381–82.
    Other courts followed.     The Fourth Circuit was an early adopter of
    Netcom and the volitional-conduct requirement. CoStar Grp., Inc. v. LoopNet,
    Inc., 
    373 F.3d 544
    , 551 (4th Cir. 2004). There, the copyright owner sued an
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    ISP, LoopNet, for direct infringement after “CoStar’s copyrighted photographs
    were posted by LoopNet’s subscribers on LoopNet’s website.” 
    Id. at 546.
    Like
    the copyright owners in Netcom, CoStar argued its “photographs were copied
    into LoopNet’s computer system,” and so LoopNet was strictly liable, even
    though LoopNet’s actions were passive. 
    Id. The court
    disagreed. It held
    instead that because LoopNet, as an ISP, was “simply the owner and manager
    of a system used by others who [were] violating CoStar’s copyrights and [was]
    not an actual duplicator itself, it [was] not directly liable for copyright
    infringement.” 
    Id. The Fourth
    Circuit also rejected the argument that “any immunity for
    the passive conduct of an ISP such as LoopNet must come from the safe harbor
    immunity provided by the Digital Millennium Copyright Act (‘DMCA’), if at all,
    because the DMCA codified and supplanted the Netcom holding.” 
    Id. at 548.
    Netcom, the court concluded, “grounded its ruling principally on its
    interpretation of § 106 of the Copyright Act as implying a requirement of
    ‘volition or causation’ by the purported infringer,” not only on pragmatic
    concerns or a gap in the law. 
    Id. at 549.
    The court commended Netcom’s
    approach in part because the Act “requires conduct by a person who causes in
    some meaningful way an infringement.” 
    Id. Thus, “to
    establish direct liability
    under §§ 501 and 106 of the Act, something more must be shown than mere
    ownership of a machine used by others to make illegal copies.” 
    Id. at 550.
    Instead, “[t]here must be actual infringing conduct with a nexus sufficiently
    close and causal to the illegal copying that one could conclude that the machine
    owner himself trespassed on the exclusive domain of the copyright owner.” 
    Id. In a
    developing line of authority, every circuit to address this issue has
    adopted some version of Netcom’s reasoning and the volitional-conduct
    requirement. See, e.g., Perfect 10, Inc. v. Giganews, Inc., 
    847 F.3d 657
    , 666–67
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    (9th Cir. 2017); Leonard v. Stemtech Int’l Inc, 
    834 F.3d 376
    , 387 (3d Cir. 2016);
    Cartoon Network LP v. CSC Holdings, Inc., 
    536 F.3d 121
    , 131 (2d Cir. 2008). 1
    BWP argues we should not step into this line because the Supreme
    Court’s 2014 decision in Aereo rejected both the Netcom line of cases and the
    volitional-conduct requirement generally. See American Broadcasting Cos. v.
    Aereo, Inc., 
    134 S. Ct. 2498
    (2014). In that case, Aereo was sued for allegedly
    infringing the petitioners’ exclusive right to perform their copyrighted works
    publicly under Section 106(4) “by selling its subscribers a technologically
    complex service that allow[ed] them to watch television programs over the
    Internet at about the same time as the programs [were] broadcast over the
    air.” 2 
    Id. at 2503.
    The first issue was whether Aereo “perform[ed].” 
    Id. at 2504.
          The Supreme Court compared Aereo’s service to the community-
    antenna-television (“CATV”) systems that Congress had meant to bring within
    the Act’s scope via a set of 1976 amendments. 3 
    Id. Although it
    acknowledged
    1We recognize, as other courts have, that “the word ‘volition’ in this context does not
    really mean an ‘act of willing or choosing’ or an ‘act of deciding’ . . . .” 
    Giganews, 847 F.3d at 666
    . One court decided the word “stands for the unremarkable proposition that proximate
    causation historically underlines copyright infringement liability no less than other torts.”
    
    Id. (quotation marks
    omitted). It also has been held that “volition requires a relationship
    between the system owner and the copyrighted work that will permit the owner to prevent
    infringement of the work without the necessity of monitoring the behavior of third parties.”
    Robert C. Denicola, Volition and Copyright Infringement, 37 CARDOZO L. REV. 1259, 1276
    (2016). At the very least, the Act “requires conduct by a person who causes in some
    meaningful way an infringement.” 
    CoStar, 373 F.3d at 549
    (emphasis omitted).
    2Aereo’s system allowed a subscriber to select a show from Aereo’s website, after
    which Aereo’s system, consisting of thousands of antennas in a centralized warehouse,
    responded as follows. First, a server tuned an antenna, dedicated to one subscriber alone, to
    the broadcast carrying the selected show. Next, a transcoder translated the signals received
    into data that could be transmitted over the internet. A server would save that data into a
    subscriber-specific folder and then begin streaming the show onto the subscriber’s screen
    once a few seconds of programming had been saved. This continued until the subscriber
    watched the entire show. See 
    Aereo, 134 S. Ct. at 2503
    .
    The CATV provider used a system of antennas on hills to “amplif[y] and modulate[]
    3
    [copyrighted local TV] signals in order to improve their strength and efficiently transmit
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    that Aereo’s subscribers selected the content to be performed, the Court
    concluded that “[g]iven Aereo’s overwhelming likeness to the cable companies
    targeted by the 1976 amendments, this sole technological difference between
    Aereo and traditional cable companies does not make a critical difference . . . .”
    
    Id. at 2507.
    Then, after also concluding that Aereo performed “publicly,” the
    Court held Aereo was liable for infringement. 
    Id. at 2508.
    The Court never
    addressed whether Aereo’s conduct was volitional, resting its holding instead
    on the similarities between the CATV systems and Aereo’s system.
    We find the dissent to be helpful in understanding the decision. Justice
    Scalia concluded that Aereo could not be held directly liable because, among
    other things, it did not engage in volitional conduct. 
    Id. at 2512
    (Scalia, J.,
    dissenting). To him, whether a defendant may be held directly liable “[m]ost
    of the time . . . will come down to who selects the copyrighted content: the
    defendant or its customers.” 
    Id. at 2513.
    He then offered a comparison:
    A comparison between copy shops and video-on-demand
    services illustrates the point. A copy shop rents out photocopiers
    on a per-use basis. One customer might copy his 10-year-old’s
    drawings—a perfectly lawful thing to do—while another might
    duplicate a famous artist’s copyrighted photographs—a use clearly
    prohibited by § 106(1). Either way, the customer chooses the
    content and activates the copying function; the photocopier does
    nothing except in response to the customer’s commands. Because
    the shop plays no role in selecting the content, it cannot be held
    directly liable when a customer makes an infringing copy.
    Video-on-demand services, like photocopiers, respond
    automatically to user input, but they differ in one crucial respect:
    them to [the home TV sets of its] subscribers.” 
    Aereo, 134 S. Ct. at 2504
    . The subscriber
    could choose any program he wanted to watch by turning the knob on his TV set. In two prior
    cases, the Court had held CATV providers were not infringers, but Congress amended the
    Copyright Act in 1976 “in large part to reject the Court’s holdings in” those cases. 
    Id. at 2505.
    Congress clarified that “both the broadcaster and the viewer of a television program ‘perform,’
    because they both show the program’s images and make audible the program’s sounds.” 
    Id. at 2506
    (emphasis omitted).
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    They choose the content. When a user signs in to Netflix, for
    example, ‘thousands of . . . movies and TV episodes’ carefully
    curated by Netflix are ‘available to watch instantly.’ That selection
    and arrangement by the service provider constitutes a volitional
    act directed to specific copyrighted works and thus serves as a
    basis for direct liability.
    
    Id. at 2513
    (alteration and citation omitted).
    Justice Scalia concluded that Aereo was neither one of his examples;
    instead, it was like “a copy shop that provides its patrons with a library card,”
    providing both the technology and indirect access to the content. 
    Id. at 2514.
    Because such a shop does not itself choose the content, it does not act with the
    requisite volition and thereby does not directly infringe. 
    Id. Neither, he
    concluded, did Aereo. 
    Id. The Court
    rejected this argument primarily because Aereo’s service was
    not materially distinguishable from the CATV systems. 
    Id. at 2507.
    The Court
    did not, though, explicitly reject Justice Scalia’s formulation of the volitional-
    conduct requirement. Indeed, it noted that “[i]n other cases involving different
    kinds of service or technology providers, a user’s involvement in the operation
    of the provider’s equipment and selection of the content transmitted may well
    bear on whether the provider performs within the meaning of the Act.” 
    Id. The systems
    used by Aereo and the CATVs were just too similar for such
    factors to matter in that case.
    BWP argues that when the majority rejected Justice Scalia’s dissenting
    copy-shop argument as “mak[ing] too much out of too little,” 
    id. at 2507,
    it at
    least eroded the volitional-conduct requirement. We disagree. As the Ninth
    Circuit recently concluded, Aereo “did not expressly address the volitional-
    conduct requirement for direct liability under the Copyright Act, nor did it
    directly dispute or comment on Justice Scalia’s explanation of the doctrine.”
    
    Giganews, 847 F.3d at 667
    . Thus, “it would be folly to presume that Aereo
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    categorically jettisoned [the volitional-conduct requirement] by implication,”
    both because Aereo itself distinguished between engaging in activity and
    merely supplying equipment and because it limited its holding to the
    technology at issue. 
    Id. (quotation marks
    omitted). We likewise conclude that
    “[t]he volitional-conduct requirement is consistent with the Aereo majority
    opinion . . . .” See 
    id. Before leaving
    Aereo, we also distinguish its facts. When a copy-shop
    owner makes a photocopier available to customers, but a customer brings in
    the copyrighted work and makes the copy himself, the infringing conduct is
    attributable only to the customer. That is because the copy-shop owner does
    not reproduce the work but “merely supplies equipment that allows others to
    do so.” See 
    Aereo, 134 S. Ct. at 2504
    . Aereo did not just provide equipment. It
    also provided access and the means to transmit the infringing material. See
    
    id. at 2506–07.
          The facts here are much closer to those in the Netcom line of cases than
    those in Aereo. Although Aereo and T&S both provided a service that others
    could use to infringe, only Aereo played an active role in the infringement.
    That role was to route infringing content to its users. True, its users would
    request the content, but they did not merely utilize Aereo’s service to store
    infringing content they obtained elsewhere. Aereo, not its users, provided the
    means to obtain and transmit copyrighted performances. Aereo’s involvement,
    in other words, was more than passive. Cf. 
    Aereo, 134 S. Ct. at 2507
    .
    The same cannot be said of T&S’s conduct. T&S hosts the forum on
    which infringing content was posted, but its connection to the infringement
    ends there. The users posted the infringing content. Unlike Aereo, T&S did
    not provide them access to that content. Holding T&S directly liable thus
    raises the same concern as it did in Netcom: “it does not make sense to adopt a
    rule that could lead to the liability of countless parties whose role in the
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    infringement is nothing more than setting up and operating a system that is
    necessary for the functioning of the Internet.” See 
    Netcom, 907 F. Supp. at 1372
    . Like Netcom and unlike Aereo, T&S and the infringing content are not
    linked by volitional conduct. It cannot be said that T&S’s conduct “cause[d] in
    some meaningful way an infringement.” See 
    CoStar, 373 F.3d at 549
    .
    BWP also argues that because Netcom predated the DMCA, its analysis
    is no longer good law. The particular argument is that the safe-harbor rules of
    Section 512(c) created the exclusive method of protecting an arguably innocent
    ISP: if a user directs the storage of copyrighted material on a service provider’s
    system, the ISP has no liability if (1) the provider lacks knowledge of the
    infringement, (2) does not receive direct financial benefits from the storage, (3)
    “acts expeditiously to remove, or disable access to,” the infringing material once
    learning of it, and (4) “has designated an agent to receive notifications of
    claimed infringement[.]” 17 U.S.C. § 512(c).
    T&S does not qualify for Section 512(c)’s safe harbor, as it never
    designated an agent. To BWP, adopting the volitional-conduct requirement
    would render Section 512(c)’s safe harbor meaningless. BWP also argues that
    adopting the requirement would disincentivize DMCA compliance by
    benefitting those ISPs that choose not to satisfy Section 512(c)’s requirements.
    T&S points out that Section 512 includes a caveat: “The failure of a
    service provider’s conduct to qualify for limitation of liability under this section
    shall not bear adversely upon the consideration of a defense by the service
    provider that the service provider’s conduct is not infringing under this title or
    any other defense.” See § 512(l). T&S argues that this means the DMCA does
    not abrogate the volitional-conduct requirement.
    The Fourth Circuit addressed this argument in CoStar. It too faced the
    argument that because “Congress ‘codified’ Netcom in the DMCA . . . it can
    only be to the DMCA that we look for enforcement of those principles.” CoStar,
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    16-10510 373 F.3d at 552
    (alterations in original). The court disagreed, judging that
    CoStar’s argument was “belied by the plain language of the DMCA itself”:
    Even though the DMCA was designed to provide ISPs with a safe
    harbor from copyright liability, nothing in the language of § 512
    indicates that the limitation on liability described therein is
    exclusive. Indeed, [Section 512(l)] provides explicitly that the
    DMCA is not exclusive . . . . Given that the statute declares its
    intent not to “bear adversely upon” any of the ISP’s defenses under
    law, including the defense that the plaintiff has not made out a
    prima facie case for infringement, it is difficult to argue, as CoStar
    does, that the statute in fact precludes ISPs from relying on an
    entire strain of case law holding that direct infringement must
    involve conduct having a volitional or causal aspect.
    
    Id. The court
    also referred to the canon of construction for abrogation of the
    common law: “When Congress codifies a common-law principle, the common
    law remains not only good law, but a valuable touchstone for interpreting the
    statute, unless Congress explicitly states that it intends to supplant the
    common law.” 
    Id. at 553.
           So the Fourth Circuit held that the “DMCA’s safe harbor for ISPs [is] a
    floor, not a ceiling, of protection.”          
    Id. at 555.
         Rather than altering the
    volitional-conduct requirement, “[t]he DMCA has merely added a second step
    to assessing infringement liability for [ISPs], after it is determined whether
    they are infringers in the first place under the preexisting Copyright Act.” 
    Id. In other
    words, whether there is volitional conduct is the first step of
    establishing infringement under Sections 106 and 501. See 
    id. Only if
    the
    plaintiff shows such infringement are courts to analyze whether the ISP
    nonetheless falls within Section 512’s safe harbor. See 
    id. 4 4
     Accord Perfect 10, Inc. v. Amazon.com, Inc., 
    508 F.3d 1146
    , 1158 n.4 (9th Cir. 2007)
    (“[T]he DMCA does not change copyright law; rather, ‘Congress provided that the DMCA’s
    limitations of liability apply if the provider is found to be liable under existing principles of
    law.’” (alteration omitted) (quoting Ellison v. Robertson, 
    357 F.3d 1072
    , 1077 (9th Cir. 2004)));
    BWP Media USA Inc. v. Polyvore, Inc., No. 13-CV-7867(RA), 
    2016 WL 3926450
    , at *6
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    We agree with the Fourth Circuit’s analysis on this point. BWP also
    argues that retaining the volitional-conduct requirement diminishes Section
    512(c)’s usefulness in direct-infringement cases. That may be, but it does not
    in secondary-infringement cases. See, e.g., Perfect 10, Inc. v. Amazon.com, 
    508 F.3d 1146
    , 1175 (9th Cir. 2007). Textual meaning and incentives to comply
    both remain.
    ***
    We adopt the volitional-conduct requirement in direct-copyright-
    infringement cases. BWP does not contend that T&S did, in fact, engage in
    such conduct. Thus, the district court properly granted summary judgment in
    favor of T&S. AFFIRMED.
    (S.D.N.Y. July 15, 2016) (“In light of this unambiguous statutory language and clear
    legislative history, the Court rejects Plaintiffs’ argument that, in passing the DMCA,
    Congress intended to subject ISPs to different standards of copyright liability than non-
    ISPs.”).
    12