Luvdarts Llc v. At&t Mobility, Llc

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LUVDARTS, LLC, a California No. 11-55497
limited liability company; DAVIS-
REUSS, INC., a California D.C. No.
Corporation, DBA DigiPie, 2:10-cv-05442-
Plaintiffs-Appellants, DDP-RZ
v.
OPINION
AT&T MOBILITY , LLC, a Delaware
Limited Liability Company; CELLCO
PARTNERSHIP, a New Jersey
corporation, DBA Verizon Wireless;
SPRINT SPECTRUM LP, a Delaware
Limited Parthership; T-MOBILE
USA, INC., a Delaware Corporation,
Defendants-Appellees,
VERIZON WIRELESS TELECOM , INC.,
a Delaware corporation; AT&T
WIRELESS SERVICES INC., a
Delaware corporation,
Defendants.
Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding
2 LUVDARTS V . AT&T MOBILITY
Argued and Submitted
January 11, 2013—Pasadena, California
Filed March 25, 2013
Before: Diarmuid F. O’Scannlain and William A. Fletcher,
Circuit Judges, and Edward R. Korman, Senior District
Judge.*
Opinion by Judge O’Scannlain
SUMMARY**
Copyright
The panel affirmed the district court’s dismissal of a
copyright infringement action brought against the owners of
mobile multimedia messaging networks by corporations that
produce, publish, distribute, and sell mobile multimedia
content.
The panel held that the plaintiffs failed to state a claim
that the defendants were liable for infringement committed by
third parties over their networks under a theory of either
vicarious or contributory copyright liability.
*
The Honorable Edward R. Korman, Senior United States District Judge
for the Southern District of New York, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LUVDARTS V . AT&T MOBILITY 3
COUNSEL
Perrin Disner, Law Offices of Perrin F. Disner, Los Angeles,
California, for Plaintiffs-Appellants.
Bruce G. Joseph (argued), Wiley Rein LLP, Washington,
D.C.; Joseph Peterson, Kilpatrick Stockton LLP, New York,
New York; Kent R. Raygor and Valerie Alter, Sheppard
Mullin Richter & Hampton LLP, Los Angeles, California;
and Kelly M. Klaus and Lika C. Miyake, Munger, Tolles &
Olson LLP, Los Angeles, California, for Defendants-
Appellees.
OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether the owners of mobile
multimedia messaging networks can be held liable for
copyright infringement that allegedly occurs on their
networks.
I
Plaintiffs Luvdarts LLC and Davis-Reuss, Inc.
(“Luvdarts”) are California corporations that produce,
publish, distribute and sell mobile multimedia content.
AT&T Mobility, LLC and the other co-defendants are mobile
wireless carriers (“Carriers”) who own Multimedia
Messaging Service networks (“MMS networks”). Mobile
phones use MMS networks to send and receive messages that
include multimedia content.
4 LUVDARTS V . AT&T MOBILITY
Luvdarts alleges that it is in the business of selling
commercial multimedia-messaging content designed to be
transmitted over the MMS networks to and from mobile
devices. According to its complaint, Luvdarts creates
“greeting card style messages” as well as “MMS advertising
campaigns, MMS news, MMS coupons, [and] MMS games.”
Most of Luvdarts’s business involves selling these “greeting
cards” to users who can then forward them to friends.
Attached to the content Luvdarts sells is a notice that it
may be shared only once. But there is no technical
impediment to a recipient forwarding a purchased message to
as many people as he wishes. According to Luvdarts, users
are ignoring the notice and are re-sharing the content without
permission or compensation—thereby infringing Luvdarts’s
copyrights. Luvdarts alleges that after it discovered the
infringements, it contacted the Carriers and demanded that
they provide “accountability” for the infringing content. The
Carriers took no meaningful action in response to these
demands.
Luvdarts sued the Carriers for copyright infringement.
The First Amended Complaint alleges that the Carriers
vicariously infringed, that they induced infringement, and that
they violated California’s unfair competition laws. The
Carriers filed a motion to dismiss the complaint for failure to
state a claim on which relief can be granted. Fed. R. Civ. P.
12(b)(6). Luvdarts waived the state law claim, and the
district court granted the motion as to the remaining
infringement claims, dismissing the case with prejudice.
LUVDARTS V . AT&T MOBILITY 5
II
Luvdarts’s principal argument is that the Carriers are
liable for the infringement committed by third parties over
their networks under either vicarious or contributory
copyright liability. As the Supreme Court has observed, the
Copyright Act does not explicitly render a third person liable
for another person’s infringement. Sony Corp. of Am. v.
Universal City Studios, 464 U.S. 417, 434 (1984). The
doctrines pressed here “emerged from common law principles
and are well established in the law.” Metro-Goldwyn-Mayer
Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005).
Vicarious infringement occurs when one profits from direct
infringement while declining to exercise a right to stop or
limit it, and contributory infringement liability requires
“inducing or encouraging” direct infringement. Id. The
district court concluded that given Luvdarts’s allegations,
liability against the Carriers cannot lie under either theory.
A
Luvdarts first contends that the Carriers are vicariously
liable for infringement committed on their networks.
Vicarious copyright liability is an “outgrowth” of respondeat
superior. A&M Records, Inc. v. Napster Inc., 239 F.3d 1004,
1022 (9th Cir. 2001). Vicarious liability attaches if the
Carriers had both the (1) “right and ability to supervise the
infringing activity” and (2) “a direct financial interest” in the
activity. Id. (internal quotation marks omitted). In this case,
Luvdarts concedes that the Carriers presently have no way of
supervising the use of their networks for copyright
infringement. Instead, Luvdarts’s complaint alleges only that
the Carriers could “establish[]. . .a system” that would give
them the right and ability to supervise the infringing activity.
6 LUVDARTS V . AT&T MOBILITY
Luvdarts argues that this allegation is sufficient to survive a
motion to dismiss.
Luvdarts fails to cite any authority to support this
proposition, which runs contrary to our precedent. In
Napster, this court held that “right and ability to supervise”
should be evaluated in the context of a system’s “current
architecture.” Napster Inc., 239 F.3d at 1024. Moreover, as
we noted in Perfect 10, Inc. v. Amazon.com, Inc., resting
vicarious liability on the Carriers’ failure to change their
behavior would tend to blur the distinction between
contributory liability and vicarious liability. 508 F.3d 1146,
1175 (9th Cir. 2007) (“[I]n general, contributory liability is
based on the defendant’s failure to stop its own actions which
facilitate third-party infringement, while vicarious liability is
based on the defendant’s failure to cause a third party to stop
its directly infringing activities.”). For example, under
contributory liability the Carriers’ failure to implement a
digital rights management system may be used as
circumstantial evidence of “the object of promoting”
infringement. See Grokster, 545 U.S. at 936–37. But under
vicarious liability, it cannot substitute for an allegation of a
capacity to supervise. Luvdarts’s failure to allege that the
Carriers have at least something like a capacity to supervise
is fatal to a claim of vicarious liability.
Even if the doctrine of vicarious liability imposed some
affirmative duty to acquire supervisory capacity, Luvdarts has
failed to allege facts that plausibly show that the Carriers
could implement an effective system. Luvdarts’s complaint
states only that the Carriers should “establish[] a metadata
system of digital rights management.” Nowhere does
Luvdarts explain what that system is, how it would function,
or how much implementing such a system would cost. As a
LUVDARTS V . AT&T MOBILITY 7
result, Luvdarts has not given us any facts that tend to make
plausible the assertion that the Carriers could implement a
system in the first place, much less that the Carriers could
plausibly implement a system at a low-enough cost to justify
imposition of vicarious liability.
Because Luvdarts has failed to allege adequately that the
Carriers had the necessary right and ability to supervise the
infringing conduct, the district court properly determined that
they cannot prevail on their claim of vicarious copyright
infringement.1
B
Luvdarts’s second contention is that the Carriers are
contributorily liable for the infringement committed on their
networks. Liability for contributory copyright infringement
attaches if the Carriers (1) knew of the direct infringement;
and (2) they either induced, caused, or materially contributed
to the infringing conduct. See Napster, 239 F.3d at 1019.
To establish liability, the first prong requires more than a
generalized knowledge by the Carriers of the possibility of
infringement. It is undisputed that the Carriers engage in “the
equivocal conduct of selling an item with substantial lawful
as well as unlawful uses.” Grokster 545 U.S. at 932–33. See
also Sony Corp. of Am., 464 U.S. at 442 (contributory
infringement liability does not follow from a knowledge of
1
Because Luvdarts has failed to allege adequately the first prong of
vicarious liability, we have no cause to decide whether the Carriers have
a direct financial interest in the infringement.
8 LUVDARTS V . AT&T MOBILITY
potential infringing uses if the product is “capable of
substantial noninfringing uses”). In Napster, we reaffirmed
that contributory liability did not automatically follow where
the “system allows for the exchange of copyrighted
material”—the court emphasized that “actual knowledge of
specific acts of infringement” is required for contributory
infringement liability. Napster Inc., 239 F.3d at 1021.
Luvdarts fails to allege that the Carriers had the requisite
specific knowledge of infringement. Luvdarts’s conclusory
allegations that the Carriers had the required knowledge of
infringement are plainly insufficient. See Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (“Threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice.”).
In the alternative, Luvdarts argues that the “notices” it
sent to the Carriers, referenced in the complaint, sufficed to
establish actual knowledge of infringement. However, these
notices failed to notify the Carriers of any meaningful fact.
The notices were 150-page-long lists of titles, apparently just
a transcription of every title copyrighted by Luvdarts, which
indicated that they wanted “accountability” for the
unauthorized distribution of those titles for the period from
May 2008 to November 2009. These notices do not identify
which of these titles were infringed, who infringed them, or
when the infringement occurred. The Digital Millennium
Copyright Act of 1998 (“DMCA”), by which the notices
purport to be governed, clearly precludes notices as vague as
the notices here. 17 U.S.C. § 512 (DCMA takedown notice
requires the producer to provide “[i]dentification of the
material that is claimed to be infringing or to be the subject of
infringing activity and that is to be removed or access to
which is to be disabled, and information reasonably sufficient
LUVDARTS V . AT&T MOBILITY 9
to permit the service provider to locate the material”). These
notices are indistinguishable from a generalized notification
that infringement is occurring.
Luvdarts also argues that the Carriers were “willfully
blind” to the infringement that was occurring. Willful
blindness of specific facts would establish knowledge for
contributory liability. In re Aimster Copyright Litig.,
334 F.3d 643, 650 (7th Cir. 2003). But Luvdarts does not
allege that the Carriers took active steps to avoid acquiring
knowledge. See id. The most that Luvdarts alleges is that the
Carriers proceeded with the development and operation of the
MMS networks indifferent to the risk of copyright
infringement. See United States v. Heredia, 483 F.3d 913,
918 n.4 (9th Cir. 2007) (en banc) (distinguishing willful
blindness from recklessness or negligence and clarifying that
“[a] willfully blind defendant is one who took deliberate
actions to avoid confirming suspicions of criminality”). In
order to allege willful blindness, Luvdarts must allege that the
Carriers (1) subjectively believed that infringement was likely
occurring on their networks and that they (2) took deliberate
actions to avoid learning about the infringement. See Global-
Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2070
(2011) (discussing willful-blindness-as-knowledge required
for patent infringement). Luvdarts falls far short of alleging
either element.
Because Luvdarts has failed to allege adequately that the
Carriers had the necessary specific knowledge of
10 LUVDARTS V . AT&T MOBILITY
infringement, it cannot prevail on its claim of contributory
copyright infringement.2
III
We conclude, in light of the foregoing, that Luvdarts has
failed to state a claim on which relief could be granted. The
district court therefore properly dismissed its complaint with
prejudice.3
AFFIRMED.
2
Because Luvdarts has failed to allege adequately the first prong of
contributory liability, we have no cause to decide if Luvdarts has
sufficiently alleged whether the Carriers induced or materially contributed
to the infringement.
3
W e deny Luvdarts’s motions for judicial notice as moot.