and Submitted December 5, 2016 Pasadena, California.
from the United States District Court for the Central
District of California D.C. No. 2:11-cv-07098-AB-SH Andre
Birotte, Jr., District Judge, Presiding
N. Schultz (argued), Law Offices of David N. Schultz, Los
Angeles, California; Eric J. Benink, Krause Kalfayan Benink
& Slavens LLP, San Diego, California; for
Phillip Bridges (argued), Jedediah Wakefield, Joseph S.
Belichick, and Todd R. Gregorian, Fenwick & West LLP, San
Francisco, California, for
G. Hentoff (argued) and Nicholas G. Gamse, Williams &
Connolly LLP, Washington, D.C.; George M. Borkowski,
Recording Industry Association of America Inc., Washington,
D.C.; for Amicus Curiae Recording Industry Association of
A. Woodruff, Deepak Gupta, and Anthony P. Schoenberg, Farella
Braun Martel LLP, San Francisco, California, for Amici
Curiae Electronic Frontier Foundation, Public Knowledge,
American Library Association, Association of College and
Research Libraries, and Association of Research Libraries.
Corynne McSherry, Electronic Frontier Foundation, San
Francisco, California, Of Counsel to Amicus Curiae Electronic
Jonathan Band, Policybandwidth, Washington, D.C., Of Counsel
to Amici Curiae American Library Association, Association of
College and Research Libraries, and Association of Research
Charles Duan, Public Knowledge, Washington, D.C., Of Counsel
to Amicus Curiae Public Knowledge.
D. Greenstein, Robert S. Schwartz, and Leigh O. LaMartina,
Constantine Cannon LLP, Washington, D.C., for Amici Curiae
i2Coalition, Internet Association and Computer &
Communications Industry Association.
Before: Harry Pregerson, Dorothy W. Nelson, and John B.
Owens, Circuit Judges.
panel affirmed the district court's judgment in favor of
the defendants in a copyright case involving the Usenet, an
international collection of organizations and individuals
whose computers connect to one another and exchange messages
posted by Usenet users.
Giganews, Inc., owns and operates several Usenet servers and
provides its subscribers with fee-based access to content
stored on its own servers as well as content stored on the
servers of other Usenet providers. Defendant Livewire
Services, Inc., provides its subscribers with access to the
Usenet content stored on Giganews's servers. Plaintiff
Perfect 10, Inc., owns the exclusive copyrights to tens of
thousands of adult images, many of which have been illegally
distributed over Giganews's servers.
panel affirmed the district court's partial dismissal and
partial grant of summary judgment on Perfect 10's direct
copyright infringement claim. The panel held that causation,
also referred to as "volitional conduct, " by the
defendant is one of the elements of a prima facie case of
direct infringement. The panel held that the volitional
conduct requirement was not met on Perfect 10's theories
that the defendants directly infringed its display rights and
distribution rights. The panel concluded that the evidence
showed only that Giganews's actions were akin to
passively storing material at the direction of users in order
to make that material available to other users upon request,
or automatically copying, storing, and transmitting materials
upon instigation by others. The volitional conduct
requirement also was not met as to the claim that Giganews
directly infringed on Perfect 10's right to reproduce by
uploading infringing content onto the Usenet or
panel held that Giganews was not liable for contributory
copyright infringement because Perfect 10 failed to raise a
triable issue of fact as to whether Giganews materially
contributed to or induced infringement of Perfect 10's
copyrights. The panel held that there were no simple measures
available that Giganews failed to take to remove Perfect
10's works from its servers.
panel affirmed the district court's summary judgment on
Perfect 10's vicarious infringement claim. The panel held
that Perfect 10 failed to demonstrate a causal link between
the infringing activities and a financial benefit to
panel affirmed the district court's award of
attorney's fees to the defendants under the Copyright Act
and its denial of defendants' request for supplemental
fees. The panel also affirmed the district court's denial
of defendants' request to amend the judgment to add a
judgment debtor as Perfect 10's alter ego.
NELSON, Senior Circuit Judge.
Perfect 10, Inc. ("Perfect 10" or "P10")
challenges the district court's partial dismissal of its
direct copyright infringement claim and grant of summary
judgment in favor of Appellees Giganews, Inc.
("Giganews") and Livewire Services, Inc.
("Livewire") as to all remaining claims. Perfect 10
also appeals the district court's award of attorney's
fees and costs under the Copyright Act. On cross-appeal,
Giganews and Livewire contend the district court erred by
denying their request for supplemental fees and failing to
add Perfect 10's sole shareholder and founder, Norman
Zada ("Zada"), to the judgment as Perfect 10's
alter ego. For the reasons set forth below, we affirm the
Usenet and Appellees' Operations
heart of this complex copyright dispute revolves around the
Usenet (or USENET), "an international collection of
organizations and individuals (known as 'peers')
whose computers connect to one another and exchange messages
posted by USENET users." Ellison v. Robertson,
357 F.3d 1072, 1074, n.1 (9th Cir. 2004). "To obtain
access to the USENET, a user must gain access through a
commercial USENET provider, such as Defendant [Giganews], or
an internet service provider." Arista Records LLC v.
Usenet.com, Inc., 633 F.Supp.2d 124, 130 (S.D.N.Y.
2009). Giganews owns and operates several Usenet servers and
provides its subscribers with fee-based access to content
that Giganews stores on its own servers as well as content
stored on the servers of other Usenet providers. Unlike
Giganews, Livewire does not own any Usenet servers, but
instead provides its subscribers with access to the Usenet
content stored on Giganews's servers.
Usenet content offered through Giganews's servers is
almost exclusively user-driven, in that USENET users upload
the majority of the content stored on a USENET provider's
server. This content is posted via text-based articles to
online bulletin boards called newsgroups. Each article is
associated with a unique Message-ID. Giganews and Livewire
contend that the only way to accurately identify a specific
Usenet message is with that Message-ID. Although these
articles are posted as text files, other types of files such
as images, songs, and movies may be encoded into the bodies
of the articles as binary files. Through Giganews's
browser application, known as "Mimo, " or "the
Mimo Reader, " users can open the binary files, which
are then decoded and displayed in their original format.
using a "peering process, " messages posted on one
Usenet server can automatically propagate to other Usenet
servers, which then propagate the messages to another Usenet
server, and so on. More specifically,
when an individual user with access to a USENET server posts
a message to a newsgroup, the message is automatically
forwarded to all adjacent USENET servers that furnish access
to the newsgroup, and it is then propagated to the servers
adjacent to those servers, etc. The messages are temporarily
stored on each receiving server, where they are available for
review and response by individual users. The messages are
automatically and periodically purged from each system after
a time to make room for new messages. Responses to messages,
like the original messages, are automatically distributed to
all other computers receiving the newsgroup or forwarded to a
moderator in the case of a moderated newsgroup. The
dissemination of messages to USENET servers around the world
is an automated process that does not require direct human
intervention or review.
Am. Civil Liberties Union v. Reno, 929 F.Supp. 824,
835 (E.D. Pa. 1996). This peering process only occurs after
two Usenet access providers enter into peering agreements to
accept materials from each other. The servers are then able
to synchronize their information so their content mirrors one
another's. Thus, only after Giganews engages in a peering
agreement can its servers exercise any control over the
messages copied from other servers. However, this control is
District Court explained, for example, Giganews servers
"compare the unique Message-IDs of messages on peer
servers to ensure that Giganews does not copy duplicate
articles to its servers." Perfect 10, Inc. v.
Giganews, Inc., No. CV-11-07098-AB (SHx), 2014 WL
8628034, at *3 (C.D. Cal. Nov. 14, 2014). Similarly, "if
a peer server contains an article with a Message-ID that
Giganews has already deleted from its servers, " the
Giganews servers will not then copy that article.
Id. In addition, because Giganews is a member of the
Internet Watch Foundation, which tracks individual articles
by Message-ID or entire newsgroups that contain child
pornography, certain articles and newsgroups may
automatically be deleted or blocked from peering from
Giganews's servers. Id.
than setting those basic parameters, Giganews does not select
any of the content available on its servers."
Id. Indeed, "Giganews itself did not post any
of the articles at issue in this action . . . to any Usenet
server, and all such articles were posted by Usenet users.
Nor does Giganews tell any third parties what to upload to
the Usenet, including Giganews'[s] Usenet servers."
Id. (internal citations omitted). Similarly, because
Livewire "merely contracts with Giganews for access to
[its] servers, " Livewire also has no control over the
uploaded, downloaded, transmitted, or stored content on
Giganews's servers. Id. And Livewire itself has
neither uploaded material onto the Usenet nor directed anyone
else to do so.
Perfect 10 Images on the Usenet
10 owns the exclusive copyrights to tens of thousands of
adult images, many of which have been illegally distributed
over Giganews's servers. Upon locating infringing
materials on those servers, Perfect 10 sent Giganews numerous
letters fashioned as takedown notices pursuant to the Digital
Millennium Copyright Act ("DMCA"), 17 U.S.C. §
512, et seq. While some of these notices merely
instructed Giganews to "locate all of the infringing
messages and images . . . by doing [a] mimo search" for
a particular term, others attached screen shots of the Mimo
application that displayed posts in which Perfect 10's
copyrighted images were distributed. When Perfect 10 sent
Giganews machine-readable Message-IDs, Giganews quickly
removed those messages from its servers. When Perfect 10
faxed Giganews notices containing illegible Message-IDs,
Giganews responded with a letter asking Perfect 10 to provide
the Message-IDs in a legible, machine-readable format.
Perfect 10 repeatedly declined to do so.
April 28, 2011, Perfect 10 brought suit against Giganews and
Livewire in the U.S. District Court for the Central District
of California, alleging direct and indirect copyright
infringement claims as well as trademark and state law
claims. Only the copyright infringement claims are the
subject of this appeal.
March 8, 2013, the district court denied
Defendants-Appellees' motion to dismiss Perfect 10's
indirect copyright infringement claims against Giganews and
granted their motion to dismiss those claims against Livewire
with leave to amend. The district court also granted the
motion to dismiss the direct copyright infringement claims
against both Giganews and Livewire with leave to amend,
explaining that direct infringement requires "volitional
conduct" and finding that Perfect 10 had not alleged
that Appellees "were the direct cause of, or actively
engaged in, [such] infringement." Perfect 10 v.
Giganews, Inc., No. CV11-07098 AHM (SHx), 2013 WL
2109963, at *7 (C.D. Cal. Mar. 8, 2013).
10, 2013, the district court granted in part and denied in
part Appellees' motion to dismiss Perfect 10's First
Amended Complaint ("FAC"). While the district court
allowed Perfect 10 to move forward on its direct infringement
claim against Livewire and on its direct infringement claim
against Giganews on the theory that Giganews violated Perfect
10's exclusive right to reproduce its copyrighted works
by itself uploading infringing content, the court dismissed
Perfect 10's indirect infringement claims against
parties filed eight separate motions for partial summary
judgment. In three separate orders, the district court
granted Appellees' motions for summary judgment as to the
direct and indirect copyright infringement claims and denied
Perfect 10's "mirror-image" motions as moot. In
an earlier order, the district court denied Perfect 10's
motion for summary judgment in which it argued, among other
things, that its takedown notices complied with the DMCA and
Appellees were ineligible for safe harbor protection under
March 24, 2015, upon entering a judgment in favor of
Appellees, the district court ordered Perfect 10 to pay $5,
213, 117.06 in attorney's fees and $424, 235.47 in
non-taxable costs. Subsequently, the district court denied
Appellees' motion to amend the judgment to add Zada as an