Columbia Pictures Industries, Inc. v. Fung 710 F.3d 1020 No. 10-55946, was a United States Court of Appeals for the Ninth Circuit case in which seven film studios including Columbia Pictures Industries, Inc., Disney and Twentieth Century Fox sued Gary Fung, the owner of isoHunt Web Technologies, Inc., for contributory infringement of their copyrighted works. The panel affirmed in part and vacated in part the decision of United States District Court for the Central District of California that the services and websites offered by isoHunt Web Technologies allowed third parties to download infringing copies of Columbia's works. Ultimately, Fung had "red flag knowledge" of the infringing activity on his systems, and therefore IsoHunt was held ineligible for the Digital Millennium Copyright Act § 512(c) safe harbor.
Background and case history Columbia Pictures Industries, Inc., a part of Sony Pictures Entertainment, is one of the leading production companies and distribution studios in the world. Gary Fung, is the owner of torrent websites, including isoHunt, a BitTorrent search engine, Torrentbox, Podtropolis and ed2k-it. This case, was originally filed in the Southern District of New York, and transferred, on Fung's motion, to the Central District of California.
The district court ruled that Fung had committed copyright infringement by allowing inducement of Columbia's copyrighted material over the Bit Torrent peer-to-peer network. The court also held that Fung was not entitled to protection from damages liability under any of the safe harbor provisions of the Digital Millennium Copyright Act, 17 U.S.C. § 512(a). Furthermore, the court entered a permanent injunction that prohibited Fung from engaging in any activity that would infringe Columbia's copyrighted works.
Fung appealed, contesting the district court's ruling of copyright infringement as well as his ineligibility for safe harbor protection under the DMCA. Citing violations to his right of free speech, Fung argued that the injunction was 'punitive and unduly vague'.
Discussion The circuit court reviewed two aspects of the district court's decisions about the liability determination and the scope of the injunction.
Liability
The 'Inducement' theory on which the district court's holding was based upon referred to the Supreme Court's case of Grokster III, which delved into the application of copyright law to file sharing over P2P networks. Grokster III stated that the inducement rule had four elements:
(1) The distribution of a device or product: Fung argued that because he had not developed the Bit Torrent programs or protocols, there was no new 'device' on which the plaintiff could predicate its theory of liability under the inducement rule. The court rejected Fung's argument, writing: "Unlike patents, copyrights protect expression, not products or devices. Inducement liability is not limited, either logically or as articulated in Grokster III, to those who distribute a 'device.' As a result, one can infringe a copyright through culpable actions resulting in the impermissible reproduction of copyrighted expression, whether those actions involve making available a device or product or providing some service used in accomplishing the [alleged infringement.]" This element of inducement liability, the court held, requires only that defendant engaged in a process leading to the unauthorized reproduction of a plaintiff's copyrighted expression, and there was no question that Fung had done at least that much.
(2) Acts of infringement: Columbia successfully proved copyright infringement on the basis of inducement theory by providing evidence of actual infringement by users of Fung's services. Columbia showed that the process of uploading violated their exclusive right to distribution, and that downloading the copyrighted material violated their right to reproduction.
(3) An object of promoting its use to infringe copyright: This requirement for induced liability was that device or service be distributed with the "object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement." The clear expressions and steps provided explanations to prove an improper object. isoHunt featured a list of "Box Office Movies," which corresponded to the highest-grossing movies playing in the US theaters. Fung posted several messages, encouraging isoHunt users to upload torrent files of copyrighted materials that could be then available for download. A distributor's communication to the users through messages was important to prove inducement liability.
(4) Causation: Fung argued that the plaintiffs could not demonstrate all of the allegedly infringing downloads by third parties could be traced to services provided by isoHunt. Columbia maintained that a less stringent causal link should suffice, at least at the preliminary-injunction stage of the case. The court accepted Columbia's argument, finding the disputed causal links to be relevant to damages (to be determined later in the proceedings) rather than liability. The court added: "We are mindful, however, of the potential severity of a loose causation theory for inducement liability. Under this theory of liability, the only causation requirement is that the product or service at issue was used to infringe the plaintiff’s copyrights. The possible reach of liability is enormous, particularly in the digital age." The court went on to identify many considerations that might undermine a copyright plaintiff's causation claims, though such considerations did not appear relevant to Fung's defense.
DMCA Safe Harbor Analysis
Fung sought protection under three of the DMCA's safe harbor provisions, 17 U.S.C(a), (c), (d). The district court had rejected protection under DMCA 512(a) since the provision only applied to "transitory" networks, which was not applicable because isoHunt never actually touched any of the copyrighted content. However, the circuit court rejected this ruling stating that: The district court should not have rejected this safe harbor on the ground that it did. Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007), held that the § 512(a) safe harbor does not require that the service provider transmit or route infringing material, explaining that "[t]here is no requirement in the statute that the communications must themselves be infringing, and we see no reason to import such as a requirement."
However, the court still rejected safe harbors for isoHunt because the trackers used by Fung generated information used for further infringing. Therefore, the websites were protected as service providers, but not as trackers. The district court had rejected the § 512(c) safe harbor for Fung for the same reason it had rejected the protection for the § 512(a) safe harbor. However, the circuit court maintained that the § 512(c) safe harbor covered not only the storage of the infringing content, but also the infringing activities that use the content on the system or network. Fung was denied eligibility for the § 512(c) safe harbor since the provision was only available if the service provider did not have knowledge that the content used on the system was infringing or was not aware of the facts or circumstances from which the infringing activity was apparent. The court maintained that Fung had "red flag knowledge" of the infringing activity on his systems and was thus ineligible for the § 512(c) safe harbor. The court also argued that the advertising on the site constituted a financial benefit from the infringing activity. Fung promoted advertising by attracting the site visitors who wished to engage in the infringing activity. Thus, a solid connection between the infringing activity and the revenue generation was established, and Fung was declared ineligible for protection under the § 512 (c)(1)(b) safe harbor.
Scope of Injunction
The court ruled that the injunction was vague because the injunction imposed the expectation that Fung remove all the "infringement-related terms" from the metadata and the webpages. The court also held that the certain provisions in the injunctions prevented Fung from working in any technology company whose services could be used to infringe copyrighted content even if those companies aren't liable for copyright infringement. By preventing Fung from seeking legitimate employment, the court held that the provisions in the injunction were too burdensome.
Court's decision
The circuit court affirmed the district court's grant of summary judgment to Columbia, ruling that Fung was liable for inducing copyright infringement. The court also affirmed summary judgment to Columbia in dismissing Fung's claims of being eligible for protection under the DMCA safe harbor provisions. However, the grounds of judgment differed from those of the district court.
The circuit, however, accepted Fung's appeal of the injunction being too vague and burdensome and modified the permanent injunction.
In the end, costs of $110 million in damages were imposed on to Fung.
Significance and Impact Columbia v. Fung was one of the few cases since Grokster where a court applied an "inducement" theory of copyright, rather than one of contributory or vicarious infringement. Furthermore, at the time, this case was also the only known case in which a service provider was disqualified from DMCA safe harbor provisions due to having enough "red flag knowledge" of infringing activity. Evidence of this red flag knowledge included Fung's own active encouragement of infringing activity (listing top 20 grossing movies, inviting users to upload a torrent file of these movies, etc.) and his own personal use of isoHunt to download infringing material.
Fung demonstrated that the Supreme Court's Grokster ruling was one that would come to be taken seriously as precedent. As such, any file-sharing website that has no filtering or moderating mechanism for copyrighted material while financially benefiting in any way (even with an ad-revenue model) will likely be liable for inducing copyright infringement upon litigation.
A further implication to be taken from Fung is that courts will find any file-sharing technology to be legally indistinguishable regardless of their technical specifications, e.g. whether servers are hosted centrally or peer-to-peer. Courts may furthermore assume that all P2P file-sharing will engage in copyright infringement. In the context of Fung, Grokster, and other related cases, this shifts the analysis of a service provider's liability of copyright infringement to the "front-end" of file-sharing technology, i.e. how the user interface assists the user in infringing activities. In Fung, this was a central factor in determining Fung's liability for inducing copyright infringement (e.g. providing a list top 20 grossing movies).
Criticisms The circuit court's decision has been criticized for going above and beyond the original ruling of Grokster by the Supreme Court when it ruled that "inducement liability is not limited...to those who distribute a device". By doing so, the court effectively disregards the first requirement (distribution of a device or product for infringement) in the four factors of inducement liability and expands copyright infringement to not only distributing a device or product but also a service that can be used to engage in infringing activity.