Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Partner

Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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Lawrence W. Gallick

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Lawrence W. Gallick on Toth v. Everly Well, Inc.

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As part of a new tracking system, the Department of Homeland Security will be<a href="http://www.huffingtonpost.com/entry/dhs-immigrant-social-media_us_59ccb13ee4b0210dfdfc2591" target="_blank" rel="noopener noreferrer"> keeping records of immigrants’ social media handles and search results</a>.Russia to Facebook: <a href="http://www.newsweek.com/russia-threatening-close-facebook-it-did-linkedin-671263" target="_blank" rel="noopener noreferrer">Turn over user-information</a> or risk being blocked.<a href="https://www.wsj.com/articles/google-offers-hand-to-news-publishers-1506916861" target="_blank" rel="noopener noreferrer">Google is ending a policy</a> that required news sites to allow users at least one free article-click.A new social media platform called <a href="https://steemit.com/" target="_blank" rel="noopener noreferrer">Steemit</a> will <a href="https://www.wired.com/story/the-social-network-doling-out-millions-in-ephemeral-money" target="_blank" rel="noopener noreferrer">pay users in cryptocurrency</a> for posting, commenting, or liking content—and its market capitalization is around $294 million.Not everyone is a fan of <a href="https://venturebeat.com/2017/10/03/bye-140-character-limit-twitters-new-280-character-tweets-work-fine-for-me/" target="_blank" rel="noopener noreferrer">Twitter’s new 280-character limit</a>.A type of biometric payment system that <a href="http://www.bbc.com/news/technology-41346717" target="_blank" rel="noopener noreferrer">identifies a checking or credit account owner based on the unique vein-pattern in his or her fingertip</a> would allow consumers to shop without cash, cards or devices.Initial coin offerings (ICOs) are allowing startups that develop applications for blockchain technology <a href="https://www.wsj.com/articles/how-blockchain-and-icos-are-changing-the-funding-game-for-startups-1506304861" target="_blank" rel="noopener noreferrer">to raise money without giving up the equity or decision-making power</a> they would have to surrender to venture capitalists.In this Wired op-ed, a former prisoner argues that <a href="https://www.wired.com/story/inmates-need-social-media-take-it-from-a-former-prisoner/" target="_blank" rel="noopener noreferrer">allowing inmates controlled social media use</a> might reduce recidivism and help the cell phone contraband problem.Young kids are the new social media celebrities—and <a href="https://www.nytimes.com/2017/09/27/style/viral-toddler-videos.html" target="_blank" rel="noopener noreferrer">the law isn’t clear</a> on whether they’re owed any of the money that their parents collect as a result of the viral videos.When a social media celebrity famous for posting photos of herself posing in fitness gear changed the direction of her Instagram account to one that promotes body acceptance, <a href="http://nypost.com/2017/09/19/woman-lost-70k-followers-after-she-stopped-posting-fitness-pics/" target="_blank" rel="noopener noreferrer">she initially lost 70,000 followers</a>, but she ultimately wound up with more fans than ever.Kudos to Netflix’s in-house counsel for crafting <a href="https://www.theatlantic.com/business/archive/2017/09/netflix-cease-and-desist-stranger-things/540579/" target="_blank" rel="noopener noreferrer">a cease-and-desist letter</a> for brand marketing in the modern age.

Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.

Aaron Rubin

Social Links: Russia’s threat to block Facebook; Google’s publisher-friendly move; a cease-and-desist letter worth emulating

As part of a new tracking system, the Department of Homeland Security will be keeping records of immigrants’ social media handles and search results. Russia to 

Social Links: Russia’s threat to block Facebook; Google’s publisher-friendly move; a cease-and-desist letter worth emulating

With over one billion websites on the Internet, and 211 million items of online content created every minute, it should come as no surprise that content curation is one of the hottest trends in the Internet industry. We are overwhelmed with online content, and we increasingly rely on others to separate the good from the bad so that we can make more efficient use of our time spent surfing the web.Consistent with this trend, many websites that host user-generated content are now focused on filtering out content that is awful, duplicative, off-topic, or otherwise of little interest to site visitors. And these sites often find that humans—typically passionate volunteers from the sites’ user communities—are <a href="https://www.forbes.com/sites/stevenrosenbaum/2015/07/26/the-curation-explosion/#2473ecf8409c" target="_blank" rel="noopener noreferrer">better than algorithms</a> at sorting the wheat from the chaff.Of course, any website that deals with user-generated content needs to consider potential copyright liability arising from such content. We’ve <a href="http://www.sociallyawareblog.com/2016/01/14/new-court-decision-highlights-potential-headache-for-companies-hosting-user-generated-content/" target="_blank" rel="noopener noreferrer">discussed</a> in past Socially Aware blog posts the critical importance of <a href="https://www.law.cornell.edu/uscode/text/17/512" target="_blank" rel="noopener noreferrer">Section 512(c) of the Digital Millennium Copyright Act</a> (the DMCA) to the success of YouTube, Facebook and other online platforms that host user-generated content. By providing online service providers with immunity from monetary damages in connection with the hosting of content at the direction of users, Section 512(c) has fueled the growth of the U.S. Internet industry.Nevertheless, questions have persisted as to whether a website operator’s use of employees or volunteers to review and filter user-generated content could deprive the operator of protection under the Section 512(c) safe harbor. A new Ninth Circuit decision, <a href="http://cdn.ca9.uscourts.gov/datastore/opinions/2017/04/07/14-56596.pdf" target="_blank" rel="noopener noreferrer">Mavrix Photographs, LLC v. LiveJournal, Inc.</a>, tackles this subject head on, concluding—to the alarm of many online service providers—that a company’s use of volunteer moderators to curate content hosted on its website resulted in triable issues of fact as to whether the company qualifies for DMCA safe harbor protection to the extent that such content infringes third-party copyrights.<h4>LiveJournal and the Oh No They Didn’t! Community Journal</h4>The defendant in the case, <a href="https://en.wikipedia.org/wiki/LiveJournal" target="_blank" rel="noopener noreferrer">LiveJournal</a>, operates a <a href="http://www.livejournal.com/" target="_blank" rel="noopener noreferrer">social media platform</a> on which a user can, among other things, create a “community journal” focused on a particular topic or theme. As the name suggests, a community journal allows multiple users to submit content to the journal. The creator or administrator of a community journal decides whether to enable moderation, to have no moderation, or to employ a hybrid moderation model (e.g., whitelisting certain domains while requiring moderation for others).The dispute involved a moderated community journal focused on celebrity gossip and pop culture, called <a href="http://ohnotheydidnt.livejournal.com/" target="_blank" rel="noopener noreferrer">“Oh No They Didn’t!”</a> (ONTD). Initially run entirely by volunteers, ONTD created rules to govern user submissions and posted comments; these rules included a requirement that users incorporate any referenced articles and photos in their submissions (rather than linking to such items), and a prohibition on the submission of old gossip and outdated photos.  ONTD also adopted a “blacklist” of third-party sources from which users were prohibited from copying materials for inclusion in their submissions.By 2010, ONTD was generating 52 million page views a month, making it the most popular journal on the LiveJournal platform. To maintain this success, ONTD relied on volunteer moderators (who review user-submitted items to ensure compliance with ONTD’s rules) and maintainers (who review and delete posts, and have the authority to remove users and even moderators from the ONTD community).That same year, for the first time, LiveJournal became directly involved in the operation of ONTD. In particular, it hired one of ONTD’s volunteer moderators—Brendan Delzer—to serve as the journal’s full-time “primary leader.” In this new role, Delzer instructed ONTD moderators regarding their own review and selection of content, and monitored and evaluated moderators, removing underperformers; Delzer also continued to review and select user-submitted content for posting to ONTD. By making Delzer an employee, LiveJournal sought to “take over” ONTD, in order to further grow the journal and run ads against the journal’s content.<h4>The Parties’ Dispute</h4>The plaintiff, Mavrix, is a company that specializes in candid photographs of celebrities; it generates revenue by selling its photos to magazines. Between 2010 and 2014, 20 celebrity photographs owned by the plaintiff were allegedly posted to ONTD in seven separate posts, all without Mavrix’s authorization. Some of these photos incorporated either a generic watermark or a Mavrix-specific watermark.In 2014, in lieu of sending a DMCA takedown notice, Mavrix sued LiveJournal for copyright infringement in connection with the 20 photographs. Upon learning of the suit, LiveJournal removed the photographs from its site and terminated the LiveJournal account holders who had posted the photographs. LiveJournal ultimately moved for summary judgment on the basis that it was shielded from copyright liability under the Section 512(c) safe harbor.Mavrix opposed LiveJournal’s motion and filed its own motion asserting that LiveJournal was disqualified from the Section 512(c) safe harbor because, as a result of the activities of ONTD’s volunteer moderators acting as LiveJournal’s agents:<ul><li>The photographs had not been hosted on the LiveJournal site “at the direction of a user,” as required under Section 512(c);</li><li>LiveJournal had actual or at least red flag knowledge of the photographs through the ONTD moderators; and</li><li>LiveJournal received a financial benefit directly attributable to the allegedly infringing activity, where it had the right to and ability to control such activity.</li></ul>The district court granted LiveJournal’s summary judgment motion, finding that ONTD moderators constituted independent third-party users, not agents of LiveJournal. Mavrix appealed, and the Ninth Circuit reversed.<h4>Storage at Whose Direction?</h4>As noted above, the Section 512(c) safe harbor is available only where content is stored by an online service provider “at the direction of the user.” In reaching its decision, the Ninth Circuit focused on whether LiveJournal’s use of moderators to pre-screen user-submitted content meant that the Mavrix photos were posted at LiveJournal’s direction, rather than at the direction of the users who submitted such photos to ONTD.After reviewing the sparse case law on the subject, the Ninth Circuit held that the common law of agency applies in determining whether the acts of the ONTD moderators are attributable to LiveJournal, and that genuine issues of material fact existed as to whether the moderators are LiveJournal’s agents.In reaching this conclusion, the Ninth Circuit examined the common law agency concepts of actual and apparent authority and the level of control of a principal over the agent, and found:<ul><li>Regarding actual authority (which arises where the principal assents to the agent taking action on the principal’s behalf), Mavrix had presented evidence that LiveJournal “gave its moderators explicit and varying levels of authority to screen posts” and provided “express directions about their screening functions.” Unlike other online platforms where users may independently post content, “LiveJournal relies on moderators as an integral part of its screening and posting business model.”</li><li>Regarding apparent authority (which arises when a third party reasonably believes that a person has authority to act with legal consequences on behalf of another), Mavrix had presented evidence that ONTD users may have reasonably believed that the journal’s moderators had authority to act for LiveJournal.</li><li>Regarding the level of control, Mavrix presented evidence showing that “LiveJournal maintains significant control over ONTD and its moderators”; that Delzer—a LiveJournal employee—had engaged in “substantive supervision” of ONTD moderators, and had exercised the power to select and remove moderators; and that LiveJournal had “ratified” the ONTD-developed rules that moderators relied on in screening user submissions.</li></ul>Based on its analysis of actual authority, apparent authority and control principles, the Ninth Circuit held, “From the evidence currently in the record, reasonable jurors could conclude that an agency relationship existed” between LiveJournal and ONTD’s volunteer moderators.The Ninth Circuit next turned to a related issue: If the fact finder were to determine that the ONTD moderators are agents of LiveJournal, the fact finder would then need to determine whether Mavrix’s photos “were indeed posted at the direction of the users in light of the moderators’ role in screening and posting” the photos. The court noted that posts are at the direction of the user if the online service provider (1) “played no role in posting them on its site” or (2) “carried out activities that were ‘narrowly directed’ towards enhancing the accessibility of the posts.”Regarding this second item, the Ninth Circuit observed that activities such as the automatic reformatting of posts or the manual screening of posts “for infringement or other harmful materials like pornography” can be “accessibility-enhancing,” and thus do not necessarily deprive an online service provider of protection under Section 512(c). But, if ONTD’s moderators are determined to be LiveJournal’s agents, the fact finder would then need to decide “whether the moderators’ acts were merely accessibility-enhancing activities or whether instead their extensive, manual, and substantive activities went beyond the automatic and limited manual activities we have approved as accessibility-enhancing.” In this regard, the Ninth Circuit noted that the ONTD moderators manually review the substance of user-submitted items to ensure that they contain new and exciting gossip and that only one-third of all submitted items are ultimately approved for posting.<h4>Lack of Knowledge</h4>Having provided guidance to the lower court on the threshold requirement of whether the Mavrix photos were stored at the direction of users, the Ninth Circuit turned to another Section 512(c) safe harbor requirement disputed by the parties: Whether LiveJournal lacked actual and red flag knowledge of such users’ infringing activities. If, on remand, the fact finder were to determine that the photos were stored by LiveJournal at the direction of users (rather than at LiveJournal’s own direction via its agents), LiveJournal would then need to establish that it had neither actual nor red flag knowledge that the photos were infringing.The actual knowledge inquiry looks at whether an online service provider has subjective knowledge of the specific infringing activity at issue. The district court had held that actual knowledge can only be conferred through a DMCA-compliant takedown notice received by a service provider from the copyright owner; because Mavrix had never sent such a notice, LiveJournal necessarily lacked actual knowledge of its users’ infringing activities in connection with the Mavrix photos.Sending shockwaves through the online service provider community, the Ninth Circuit rejected the district court’s approach, holding that a fact finder may determine that LiveJournal—either directly or through its agents, the volunteer moderators—in fact possessed subjective (and thus actual) knowledge of the infringing posts, even in the absence of a takedown notice from Mavrix.Further, even if LiveJournal can establish on remand that it lacked actual knowledge, it must also show that it did not have red flag knowledge of the infringing posts. Red flag knowledge exists where an online service provider is aware of facts that would have made the specific infringement at issue objectively obvious to a reasonable person. Such infringement must be “immediately apparent to a non-expert.”The Ninth Circuit noted that some of the posted Mavrix photos contained either a generic watermark or a Mavrix-specific watermark, and that, on remand, the fact finder will need to determine whether it would have been objectively obvious to a reasonable person that photos bearing such watermarks were infringing.<h4>Lack of Financial Benefit and the Right and Ability to Control</h4>The Ninth Circuit then turned to the final Section 512(c) safe harbor requirement at issue: Even if LiveJournal were to establish on remand that the Mavrix photos were stored at the direction of users, and even if it were able to establish that it lacked actual or red flag knowledge that the photos were infringing, it then must show that it did not financially benefit from infringing activities that it had the right and ability to control.The Ninth Circuit stated that the right and ability to control component of this final requirement involves “something more” than the mere ability of the service provider to remove or block access to materials posted on its website. This “something more” exists where the service provider exerts “high levels of control” over the activities of users. The court observed that, on remand, the fact finder should take into account the following in assessing whether LiveJournal had a right and ability to control the infringing posts:<ul><li>LiveJournal ratified ONTD rules that instruct users on the substance of their posts;</li><li>ONTD moderators screened the substantive content of user submissions;</li><li>Nearly two-thirds of posts submitted by ONTD users were rejected by ONTD moderators, including on substantive grounds;</li><li>ONTD prohibited users from submitting content taken from third-party content sources identified on a “blacklist” maintained by ONTD; and</li><li>LiveJournal implemented a mechanism to automatically block any submitted items originating from one of the sources on the ONTD blacklist.</li></ul>The court concluded that “the fact finder must assess whether LiveJournal’s extensive review process, infringement list, and blocker tool constituted high levels of control to show ‘something more’.”Finally, the Ninth Circuit noted that LiveJournal would need to establish that it did not derive a financial benefit from infringement that it had the right and ability to control. A safe harbor-disqualifying financial benefit “need not be substantial or a large portion of the service provider’s revenue,” and could be based on a broad availability of infringing materials attracting advertisers to the service provider’s site. On remand, the fact finder would need to consider the following:<ul><li>LiveJournal’s receipt of revenue from advertising based on the number of ONTD page views; and</li><li>Evidence presented by Mavrix (but contested by LiveJournal) showing that approximately 84% of posts on ONTD contain infringing material</li></ul>In order for LiveJournal to prevail on its safe harbor defense, the fact finder would need to determine whether LiveJournal met its burden of establishing that it did not financially benefit from infringement or that, if it did so benefit, it lacked the right and ability to control such infringement.<h4>Concluding Thoughts</h4>The Ninth Circuit’s Mavrix opinion may be the most significant DMCA safe harbor decision since the Second Circuit’s landmark <a href="http://scholar.google.com/scholar_case?case=13644579048975596329&hl=en&as_sdt=6&as_vis=1&oi=scholarr" target="_blank" rel="noopener noreferrer">Viacom Int’l, Inc. v. YouTube, Inc.</a> ruling in 2012. On numerous fronts—including what constitutes “at the direction of a user,” what constitutes “actual knowledge,” what constitutes “red flag knowledge,” what constitutes a “right and ability to control” and what constitutes a “financial benefit”— the Mavrix decision appears to go against the tide of generally pro-service provider decisions on these issues over the past two decades.Regardless of what the district court ultimately decides on remand, Mavrix is a wake-up call to website operators and other online service providers who rely on volunteers to screen, review or curate user-generated content. Such operators and service providers will want to carefully study the Ninth Circuit’s decision to determine whether they should take steps to modify their current practices regarding user-generated content. And, although Mavrix focuses on volunteers, not employees, companies should keep in mind that employees engaged in screening, reviewing or curating user-generated content are even more likely than volunteers to qualify as company agents, and thus may raise some of the same DMCA safe harbor concerns discussed in the Mavrix decision.

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Could the Use of Online Volunteers and Moderators Increase Your Company’s Copyright Liability Exposure?

Could the Use of Online Volunteers and Moderators Increase Your Company’s Copyright Liability Exposure?

With over one billion websites on the Internet, and 211 million items of online content created every minute, it should come as no surprise that content curatio

One of the most significant legal concerns for Internet service providers is the risk of exposure to liability for the copyright infringements of their users. The concern is not unreasonable. Because Internet service providers can be held secondarily liable for the infringements of their users, and because this liability can come with statutory damages attached, the service provider’s potential economic exposure can be significant, especially for Internet service providers engaged in the transmission or hosting of user-generated content.Moreover, the principle of joint and several liability may further increase this potential economic exposure for Internet service providers.Under <a href="https://www.law.cornell.edu/uscode/text/17/504" target="_blank" rel="noopener">Section 504(c) of the Copyright Act</a>, which permits a range of statutory damages for each infringed work, the principle of joint and several liability can make a defendant liable for multiple statutory damage awards for infringing a single work. The Ninth Circuit’s decision in <a href="https://casetext.com/case/columbia-pictures-television-v-krypton-bc" target="_blank" rel="noopener">Columbia Pictures Television v. Krypton Broadcasting of Birmingham, Inc.</a> two decades ago illustrates the operation of this principle.The defendants in Columbia Pictures were three television stations that had directly infringed upon plaintiff’s copyrights independently of each other. Consequently, the company that owned the three stations was secondarily liable for their infringement. Relying in part on legislative history, the court held that the plaintiff was entitled to separately calculated statutory awards against each of the three stations as they were separate infringers, and that, with respect to these awards, each of the three stations was jointly and severally liable with their common owner.As applied to infringement on the Internet, statutory damages can have a truly punitive impact when the downstream direct infringements are numerous and the upstream infringer, often an Internet service provider, is secondarily liable. Even if a court exercises its discretion to award no more than the $750 minimum for each of the separate infringements subject to joint and several liability, a statutory award for tens—or hundreds—of thousands of Internet-based direct infringements could bankrupt all but the most deep-pocketed service provider. The mere prospect of such an award could discourage companies from entering this market.To avoid punitive statutory damage awards against jointly and severally liable copyright defendants, some courts have invoked proportionality as a principle of statutory interpretation. In <a href="https://casetext.com/case/arista-records-llc-v-lime-group-llc-7" target="_blank" rel="noopener">Arista Records LLC v. Lime Group LLC</a>, for example, a file-sharing service provider faced a potential near-billion-dollar damage award for the conduct of a multitude of downstream infringers. The New York district court found that “the most plausible interpretation of Section 504(c) is one that authorizes only a single statutory damage award per work against a secondarily liable defendant, particularly in the context of the mass infringement found in the context of online peer-to-peer file sharing.” Accordingly, the court limited the plaintiffs’ statutory damages to a single statutory damage award per work.More recently, in <a href="http://www.leagle.com/decision/In%20FCO%2020160818115/FRIEDMAN%20v.%20LIVE%20NATION%20MERCHANDISE,%20INC." target="_blank" rel="noopener">Friedman v. Live Nation Merchandise, Inc.</a>, the Ninth Circuit adopted a different approach to the joint-and-several-liability conundrum. The court held that, for a plaintiff to recover multiple damage awards against a secondarily liable defendant based on downstream infringement, it must join the direct infringers as defendants. The court found nothing in the text of Section 504(c)(1) that “admits of a ‘mass-marketing’ exception” of the sort endorsed in Arista, and it observed that its Columbia Pictures holding was premised on the fact that each downstream infringer in that case also was a named defendant. Because the plaintiff in Friedman had not joined any of the 104 alleged downstream infringers (retailers who distributed the infringing merchandise), their unadjudicated liability could not enlarge his statutory damage award against Live Nation.Read and applied literally, the statutory formulation could support multiplication of the statutory award against a single contributory infringer by the hundreds of downstream direct infringers with whom it is jointly and severally liable. The Friedman decision attempts to avoid this possibility by importing the due process requirement that, for the copyright owner to obtain remedies against the contributory infringer, the direct infringers must also be parties to the action.The Arista court presumably would have followed the Freidman approach in expanding a statutory award against the secondary infringer if the direct infringers had been joined. As the Arista court noted, if the plaintiffs “were suing multiple individually liable infringers in the same lawsuit, they would be entitled to one award with respect to each individual’s infringement of any given work.”Internet service providers and other potential upstream infringers should understand that the current statutory-damages regime is particularly unsuitable for Internet cases, and that, while Friedman and Arista offer expedient solutions for limiting punitive awards, they are neither definitive nor entirely responsive to the problem. As the Friedman court noted, there is nothing in the statute to support Arista’s “mass-marketing” exception to multiple statutory damage awards, much less to indicate how a court should go about drawing a “mass-market” line. Nor does the Friedman rule that downstream infringers must be joined as defendants help much in Internet cases, where a plaintiff can identify and join large numbers of defendants with relatively little effort, and where even a minimum award of $750 for each infringement might repay the expense. The real problem with Section 504(c)(1) in this respect is that Congress, when it considered the provision, failed to contemplate secondary liability for infringement on this massive scale.Until the contemporary reality of Internet usage is addressed in the statute, Internet service providers face greater exposure than do other alleged infringers.*             *             *For more Socially Aware articles on copyright infringement in the digital age, please read: <a title="Permalink to Second Circuit Clarifies “Repeat Infringer” Policy Requirement for DMCA Copyright Safe Harbors" href="http://www.sociallyawareblog.com/2017/02/06/repeat-infringer-policy-requirement-for-key-copyright-safe-harbor-for-online-service-providers/" target="_blank" rel="noopener">Second Circuit Clarifies “Repeat Infringer” Policy Requirement for DMCA Copyright Safe Harbors</a>; <a title="Permalink to New Copyright Office Rule Creates Potential “Gotcha” for Blogs and Websites Hosting User-Generated Content" href="http://www.sociallyawareblog.com/2016/12/06/new-copyright-office-rule-creates-potential-gotcha-for-blogs-and-websites-hosting-user-generated-content/" target="_blank" rel="noopener">New Copyright Office Rule Creates Potential “Gotcha” for Blogs and Websites Hosting User-Generated Content</a>; and <a title="Permalink to Do Not Go Gentle Into That Jurisdiction: No “Situs of Injury” Merely Because Copyrighted Material Is Accessible" href="http://www.sociallyawareblog.com/2016/05/03/do-not-go-gentle-into-that-jurisdiction-no-situs-of-injury-merely-because-copyrighted-material-is-accessible/" target="_blank" rel="noopener">Do Not Go Gentle Into That Jurisdiction: No “Situs of Injury” Merely Because Copyrighted Material Is Accessible</a>. For an interview with Paul Goldstein, see <a title="Permalink to Twenty Years Down the Road: A Q&A With Paul Goldstein, Author of Copyright’s Highway" href="http://www.sociallyawareblog.com/2015/03/03/twenty-years-down-the-road-a-qa-with-paul-goldstein-author-of-copyrights-highway/" target="_blank" rel="noopener">Twenty Years Down the Road: A Q&A With Paul Goldstein, Author of Copyright’s Highway</a>.

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Paul Goldstein, the Lillick Professor of Law at Stanford Law School, has been of counsel to Morrison & Foerster since 1988 and works with lawyers in the firm's offices around the world, advising on co

Paul Goldstein

Paul Goldstein, the Lillick Professor of Law at Stanford Law School, has been of counsel to Morrison & Foerster since 1988 and works with lawyers in the firm's offices around the world, advising on copyright and related intellectual property matters that arise in the context of litigation, licensing, and counselling.

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Joyce Liou is a partner in the firm’s Intellectual Property Group. Ms. Liou focuses her practice on intellectual property litigation, domestic and international trademark prosecution, copyright and tr

Joyce Liou

Limiting Statutory Damages in Internet Copyright Cases