Three adult Internet companies were not directly involved in any content infringement and thus immune from charges of secondary infringement, unfair competition, and false advertising leveled in litigation by Perfect 10, a federal judge has ruled.
Perfect 10 general counsel Daniel Cooper said the company would appeal the ruling.
"[U.S. District] Judge [Lourdes G.] Baird essentially ruled that, because CCBill, iBill, and Internet Key were all Internet service providers that were not themselves directly involved in any infringing content, and because they never received proper notifications of infringements, they were immune from over half of Perfect 10's lawsuit," said attorney Jay Spillane, whose firm represents CCBill and CWIE in the litigation.
Spillane said Perfect 10 wanted a ruling to the effect that defendants had secondary liability by virtue of their knowingly sharing in the proceeds of the sale of infringing material. CCBill wanted a determination on whether the Digital Millennium Copyright Act and the Communications Decency Act applied to Perfect 10's claims, with the DMCA used to defend against Perfect 10 charges that CCBill violated the federal RICO statute and the CDA against unfair competition and false advertising charges.
Baird did not rule, however, regarding Internet Key's involvement prior to DMCA registration. And, she did not rule on the right of publicity as she had the issues of infringement, unfair competition, and false advertising.
The judge divided the case into two portions, one concentrating on the questions of the extent to which the DMCA and CDA applied, Spillane said. "Not all the cases fell under the DMCA and the CDA," he said.
He said two points in Baird's ruling held particular interest for the Internet in general and the adult Net in particular: companies offering interactive computer services and being sued for others' content are immune under the CDA from being sued for defamation, unfair competition, and false advertising; and, billing companies are considered Internet service providers under the DMCA for connecting to sites that might have had material suspected of having been infringed.
"Perfect 10 argued that this provision had a very narrow meaning, limited to companies providing connectivity to the Internet," Spillane said. "Judge Baird correctly disagreed, ruling that the billing companies 'provided connections' to the Websites in a broader sense, providing payment processing services and communicating user name and password information that allowed consumers to reach the sites in question. This ruling could have very significant application for any company that can be said to 'provide connections' to a third party Website that may contain infringing material."
Cooper said Perfect 10 "respectfully disagree[s]" with the Court’s interpretation of the DMCA, specifically Section 512a of the Act. "The problem with this ruling," Cooper told AVNOnline.com, "is that, in the first instance, it ignores the precedent set by the Napster case on this very issue. Secondly, if followed to its logical conclusion, the court's ruling would provide a safe harbor to any Webmaster or billing company who merely linked to an infringing Website, even if the Webmaster or the billing company shared in the revenues from the sale of the stolen content. And we don't think that that's what the [DMCA] intended."
"We think Sect. 512a was designed to protect cable companies, backbone providers, and telephone companies," said Perfect 10 owner Norman Zada to AVNOnline.com, "and not simply people who link to infringing Websites through the Internet." Cooper said it isn't simply a matter of just linking to infringing sites but linking to them in exchange for percentages of revenues generated.
Cooper also said Perfect 10 respectfully disagrees with the Court’s ruling on the application of the CDA, particularly Section 230 of that law. "That subsection," he said, "expressly states that it is not meant to affect any laws pertaining to intellectual property. And this case is entirely about intellectual property. Given that, we don't believe that the CDA should have had any impact on this."
Zada presented an example of a billing company or Website promoting or billing for a Website with a phony registration outside the United States that steals full length feature films, songs, Microsoft software, and Perfect 10’s library. He said that the current ruling would keep Microsoft, the movie studios, the recording studios, and Perfect 10 from receiving damages from anyone who worked with the thieving Website for a percentage of the profits.
"The problem with the Internet is that it is very easy to steal using a phony registration with no risk of getting caught," he said. "So copyright holders have to be able to go after people who can be found who are profiting from the theft of others who can’t be found. The court’s ruling seems to ignore that reality.”
"The only thing Perfect 10 could do under this ruling would be to DMCA the Website that was referring traffic to, or billing for, the thieving Website," Zada continued. "And we could send out DMCA notices until we were blue in the face, and at some point, if the thieving Website simply changed its registration, the referring or billing Website would have no liability for what could be the ongoing theft of massive amounts of intellectual property.”
Spillane said he believes Perfect 10 got too aggressive for their own good before Baird, after Baird ruled in their favor over an earlier suit they filed against Cybernet Ventures on similar grounds. "Ever since the Cybernet Ventures case they have done poorly in front of Baird," Spillane said. "I believe they've come to realize they've soured her on their litigation tactics. They were hugely aggressive, which is part of what helped sour Judge Baird's view of their tactics."
Zada said people should remember that Perfect 10 is the entity whose material has been misappropriated. "We have tried very hard to play by the rules," he said. "Our opinion is that a vast preponderance of other adult Webmasters are not playing by the rules, and our only recourse has been to seek help through the legal system in protecting our interests. We only litigate because we have to litigate, in order to protect our intellectual property and to ensure a level playing field."
Earlier this year, Perfect 10 sued Visa and MasterCard, plus FirstData Corp., Cardservice International, Humboldt Bank, and Does 1-100 in federal court, accusing those companies of offering "crucial transactional support services" for selling millions of stolen images and film clips "worth billions of dollars that belong to Perfect 10 and third parties," according to a filing in the case.
