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17.30 Copyright—Affirmative Defense—Limitation on Liability for Information Residing on Systems of Networks at Direction of Users (17 U.S.C. § 512(c))

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17.30 COPYRIGHT—AFFIRMATIVE DEFENSE—LIMITATION 
ON LIABILITY FOR INFORMATION RESIDING ON SYSTEMS OR NETWORKS
AT DIRECTION OF USERS (17 U.S.C. § 512(c)) 

The defendant contends that the defendant is a service provider and therefore is not liable for copyright infringement because the infringement was caused by information residing on the defendant's systems or networks at the direction of users. The defendant has the burden of proving each element of this defense by a preponderance of the evidence. 

The defendant is eligible to use this defense if the defendant: 

1. is a service provider of network communication services, online services or network access; 

2. adopted, reasonably implemented and informed users of a policy to terminate users who are repeat copyright infringers;

3. accommodated and did not interfere with standard technical measures used to identify or protect copyrighted works;

4. designated an agent to receive notifications of claimed infringement, and made the agent’s name, phone number and email address available on its website and to the Copyright Office; and

5. is facing liability for copyright infringement based on information residing on the defendant’s systems or networks at the direction of users. 

This defense applies if the defendant: 

1. lacked actual knowledge that the material or activity on the system or network was infringing;

2. was either (a) not aware of facts or circumstances from which specific infringing activity was apparent, or (b) upon obtaining knowledge or awareness or upon receiving a valid notification of claimed infringement, acted expeditiously to remove or disable access to the material; and

3. while having the right and ability to control the infringing activity, did not receive a financial benefit directly attributable to the infringing activity. 

If you find the defendant has proved all of these elements, your verdict should be for the defendant. If, on the other hand, you find that the defendant has failed to prove any of these elements, the defendant is not entitled to prevail on this affirmative defense. 

Comment 

This instruction is based on 17 U.S.C. § 512 (c), (i) and (k). 

For a definition of a service provider of network communication services, see Instruction 17.27 (Copyright—Affirmative Defense—Service Provider of Network Communications Services Defined). For commentary on a reasonably implemented policy for the termination of users who are repeat infringers, see Instruction 17.28 (Copyright—Affirmative Defense—Limitation on Liability for Transitory Digital Network Communications). For an instruction on the requirements for a valid notice of claimed infringement, see Instruction 17.29 (Copyright—Affirmative Defense—Limitation on Liability for System Caching). 

Liability for Acts of Moderators or Similar Persons: Applying the common law of agency, a web site may be liable for the acts of its unpaid moderators or other third parties who select, screen or curate the site’s content. Mavrix Photographs, LLC v. LiveJournal, Inc., 873 F.3d 1045, 1054 (9th Cir. 2017) (holding that "common law agency principles apply to the analysis of whether a service provider like LiveJournal is liable for the acts of its moderators"). 

Information Residing on Systems or Networks at the Direction of Users: Information residing on systems or networks need "not actually reside on [the defendant’s] servers." Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020, 1042 (9th Cir. 2013) (finding that storage of "torrent" files that do not contain infringing content themselves, but are used to facilitate copyright infringement, would be "facially eligible for the safe harbor"). 

Actual Knowledge of Infringement: Actual knowledge of the specific infringing material is required; general knowledge that the defendant's services are used for copyright infringement is insufficient. UMG Recordings, Inc. v. Shelter Capital Partners, LLC, 718 F.3d 1006, 1022 (9th Cir. 2013). Notifications about copyright infringement from a party who is not the copyright holder or an agent of the copyright holder does not provide actual knowledge of infringement. Id. at 1025. 

Awareness of Facts or Circumstances from which Specific Infringing Activity Is Apparent (Also Known As "Red Flag" Knowledge): "Red flag knowledge arises when a service provider is aware of facts that would have made the specific infringement objectively obvious to a reasonable person." Mavrix, 873 F.3d at 1057 (internal quotes omitted). A fact or circumstance from which infringing activity is apparent must be about a specific instance of copyright infringement. Id.(finding that news reports discussing general problem of copyright infringement on website and CEO’s acknowledgment of this general problem were not enough to be "red flag"). However, evidence that the defendant actually knew about specific infringing activity could suffice to make that infringing activity apparent. Columbia Pictures Indus., Inc., 710 F.3d at 1043-46 (holding that evidence that defendant encouraged and assisted users who were infringing copyright in "current and well-known" works created "red flag" knowledge of infringement). A characteristic of the website itself must be very apparent to qualify as a fact or circumstance from which infringing activity is apparent. Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1114 (9th Cir. 2007) (holding that website names such as "illegal.net" or "stolencelebritypics.com" do not automatically function as red flags signaling infringement); see also UMG Recordings, Inc., 718 F.3d at 1022-23 ("hosting a category of copyrightable material" with knowledge that "services could be used to share infringing material" is not automatically red flag). Although notices from noncopyright holders do not convey actual knowledge of infringement, they can serve as red flags that make infringing activity apparent. Id. at 1025. 

Financial Benefit Directly Attributable to Infringing Activity/Right and Ability to Control: The requirement that the service provider not have received a financial benefit directly attributable to the infringement activity applies "in a case in which the service provider has the right and ability to control such activity." 17 U.S.C. § 512(d). To have "the right and ability to control," the service provider must exert "substantial influence on the activities of users." UMG Recordings, Inc., 718 F.3d at 1030. "Substantial influence" may include high levels of control over the activities of users; "purposeful, culpable expression and conduct"; active involvement by the service provider in the listing, bidding, sale and delivery of items offered for sale; or control of vendor sales through the previewing of products prior to their listing, the editing of product descriptions or the suggesting of prices. Id. (citing Viacom Internat’l v. YouTube, Inc., 676 F.3d 19, 38 (2d Cir.2012)). 

"In determining whether the financial benefit criterion is satisfied, courts should take a common-sense, fact-based approach, not a formalistic one." Mavrix, 873 F.3d at 1059 (9th Cir. 2017) (quoting S. Rep. No. 105-190, at 44 (1998)). The relevant inquiry regarding financial benefit is "whether the infringing activity constitutes a draw for subscribers, not just an added benefit." Perfect 10, 488 F.3d at 1117 (quoting Ellison v. Robertson, 357 F.3d 1072, 1079 (9th Cir. 2004)). A "one-time set-up fee [or] flat, periodic payments" for the service provided does not qualify. Id. at 1118 (finding that fees for webhosting not direct financial benefit). The financial benefit need not be substantial or a large proportion of the service provider’s revenue. Mavrix, 873 F.3d at 1059.

Revised Dec. 2017