Category Archives: Secondary Liability

Copy shop liable for direct infringement from student on-premises copying of course packets

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Shourin Sen - 16 October 2009 – 9:00 am
Filed under Contributory Infringement, Contributory Liability, Secondary Liability

Blackwell Publishing Group, Inc. v. Excel Research Group, LLC 07-12731 (E.D. Mich. 2009).

The Eastern District of Michigan issued a decision on Wednesday that is sure to be controversial. A group of publishers brought suit alleging that a copy shop had infringed thirty-three of their works. The copy shop had accepted course packets from professors; ensured that the course packets were in proper form to be copied; given the packets to students upon request; and provided copy machines for the students to copy the packets.

The twist

If you were looking at this case from afar, you’d probably expect the Court to find the copy shop was secondarily liable for infringing copies made by the students. Instead the Court found the copy shop directly liable for infringement of the publishers 106(1) right to make reproductions and 106(3) right to distribute. Why?

For  four of the thirty-three allegedly infringed works the students were arguably authorized to make copies. The university the students attended had entered into licensing agreements with the publishers that allowed “student copying.” So for at least some of the works, the Court ostensibly believed it had to find that the copy shop directly infringed the publisher’s works to find the copy shop liable.

The Court may have also felt that it could not find the students directly liable for the remaining twenty-nine works under a fair use evaluation.  There can be no secondary liability without direct liability. The copy shop, then, couldn’t be liable without a finding that the students directly infringed the works. I’m not convinced that the outcome of a fair use evaluation, regardless of the outcome, should change in this circumstance if it is being conducted from the point of view of the students or the copy shop, but reasonable minds can reach a contrary conclusion.

106(1) right to reproduce the copyrighted work

In a section labeled “Direct Infringers” the Court wrote the following:

Excel next argues that because it is the students who do the copying, they are the purported infringers and therefore the publishers cannot establish that Excel is an infringer. While “[t]he Copyright Act does not expressly render anyone liable for infringement committed by another,” Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 434 (1984), Excel’s argument ignores the circumstances of the copying.

First, although students press the start button and make a copy of the coursepack, Excel is the source of the reproduction. Excel controls the entire copying process. It retains the “master,” maintains its quality, gives it to a student to copy, and accepts payment. Excel also owns and supplies all of the elements of reproduction – the venue, the copy machines, the paper, and the utilities. Excel staff members are available to assist students in the copying process and also provide binding services if requested. This scenario is vastly different from a student, who happens to obtain a coursepack from a friend or other third party and comes into Excel’s premises and makes a copy. Under this scenario, whether Excel would be liable is a different question. Here, however, it is clear that this is not mere student copying.

From this paragraph and context provided by the rest of the decision we can deduce that the Court found that the copy shop was directly liable for the student copying — that the copy shop was actually making the copies, not the students.  (When the Court conducted its fair use evaluation, it considered the direct infringement by the copy shop and not by the students.)

This creates a groundbreaking and potentially troublesome extension of direct liability. It should be noted that the publisher’s amended complaint primarily asserts infringement claims under secondary liability. There is only one boilerplate sentence that mentions directly liability.

Direct liability verses secondary Liability

Edit: Peter Hirtle raises interesting questions about this case at the LibraryLaw Blog. He points to a provision in the Copyright Act, 17 U.S.C. 108(f), that I should paid more attention to before posting. 108(f) shields libraries from liability stemming from the “unsupervised use of reproducing equipment located on [their] premises,” provided that they post a warning on their duplication machines stating that an individual may be personally liable for using the machine to make infringing copies.  I’ve changed this paragraph to reflect the provision. Mr. Hurtle questions whether this decision eliminates the safe harbor for libraries under 108(f):

It is common for libraries to receive from a faculty member a copy of a course pack and place it on reserve (much as faculty members provided copies of their course packs to Excel).  If a student then borrowed that course pack and copied it on a library photocopy machine, would the library be liable?  Section 108(f) of the Copyright Act protects libraries from charges of contributory infringement for copying done by patrons on library equipment, but could this decision be extended to suggest that libraries, just like Excel, have direct, not contributory, liability  for infringing copies made by students?  If so, the “safe harbor” of 108(f) would evaporate.

I think this analysis is spot on. The Court in Blackwell found that when an entity “retains the ‘master,’ maintains its quality, gives it to a student to copy, and accepts payment,” it is the party making duplications; not a third-party, be it supervised or unsupervised. 108(f) is drafted in broad terms and doesn’t explicitly just provide a shield against secondary liability. But I think that it is possible to make a strong argument that Blackwell has essentially eliminated the 108(f) safe harbor.

106(3) right to distribute copies

The Court also found that the copy shop directly infringed the publisher’s 106(3) distribution right by “renting” their copy of the course packets to the students, even though the students never left the copy shop’s premises. This actually presents a more interesting issue than may appear at first blush.  17 U.S.C. 106(3) grants a copyright owner the exclusive right to “distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” The Copyright Act, however, does not define “distribute.”

William Patry contends that the operative language in 106(3)  is “distribute copies . . . to the public” not “sale or other transfer of ownership, or by rental, lease, or lending.” This makes a difference in the context of selling a house that infringes a copyright owner’s architectural work. If “distribute copies . . . to the public” is the operative language, invoking some kind of motion, then a sale of house, which is merely a change of title, would not be considered an infringing act.

Would the copy shop’s on-site supply of the course packets be considered a distribution under Patry’s reading of 106(3)? For that matter, is Patry’s proposed definition of 106(3) viable in all contexts?

(h/t Mary Minow at Fairly Used Blog)

Contributory trademark infringement claims against flea market landowner dismissed

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Shourin Sen - 16 June 2009 – 9:00 am
Filed under Contributory Liability, Secondary Liability

Malletier v. The Flea Market, Inc., 2009 WL 1625946 (N.D. Cal. 2009)

Judge Wilken addressed a rather fetching contributory trademark infringement issue last Wednesday. The Flea Market, located in Sacramento, was one of the largest open-air flea markets in the United States. The market stretched 120 acres, had over two thousand vendors, and received approximately four million visitors a year.

Storied fashion designer and manufacturer Louis Vuitton brought suit against The Flea Market, Inc., the operator of the market, and the real estate company that leased the land to the market. The real estate company moved to dismiss arguing that it didn’t have sufficient control over the vendors to be liable for contributory infringement.  The Court dismissed, distinguishing the case from the Ninth Circuit’s holding in Fonovisa, Inc. v. Cherry Auction, Inc, on the grounds that in Fonovisa, the defendant ran the flea market, not just leased the land.

Contributory Infringement

The Court cited Lockheed Martin Corp. v. Network Soultions, Inc., 194 F.3d 980, 983 (9th Cir. 1999) for the test for contributory liability for trademark infringement:

“Contributory infringement occurs when the defendant either intentionally induces a third party to infringe the plaintiff’s mark or supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe the service mark.” Plaintiff does not allege that Defendant induced a third party to infringe. Thus, Plaintiff must show that Defendant supplies a product to a third party with knowledge that the product is being used to infringe the mark. To satisfy the “supplies a product” prong of the test, the court “consider[s] the extent of control exercised by the defendant over the third party’s means of infringement.” Lockheed, 194 F .3d at 984.

The Court then proceeded to distinguish Malletier from Fonovisa:

[I]n Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir.1996), the Ninth Circuit addressed this requirement in the context of flea markets. In that case, Cherry Auction, Inc. operated a swap meet in which vendors paid daily rental fees in exchange for booth space. Cherry Auction supplied parking, conducted advertising and retained the right to exclude any vendor for any reason at any time. Cherry Auction was also aware that vendors in their swap meet were selling counterfeit recordings in violation of the plaintiff’s trademarks and copyrights. The Ninth Circuit held that Cherry Auction was liable for contributory infringement because it “suppl[ied] the necessary marketplace” for the sale of infringing products. Id. at 265; Lockheed, 194 F.3d at 984.

Defendant distinguishes Fonovisa because in that case the defendant both owned and operated the market, whereas here, the property owner, Defendant, and the market operator, The Flea Market, are two separate and distinct entities. As a property owner, Defendant leases land to The Flea Market without exercising any specific, direct control over the Flea Market’s tenants’ business operations. Therefore, Defendant argues, it cannot be liable for having any control over the sale of the infringing products.

Plaintiff has not alleged any facts showing a relationship between Defendant and the vendors. The only facts alleged in the complaint that specifically refer to Defendant state that it and The Flea Market are “closely related to each other and collectively own the land, building, structures and fixtures at the market.” The complaint also states that Defendant receives “substantial sums of money” from The Flea Market’s lease agreements with the market’s tenants and vendors. No case supports the proposition that a property owner may be liable for contributory trademark infringement if it only leases property to a separate and distinct entity, which in turn operates a flea market and rents space to a vendor, which in turn infringes trademarks. Property ownership alone does not establish that Defendant exercised control over the sale of the infringing products.

A9 wins summary judgment motion on contributory infringement claim; entitled to DMCA 512(c) safe harbor

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Shourin Sen - 18 May 2009 – 9:00 am
Filed under DMCA, Secondary Liability

Perfect 10, Inc. v. Amazon.com, Inc., 2009 WL 1334364 (C.D. Cal. 2009)

This past Tuesday, Judge A. Howard Matz released an order in Perfect 10, Inc. v. Amazon.com, an ancillary to the blockbuster copyright  case Perfect 10 v. Google. Judge Matz is in a horse race with Judge Batts of the S.D.N.Y. for the title of most prolific judge on copyright issues over the past few months, which is great on both fronts for anybody who like well-articulated copyright decisions. The Court earlier granted summary judgment in favor of defendant A9 on claims for direct and vicarious copyright infringement. At issue in this order was the final remaining claim for contributory copyright infringement.

A9, a wholly owned subsidiary of Amazon, sought a summary determination that it was entitled to the § 512(c) safe harbor provisions of the DMCA due to the fact that Perfect 10 sent infringement notices in A9’s search results to Amazon, not itself. Perfect 10, in response, argued two grounds: first that A9 had actual knowledge of the infringement from court papers filed during litigation; and second, that A9 should be equitably estopped from seeking safe harbor. The court rejected the arguments and granted summary judgment in favor of A9 on the remaining claim.

Actual knowledge

Perfect 10 argued that the court papers it sent to A9 during litigation conferred actual knowledge of infringement:

Perfect 10 contended that A9 is not entitled to the safe harbor because it did in fact receive Perfect 10’s DMCA notices, and therefore had actual knowledge of infringement. An ISP is not entitled to the § 512(c) safe harbor if it has “actual knowledge that the material or an activity using the material on the system or network is infringing.” 17 U.S.C. § 512(c)(1)(A)(i) (emphasis added). The ISP must know that “specific infringing material is available using its system,” Amazon.com, 508 F.3d at 1172 (emphasis in original).

The Court wasn’t buying:

They are legally irrelevant. The absurd result otherwise would be that the complaint or any other pleading that contains sufficient identification of the alleged infringement could count as a DMCA notification.

Equitable estoppel

Perfect 10 made five core arguments in regards to equitable estoppel. First, Perfect 10 contended that Amazon instructed copyright owners to send DMCA notices regarding its affiliates directly to Amazon in the Conditions of Use posted on its site. The Court disagreed finding that neither Amazon’s Conditions of Use or filings with the Copyright Office included A9 among it affiliates.

Second, Perfect 10 argued that Amazon held itself out as an authorized agent for A9 because Amazon’s counsel responded to notices sent from Perfect 10, apparently on behalf of both Amazon and A9. The Court found that the fact that A9’s counsel was cc’d on a letter was insufficient to support the conclusion that Amazon was acting on its behalf, especially since A9 designated its own copyright agent on its site and in filings with the Copyright Office.

Perfect 10’s third and fourth estoppel arguments centered on Amazon’s actions, not A9’s. Perfect 10 contended that Amazon was the proper recipient because the infringing activity took place on its website, because the A9 search box was included on Amazon.com. The Court found that since A9 designated its own copyright agent, Amazon wasn’t the proper recipient, a fact that Perfect 10 was aware of as evidenced by the fact that Perfect 10 brought suit against A9 as well as Amazon.

Fourth, Perfect 10 argued that Amazon was obligated to notify A9 of the alleged infringements because it owns and hosts the site/corporation. The Court disagreed finding no precedent for the requirement that one ISP must pass along notices to another, because of ownership or hosting. The Court noted that even if Amazon’s representations were misleading it wouldn’t mean that A9 failed to comply with the DMCA’s requirements for designating a copyright agent or that a third party could ignore the designation:

Perfect 10 cites no authority that would require one ISP, by virtue of its ownership or hosting of another ISP, to pass along a DMCA notice, where the two ISPs are distinct corporate entities and, more importantly, have each properly designated its own copyright agent. That Amazon’s representations may have been misleading does not mean A9 failed to comply with the DMCA’s requirements for designating a copyright agent or that [Perfect 10] could ignore A9’s designation. See 17 U.S.C. § 512(c)(3)(A) (“To be effective …, a notification of claimed infringement must be a written communication provided to the designated agent of a service provider …”) (emphasis added).

Finally, Perfect 10 argued that A9 failed to satisfy the DMCA’s requirements for the designation of a copyright agent to receive notifications of infringement. Subsection 512(c)(2) requires a service provider to designate a copyright agent “by making available through its service, including on its website in a location accessible to the public, and by providing to the Copyright Office, substantially the following information: the name, address, phone number, and electronic mail address of the agent. [emphasis added]” Perfect 10 argued that A9 failed to meet the requirements because the name of the agent on its Copyright Office filing was outdated. The Court rejected the veracity of the factual assertion, but noted that even if it was true, it was not of consequence:

In any event, these are precisely the sort of technical departures from the listed requirements that Congress believed were inconsequential. There is no genuine dispute that the Copyright Office designation was valid and accurate and enabled anyone who saw it to contact A9’s designated agent, through mail, fax, telephone, or the online complaint form. Hence, A9’s Copyright Office listing substantially complies with § 512(c)(2).

UMG’s secondary liability claims against Veoh’s investors dismissed with prejudice

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Shourin Sen - 17 May 2009 – 5:58 pm
Filed under Secondary Liability

UMG Recordings, Inc. v. Veoh Networks Inc. (C.D. Cal. 2009)

We last checked in on UMG v. Veoh in early February. At the time, Judge A. Howard Matz dismissed a series of secondary liability claims against Veoh’s investors, including contributory infringement, vicarious infringement and inducement to infringe. The previous claims where dismissed without prejudice providing UMG the opportunity to do some more fishing and refile if it so desired. The previous order for dismissal, however, ended with a rather stern signal for where the Court stood on the issue of secondary liability for investors:

Although Plaintiffs may file a Second Amended Complaint, they should reflect carefully what is likely to result if they do so. The Court’s existing scheduling requirements and the near certain additional costs and complications that will flow from attempting to go after deep pockets whose potential liability could entail vexing issues of corporate governance caution that “less may be more.”

UMG decided to file a second amended complaint alleging secondary liability claims against Veoh’s investors, nonetheless. The Court, last Tuesday, addressed the claims after the additional discovery, finding that few new allegations of substance were uncovered. Regardless, the discussion of the allegations as they are is certainly interesting:

Although the[ new] details are titillating insofar as they offer a glimpse into the inner workings of Veoh and its Board of Directors, they boil down to allegations that overlap almost entirely with the allegations of the FAC: the Investor Defendants knew that infringing activity was occurring on Veoh’s site; as board members and financial supporters of Veoh the Investor Defendants could have done more to prevent this activity, such as implementing filtering software or hiring employees to ferret out infringing content; and the Investor Defendants hoped to eventually profit from their investment in Veoh, and thus sought to attract more users to Veoh by providing funding and by implementing policies that “facilitated more infringement.”

The only allegations that are arguably new are that the Investor Defendants’ principals sometimes acted as the “public face” of Veoh, and that the Board considered copyright matters. But these allegations do not support UMG’s infringement claims. The “public face” allegations simply claim that the investors (a) explained Veoh’s policies to the public, and (b) sought relationships with content providers. Neither of these allegations suggests anything unlawful. In fact, the allegations concerning relationship building, including an attempt to form an agreement with UMG, actually suggest that the investors were actively seeking to ensure that copyrights were not violated. In addition, the fact that the Board considered copyright matters at its meetings is neither surprising nor damning. If the Board had not considered copyright matters, UMG would likely claim that it had been derelict in its duties.

The Court found, once again, that the merits of secondary liability for copyright infringement didn’t trump the benefits of corporate governance structures. The claim was dismissed with prejudice so this issue is now preserved for appeal, which I would anticipate is forthcoming given UMG’s tactical decision to file a second amended complaint:

In the absence of clear precedent, this Court is not willing to expand the scope of copyright liability in a manner that presents a substantial risk of upending well established concepts of corporate governance. Although the judicially-fashioned principles of secondary copyright liability serve an important purpose, UMG’s proposed extension of these principles would likely invite a wholesale weakening of the no less important principle that the corporate form is meant to protect shareholders, directors, and officers from ordinary liability. To allow for derivative copyright liability to be imposed on these Investor Defendants would be particularly problematical. The vast and rapid expansion of software technology in telecommunications is generally beneficial to our economy and society, and we should not erect obstacles to that growth in the absence of sound legal and policy-based reasons.

Secondary liability claims against CEO and GC of software company dismissed: a compensation package tied to corporate profits doesn’t by itself create a direct financial interest

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Shourin Sen - 26 March 2009 – 9:00 am
Filed under Secondary Liability

Netbula, LLC v. Chordiant Software, Inc., 2009 WL 750201 (N.D. Cal. 2009)

Netbula brought suit against Chordiant Software alleging copyright infringement, and claims for vicarious copyright infringement against the company’s CEO and General Counsel.  The CEO and GC moved to dismiss.

To state a claim for vicarious copyright infringement a plaintiff must allege that a defendant had:

(1) the right and ability to supervise the infringing conduct and (2) a direct financial interest in the infringing activity. Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788, 802 (9th Cir.2007).

Direct Financial Interest in the Infringing Activity

Netbula alleged that the CEO and GC had compensation packages from which they personally profited in some way from their company’s net income.  In addition, the CEO owned shares of Choridant, but neither officer was a majority holder.  Judge James Ware of the federal district court in San Jose dismissed the claims with leave to amend.  Judge Ware, citing Veoh, found that the direct financial interest alleged was too attenuated:

Plaintiffs simply allege that [the CEO] and [the GC] have compensation packages under which they personally profit “in some way” from Chordiant’s profits. Such allegations only show that [the CEO] and [GC's] compensation is a function of Chordiant’s performance. Plaintiffs do not allege a direct relationship between their compensation and Chordiant’s acts of primary infringement.

Right and Ability to Supervise

Netbula alleged that, as acting CEO and GC of Chordiant, the officers had  “the right and ability to supervise Chordiant’s infringing act.”  Judge Ware found that Netbula failed to satisfy the prong because its claims were conclusory and didn’t allege sufficient facts.  According to the Court, Netbula didn’t allege more than general superviosry power within the corporation and didn’t speak to oversight regarding the alleged infringing conduct.

Howard Stern’s motion to dismiss claim for vicarious infringement of live spokesman software denied

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Shourin Sen - 25 March 2009 – 9:00 am
Filed under Secondary Liability

Live Face on Web, LLC v. Howard Stern Productions, Inc., 2009 WL 723481 (E.D. Pa. 2009)

Live Face on Web, a software firm, designed a product that allowed a company to display a “live” spokesperson on a website.   Live Face alleged that Cameo HD appropriated its software and offered it to Howard Stern Productions.

According to the complaint, Howard Stern Productions put up videos on its website of its show’s cast that were powered by the software.   Live Face brought suit against Cameo HD and Howard Stern Productions for direct copyright infringement.  In addition, Live Face took a flier on contributory and vicarious infringement.   Howard Stern Productions moved to dismiss.

Contributory infringement

(1) direct copyright infringement by a third party; (2) knowledge of the third-party infringement; and (3) a material contribution to the infringement.

Judge McGlaghlin granted the motion to dismiss the claim for contributory infringement, finding that the complaint didn’t allege facts that would show Howard Stern Productions knew of Cameo’s third-party infringement.

Vicarious infringement

(1) direct copyright infringement by a third party; (2) an obvious and direct financial interest in the exploitation of the copyrighted materials; and (3) the right and ability to supervise the infringing activity.

Howard Stern Productions made two arguments in regards to (2) direct financial interest:  first, that the Live Face claim should fail because it didn’t alleged that visitors were drawn to the website specifically because of the ability to infringe; and second, even if Live Face wasn’t required to make such a showing, an allegation merely linking advertising revenue to the number of website users was insufficient to satisfy the element.   Judge McGlaghlin denied the motion to dismiss, finding that Howard Stern Production’s framing of the direct financial interest element was overly narrow:

That these allegations are sufficient at this stage is reinforced by Nimmer’s view of the direct financial interest element. According to Nimmer, courts “seem to have relaxed” the standard over time, and “[i]t seems scarcely an exaggeration to posit that ‘an obvious and direct financial interest’ is now understood to encompass a possible, indirect benefit.’ “ Nimmer on Copyright, § 12.04[A][2]; see also A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1023 (9th Cir.2001) (finding direct financial interest where defendant’s “future revenue” depended on increases in userbase); Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 263 (9th Cir.1996) (finding direct financial interest from admission fees, concession stand sales, and parking fees at the flea market at which the infringing material was available); Shapiro, Bernstein, 316 F.2d at 307 (explaining the line of cases in which infringing activities provide a proprietor with “a source of customers and enhanced income”); Aimster, 252 F.Supp.2d at 655 (finding direct financial interest where every website user had to pay a registration fee, and where the company solicited contributions to the Aimster litigation and also sold posters, jeans, and other Aimster-related merchandise on its website, thus benefiting the defendant’s overall “commercial enterprise”); see also Ellison, 357 F.3d at 1079 (stating that the “essential aspect” of the direct financial interest inquiry is whether there is a causal relationship between the infringing activity and “any financial benefit a defendant reaps, regardless of how substantial the benefit is in proportion to a defendant’s overall profits” (emphasis added)).

Secondary liability for investors: last week’s order in UMG Recordings, Inc. v. Veoh Networks, Inc.

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Shourin Sen - 8 February 2009 – 12:29 am
Filed under Secondary Liability

On Monday, Judge Matz of the Central District of California dismissed without prejudice UMG’s complaint against Veoh’s investors.  UMG had alleged copyright infringement against the investors under theories of secondary liability: contributory copyright infringement, vicarious liability, and inducement to infringe.

Contributory Copyright Infringement

To be liable for contributory infringement, the defendant must [1] have knowledge or reason to have knowledge of direct infringement and [2] must provide material assistance to the infringer. See A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019-22 (9th Cir. 2001).  Stated the court:

Merely exercising ownership power to select members for a Board of Directors cannot invite derivative liability for infringement. Nor is there a common law duty for investors (even ones who collectively control the Board) “to remove copyrighted content,” in light of the DMCA. Similarly, the mere objective of increasing the value of ownership is neither invidious nor a sufficiently “direct” benefit within the meaning or context of derivative liability for infringement.

Vicarious Liability

A party may be vicariously liable if it has [1] the right and ability to supervise the infringing activity, and [2] has a direct financial interest in the infringing activities. See Napster, 239 F.3d at 1022.  The Court found that the alleged financial benefit was too far removed from the alleged infringement to be considered a “direct” financial interest.

In this case, unlike Fonovisa, Ellison, and Napster, the alleged financial benefit that the Investor Defendants might some day enjoy will not come directly from Veoh’s users or from Veoh’s advertisers. Rather, the [complaint] alleges that the alleged infringement “continue[d] to attract users and advertising dollars to Veoh, and increase[d] the value of [the Investors Defendants’] financial interests in Veoh.” The [complaint] does not allege that the investors received, or will receive, fees paid by customers or even by advertisers. Nor does the FAC allege that Veoh has paid or will pay any dividend or distribution to the Investor Defendants. It only alleges that “each will profit from their investments through the sale of Veoh to a potential acquiring company or through a public offering” [citation omitted.]

Inducement to Infringe Copyright

A party may be liable for Inducement to infringe copyright if they distribute a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement.  See Metro-Goldwyn-Mayer Studios Inc., et al. v. Grokster, Ltd., et al., 545 U.S. 913, 936-37 (2005).  Judge Matz found that the complaint didn’t allege that investors “encouraged infringement by Veoh or by Veoh’s users in connection with the use or “distribution” of Veoh’s service.”

Where are we now?

While the Court granted UMG until February 23 to file an amended complaint, the order contained a rather stern caution:

Although Plaintiffs may file a Second Amended Complaint, they should reflect carefully what is likely to result if they do so. The Court’s existing scheduling requirements and the near certain additional costs and complications that will flow from attempting to go after deep pockets whose potential liability could entail vexing issues of corporate governance caution that “less may be more.”

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