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FLEA MARKET LIABLE FOR CONTRIBUTORY COPYRIGHT INFRINGMENT; NO CAN-SPAM VIOLATION ABSENT KNOWLEDGE
August 29, 2006
FLEA MARKET LIABLE FOR CONTRIBUTORY COPYRIGHT INFRINGMENT
A federal court in New Jersey has recently determined that an outdoor flea market and file sharing networks like Grokster really don't have very much in common. As a result, the flea market operator can't rely on a defense to copyright infringment available to those file sharing networks.
The case arose when operators of the New Jersey flea market were accused of looking the other way while vendors sold thousands of bootleg CDs. The flea market operators argued that they could not be contributorily liable for their vendors' infringement because "mere knowledge of potential or actual infringing uses" is not enough to subject a distributor of a product or device to liability.
The operators cited to a 2005 U.S. Supreme Court case involving the Grokster network. In that case, the court ruled that a person who sells 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, is liable for the resulting acts of infringement by third parties." But the court also ruled in that case that "mere knowledge" of actual infringement is not enough to trigger liability. The flea market operators argued that, under this theory, their "mere knowledge" that vendors were selling bootleg CDs could not make them liable for copyright infringement.
Unfortunately for the operators, the court wasn't buying their theory, finding that the argument "makes little sense" (ouch!) According to the court, the flea market operators exert "substantial and continuous control" over their vendors, and are not like a technology company that releases a device into the stream of commerce and then loses control over its end uses. The court determined that it is appropriate to impose liability for contributory infringement when there is an "ongoing relationship" with the direct infringer.
The test ultimately is about control. This court determined that it's a little easier to keep tabs on a group of flea market vendors than millions of anonymous downloaders.
NO CAN-SPAM VIOLATION ABSENT KNOWLEDGE
An online university cannot be liable for violating the federal CAN-SPAM Act when there is no proof that the university had actual knowledge that its agents violated the act, according to a recent decision from a California federal court.
Hypertouch Inc., an Internet Service Provider, brought the suit, (the Act specifically allows ISP's to bring claims) claiming that Kennedy-Western University ("KWU" -- they didn't make the field of 64 this year, in case you were wondering) violated the CAN-SPAM Act by culling Web sites and proprietary services for e-mail addresses, and by obtaining e-mail addresses using a computer program that randomly combined names and letters. The court concluded that both of these activities violate the CAN-SPAM Act.
This finding, of course, was only part of the determination. The remaining question was whether KWU could be liable for the violations. According to the court, KWU could be liable only if it had actual knowledge that its agent would violate the CAN-SPAM Act, or it consciously avoided such knowledge.
Although Hypertouch was able to establish that a violation had occurred, it failed to present evidence that KWU had the requisite knoweldge sufficient for a finding of liability. KWU, on the other hand, produced evidence that it had promulgated guidelines and practices to ensure that neither it nor its agent would violate the anti-spam laws. KWU had even retained an outside expert on an ongoing basis to monitor e-mail marketing agencies that KWU retained.
Based on its finding that Hypertouch failed to present sufficient evidence to establish KWU's liability, the court granted KWU summary judgment.
The case shows the importance of making an effort to ensure compliance with the CAN-SPAM Act. Even if violations occur, those efforts may prevent a finding of liability.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.