Troubling Ruling Against Web Hosting Firm: Your Liability Just Went Up

Legal Issues

from the not-good dept

Last year, we wrote about a troubling ruling against a web hosting firm, Akanoc, that was sued by Louis Vuitton for hosting some sites offering up counterfeit goods. We had trouble with the idea that a web host should be liable for what its users were doing, but some of the details that came out in the comment suggested that the hosting firm may have brought it upon itself by not responding to various takedown notices. Even so, the precedents set in this case are going to be applied to situations where the webhost wasn’t such a bad actor, and the latest ruling in that case is especially troubling on a variety of points (you can read the full ruling as well). While the common saying is that “hard cases make bad law,” at times easy cases can make bad law as well. That’s because in a case like this, where it seems clear that the web host was a “bad player” it’s easy to pile on the punishments, without realizing how those may get applied in other cases, with players who aren’t nearly as bad.

Among the troubling aspects of this ruling, called out in Eric Goldman’s analysis above, followed by my own commentary:

• posting photos of counterfeit goods constitutes direct copyright infringement

  Reading through the actual ruling, what happened here isn’t entirely clear, but it does seem troubling. The relevant part of the ruling states:

  Further, the Court rejects Defedants’ contention that the digital pictures of the counterfeit goods cannot constitute “copies” under the Copyright Act because Plaintiff’s copyright covers only physical goods… The Court finds no support for Defendants’ position in the language of the Copyright Act, which requires only that copies of a copyrighted work be “fixed by any method now known or later developed, and from which the work can be perceived reporduced, or otherwise communicated, either directly or with the aid of a machine or device.”… The digital pictures stored on Defendants’ servers fall squarelty within the statutory language. To find otherwise would render protection of a copyright meaningless by permitting, for example, unauthorized digital copies of a paper photograph to be noninfringing simply because the copy is embodied in a different medium than the original work. Thus, the Court finds that the evidence was sufficient to support the jury’s finding of direct copyright infringement.

  But, that “example” at the end seems to be quite different. From the basic description, this isn’t just a photograph of the official object, but a photograph of the counterfeit. Now, I could see how the counterfeit could be breaking trademark law, but why should a photograph of the counterfeit also be copyright infringement?

• it’s become vogue to challenge copyright statutory damages on constitutional grounds, but this court rejects a due process challenge against both copyright and trademark statutory damages. A Gore challenge to the ratio of actual to “punitive” damages was inapplicable to statutory damages.

  Both the Jammie Thomas-Rasset case and the Joel Tenenbaum case have argued that the statutory copyright damages are unconstitutional on these grounds, using the Gore case as an example. Now the RIAA has a case to point to that says the Gore ruling isn’t applicable for statutory damages. This doesn’t mean that the unconstitutional claims won’t fly, but the lawyers making those arguments are going to have to dig deeper to make their case.

• the defendant’s sole officer was personally liable for the infringements because he “had nearly complete control over Defendants’ operations. He was the general manager and sole owner of the corporate Defendants….He also held the principal decision-making authority as to responding to infringement notices, and he instructed his part-time employee regarding how to respond to such notices….Moreover, he was the designated agent under the DMCA for receiving infringement notices and decided whether or not to terminate offending customers.” Does this ruling imply that the person designated as the 512 agent for notice has an increased risk of personal liability…?

  Indeed, this is the most troubling part of the ruling. It basically could make the designated DMCA agent for any company potentially personally liable if he screws up in dealing with DMCA takedown notices. As Goldman notes later in his post: “What sucker will agree to be a 512 agent in the future?” It might not be that bad, because the court also seems to be saying that the fact that this guy ran the company by himself was part of the issue, but even that’s troubling. There’s a reason that people set up corporations, and that’s to protect the individuals from personal liability, even if it’s just a one-person company.

Now, it may be clear that Akanoc did a number of questionable things here, but it’s resulted in a bad situation where a court can make rulings applying to a likely “bad actor” that will undoubtedly be mentioned in future cases relating to actors who weren’t necessarily so bad, and we may all suffer the consequences for it.

Filed Under: copyright, dmca, liability, web hosts
Companies: akonic, louis vuitton