'Alison Frankel at Reuters reports that the 9th Circuit has ruled against the blogging platform LiveJournal and exposed the company to liability for copyright infringement despite Digital Millennium Copyright Act safe harbors that, according to LiveJournal, should protect it.
At issue is the site Oh No They Didn’t! (ONTD), a gossip site hosted on LiveJournal. Originally managed by volunteer moderators. LiveJournal hired one of those moderators to take more direct control so they could better sell ads. When the celebrity photo agency Mavrix sued the site for hosting copyright infringing photos, they also argued that this relationship made LiveJournal an editor of the site and, thus, it wasn’t simply content uploaded by third parties.
The 9th Circuit agreed...'
The case will now go back to the district court which must decide whether or not the moderators were acting as LJ's "agents":
The DMCA safe harbour applies only "if the photographs were posted at the direction of users". In this case the photos were posted "after a team of volunteer moderators, led by an employee of the defendant, reviewed and approved them".If the court finds that the moderators were not acting as LJ's agents, it must still decide whether LJ "lacked actual ... knowledge of the infringements":
"Actual knowledge refers to whether the service provider had subjective knowledge while red flag knowledge turns on whether a reasonable person would objectively know of the infringements." Previously "the district court held that LiveJournal lacked actual knowledge of the infringing nature of Mavrix's photographs solely on the basis of Mavrix's failure to notify LiveJournal of the infringements." The appeal court says that this was not a complete assessment, and that the court must "determine whether LiveJournal, through its agents, had actual knowledge of the infringing nature of the posts".If the court finds that LJ lacked actual knowledge, it has still to determine whether LJ lacked "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.' ... The infringement must be immediately apparent to a non-expert. ... Some of the photographs at issue in this case contained either a generic watermark ... or a watermark containing Mavrix's website, “Mavrixonline.com.”... To determine whether LiveJournal had red flag knowledge, the fact finder should assess if it would be objectively obvious to a reasonable person that material bearing a generic watermark or a watermark referring to a service provider's website was infringing."If LJ clears the hurdles above, then finally the court must "determine whether LiveJournal showed that it did not financially benefit from infringements that it had the right and ability to control":
"LiveJournal's rules instruct users on the substance and infringement of their posts. The moderators screen for content and other guidelines such as infringement. Nearly two-thirds of submitted posts are rejected, including on substantive grounds. ONTD maintains a list of sources that have complained about infringement from which users should not submit posts. LiveJournal went so far as to use a tool to automatically block any posts from one source. ... LiveJournal derives revenue from advertising based on the number of views ONTD receives. Mavrix presented evidence showing that approximately 84% of posts on ONTD contain infringing material, although LiveJournal contested the validity of this evidence."Fortune: "The ruling is not a final defeat for LiveJournal since it simply asks the lower court to reconsider its original decision. But the structure and tone of the ruling strongly nudges the court towards only one conclusion: copyright infringement."
There are 20 photos at issue in the case. If LJ loses and Mavrix seeks maximum damages, that might be as much as $150,000 per image, if I understand US law correctly.
Some reports of the case online