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To be eligible at the threshold for the 17 U.S.C.S. § 512(c) safe harbor, a service provider must show that the infringing material was stored at the direction of the user. 17 U.S.C. § 512(c)(1). If it meets that threshold requirement, the service provider must then show that (1) it lacked actual or red flag knowledge of the infringing material; and (2) it did not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity. Because the § 512(c) safe harbor is an affirmative defense, the service provider must establish beyond controversy every essential element and failure to do so will render the service provider ineligible for the § 512(c) safe harbor's protection.
Plaintiff Mavrix Photographs ("Mavrix") sued LiveJournal for posting twenty of its copyrighted photographs online. The district court held that the Digital Millennium Copyright Act's ("DMCA") § 512(c) safe harbor protected LiveJournal from liability because Mavrix's photographs were stored at the direction of the user. 17 U.S.C. § 512(c). Mavrix appealed the district court's summary judgment in favor of LiveJournal.
Did the district court err in holding that DMCA safe harbor protected LiveJournal from liability?
The court reversed the district court's holding, on summary judgment, that LiveJournal was protected by the safe harbor of the Digital Millennium Copyright Act from liability for posting the plaintiff's photographs online and (2) vacating a discovery order. The court held that the safe harbor set forth in 17 U.S.C. § 512(c) would apply if the photographs were stored at the direction of users. LiveJournal posted the photographs after a team of volunteer moderators, led by an employee of LiveJournal, reviewed and approved them. The court held that whether the photographs were stored at the direction of users depended on whether the acts of the moderators could be attributed to LiveJournal. Disagreeing with the district court, the court held that the common law of agency applied to LiveJournal’s safe harbor defense. Because there were genuine factual disputes regarding whether the moderators were LiveJournal’s agents, the court reversed the district court's summary judgment and remanded the case for trial. The court also discussed the remaining elements of the safe harbor affirmative defense. If an internet service provider shows that the infringing material was posted "at the direction of the user," it must then also show that (1) it lacked actual or red flag knowledge of the infringing material; and (2) it did not financially benefit from infringements that it had the right and ability to control. The court held that to fully assess actual knowledge, the fact finder must consider not only whether the copyright holder has given notice of the infringement, but also the service provider's subjective knowledge of the infringing nature of the posts. The court held that to determine whether the defendant had red flag knowledge, the fact finder would need to assess whether it would be objectively obvious to a reasonable person that material bearing a generic watermark or a watermark referring to the plaintiff's website was infringing. When assessing the service provider's right and ability to control the infringements, the fact finder should consider the service provider's procedures that existed at the time of the infringements and whether the service provider had "something more" than the ability to remove or block access to posted materials. Finally, the court vacated the district court's order denying discovery of the moderators' identities. It remanded the case for further proceedings.