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Under the Copyright Act, the owner of a copyright has the exclusive right to display its work, 17 U.S.C.S. § 106(5). "Display" means to show a copy of a work, either directly or by means of a film, slide, television image, or any other device or process.
The heart of this complex copyright dispute revolves around the Usenet (or USENET), "an international collection of organizations and individuals (known as 'peers') whose computers connect to one another and exchange messages posted by USENET users." To obtain access to the USENET, a user must gain access through a commercial USENET provider, such as Defendant [Giganews], or an internet service provider.” Giganews owns and operates several Usenet servers and provides its subscribers with fee-based access to content that Giganews stores on its own servers as well as content stored on the servers of other Usenet providers. Unlike Giganews, Livewire does not own any Usenet servers, but instead provides its subscribers with access to the Usenet content stored on Giganews's servers. The Usenet content offered through Giganews's servers is almost exclusively user-driven, in that users upload the majority of the content stored on a provider's server. This content is posted via text-based articles to online bulletin boards called newsgroups. Each article is associated with a unique Message-ID. Giganews and Livewire contend that the only way to accurately identify a specific Usenet message is with that Message-ID. Although these articles are posted as text files, other types of files such as images, songs, and movies may be encoded into the bodies of the articles as binary files. Through Giganews's browser application, known as "Mimo," or "the Mimo Reader," users can open the binary files, which are then decoded and displayed in their original format. By using a "peering process," messages posted on one Usenet server can automatically propagate to other Usenet servers, which then propagate the messages to another Usenet server, and so on. This peering process only occurs after two Usenet access providers enter into peering agreements to accept materials from each other. The servers are then able to synchronize their information so their content mirrors one another's. Thus, only after Giganews engages in a peering agreement can its servers exercise any control over the messages copied from other servers. However, this control is minimal. Other than setting basic parameters, Giganews does not select any of the content available on its servers." Indeed, "Giganews itself did not post any of the articles at issue in this action . . . to any Usenet server, and all such articles were posted by Usenet users. Nor does Giganews tell any third parties what to upload to the Usenet, including Giganews'[s] Usenet servers.
Perfect 10 owns the exclusive copyrights to tens of thousands of adult images, many of which have been illegally distributed over Giganews's servers. Upon locating infringing materials on those servers, Perfect 10 sent Giganews numerous letters fashioned as takedown notices pursuant to the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 512, et seq. While some of these notices merely instructed Giganews to "locate all of the infringing messages and images . . . by doing [a] mimo search" for a particular term, others attached screen shots of the Mimo application that displayed posts in which Perfect 10's copyrighted images were distributed. When Perfect 10 sent Giganews machine-readable Message-IDs, Giganews quickly removed those messages from its servers. When Perfect 10 faxed Giganews notices containing illegible Message-IDs, Giganews responded with a letter asking Perfect 10 to provide the Message-IDs in a legible, machine-readable format. Perfect 10 repeatedly declined to do so.
On April 28, 2011, Perfect 10 brought suit against Giganews and Livewire in the U.S. District Court for the Central District of California, alleging direct and indirect copyright infringement claims as well as trademark and state law claims. Only the copyright infringement claims are the subject of this appeal. Among others, the district court ruled that neither Giganews nor Limewire directly infringed Perfect 10’s copyrights.
Were Perfect 10’s copyrights infringed by Giganews and/or Limewire?
As the district court correctly concluded, the allegation that Giganews directly infringes Perfect 10's display rights through the Giganews Mimo reader did not state a claim because the fact that "users may use Giganews's reader to display infringing images does not constitute volitional conduct by Giganews." This was because "Mimo is just a reader, a piece of software that allows a user to view an image," and therefore, "[t]o the extent that Mimo is used to view infringing images, this is done by the user." Moreover, even if the court were to consider Perfect 10's evidence, the claim would still fail. The sole evidence Perfect 10 pointed to in support of its argument that Giganews was not merely a passive host shows only that images and thumbnails were accessed through the Giganews platform. The evidence did not demonstrate that Giganews — as opposed to the user who called up the images — caused the images to be displayed. Further, the court in Amazon did not render Giganews liable for direct infringement of Perfect 10's display rights. In Amazon, there was "no dispute that Google's computers store[d] thumbnail versions of Perfect 10's copyrighted images and communicate[d] copies of those thumbnails to Google's users." The court therein Perfect 10 established "a prima facie case that Google's communication of its stored thumbnails directly infringe[d] Perfect 10's display right." However, citing CoStar, it noted that "[b]ecause Google initiates and controls the storage and communication of these thumbnail images, we do not address whether an entity that merely passively owns and manages an Internet bulletin board or similar system violates a copyright owner's display and distribution rights when the users of the bulletin board or similar system post infringing works.