Costar Group, Inc. v. Loopnet, Inc.
| Decision Date | 21 June 2004 |
| Docket Number | No. 03-1911.,03-1911. |
| Citation | 373 F.3d 544 |
| Parties | COSTAR GROUP, INCORPORATED; CoStar Realty Information, Incorporated, Plaintiffs-Appellants, v. LOOPNET, INCORPORATED, Defendant-Appellee. BMG Music; EMI Music, North America; Sony Music Entertainment, Incorporated; Universal Music Group; Univision Music, LLC; Columbia Pictures Industries, Incorporated; Metro-Goldwyn-Mayer Studios, Incorporated; Paramount Pictures Corporation; Twentieth Century Fox Film Corporation; Universal City Studios, LLLP, Amici Supporting Appellants, Bellsouth Telecommunications, Incorporated; Netcoalition; Ebay Incorporated; Computer & Communications Industry Association; Google Incorporated; Yahoo! Incorporated; Amazon.Com, Incorporated; United States Internet Service Provider Association; Verizon Communications, Incorporated; U.S. Internet Industry Association, Amici Supporting Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Jonathan D. Hacker, O'Melveny & Myers, L.L.P., Washington, D.C., for Appellants. Kurt B. Opsahl, Perkins Coie, L.L.P., San Francisco, California, for Appellee. Bruce G. Joseph, Wiley, Rein & Fielding, L.L.P., Washington, D.C., for Amici Supporting Appellee.
ON BRIEF:
Walter Dellinger, O'MELVENY & MYERS, L.L.P., Washington, D.C., for Appellants. Kenneth B. Wilson, Perkins Coie, L.L.P., San Francisco, California, for Appellee. Paul B. Gaffney, Joseph M. Terry, Manish K. Mital, Williams & Connolly, L.L.P., Washington, D.C., for Amici Supporting Appellants. Scott E. Bain, Wiley, Rein & Fielding, L.L.P., Washington, D.C., for Amici Supporting Appellee.
Before NIEMEYER, MICHAEL, and GREGORY, Circuit Judges.
Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge MICHAEL joined. Judge GREGORY wrote a dissenting opinion.
CoStar Group, Inc. and CoStar Realty Information, Inc. (collectively "CoStar"), a copyright owner of numerous photographs of commercial real estate, commenced this copyright infringement action against LoopNet, Inc., an Internet service provider, for direct infringement under §§ 501 and 106 of the Copyright Act because CoStar's copyrighted photographs were posted by LoopNet's subscribers on LoopNet's website. CoStar contended that the photographs were copied into LoopNet's computer system and that LoopNet therefore was a copier strictly liable for infringement of CoStar's rights under § 106, regardless of whether LoopNet's role was passive when the photographs were copied into its system.
Relying on Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D.Cal.1995), the district court entered summary judgment in favor of LoopNet on the claim of direct infringement under § 106. We agree with the district court. Because LoopNet, as an Internet service provider, is simply the owner and manager of a system used by others who are violating CoStar's copyrights and is not an actual duplicator itself, it is not directly liable for copyright infringement. We therefore affirm.
CoStar is a national provider of commercial real estate information, and it claims to have collected the most comprehensive database of information on commercial real estate markets and commercial properties in the United States and the United Kingdom. Its database includes a large collection of photographs of commercial properties, and CoStar owns the copyright in the vast majority of these photographs. CoStar makes its database, including photographs, available to customers through the Internet and otherwise, and each customer agrees not to post CoStar's photographs on its own website or on the website of a third party.
LoopNet is an Internet service provider ("ISP") whose website allows subscribers, generally real estate brokers, to post listings of commercial real estate on the Internet. It claims that its computer system contains over 100,000 customer listings of commercial real estate, including approximately 33,000 photographs, and that it was, during the district court proceedings, adding about 2200 listings each day, 250 of which include photographs. LoopNet does not post real estate listings on its own account. Rather it provides a "web hosting service that enables users who wish to display real estate over the Internet to post listings for those properties on LoopNet's web site."
When using LoopNet's services, a subscriber fills out a form and agrees to "Terms and Conditions" that include a promise not to post copies of photographs without authorization. If the subscriber includes a photograph for a listing, it must fill out another form and agree again to the "Terms and Conditions," along with an additional express warranty that the subscriber has "all necessary rights and authorizations" from the copyright owner of the photographs. The subscriber then uploads the photographs into a folder in LoopNet's system, and the photograph is transferred to the RAM of one of Loop-Net's computers for review. A LoopNet employee then cursorily reviews the photograph (1) to determine whether the photograph in fact depicts commercial real estate, and (2) to identify any obvious evidence, such as a text message or copyright notice, that the photograph may have been copyrighted by another. If the photograph fails either one of these criteria, the employee deletes the photograph and notifies the subscriber. Otherwise, the employee clicks an "accept" button that prompts LoopNet's system to associate the photograph with the web page for the property listing, making the photograph available for viewing.
Beginning in early 1998, CoStar became aware that photographs for which it held copyrights were being posted on LoopNet's website by LoopNet's subscribers. When CoStar informed LoopNet of the violations, LoopNet removed the photographs. In addition, LoopNet instituted and followed a policy of marking properties to which infringing photographs had been posted so that if other photographs were posted to that property, LoopNet could inspect the photographs side-by-side to make sure that the new photographs were not the infringing photographs. By late summer 1999, CoStar had discovered 112 infringing photographs on LoopNet's website, and by September 2001, it had found over 300. At that time, LoopNet had in its system about 33,000 photographs posted by its subscribers.
CoStar commenced this action in September 1999 against Loop-Net, alleging copyright infringement, violation of the Lanham Act, and several state-law causes of action. On cross-motions for summary judgment, the district court concluded that LoopNet had not engaged in direct infringement under the Copyright Act. It left open, however, CoStar's claims that LoopNet might have contributorily infringed CoStar's copyrights and that LoopNet was not entitled to the "safe harbor" immunity provided by the Digital Millennium Copyright Act, 17 U.S.C. § 512. When the parties stipulated to the dismissal of all claims except the district court's summary judgment in favor of Loop-Net on direct infringement, the district court entered final judgment on that issue in favor of LoopNet. From entry of the judgment, CoStar noticed this appeal.
CoStar contends principally that the district court erred in providing LoopNet "conclusive immunity," as a "`passive' provider of Internet" services, from strict liability for its hosting of CoStar's copyrighted pictures on LoopNet's website. The district court based its decision on the reasoning of Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D.Cal.1995) ("Netcom"), which held that an ISP serving as a passive conduit for copyrighted material is not liable as a direct infringer. CoStar asserts that LoopNet is strictly liable for infringement of CoStar's rights protected by § 106 of the Copyright Act. According to CoStar, any immunity for the passive conduct of an ISP such as LoopNet must come from the safe harbor immunity provided by the Digital Millennium Copyright Act ("DMCA"), if at all, because the DMCA codified and supplanted the Netcom holding. Because Loop-Net could not meet the conditions for immunity under the DMCA as to many of the copyrighted photographs, LoopNet accordingly would be liable under CoStar's terms for direct copyright infringement for hosting web pages containing the infringing photos.
Stated otherwise, CoStar argues (1) that the Netcom decision was a pragmatic and temporary limitation of traditional copyright liability, which would otherwise have held ISPs strictly liable, and that in view of the enactment of the DMCA, Netcom's limitation is no longer necessary; (2) that Congress considered Netcom in enacting the DMCA, codifying its principles and thereby supplanting and preempting Netcom as the only exemption from liability for direct infringement; and (3) that because LoopNet cannot satisfy the conditions of the DMCA, it remains strictly liable for direct infringement under §§ 106 and 501 of the Copyright Act. We will address CoStar's points, determining first the nature and applicability of the Netcom decision and second the impact of the DMCA on Netcom.
In Netcom, the court held, among other things, that neither the ISP providing Internet access, nor the bulletin board service storing the posted material, was liable for direct copyright infringement under § 106 when a subscriber posted copyrighted materials on the Internet. The court observed that "[a]lthough copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant's system is merely used to use a copy by a third party." 907 F.Supp. at 1370. In responding to the argument that the ISP's computers stored and thereby "copied" copyrighted material on its system for a period of days in rendering its service, the court stated:
Where the infringing subscriber is clearly directly liable...
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