Als Scan v. Remarq Communities

• Decision Date: 01 November 2000
• Docket Number: No. 00-1351,00-1351
• Citation: 239 F.3d 619
• Parties: (4th Cir. 2001) ALS SCAN, INCORPORATED, Plaintiff-Appellant, v. REMARQ COMMUNITIES, INCORPORATED, Defendant-Appellee. . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 619

239 F.3d 619 (4th Cir. 2001)

ALS SCAN, INCORPORATED, Plaintiff-Appellant, v. REMARQ COMMUNITIES, INCORPORATED, Defendant-Appellee.

No. 00-1351.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: November 1, 2000.

Decided: February 6, 2001.

Appeal from the United States District Court for the District of Maryland, at Baltimore.

J. Frederick Motz, Chief District Judge. (CA-99-2594-JFM) COUNSEL: ARGUED: Harry Brett Siegel, LAW OFFICE OF JOEL MARC ABRAMSON, Columbia, Maryland, for Appellant. Robert R. Vieth, COOLEY GODWARD, L.L.P., Reston, Virginia, for Appellee. ON BRIEF: Robert T. Cahill, COOLEY GODWARD, L.L.P., Reston, Virginia, for Appellee.

Before WIDENER, WILKINS, and NIEMEYER, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opin-ion. Judge Niemeyer wrote the opinion, in which Judge Widener and Judge Wilkins joined.

OPINION

NIEMEYER, Circuit Judge:

We are presented with an issue of first impression-whether an Internet service provider enjoys a safe harbor from copyright infringement liability as provided by Title II of the Digital Millennium Copyright Act ("DMCA") when it is put on notice of infringement activity on its system by an imperfect notice. Because we conclude that the service provider was provided with a notice of infringing activity that substantially complied with the Act, it may not rely on a claim of defective notice to maintain the immunity defense provided by the safe harbor. Accordingly, we reverse the ruling of the district court that found the notice fatally defective, and affirm its remaining rulings.

I

ALS Scan, Inc., a Maryland corporation, is engaged in the business of creating and marketing "adult" photographs. It displays these pictures on the Internet to paying subscribers and also sells them through the media of CD ROMs and videotapes. ALS Scan is holder of the copyrights for all of these photographs.

RemarQ Communities, Inc., a Delaware corporation, is an online Internet service provider that provides access to its subscribing members. It has approximately 24,000 subscribers to its news group base and provides access to over 30,000 newsgroups which cover thousands of subjects. These newsgroups, organized by topic, enable subscribers to participate in discussions on virtually any topic, such as fine arts, politics, religion, social issues, sports, and entertainment. For example, RemarQ provides access to a newsgroup entitled "Baltimore Orioles," in which users share observations or materials about the Orioles. It claims that users post over one million articles a day in these newsgroups, which RemarQ removes after about 8-10 days to accommodate its limited server capacity. In providing access to newsgroups, RemarQ does not monitor, regulate, or censor the content of articles posted in the newsgroup by subscribing members. It does, however, have the ability to filter information contained in the newsgroups and to screen its members from logging onto certain newsgroups, such as those containing pornographic material.

Two of the newsgroups to which RemarQ provides its subscribers access contain ALS Scan's name in the titles. These newsgroups -"alt.als" and "alt.binaries.pictures.erotica.als" -contain hundreds of postings that infringe ALS Scan's copyrights. These postings are placed in these newsgroups by RemarQ's subscribers.

Upon discovering that RemarQ databases contained material that infringed ALS Scan's copyrights, ALS Scan sent a letter, dated August 2, 1999, to RemarQ, stating:

Both of these newsgroups ["alt.als" and "alt.binaries.pictures.erotica.als"] were created for the sole purpose of violating our Federally filed Copyrights and Tradename. These newsgroups contain virtually all Federally Copyrighted images. . . . Your servers provide access to these illegally posted images and enable the illegal transmission of these images across state lines.

This is a cease and desist letter. You are hereby ordered to cease carrying these newsgroups within twenty-four (24) hours upon receipt of this correspondence . . . .

America Online, Erol's, Mindspring, and others have all complied with our cease and desist order and no longer carry these newsgroups.

* * *

Our ALS Scan models can be identified at http://www.alsscan.com/modlinf2.html[.] Our copyright information can be reviewed at http://www.alsscan.com/ copyrite.html[.]

RemarQ responded by refusing to comply with ALS Scan's demand but advising ALS Scan that RemarQ would eliminate individual infringing items from these newsgroups if ALS Scan identified them "with sufficient specificity." ALS Scan answered that RemarQ had included over 10,000 copyrighted images belonging to ALS Scan in its newsgroups over the period of several months and that

[t]hese newsgroups have apparently been created by individuals for the express sole purpose of illegally posting, transferring and disseminating photographs that have been copyrighted by my client through both its websites and its CD-ROMs. The newsgroups, on their face from reviewing messages posted thereon, serve no other purpose.

When correspondence between the parties progressed no further to resolution of the dispute, ALS Scan commenced this action, alleging violations of the Copyright Act and Title II of the DMCA, as well as unfair competition. In its complaint, ALS Scan alleged that RemarQ possessed actual knowledge that the newsgroups contained infringing material but had "steadfastly refused to remove or block access to the material." ALS Scan also alleged that RemarQ was put on notice by ALS Scan of the infringing material contained in its database. In addition to injunctive relief, ALS Scan demanded actual and statutory damages, as well as attorneys fees. It attached to its complaint affidavits establishing the essential elements of its claims.

In response, RemarQ filed a motion to dismiss the complaint or, in the alternative, for summary judgment, and also attached affidavits, stating that RemarQ was prepared to remove articles posted in its newsgroups if the allegedly infringing articles were specifically identified. It contended that because it is a provider of access to newsgroups, ALS Scan's failure to comply with the DMCA notice requirements provided it with a defense to ALS Scan's copyright infringement claim.

The district court ruled on RemarQ's motion, stating, "[RemarQ's] motion to dismiss or for summary judgment is treated as one to dismiss and, as such, is granted." In making this ruling, the district court held: (1) that RemarQ could not be held liable for direct copyright infringement merely because it provided access to a newsgroup containing infringing material; and (2) that RemarQ could not be held liable for contributory infringement because ALS Scan failed to comply with the notice requirements set forth in the DMCA, 17 U.S.C. S 512(c)(3)(A). This appeal followed.

II

ALS Scan contends first that the district court erred in dismissing its direct copyright infringement claim. It contends that it stated a cause of action for copyright infringement when it alleged (1) the "ownership of valid copyrights," and (2) RemarQ's violation of its copyrights "by allowing its members access to newsgroups containing infringing material."¹ See generally Keeler Brass Co. v. Continental Brass Co., 862 F.2d 1063, 1065 (4th Cir. 1988) (describing the requirements of a direct infringement claim). In rejecting ALS Scan's direct infringement claim, the district court relied on the decision in Religious Technology Center v. Netcom On- Line Communication Services, Inc., 907 F. Supp. 1361, 1368-73 (N.D. Cal. 1995), which concluded that when an Internet provider serves, without human intervention, as a passive conduit for copyrighted material, it is not liable as a direct infringer. The Netcom court reasoned that "it does not make sense to adopt a rule that could lead to liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet." Id. at 1372. That court observed that it would not be workable to hold "the entire Internet liable for activities that cannot reasonably be deterred." Id.; see also Marobie-FL, Inc. v. National Ass'n of Fire Equip. Distribs., 983 F. Supp. 1167, 1176-79 (N.D. Ill. 1997) (agreeing with Netcom's reasoning). ALS Scan argues, however, that the better reasoned position, contrary to that held in Netcom, is presented in Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552, 1555-59 (M.D. Fla. 1993), which held a computer bulletin board service provider liable for the copyright infringement when it failed to prevent the placement of plaintiff's copyrighted photographs in its system, despite any proof that the provider had any knowledge of the infringing activities.

Although we find the Netcom court reasoning more persuasive, the ultimate conclusion on this point is controlled by Congress' codification of the Netcom principles in Title II of the DMCA. As the House Report for that Act states,

The bill distinguishes between direct infringement and secondary liability, treating each separately. This structure is consistent with evolving case law, and appropriate in light of the different legal bases for and policies behind the different forms of liability.

As to direct infringement, liability is ruled out for passive, automatic acts engaged in through a technological process initiated by another. Thus the bill essentially codifies the result in the leading and most thoughtful judicial decision to date: Religious Technology Center v. Netcom On-Line Communications Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). In doing so, it overrules these aspects of Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993), insofar as that case suggests that such acts by service providers could constitute direct infringement, and provides certainty that Netcom and its progeny, so far...