Perfect 10, Inc. v. CCBill LLC

NOTE: This decision includes a discussion of copyright law, including the DMCA and its safe harbor provisions. This summary excludes those issues, instead focusing on the panel’s Section 230 analysis.

DATE: Filed March 29, 2007, amended May 31, 2007

COURT: United States Court of Appeals, Ninth Circuit (before Reinhardt, Kozinski, Milan D. Smith, Jr., Circuit Judges. Opinion by Smith.)

PLAINTIFF: Perfect 10, Inc.

DEFENDANTS: CCBill LLC, Cavecreek Wholesale Internet Exchange d/b/a CWIE LLC, and Netpass Systems Inc.

MATERIAL ALLEGATIONS: “Perfect 10 is the publisher of the eponymous adult entertainment magazine and the owner of the website, perfect10.com. Perfect10.com is a subscription site where consumers pay a membership fee in order to gain access to content on the website. Perfect 10 has created approximately 5,000 images of models for display in its website and magazine. Many of the models in these images have signed releases assigning their rights of publicity to Perfect 10. Perfect 10 also holds registered U.S. copyrights for these images and owns several related, registered trademark and service marks.

“CWIE provides webhosting and related Internet connectivity services to the owners of various websites. For a fee, CWIE provides “ping, power, and pipe,” services to their clients by ensuring the “box” or server is on, ensuring power is provided to the server and connecting the client’s service or website to the Internet via a data center connection. CCBill allows consumers to use credit cards or checks to pay for subscriptions or memberships to e-commerce venues.

“Beginning August 10, 2001, Perfect 10 sent letters and emails to CCBill and CWIE stating that CCBill and CWIE clients were infringing Perfect 10 copyrights.”

CAUSES OF ACTION: Copyright and trademark violations, violation of right of publicity, unfair competition, false and misleading advertising, and RICO claims.

PROCEDURAL HISTORY: The U.S. District Court for the Central District of California, Lourdes G. Baird, J., granted judgment in part for defendants. Parties appealed.

PROCEDURAL ACTION TAKEN HERE: Affirmed in part, reversed in part, and remanded.

OUTCOME: “As a practical matter, inclusion of rights protected by state law within the “intellectual property” exemption would fatally undermine the broad grant of immunity provided by the CDA. . . . Accordingly, CCBill and CWIE are eligible for CDA immunity for all of the state claims raised by Perfect 10.”

OPINION: “The immunity created by § 230(c)(1) is limited by § 230(e)(2), which requires the court to “construe Section 230(c)(1) in a manner that would neither ‘limit or expand any law pertaining to intellectual property.’” As a result, the CDA does not clothe service providers in immunity from “law[s] pertaining to intellectual property.” [citations omitted]”

Intellectual Property = Federal Intellectual Property. “The CDA does not contain an express definition of “intellectual property,” and there are many types of claims in both state and federal law which may-or may not-be characterized as “intellectual property” claims. While the scope of federal intellectual property law is relatively well-established, state laws protecting “intellectual property,” however defined, are by no means uniform. Such laws may bear various names, provide for varying causes of action and remedies, and have varying purposes and policy goals. Because material on a website may be viewed across the Internet, and thus in more than one state at a time, permitting the reach of any particular state’s definition of intellectual property to dictate the contours of this federal immunity would be contrary to Congress’s expressed goal of insulating the development of the Internet from the various state-law regimes. . . .

Elaborating in a footnote amended to the decision, the panel added that “[s]tates have any number of laws that could be characterized as intellectual property laws: trademark, unfair competition, dilution, right of publicity and trade defamation, to name just a few. Because such laws vary widely from state to state, no litigant will know if he is entitled to immunity for a state claim until a court decides the legal issue. And, of course, defendants that are otherwise entitled to CDA immunity will usually be subject to the law of numerous states. An entity otherwise entitled to § 230 immunity would thus be forced to bear the costs of litigation under a wide variety of state statutes that could arguably be classified as ‘intellectual property.’” Accordingly, “[i]n the absence of a definition from Congress, we construe the term “intellectual property” to mean “federal intellectual property.”

The panel noted that in the 1st Circuit’s Universal Communication decision, “the court seems to simply have assumed” that state law counts as intellectual property for purposes of Section 230. “We thus create no conflict with Universal Communication.” However, the panel also noted that Universal Communication “demonstrates the difficulties inherent in allowing state laws to count as intellectual property for CDA purposes.”

REHEARING PETITIONS: On May 31, 2007 a petition for rehearing and petition for rehearing en banc were denied. The panel added that “[n]o further petitions for rehearing may be filed.”

PETITION FOR CERTIORARI: On August 27, 2007 Perfect 10 filed a Petition for a Writ of Certiorari with the U.S. Supreme Court, asking it to review the Ninth Circuit’s grant of Section 230 immunity to state IP claims. See my post discussing the Petition here. The Supreme Court denied the petition on December 3, 2007.

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