Fung and Isohunt found liable for inducing worldwide copyright infringement

Earlier this week, a US district court granted summary judgement to MPAA members holding that Gary Fung and four websites operated by him, including Isohunt one of Canada’s largest bittorrent sites, contribute to massive worldwide copyright infringement.

Operators of bittorrent sites like isoHunt often claim they are nothing but content neutral search engines like Google. The Isohunt court disagreed holding, based on uncontested expert evidence, that approximately 95 percent of all files made accessible through Isohunt were infringing or highly likely to be infringing.

The plaintiffs had claimed that Fung was liable for the direct infringement of his sites’ users based on three secondary liability theories: inducement to infringe, material contribution to infringement, and vicarious liability. The first two theories (inducement and material contribution) are known collectively in the US as “contributory liability.” Despite the analytical similarities between the inducement and material contribution theories, some US courts have held that inducement and material contribution are distinct theories of contributory liability through which defendants can be found liable.

Generally, inducement requires that the defendant has undertaken purposeful acts aimed at assisting and encouraging others to infringe copyright. By contrast, material contribution (in the context of computer system operators) applies if the defendant “has actual knowledge that specific infringing material is available using its system, and can take simple measures to prevent further damage to copyrighted works, yet continues to provide access to infringing works.” The third theory, vicarious liability, is similar to contributory liability but includes some contours that differ from these other theories of liability. A defendant infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.

The Isohunt court premised its liability on the inducement doctrine not finding it necessary to consider the other two theories.

An interesting issue in the case was whether the US court had subject matter jurisdiction over the infringement given that Fung’s four web sites were hosted in Canada. The court held it did based on the well established principle in US law that in the context of secondary liability, an actor may be liable for activity undertaken abroad that knowingly induces infringement within the United States.  Once a plaintiff has established that an act of infringement has taken place within the United States, defendants may be held liable for their conduct that constitutes inducement, material contribution, or vicarious infringement, even if Defendants’ conduct took place abroad.

Fung had argued that to establish acts of direct infringement that are subject to the US copyright law, the plaintiff has to provide evidence that both the transferor and the transferee are located in the United States. The court rejected this contention holding that proof of either acts of uploading or downloading a file in the US are all that is required. According to the court:

“However, United States copyright law does not require that both parties be located in the United States. Rather, the acts of uploading and downloading are each independent grounds of copyright infringement liability. Uploading a copyrighted content file to other users (regardless of where those users are located) violates the copyright holder’s § 106(3) distribution right. Downloading a copyrighted content file from other users (regardless of where those users are located) violates the copyright holder’s § 106(1) reproduction right… Accordingly, Plaintiffs need only show that United States users either uploaded or downloaded copyrighted works; Plaintiffs need not show that a particular file was both uploaded and downloaded entirely within the United States.”

The court found that there was overwhelming evidence of acts of direct infringement in the US.

The argument that bittorrent sites like Isohunt are nothing but content neutral search engines like Google was also categorically dismissed by the court holding that “the evidence of Defendant’s intent to induce infringement is overwhelming and beyond reasonable dispute”. This finding was backed up by detailed findings about messages to users, assistance to users, and the implementation of technical features, which were all intended to induce direct infringement by site users. The court also found that the defendants’ business model depended on massive infringing uses of the plaintiffs’ copyright materials.

The defendants had also relied on three safe harbours provided under the DMCA to exclude their liability; namely, the safe harbours available to providers of information location tools (ILTs); to mere conduits; and to providers of hosting services. These exclusions were carefully drafted to ensure that they applied to innocent intermediaries without creating the inadvertent consequence that they could be relied on by unauthorized file sharing sites and services. The court held they did not apply for several reasons.

First, the DMCA safe harbours were inapplicable because Fung was liable for secondary infringement. Since the safe harbours were intended for use by only innocent intermediaries, they were not available because Fung was found to have actively induced infringement. According to the court:

“The Digital Millennium Copyright Act provides affirmative defenses for providers of certain internet services. In many ways, the Digital Millennium Copyright Act is simply a restatement of the legal standards establishing secondary copyright infringement – in many cases, if a defendant is liable for secondary infringement, the defendant is not entitled to Digital Millennium Copyright Act immunity; if a defendant is not liable for secondary infringement, the defendant is entitled to Digital Millennium Copyright Act immunity. The two sets of rules do not entirely overlap, but this framework is helpful for understanding the Act’s statutory text and structure.”

(This finding by the court is consistent with the approach taken by the Supreme Court of Canada in the SOCAN Tariff 22 case which held that the intermediary exception in para 2.4(1)(b) of the Copyright Act applies only to innocent intermediaries.)

Second, the DMCA safe harbours were unavailable because Fung had not met the statutory condition that requires US service providers to do what they can reasonably be asked to do to prevent the use of their service by repeat infringers, if they want to rely on the DMCA safe harbours.

Third, Fung was unable to rely on the DMCA safe harbours because he could not inadvertently fit within their intentionally specific provisions. For example, under the DMCA a provider of “information location tools”  must satisfy the three conjunctive requirements to apply; the defendant (1) must not know or have reason to know of infringing activities, or does not remove infringing materials upon receipt of such knowledge; (2) does not profit from infringement where it has the power to control the infringement; and (3) upon receiving notice (in the statutorily prescribed manner) from the copyright holder, removes the infringing material. Fung was not able to satisfy any of these requirements. Fung was also unable to rely on the hosting or conduit exceptions because, according to the court, no infringing materials were posted on or passed through defendants’ systems.

The  Isohunt case should be of particular interest to Canadians as we assess the amendments needed to our laws to enable Canadians to stem online infringements facilitated by unauthorized Canadian file sharing sites and services. It is apparent from the opinion in the case that key legal doctrines played a major role in the findings of infringement. In particular, the following factors were central to the court’s findings of liability:

  1. Liability for direct infringement based upon acts of uploading (e.g., making files available for distribution such as required by the WCT and WPPT making available and distribution rights) and downloading (creating reproductions of files).
  2. Existence of robust doctrines of secondary liability such as inducement.
  3. Service provider safe harbours that (a) are narrowly tailored, (b) protect only legitimate innocent intermediaries e.g., ISPs who do not participate in or induce infringement by users of their services, and (c) do not apply unless the service providers act responsibly and do what they can reasonably be asked to do to prevent the use of their service by repeat infringers.
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