North Carolina Court Issues Leading Decision Regarding Copyright Infringement

            In the digital age where the internet permeates every aspect of our lives and commerce, the courts are continually called upon to demarcate where and how communications and intellectual property laws apply to the services provided by websites and internet service providers.  Many internet-based companies find themselves facing potential liability based upon their legitimate business activities due to the unfortunate attempts by users of their services to thwart the intellectually property rights of others.  The U.S. District Court for the Western District of North Carolina is among the most recent courts to issue a decision favoring internet-based companies in this continuing struggle in Ark Promotions, Inc. v., Inc., YouTube, LLC and YouTube, Inc., No. 3:12-CV-131-RJC-DCK, 2012 U.S. Dist. LEXIS 149283 (W.D.N.C. Oct. 16, 2012).  Defendants and YouTube operate websites that allow users to create or upload videos and share the video broadcasts with others.  Plaintiff Ark Promotions, a boxing promoter, sued and YouTube because individuals uploaded and streamed video of one of Ark Promotions’ pay-per-view boxing matches to the YouTube and video-hosting websites, which allowed thousands of people to view the match without paying for it. Our very own Magistrate Judge David Keesler issued a recommendation to grant the defendants’ motion to dismiss with prejudice plaintiff’s claims against and YouTube for violations of the Communications Act and inducement of copyright infringement under Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).  The recommendation went unopposed and Chief Judge Conrad adopted it, having found that Magistrate Judge Keesler had conducted a “thorough examination and dismissal of plaintiff’s claims.”  According to counsel for defendants, Magistrate Judge Keesler and Chief Judge Conrad join the ranks of the first few judges in the country to grant a 12(b)(6) motion to dismiss a complaint for inducement of copyright infringement (see here).  A look at the key factors underlying the decision in this case will inform companies facing such claims in North Carolina (and elsewhere, as the court noted that plaintiffs cited no authority supporting their position).  

            The Communications Act Does Not Apply to Retransmission of Cable/Satellite Broadcasts via the Internet.  Receiving a video of an authorized cable broadcast streamed on the internet is not cable theft.  This is so, whether the streaming was done simultaneously with receipt of the cable signal from an authorized cable provider or done via the uploading of a recording of the authorized cable broadcast to the internet at a later time.  Nor is receiving video of authorized cable or satellite broadcasts streamed on the internet considered the receipt or publication of an intercepted radio communication.  While these two statements sound like common sense, it was necessary for our court to confirm these principles in Ark Promotions. Plaintiff alleged unauthorized interception or reception of cable service in violation of 47 U.S.C. § 553 andunauthorized publication or use of communications in violation of 47 U.S.C. § 605 based upon allegations that video of its copyrighted pay-per-view broadcast of a boxing match was streamed on’s website by third-parties and video clips of the fight were uploaded to YouTube by third-parties after the broadcast.  The court held that “because Defendants did not intercept or receive a direct cable or satellite communication, Plaintiff fails to state a claim upon which relief may be granted as a matter of law under § 553 or § 605. Plaintiff has not identified any authority supporting a finding that receipt of a retransmission of a communication by computer or the internet creates liability under the Communications Act.”  This was the outcome, despite the fact that plaintiff allegedly had notified prior to and during the broadcast that its users planned to use the website to transmit the live fight.  

            In another recent case with similar claims, Zuffa, LLC v., 838 F.Supp.2d 1102 (D.Nev. 2012), the court noted the peculiar attempt by the plaintiff to bring Communications Act claims based upon internet video streaming: “neither can the Court or the parties find an instance where a plaintiff has asserted Communications Act claims under facts similar to these. Rather, again, Communications Act claims are generally colloquially referred to as claims for ‘stealing cable.’ In cases such as these for illegally streaming copyright protected video, such as against YouTube, plaintiffs simply assert copyright (and maybe trademark) claims, not cable theft.” 

            Decision deferred on whether the Communications Decency Act Provides Immunity to Communications Act Claims.  Section 230 of the Communications Decency Act(47 U.S.C. § 230(c)(1))provides protection for internet-based companies that host or transmit content created by third parties by prohibiting them from being treated as the “publisher or speaker” of content created or developed by such third parties.  Defendants in Ark Promotions argued that this protection clearly grants them immunity to the plaintiff’s claims under the Communications Act (if the Act were applicable) because the claims are based upon conduct of third parties who allegedly streamed and uploaded content to the defendants’ websites.  There are no cases that have resolved whether Section 230 applies to Communications Act claims, and our court in Ark Promotions joined the court in Zuffa in deferring a decision on the issue, having already found that the Communications Act claims asserted by the plaintiffs did not apply to the video streaming at issue.  The Ark Promotions defendants argued that no courts have “applied Section 230 specifically in the context of claims under the Communications Act…because, as discussed above, that statute is clearly inapplicable to the hosting of content by a website” and “while this issue may be new, the law is clear.” 

            Providing Instructions on How to Use the Website Is Not Enough to Support a Claim for Inducement of Copyright Infringement.  Defendants’ counsel notes that the WDNC is among the first courts in the country to dismiss a complaint for inducement of copyright infringement.  The Ark Promotions court cited Ashcroft v. Iqbal, 556 U.S. 662 (2009) in noting that a complaint will survive a motion to dismiss “if it contains enough facts to state a claim to relief that is plausible on its face,” meaning that the plaintiff has plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”  Plaintiff in this case fell far short of this standard by merely pleading in one sentence that “ provides detailed instructions on its website directing users how to stream live video over the Internet through the website.”  According to Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd, 545 U.S. 913 (2005),an inducement claim requires “active steps…taken to encourage direct infringement,…such as advertising an infringing use or instructing how to engage in an infringing use.”  In Ark Promotions, the court found that plaintiff’s complaint “does no more than suggest that is providing instructions for use of its product for lawful purposes.” 

            The Bottom Line.  Internet-based companies that operate content sharing services similar to those of and YouTube should take comfort in this North Carolina decision.  The sharing services provided by such internet-based companies do not appear to subject them to liability under the Communications Act; and, without more direct involvement in encouraging the use of such services for unlawful purposes, simply providing content sharing services and instructing users on how to operate the services does not appear to subject these companies to liability for inducement of copyright infringement.  The court did, however, decline to address whether the Communications Decency Act provides protection for such companies from claims under the Communications Act.  But this novel question may never be tackled by the courts since the law on the inapplicability of the Communications Act to such services seems to be clear.

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