U.S. Appeals Court for the 9th Circuit finds BitTorrent operator liable for contributory infringement on an inducement theory (Columbia Picture v. Fung)

On 21 March 2013, the U.S. 9th Circuit affirmed in part and vacated in part the California Central District Court decision that Gary Fung, the operator of several BitTorrent websites featuring infringing materials, was liable for contributory copyright infringement on an inducement theory.

To reach this conclusion, the Court, heavily relying on the U.S. Supreme Court decision in Grokster, found that Fung had not only distributed a service enabling infringement, but had done so with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps to foster infringement. Specifically, the Court found that Fung had (i) encouraged the uploading of torrent files that referred to copyrighted content, (ii) helped in localizing infringing content and (iii) deliberately avoided taking any steps to “develop any tools or other mechanisms to diminish third party users’ infringing activity” (although the Court stressed that this element alone may not support a finding of liability).

The Court then rejected the affirmative defenses raised by Fung, based on three of the four DMCA safe harbors (namely the routing, linking and hosting safe harbors). The Court first observed that in view of the overwhelming presence of infringing content, Fung had at least “sufficient awareness” (or “red flag” notice) of infringing activity. The Court then held that Fung directly received a financial benefit from this infringing activity – notably through higher advertising revenues “predicated on the broad availability of infringing material” – and also had the right and ability to control this activity, since he “organized” and “described” torrent files on his sites with specific search terms describing material likely to be infringing.

The Court however rejected the argument that inducement liability was inherently incompatible with protection under the DMCA safe harbors and reversed the district court’s permanent injunction on the basis that certain provisions of the injunction were too vague or unduly burdensome. [Béatrice Martinet Farano]