The Negligence Theory of Copyright Liability

by Wendy McElroy on January 2, 2013

Ed. note: Usually liability for copyright is “direct”—as a result of actions by a person that amount to copyright infringement. There are also types of “secondary” liability, such as “contributory” or “vicarious” infringement. Under the doctrine of contributory infringement, “One who knowingly induces, causes or materially contributes to copyright infringement, by another but who has not committed or participated in the infringing acts him or herself, may be held liable as a contributory infringer if he or she had knowledge, or reason to know, of the infringement.” As for vicarious liability: “A person may be held liable for the infringing acts committed by another if he or she had the right and ability to control the infringing activities and had a direct financial interest in such activities.”

Ms. McElroy’s article below discusses an attempt to expand copyright liability by adding a new type of “secondary” liability: negligent. But as noted in an EFF article cited by McElroy, arguments for the negligence theory of copyright liability

ignore[] traditional theories in favor of an unprecedented claim based on negligence and a 1932 case about boats.

It’s a creative theory. It’s also wrong.

First, there is no negligence theory of copyright liability. Zip, none, nada. Only direct, vicarious and contributory (which includes inducement) ….

This theory also ignores the safe harbor provisions of the DMCA.

—Ed.

The Negligence Theory of Copyright Liability

By Wendy McElroy

A new business model has emerged from America’s litigious nature: copyright trolling. A copyright troll is someone who uses copyright law in an opportunistic manner for no other reason than to make money through lawsuits or the threat thereof. After notifying an alleged infringer of impending litigation, the troll offers to settle out of court for a sum that is often less than the cost of defending a lawsuit.

The issue of trolling is distinct from the question of whether or not protecting intellectual property (IP) is a valid function of law. Arguably, those who support the legal protection of ideas – copyright and patent – should be more alarmed than those who argue against IP. Trolls typically use an overly broad interpretation of the law to extort pre-court profits.¹ The process results in bad publicity and occasional court decisions that are unfavorable for copyright enforcers. It also provides ammunition to anti-IP advocates. They can point to trolling as a reflection of the injustice and harm caused by IP laws.

One overly broad interpretation of IP law is currently being pushed to the forefront: the negligence theory of copyright liability.

A NEW THEORY OF NEGLIGENCE

Trolls want to ascribe negligent liability to anyone who operates an open wifi router or otherwise enables the downloading of copyrighted material. Under this legal theory, a customer who uses an open network at Starbucks to make ‘improper’ downloads would leave Starbucks liable for copyright infringement. Any school, library, restaurant, airport or other open wifi hotspot would be equally vulnerable, as would internet service providers (ISPs).

Immense problems confront this legal theory. Electronic Frontier Foundation (EFF) stated one of them, “[N]o court has ever found that anyone is liable simply because another user of his or her open wifi committed some legal wrong….Sometimes people use those connections for bad acts, most of the time they don’t, the world gets a valuable public service, and the open wifi providers are not liable.”²

EFF stated another problem. “In 2012, at least six federal judges in California, New York, and Hawaii agreed³ with us,⁴ throwing out or blocking cases based on this theory. Not a single judge that we know of has let the ‘copyright negligence’ or ‘wifi negligence’ theory go forward when a defendant has challenged it.”⁵

Moreover, the Digital Millennium Copyright Act (DMCA) of 1998⁶ provides what is called a “safe harbor” for wifi routers and ISPs. Generically speaking, a safe harbor law is one that restricts or eliminates legal liability for those who act in good faith and in accordance with defined standards. The DMCA offers safety to service providers who facilitate “the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.” (17 USC § 512 – Limitations on liability relating to material online)⁷ A service provider need only satisfy certain defined standards. For example, “[t]he transmission, routing, provision of connections, or storage is carried out by an automatic technical process.” The automatic process distinguishes a service provider from a publisher who offers a ‘hands-on’ process that typically includes editing and proofreading.

In other words, no court has upheld the negligence theory of copyright liability for those who merely provide automatic access to the internet. Several judges have dismissed the theory. And federal law offers safe harbor to such service providers. The matter seems to be settled law.

Nevertheless, copyright trolls continue to use personal injury law on the state level to pursue liability claims against automatic providers. Consider an attorney named Brett Gibbs, affiliated with the Prenda Law firm. EFF estimates that Gibbs “has about 30 open cases in Northern California alone….It’s likely that Prenda is using the threat of these suits to demand settlements of $2,000-$5,000 from Internet subscribers, without evidence that the subscribers themselves downloaded anything.” Such settlements can occur at any point in the proceedings prior to the judge’s final ruling.

Individual internet subscribers are included in the negligent liability claims on the grounds that their open connection was used by someone else to download protected material. In the California case AF Holdings vs. Josh Hatfield and John Doe, Hatfield was accused of failing to secure his internet connection; this allowed a third party identified as John Doe to download videos.

In September of this year, Judge Phyllis Hamilton ruled in favor of Hatfield’s motion to dismiss. She found that “AF Holdings has not articulated any basis for imposing on Hatfield a legal duty to prevent the infringement of AF Holdings’ copyrighted works, and the court is aware of none.”⁸

And, yet, open cases still proliferate in California, perhaps in pursuit of nothing more than lucrative out-of-court settlements. The situation may be poised to do an about face.

ACCUSED INFRINGERS GO ON THE ATTACK

On December 13, defense attorney Morgan E. Pietz filed a Motion to Relate in the United States District Court, Northern District of California.⁹ The motion seeks to allow over two dozen John Doe defendants to be treated as a single party for the purpose of defending against motions brought against them by two plaintiffs: AF Holdings and Ingenuity 13.

Pietz claims that both plaintiffs have filed “substantially identical cookie cutter complaints” against the defendants, unleashing “a tsunami of John Doe pornographic copyright infringement actions.” Each John Doe is accused of not securing an internet connection from third party use.

Other similarities in the cases make a Motion to Relate appropriate. Both plaintiffs are “shell entities organized under the laws of the Federation of St. Kitts and Nevis”; both are represented by Prenda Law. In each case, the plaintiffs seek pre-service discovery subpoenas to force ISPs to disclose information for use in a possible lawsuit.

Pietz has also gone on the attack in another manner. His motion informs the judge that Prenda may be “defrauding Courts across the country” through a sleight of hand regarding identity and other matters. The motion states, “[i]t appears the plaintiffs’ lawyers may truly be the real parties in interest in these cases, there are undisclosed financial interests in the outcome” and “improper fee splitting may be occurring.”

He cites an ongoing legal scuffle in Michigan which involves Prenda. The legal tangle started when a man named Alan Cooper became the caretaker of property owned by copyright attorney John Steele. In an October 15 Forbes article entitled “How Porn Copyright Lawyer John Steele Has Made A ‘Few Million Dollars’ Pursuing (Sometimes Innocent) ‘Porn Pirates’,” Steele reportedly bragged about filing over 350 pornographic infringement suits and “currently suing approximately 20,000 people.”¹⁰

Cooper alleges that, without his knowledge or consent, Steele and Prenda began to use his name, his signature and to list him as manager of companies such as AF Holdings.¹¹ In short, he accuses them of identity theft.

The accusation came to light when AF Holdings brought several lawsuits in Michigan. In one of them, Cooper addressed a letter to the judge through an attorney in which he stated a concern that the misappropriation of his name was opening him to liability. The letter identified “Steele’s former law firm, Steele Hansmeier” as the apparent “predecessor firm to Prenda Law” with whom it shared a domain name. Moreover, the letter stated that Steele “is currently (Nov. 29) ‘of counsel’ with Prenda Law.”¹²

Pietz’s motion also cites Sunlust Pictures, Inc. v. Tuan Nguyen, a 2012 pornographic infringement case brought by Prenda in Florida. When the accusation of identity theft arose against the plaintiff and Prenda, the court demanded the physical presence of the plaintiff. Judge Mary Scriven eventually dismissed the case “for failure [of the plaintiff] to appear at this hearing, for failure to present a lawful agent, for attempted fraud on the Court by offering up a person who has no authority to act on behalf of the corporation as its corporate representative.” She added, “the Court will hear, by motion, a motion for sanctions and fees against this Sunlust entity and everyone affiliated with it…”¹³

Both Gibbs of Prenda and an attorney for AF Holdings have denied the charge of identity theft but neither seem willing to explain who is the real CEO.¹⁴ In short, the Prenda saga cries out for a federal investigation.

CONCLUSION

A legal structure that is massively abused over an extended period, despite being tested by many courts in various jurisdictions, is fundamentally flawed. Current IP laws should be swept away. The outright abolition of copyright and patent would accomplish this goal, and it is the path I endorse. Hopefully the Prenda debacle will convince even pro-IP voices, however, that the proper way to protect ideas is to facilitate their free flow through society.

{ 1 comment… add one }

Peter Šurda January 3, 2013, 4:39 pm

Sadly, in Germany, negligent contributory liability for copyright infringement is alive. People lost in court when others used their WiFi connection or when they ran a TOR exit node that transmitted infringing data.

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