Perfect 10, Inc. v. Ccbill LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PERFECT 10, INC., a California 

corporation,

Plaintiff-Appellant,

v.

CCBILL LLC, a corporation; No. 04-57143

CAVECREEK WHOLESALE INTERNET

EXCHANGE, a corporation d/b/a  D.C. No.

CV-02-07624-LGB

CWIE LLC,

Defendants-Appellees,

and

NETPASS SYSTEMS INC., a

corporation,

Defendant.



PERFECT 10, INC., a California 

corporation,

Plaintiff-Appellee,

v.

CCBILL LLC, a corporation; No. 04-57207

CAVECREEK WHOLESALE INTERNET

EXCHANGE, a corporation d/b/a  D.C. No.

CV-02-07624-LGB

CWIE LLC,

Defendants-Appellants, OPINION

and

NETPASS SYSTEMS INC., a

corporation,

Defendant.



3551

3552 PERFECT 10, INC. v. CCBILL LLC

Appeal from the United States District Court

for the Central District of California

Lourdes G. Baird, District Judge, Presiding

Argued and Submitted

December 4, 2006—Pasadena, California

Filed March 29, 2007

Before: Stephen Reinhardt, Alex Kozinski,

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.

PERFECT 10, INC. v. CCBILL LLC 3557

COUNSEL

Daniel J. Cooper, General Counsel, Perfect 10, Inc., Beverly

Hills, California, and Jeffrey N. Mausner, Berman, Mausner

& Resser, A Law Corporation, Los Angeles, California, for

the plaintiff-appellant/cross-appellee.

Jay M. Spillane, Fox & Spillane, LLP, Los Angeles, Califor-

nia, and John P. Flynn, Tiffany & Bosco, P.A., Phoenix, Ari-

zona, for the defendants-appellees/cross-appellants.

OPINION

MILAN D. SMITH, JR., Circuit Judge:

Perfect 10, the publisher of an adult entertainment maga-

zine and the owner of the subscription website perfect10.com,

alleges that CCBill and CWIE violated copyright, trademark,

and state unfair competition, false advertising and right of

publicity laws by providing services to websites that posted

images stolen from Perfect 10’s magazine and website. Per-

fect 10 appeals the district court’s finding that CCBill and

CWIE qualified for certain statutory safe harbors from copy-

right infringement liability under the Digital Millennium

Copyright Act (“DMCA”), 17 U.S.C. § 512, and that CCBill

and CWIE were immune from liability for state law unfair

competition and false advertising claims based on the Com-

munications Decency Act (“CDA”), 47 U.S.C. § 230(c)(1).

CCBill and CWIE cross-appeal, arguing that the district court

erred in holding that the CDA does not provide immunity

against Perfect 10’s right of publicity claims and in denying

3558 PERFECT 10, INC. v. CCBILL LLC

their requests for costs and attorney’s fees under the Copy-

right Act.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We

affirm in part, reverse in part, and remand.

BACKGROUND

Perfect 10 is the publisher of the eponymous adult enter-

tainment magazine and the owner of the website, per-

fect10.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 maga-

zine. Many of the models in these images have signed

releases assigning their rights of publicity to Perfect 10. Per-

fect 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 connectiv-

ity services to the owners of various websites. For a fee,

CWIE provides “ping, power, and pipe,” services to their cli-

ents 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 sub-

scriptions 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. Perfect 10

directed these communications to Thomas A. Fisher, the des-

ignated agent to receive notices of infringement. Fisher is also

the Executive Vice-President of both CCBill and CWIE. Rep-

resentatives of celebrities who are not parties to this lawsuit

also sent notices of infringement to CCBill and CWIE. On

September 30, 2002, Perfect 10 filed the present action alleg-

PERFECT 10, INC. v. CCBILL LLC 3559

ing copyright and trademark violations, state law claims of

violation of right of publicity, unfair competition, false and

misleading advertising, as well as RICO claims.

STANDARDS OF REVIEW

We review a district court’s grant of summary judgment de

novo. Rossi v. Motion Picture Ass’n of Am. Inc., 391 F.3d

1000, 1002 (9th Cir. 2004). “Viewing the evidence in the light

most favorable to the nonmoving party, we must determine

whether there are any genuine issues of material fact and

whether the district court correctly applied the relevant sub-

stantive law.” Leever v. Carson City, 360 F.3d 1014, 1017

(9th Cir. 2004). The district court’s interpretations of the

Copyright Act are also reviewed de novo. Ellison v. Robert-

son, 357 F.3d 1072, 1076 (9th Cir. 2004).

We review a district court’s decision to grant or deny attor-

ney’s fees under the Copyright Act for abuse of discretion.

Columbia Pictures Television, Inc. v. Krypton Broad. of Bir-

mingham, Inc., 259 F.3d 1186, 1197 (9th Cir. 2001).

DISCUSSION

I. SECTION 512 SAFE HARBORS

[1] The DMCA established certain safe harbors to “provide

protection from liability for: (1) transitory digital network

communications; (2) system caching; (3) information residing

on systems or networks at the direction of users; and (4) infor-

mation location tools.” Ellison, 357 F.3d at 1076-77 (citing 17

U.S.C. §§ 512(a)-(d)) (footnotes omitted). These safe harbors

limit liability but “do not affect the question of ultimate liabil-

ity under the various doctrines of direct, vicarious, and con-

tributory liability,” Perfect 10, Inc. v. Cybernet Ventures, Inc.,

213 F. Supp. 2d 1146, 1174 (C.D. Cal. 2002) (citing H.R.

Rep. 105-551 (II), at 50 (1998) (“H.R. Rep.”),1 and “nothing

1

The relevant portions of H.R. Rep. 105-551 (II) (1998) and S. Rep.

105-190 (1998) are largely identical. We cite to H.R. Rep. for purposes of

consistency.

3560 PERFECT 10, INC. v. CCBILL LLC

in the language of § 512 indicates that the limitation on liabil-

ity described therein is exclusive.” CoStar Group, Inc. v.

LoopNet, Inc., 373 F.3d 544, 552 (4th Cir. 2004).

A. Reasonably Implemented Policy: § 512(i)(1)(A)

[2] To be eligible for any of the four safe harbors at

§§ 512(a)-(d), a service provider must first meet the threshold

conditions set out in § 512(i), including the requirement that

the service provider:

[H]as adopted and reasonably implemented, and

informs subscribers and account holders of the ser-

vice provider’s system or network of, a policy that

provides for the termination in appropriate circum-

stances of subscribers and account holders of the ser-

vice provider’s system or network who are repeat

infringers.

Section 512(i)(1)(A); Ellison, 357 F.3d at 1080.

[3] The statute does not define “reasonably implemented.”

We hold that a service provider “implements” a policy if it

has a working notification system, a procedure for dealing

with DMCA-compliant notifications, and if it does not

actively prevent copyright owners from collecting information

needed to issue such notifications. Ellison, 357 F.3d at 1080

(working notification system required); Corbis Corp. v. Ama-

zon.com, Inc., 351 F. Supp. 2d 1090, 1102-03 (W.D. Wash.

2004) (must adopt procedure for dealing with notifications);

In re Aimster Copyright Litig., 252 F. Supp. 2d 634, 659

(N.D. Ill. 2002) (policy not implemented if service provider

actively blocks collection of information). The statute permits

service providers to implement a variety of procedures, but an

implementation is reasonable if, under “appropriate circum-

stances,” the service provider terminates users who repeatedly

or blatantly infringe copyright. See 17 U.S.C. § 512(i); Cor-

bis, 351 F. Supp. 2d at 1102.

PERFECT 10, INC. v. CCBILL LLC 3561

1. “Implementation”

Perfect 10 argues that there is a genuine issue of material

fact whether CCBill and CWIE prevented the implementation

of their policies by failing to keep track of repeatedly infring-

ing webmasters. The district court found that there was not,

and we agree.

In Ellison, Stephen Robertson posted copies of Harlan Elli-

son’s copyrighted short stories on Internet newsgroups avail-

able through USENET servers. 357 F.3d at 1075. Ellison

asserted that America Online, Inc. (“AOL”) had infringed his

copyright by providing access to the USENET servers. Id.

Based on evidence that AOL changed its contact email

address for copyright infringement notices from copy-

right@aol.com to aolcopyright@aol.com in the fall of 1999,

but neglected to register the change with the U.S. Copyright

Office until April 2000, we held that the district court erred

in concluding on summary judgment that AOL satisfied the

requirements of § 512(i). Id. at 1077. Even though Ellison did

not learn of the infringing activity until after AOL had noti-

fied the U.S. Copyright Office of the correct email address,

we found that “AOL allowed notices of potential copyright

infringement to fall into a vacuum and go unheeded; that fact

is sufficient for a reasonable jury to conclude that AOL had

not reasonably implemented its policy against repeat infring-

ers.” Id. at 1080.

Similarly, the Aimster cases hold that a repeat infringer pol-

icy is not implemented under § 512(i)(1)(A) if the service pro-

vider prevents copyright holders from providing DMCA-

compliant notifications. In Aimster, the district court held that

Aimster did not reasonably implement its stated repeat

infringer policy because “the encryption on Aimster renders

it impossible to ascertain which users are transferring which

files.” 252 F. Supp. 2d at 659. The court found that

“[a]dopting a repeat infringer policy and then purposely evis-

cerating any hope that such a policy could ever be carried out

3562 PERFECT 10, INC. v. CCBILL LLC

is not an ‘implementation’ as required by § 512(i).” Id. The

Seventh Circuit affirmed, finding that Aimster did not meet

the requirement of § 512(i)(1)(A) because, in part, “by teach-

ing its users how to encrypt their unlawful distribution of

copyrighted materials [Aimster] disabled itself from doing

anything to prevent infringement.” In re Aimster Copyright

Litig., 334 F.3d 643, 655 (7th Cir. 2003).

[4] Based on Ellison and the Aimster cases, a substantial

failure to record webmasters associated with allegedly

infringing websites may raise a genuine issue of material fact

as to the implementation of the service provider’s repeat

infringer policy. In this case, however, the record does not

reflect such a failure. Perfect 10 references a single page from

CCBill and CWIE’s “DMCA Log.” Although this page shows

some empty fields in the spreadsheet column labeled “Web-

masters [sic] Name,” Perfect 10’s conclusion that the DMCA

Log thus “does not reflect any effort to track notices of

infringements received by webmaster identity” is not sup-

ported by evidence in the record. The remainder of the

DMCA Log indicates that the email address and/or name of

the webmaster is routinely recorded in CCBill and CWIE’s

DMCA Log. CCBill’s interrogatory responses dated Decem-

ber 11, 2003 also contain a chart indicating that CCBill and

CWIE largely kept track of the webmaster for each website.

[5] Unlike Ellison and Aimster, where the changed email

address and the encryption system ensured that no informa-

tion about the repeat infringer was collected, it is undisputed

that CCBill and CWIE recorded most webmasters. The dis-

trict court properly concluded that the DMCA Log does not

raise a triable issue of fact that CCBill and CWIE did not

implement a repeat infringer policy.

2. Reasonableness

[6] A service provider reasonably implements its repeat

infringer policy if it terminates users when “appropriate.” See

PERFECT 10, INC. v. CCBILL LLC 3563

Corbis, 351 F. Supp. 2d at 1104. Section 512(i) itself does not

clarify when it is “appropriate” for service providers to act. It

only requires that a service provider terminate users who are

“repeat infringers.”

[7] To identify and terminate repeat infringers, a service

provider need not affirmatively police its users for evidence

of repeat infringement. Section 512(c) states that “[a] service

provider shall not be liable for monetary relief” if it does not

know of infringement. A service provider is also not liable

under § 512(c) if it acts “expeditiously to remove, or disable

access to, the material” when it (1) has actual knowledge, (2)

is aware of facts or circumstances from which infringing

activity is apparent, or (3) has received notification of claimed

infringement meeting the requirements of § 512(c)(3). Were

we to require service providers to terminate users under cir-

cumstances other than those specified in § 512(c), § 512(c)’s

grant of immunity would be meaningless. This interpretation

of the statute is supported by legislative history. See H.R.

Rep., at 61 (Section 512(i) is not intended “to undermine the

. . . knowledge standard of [§ 512](c).”).

Perfect 10 claims that CCBill and CWIE unreasonably

implemented their repeat infringer policies by tolerating fla-

grant and blatant copyright infringement by its users despite

notice of infringement from Perfect 10, notice of infringement

from copyright holders not a party to this litigation and “red

flags” of copyright infringement.

a. Perfect 10’s Claimed Notice of Infringement

Perfect 10 argues that CCBill and CWIE implemented their

repeat infringer policy in an unreasonable manner because

CCBill and CWIE received notices of infringement from Per-

fect 10, and yet the infringement identified in these notices

continued. The district court found that Perfect 10 did not pro-

vide notice that substantially complied with the requirements

3564 PERFECT 10, INC. v. CCBILL LLC

of § 512(c)(3),2 and thus did not raise a genuine issue of mate-

rial fact as to whether CCBill and CWIE reasonably imple-

mented their repeat infringer policy. We agree.

[8] Compliance is not “substantial” if the notice provided

complies with only some of the requirements of

§ 512(c)(3)(A). Section 512(c)(3)(B)(ii) explains that a ser-

vice provider will not be deemed to have notice of infringe-

ment when “the notification that is provided to the service

provider’s designated agent fails to comply substantially with

2

Section 512(c)(3) reads:

(A) To be effective under this subsection, a notification of

claimed infringement must be a written communication provided

to the designated agent of a service provider that includes sub-

stantially the following:

(i) A physical or electronic signature of a person authorized to

act on behalf of the owner of an exclusive right that is allegedly

infringed.

(ii) Identification of the copyrighted work claimed to have been

infringed, or, if multiple copyrighted works at a single online site

are covered by a single notification, a representative list of such

works at that site.

(iii) Identification of the material that is claimed to be infring-

ing or to be the subject of infringing activity and that is to be

removed or access to which is to be disabled, and information

reasonably sufficient to permit the service provider to locate the

material.

(iv) Information reasonably sufficient to permit the service pro-

vider to contact the complaining party, such as an address, tele-

phone number, and, if available, an electronic mail address at

which the complaining party may be contacted.

(v) A statement that the complaining party has a good faith

belief that use of the material in the manner complained of is not

authorized by the copyright owner, its agent, or the law.

(vi) A statement that the information in the notification is accu-

rate, and under penalty of perjury, that the complaining party is

authorized to act on behalf of the owner of an exclusive right that

is allegedly infringed.

PERFECT 10, INC. v. CCBILL LLC 3565

all the provisions of subparagraph (A) but substantially com-

plies with clauses (ii), (iii), and (iv) of subparagraph (A)” so

long as the service provider responds to the inadequate notice

and explains the requirements for substantial compliance. The

statute thus signals that substantial compliance means sub-

stantial compliance with all of § 512(c)(3)’s clauses, not just

some of them. See H.R. Rep., at 56 (A communication sub-

stantially complies even if it contains technical errors such as

misspellings or outdated information.). See also Recording

Indus. Ass’n of Am., Inc. v. Verizon Internet Servs., Inc., 351

F.3d 1229, 1236 (D.C. Cir. 2003) (citing H.R. Rep., at 56).3

Perfect 10 claims that it met the requirements of

§ 512(c)(3) through a combination of three sets of documents.

The first set of documents is a 22,185 page bates-stamped

production on October 16, 2002 that includes pictures with

URLs of Perfect 10 models allegedly posted on CCBill or

CWIE client websites. The October 16, 2002 production did

not contain a statement under penalty of perjury that the com-

plaining party was authorized to act, as required by

§ 512(c)(3)(A)(vi). The second set of documents was also not

sworn to, and consisted of a spreadsheet emailed to Fisher on

July 14, 2003 identifying the Perfect 10 models in the October

16, 2002 production by bates number. On December 2, 2003,

Perfect 10 completed interrogatory responses which were

signed under penalty of perjury. These responses incorporated

the July 14, 2003 spreadsheet by reference.

[9] Taken individually, Perfect 10’s communications do not

substantially comply with the requirements of § 512(c)(3).

Each communication contains more than mere technical

errors; often one or more of the required elements are entirely

absent. See Perfect 10, Inc. v. CCBill, LLC, 340 F. Supp. 2d

3

We do not read the Fourth Circuit’s holding in ALS Scan, Inc. v.

RemarQ Communities, Inc., 239 F.3d 619, 625 (4th Cir. 2001), as holding

that only location information is required for substantial compliance with

the terms of § 512(c)(3).

3566 PERFECT 10, INC. v. CCBILL LLC

1077, 1100-01 (C.D. Cal. 2004) (“Order”). In order to sub-

stantially comply with § 512(c)(3)’s requirements, a notifica-

tion must do more than identify infringing files. The DMCA

requires a complainant to declare, under penalty of perjury,

that he is authorized to represent the copyright holder, and

that he has a good-faith belief that the use is infringing. This

requirement is not superfluous. Accusations of alleged

infringement have drastic consequences: A user could have

content removed, or may have his access terminated entirely.

If the content infringes, justice has been done. But if it does

not, speech protected under the First Amendment could be

removed. We therefore do not require a service provider to

start potentially invasive proceedings if the complainant is

unwilling to state under penalty of perjury that he is an autho-

rized representative of the copyright owner, and that he has a

good-faith belief that the material is unlicensed.4

Permitting a copyright holder to cobble together adequate

notice from separately defective notices also unduly burdens

service providers. Indeed, the text of § 512(c)(3) requires that

the notice be “a written communication.” (Emphasis added).

Again, this requirement is not a mere technicality. It would

have taken Fisher substantial time to piece together the rele-

vant information for each instance of claimed infringement.

To do so, Fisher would have to first find the relevant line in

the spreadsheet indicating ownership information, then comb

the 22,185 pages provided by Perfect 10 in order to find the

appropriate image, and finally copy into a browser the loca-

tion printed at the top of the page—a location which was, in

some instances, truncated. The DMCA notification proce-

dures place the burden of policing copyright infringement—

4

Perfect 10’s argument that its initial notice substantially complied with

the DMCA’s notice requirements because Fisher, the recipient of that

notice, admitted that he could have found the infringing photographs on

the basis of the October 16, 2002, bates-stamped production, is thus beside

the point. Without the predicate certification under penalty of perjury,

Fisher would have had no reason to go looking for the photographs.

PERFECT 10, INC. v. CCBILL LLC 3567

identifying the potentially infringing material and adequately

documenting infringement—squarely on the owners of the

copyright. We decline to shift a substantial burden from the

copyright owner to the provider; Perfect 10’s separate com-

munications are inadequate.

[10] Since Perfect 10 did not provide effective notice,

knowledge of infringement may not be imputed to CCBill or

CWIE based on Perfect 10’s communications. Perfect 10’s

attempted notice does not raise a genuine issue of material

fact that CCBill and CWIE failed to reasonably implement a

repeat infringer policy within the meaning of § 512(i)(1)(A).

b. Non-Party Notices

Perfect 10 also cites to notices of infringement by other

copyright holders, and argues that CCBill and CWIE did not

reasonably implement their repeat infringer policies because

they continued to provide services for websites that infringed

non-party copyrights. The district court expressly declined to

consider evidence of notices provided by any party other than

Perfect 10 on the basis that these notices were irrelevant to

Perfect 10’s claims. We disagree.

[11] CCBill and CWIE’s actions towards copyright holders

who are not a party to the litigation are relevant in determin-

ing whether CCBill and CWIE reasonably implemented their

repeat infringer policy. Section 512(i)(1)(A) requires an

assessment of the service provider’s “policy,” not how the

service provider treated a particular copyright holder. See

Ellison, 357 F.3d at 1080 (AOL’s repeat infringer policy was

not reasonably implemented because copyright holders other

than Ellison could have attempted to notify AOL during the

time that AOL’s email address was incorrectly listed.). Thus,

CCBill and CWIE’s response to adequate non-party notifica-

tions is relevant in determining whether they reasonably

implemented their policy against repeat infringers.

3568 PERFECT 10, INC. v. CCBILL LLC

[12] A policy is unreasonable only if the service provider

failed to respond when it had knowledge of the infringement.

The district court in this case did not consider any evidence

relating to copyright holders other than Perfect 10. We

remand for determination of whether CCBill and/or CWIE

implemented its repeat infringer policy in an unreasonable

manner with respect to any copyright holder other than Per-

fect 10.

c. Apparent Infringing Activity

[13] In importing the knowledge standards of § 512(c) to

the analysis of whether a service provider reasonably imple-

mented its § 512(i) repeat infringer policy, Congress also

imported the “red flag” test of § 512(c)(1)(A)(ii). Under this

section, a service provider may lose immunity if it fails to

take action with regard to infringing material when it is

“aware of facts or circumstances from which infringing activ-

ity is apparent.” § 512(c)(1)(A)(ii). Notice that fails to sub-

stantially comply with § 512(c)(3), however, cannot be

deemed to impart such awareness. §§ 512(c)(3)(B)(i) & (ii).

Perfect 10 alleges that CCBill and CWIE were aware of a

number of “red flags” that signaled apparent infringement.

Because CWIE and CCBill provided services to “illegal.net”

and “stolencelebritypics.com,” Perfect 10 argues that they

must have been aware of apparent infringing activity. We dis-

agree. When a website traffics in pictures that are titillating by

nature, describing photographs as “illegal” or “stolen” may be

an attempt to increase their salacious appeal, rather than an

admission that the photographs are actually illegal or stolen.

We do not place the burden of determining whether photo-

graphs are actually illegal on a service provider.

Perfect 10 also argues that a disclaimer posted on illegal.net

made it apparent that infringing activity had taken place. Per-

fect 10 alleges no facts showing that CWIE and CCBill were

aware of that disclaimer, and, in any event, we disagree that

PERFECT 10, INC. v. CCBILL LLC 3569

the disclaimer made infringement apparent. The disclaimer in

question stated: “The copyrights of these files remain the cre-

ator’s. I do not claim any rights to these files, other than the

right to post them.” Contrary to Perfect 10’s assertion, this

disclaimer is not a “red flag” of infringement. The disclaimer

specifically states that the webmaster has the right to post the

files.

In addition, Perfect 10 argues that password-hacking web-

sites, hosted by CWIE, also obviously infringe. While such

sites may not directly infringe on anyone’s copyright, they

may well contribute to such infringement. The software pro-

vided by Grokster in Metro-Goldwyn-Mayer Studios Inc. v.

Grokster, Ltd., 545 U.S. 913 (2005), also did not itself

infringe, but did enable users to swap infringing files. Grok-

ster held that “instructing [users] how to engage in an infring-

ing use” could constitute contributory infringement. Id. at

936. Similarly, providing passwords that enable users to ille-

gally access websites with copyrighted content may well

amount to contributory infringement.

[14] However, in order for a website to qualify as a “red

flag” of infringement, it would need to be apparent that the

website instructed or enabled users to infringe another’s copy-

right. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,

1013 n.2 (9th Cir. 2001). We find that the burden of determin-

ing whether passwords on a website enabled infringement is

not on the service provider. The website could be a hoax, or

out of date. The owner of the protected content may have sup-

plied the passwords as a short-term promotion, or as an

attempt to collect information from unsuspecting users. The

passwords might be provided to help users maintain anonym-

ity without infringing on copyright. There is simply no way

for a service provider to conclude that the passwords enabled

infringement without trying the passwords, and verifying that

they enabled illegal access to copyrighted material. We

impose no such investigative duties on service providers.

3570 PERFECT 10, INC. v. CCBILL LLC

Password-hacking websites are thus not per se “red flags” of

infringement.

[15] Perfect 10 also alleges that “red flags” raised by third

parties identified repeat infringers who were not terminated.

Because the district court did not consider potential red flags

raised by third parties, we remand to the district court to

determine whether third-party notices made CCBill and

CWIE aware that it provided services to repeat infringers, and

if so, whether they responded appropriately.

B. Standard Technical Measures: § 512(i)(1)(B)

[16] Under § 512(i)(1)(B), a service provider that interferes

with “standard technical measures” is not entitled to the safe

harbors at §§ 512(a)-(d). “Standard technical measures” refers

to a narrow group of technology-based solutions to online

copyright infringement:

[T]he term “standard technical measures” means

technical measures that are used by copyright own-

ers to identify or protect copyrighted works and—

(A) have been developed pursuant to a

broad consensus of copyright owners and

service providers in an open, fair, volun-

tary, multi-industry standards process;

(B) are available to any person on reason-

able and nondiscriminatory terms; and

(C) do not impose substantial costs on ser-

vice providers or substantial burdens on

their systems or networks.

§ 512(i)(2). Perfect 10 argues that CCBill does not qualify for

any safe harbor because it interfered with “standard technical

measures” by blocking Perfect 10’s access to CCBill affiliated

PERFECT 10, INC. v. CCBILL LLC 3571

websites in order to prevent Perfect 10 from discovering

whether those websites infringed Perfect 10 copyrights.

There are two disputed facts here.

We are unable to determine on this record whether access-

ing websites is a standard technical measure, which was “de-

veloped pursuant to a broad consensus of copyright owners

and service providers in an open, fair, voluntary, multi-

industry standards process.” § 512(i)(2)(A). We thus remand

to the district court to determine whether access to a website

is a “standard technical measure,” and if so, whether CCBill

interfered with that access.

[17] If allowing access is a standard technical measure,

CCBill claims it only blocked Perfect 10’s credit card because

Perfect 10 had previously reversed charges for subscriptions;

Perfect 10 insists it did so in order to prevent Perfect 10 from

identifying infringing content. If CCBill is correct, Perfect

10’s method of identifying infringement—forcing CCBill to

pay the fines and fees associated with chargebacks—may well

impose a substantial cost on CCBill. If not, CCBill may well

have interfered with Perfect 10’s efforts to police the websites

in question for possible infringements. Because there are dis-

puted issues of material fact, we remand to the district court

for a determination of whether CCBill’s refusal to process

Perfect 10’s transactions interfered with a “standard technical

measure” for identifying infringement.

C. Transitory Digital Network Communications:

§ 512(a)

[18] Section 512(a) provides safe harbor for service provid-

ers who act as conduits for infringing content. In order to

qualify for the safe harbor of § 512(a), a party must be a ser-

vice provider under a more restrictive definition than applica-

ble to the other safe harbors provided under § 512:

3572 PERFECT 10, INC. v. CCBILL LLC

As used in subsection (a), the term “service provid-

er” means an entity offering the transmission, rout-

ing, 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.

Section 512 (k)(1)(A). The district court held that CCBill met

the requirements of § 512(k)(1)(A) by “provid[ing] a connec-

tion to the material on its clients’ websites through a system

which it operates in order to provide its clients with billing

services.” Order at 1102. We reject Perfect 10’s argument that

CCBill is not eligible for immunity under § 512(a) because it

does not itself transmit the infringing material. A service pro-

vider is “an entity offering the transmission, routing, or pro-

viding of connections for digital online communications.”

§ 512(k)(1)(A). There is no requirement in the statute that the

communications must themselves be infringing, and we see

no reason to import such a requirement. It would be perverse

to hold a service provider immune for transmitting informa-

tion that was infringing on its face, but find it contributorily

liable for transmitting information that did not infringe.

Section 512(a) provides a broad grant of immunity to ser-

vice providers whose connection with the material is tran-

sient. When an individual clicks on an Internet link, his

computer sends a request for the information. The company

receiving that request sends that request on to another com-

puter, which sends it on to another. After a series of such

transmissions, the request arrives at the computer that stores

the information. The requested information is then returned in

milliseconds, not necessarily along the same path. In passing

the information along, each intervening computer makes a

short-lived copy of the data. A short time later, the informa-

tion is displayed on the user’s computer.

[19] Those intervening computers provide transient connec-

tions among users. The Internet as we know it simply cannot

PERFECT 10, INC. v. CCBILL LLC 3573

exist if those intervening computers must block indirectly

infringing content. We read § 512(a)’s grant of immunity

exactly as it is written: Service providers are immune for

transmitting all digital online communications, not just those

that directly infringe.

[20] CCBill transmits credit card information and proof of

payment, both of which are “digital online communications.”

However, we have little information as to how CCBill sends

the payment it receives to its account holders. It is unclear

whether such payment is a digital communication, transmitted

without modification to the content of the material, or trans-

mitted often enough that CCBill is only a transient holder. On

the record before us, we cannot conclude that CCBill is a ser-

vice provider under § 512(a). Accordingly, we remand to the

district court for further consideration the issue of whether

CCBill meets the requirements of § 512(a).

D. Information Location Tools: § 512(d)

After CCBill processes a consumer’s credit card and issues

a password granting access to a client website, CCBill dis-

plays a hyperlink so that the user may access the client web-

site. CCBill argues that it falls under the safe harbor of

§ 512(d) by displaying this hyperlink at the conclusion of the

consumer transaction. We disagree. Section 512 (d) reads:

A service provider shall not be liable for monetary

relief, or, except as provided in subsection (j), for

injunctive or other equitable relief, for infringement

of copyright by reason of the provider referring or

linking users to an online location containing

infringing material or infringing activity, by using

information location tools, including a directory,

index, reference, pointer, or hypertext link.

Even if the hyperlink provided by CCBill could be viewed as

an “information location tool,” the majority of CCBill’s func-

3574 PERFECT 10, INC. v. CCBILL LLC

tions would remain outside of the safe harbor of § 512(d).

Section 512(d) provides safe harbor only for “infringement of

copyright by reason of the provider referring or linking users

to an online location containing infringing material or infring-

ing activity.” (Emphasis added). Perfect 10 does not claim

that CCBill infringed its copyrights by providing a hyperlink;

rather, Perfect 10 alleges infringement through CCBill’s per-

formance of other business services for these websites. Even

if CCBill’s provision of a hyperlink is immune under

§ 512(n), CCBill does not receive blanket immunity for its

other services.

E. Information Residing on Systems or Networks at the

Direction of Users: § 512(c)

Section 512(c) “limits the liability of qualifying service

providers for claims of direct, vicarious, and contributory

infringement for storage at the direction of a user of material

that resides on a system or network controlled or operated by

or for the service provider.” H.R. Rep., at 53. A service pro-

vider qualifies for safe harbor under § 512(c) if it meets the

requirements of § 512(i) and:

(A)(i) does not have actual knowledge that the mate-

rial or an activity using the material on the system or

network is infringing;

(ii) in the absence of such actual knowledge, is not

aware of facts or circumstances from which infring-

ing activity is apparent; or

(iii) upon obtaining such knowledge or awareness,

acts expeditiously to remove, or disable access to,

the material;

(B) does not receive a financial benefit directly

attributable to the infringing activity, in a case in

PERFECT 10, INC. v. CCBILL LLC 3575

which the service provider has the right and ability

to control such activity; and

(C) upon notification of claimed infringement as

described in paragraph (3), responds expeditiously to

remove, or disable access to, the material that is

claimed to be infringing or to be the subject of

infringing activity.

Section 512(c)(1). As discussed above, Perfect 10 did not pro-

vide CWIE with knowledge or awareness within the standard

of § 512(c)(1)(A), and Perfect 10 did not provide notice that

complies with the requirements of § 512(c)(3).

[21] The remaining question is whether Perfect 10 raises a

genuine issue of material fact that CWIE does not qualify for

safe harbor under § 512(c) because it fails to meet the require-

ments of § 512(c)(1)(B), namely, that a service provider not

receive a direct financial benefit from the infringing activity

if the service provider also has the right and ability to control

the infringing activity.

[22] Based on the “well-established rule of construction

that where Congress uses terms that have accumulated settled

meaning under common law, a court must infer, unless the

statute otherwise dictates, that Congress means to incorporate

the established meaning of these terms,” Rossi, 391 F.3d at

1004 n.4 (9th Cir. 2004) (quoting Neder v. United States, 527

U.S. 1, 21 (1999)), we hold that “direct financial benefit”

should be interpreted consistent with the similarly-worded

common law standard for vicarious copyright liability. See,

e.g., Ellison, 357 F.3d at 1078 (a vicariously liable copyright

infringer “derive[s] a direct financial benefit from the

infringement and ha[s] the right and ability to supervise the

infringing activity”). Thus, the relevant inquiry is “whether

the infringing activity constitutes a draw for subscribers, not

just an added benefit.” Id. at 1079. In Ellison, the court held

that “no jury could reasonably conclude that AOL received a

3576 PERFECT 10, INC. v. CCBILL LLC

direct financial benefit from providing access to the infringing

material” because “[t]he record lacks evidence that AOL

attracted or retained subscriptions because of the infringement

or lost subscriptions because of AOL’s eventual obstruction

of the infringement.” Id.

[23] In this case, Perfect 10 provides almost no evidence

about the alleged direct financial benefit to CWIE. Perfect 10

only alleges that “CWIE ‘hosts’ websites for a fee.” This alle-

gation is insufficient to show that the infringing activity was

“a draw” as required by Ellison. 357 F.3d at 1079. Further-

more, the legislative history expressly states that “receiving a

one-time set-up fee and flat, periodic payments for service

from a person engaging in infringing activities would not con-

stitute receiving a ‘financial benefit directly attributable to the

infringing activity.’ ” H.R. Rep., at 54. Perfect 10 has not

raised a genuine issue of material fact that CWIE receives a

direct financial benefit from infringing activity. Because

CWIE does not receive a direct financial benefit, CWIE meets

the requirements of § 512(c).

[24] If the district court finds that CWIE meets the thresh-

old requirements of § 512(i), CWIE is entitled to safe harbor

under § 512(c).

II. COMMUNICATIONS DECENCY ACT

[25] The Communications Decency Act states that “[n]o

provider or user of an interactive computer service shall be

treated as the publisher or speaker of any information pro-

vided by another information content provider,” and expressly

preempts any state law to the contrary. 47 U.S.C.

§§ 230(c)(1), (e)(3). “The majority of federal circuits have

interpreted the CDA to establish broad ‘federal immunity to

any cause of action that would make service providers liable

for information originating with a third-party user of the ser-

vice.’ ” Almeida v. Amazon.com, Inc., 456 F.3d 1316, 1321

(11th Cir. 2006) (quoting Zeran v. America Online, Inc., 129

PERFECT 10, INC. v. CCBILL LLC 3577

F.3d 327, 331 (4th Cir. 1997)); see also Carafano v. Metro-

splash.com, Inc., 339 F.3d 1119, 1122 (9th Cir. 2003) (citing

Batzel v. Smith, 333 F.3d 1018, 1026-27 (9th Cir. 2003)).

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.’ ” Gucci Am., Inc. v.

Hall & Assocs., 135 F. Supp. 2d 409, 413 (S.D.N.Y. 2001)

(quoting § 230(e)(2)). As a result, the CDA does not clothe

service providers in immunity from “law[s] pertaining to

intellectual property.” See Almeida, 456 F.3d at 1322.

[26] 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 char-

acterized 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 con-

tours of this federal immunity would be contrary to Con-

gress’s expressed goal of insulating the development of the

Internet from the various state-law regimes. See 47 U.S.C.

§§ 230(a) and (b); see also Batzel, 333 F.3d at 1027 (noting

that “courts construing § 230 have recognized as critical in

applying the statute the concern that lawsuits could threaten

the ‘freedom of speech in the new and burgeoning Internet

medium’ ” (quoting Zeran, 129 F.3d at 330)). In the absence

of a definition from Congress, we construe the term “intellec-

tual property” to mean “federal intellectual property.”

Accordingly, CCBill and CWIE are eligible for CDA immu-

nity for all of the state claims raised by Perfect 10.

3578 PERFECT 10, INC. v. CCBILL LLC

III. DIRECT COPYRIGHT INFRINGEMENT

“Plaintiffs must satisfy two requirements to present a prima

facie case of direct infringement: (1) they must show owner-

ship of the allegedly infringed material and (2) they must

demonstrate that the alleged infringers violate at least one

exclusive right granted to copyright holders under 17 U.S.C.

§ 106.” Napster, 239 F.3d at 1013. Perfect 10 alleges that

CCBill and CWIE directly infringed its copyrights through its

website, hornybees.com.

There is a genuine issue of material fact as to the relation-

ship between CCBill/CWIE and hornybees.com. CCBill and

CWIE state that hornybees.com is operated by an entity called

“CCBucks,” and that CCBill and CWIE have no interest in

hornybees.com. However, the hornybees.com website reads:

“Brought to you by CCBill LLC and Cavecreek Web Host-

ing.” The record indicates that Cavecreek Web Hosting may

be CWIE, and that CWIE may be the registrant of horny-

bees.com. Furthermore, the vice president of operations of

both CCBill and CWIE lists CCBucks as being related to

CWIE and CCBill.

Perfect 10 has also raised a genuine issue of material fact

that hornybees.com has infringed Perfect 10’s copyrights by

posting pictures of a Perfect 10 model’s body with the head

of a celebrity. The declaration provided by Perfect 10’s

founder and president asserting that the photo is that of a Per-

fect 10 model is sufficient evidence to raise a genuine issue

of material fact.

[27] Because Perfect 10 has raised a triable issue whether

CCBill and CWIE directly infringed Perfect 10 copyrights by

operating hornybees.com, and because the district court did

not address this issue in its order granting summary judgment

PERFECT 10, INC. v. CCBILL LLC 3579

in favor of Perfect 10, we remand this issue for a determina-

tion by the district court.5

IV. COSTS AND ATTORNEY’S FEES

The Copyright Act of 1976 permits the district court to

“award a reasonable attorney’s fee to the prevailing party as

part of the costs.” 17 U.S.C. § 505. Fees are proper under this

statute when either successful prosecution or successful

defense of the action furthers the purposes of the Copyright

Act. See Fantasy, Inc. v. Fogerty, 94 F.3d 553, 558 (9th Cir.

1996) (“[A] successful defense of a copyright infringement

action may further the policies of the Copyright Act every bit

as much as a successful prosecution of an infringement claim

by the holder of a copyright.” (quoting Fogerty v. Fantasy,

Inc., 510 U.S. 517, 527 (1994)). As such, prevailing defen-

dants as well as prevailing plaintiffs are eligible for such an

award, and the standards for evaluating whether an award is

proper are the same regardless of which party prevails.

Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994).

Thus, the awarding of attorney’s fees is a matter for the dis-

trict court’s discretion. Id. To guide that discretion, the

Supreme Court endorsed the non-exclusive list employed by

the Third Circuit in Lieb v. Topstone Industries, Inc., 788 F.2d

151, 156 (1986) (the so-called “Lieb factors”). Fogerty, 510

U.S. at 534 n.19. The list includes “frivolousness, motivation,

objective unreasonableness (both in the factual and in the

legal components of the case) and the need in particular cir-

cumstances to advance considerations of compensation and

deterrence.” Id.

[28] The district court made clear in its order denying fees

that it had weighed each of the Lieb factors and validly exer-

cised its discretion to deny defendants’ fees. Defendants argue

5

If CCBill and CWIE operate hornybees.com, no immunity for infringe-

ment on that site is available under either the DMCA or the CDA.

3580 PERFECT 10, INC. v. CCBILL LLC

that the district judge inadequately considered these factors,

that Perfect 10’s litigation positions were frivolous and merit-

less, and that Perfect 10 is a serial filer of nuisance copyright

claims. Because we reverse in part and remand a substantial

portion of this case to the district court, there is ample support

for the district court’s finding that Perfect 10’s legal claims

are not frivolous or objectively unreasonable. The district

court reasonably found the evidence regarding Perfect 10’s

motivation to be equivocal, and did not abuse its discretion in

weighing the interests of compensation and deterrence and

denying costs and attorney’s fees to defendants.

CONCLUSION

We remand to the district court for a determination of

whether CCBill and CWIE reasonably implemented a policy

under § 512(i)(1)(A) based on its treatment of non-party

copyright holders. Because § 512(i)(1)(A) is a threshold

determination, we remand the remaining issues under § 512

for further proceedings consistent with this opinion.

We remand for further determination of whether horny-

bees.com is owned by CCBill or CWIE, and if so, whether

CCBill or CWIE are directly liable under state or federal law

for its operation.

The district court’s decision regarding CDA immunity is

affirmed as to the unfair competition and false advertising

claims, and reversed as to the right of publicity claim.

We affirm the district court’s decision to deny an award of

attorney’s fees and costs to defendants.

Each party shall bear its own costs on appeal.

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED