In an opinion that elaborates on the degree of third-party supervision required in order to attach vicarious copyright infringement liability, the U.S. Court of Appeals for the Ninth Circuit Court upheld a decision that dismissed claims of vicarious copyright infringement against the major wireless networks for content distributed over their networks.  The plaintiffs failed to plead a claim of copyright infringement because there was no identification of any system of supervision in place for the wireless carriers to influence, affect, or control what content its users were sharing on multimedia messaging service networks.  Luvdarts, LLC et al. v. AT&T Mobility et al., Case No. 11-55497 (9th Cir., Mar. 25, 2013) (O’Scannlain, J.).

The plaintiffs, Luvdarts and Digipie, are in the business of creating, publishing and selling commercial multimedia messaging content for distribution over a wireless network, including content such as greeting cards, advertisements, news, coupons and games.  Luvdarts attaches a notice to each piece of content it sells, indicating that each message it sells can only be shared once.  Cell phone users ignored the notice, however, and widespread re-sharing of Luvdarts’ content occurred over major wireless carrier networks.  Luvdarts’, accordingly, brought a copyright action against AT&T, Verizon Wireless, Sprint and T-Mobile, alleging that these carriers were liable for between $8 billion and $10 billion worth of damages under a theory of vicarious copyright infringement.

After the district court dismissed the complaint for failure to state a claim on which relief can be granted, the plaintiff’s appealed.  The 9th Circuit agreed with the district court, concluding that Luvdarts failed to state a claim under a vicarious liability theory by not alleging that the wireless carriers had at least some capacity to supervise the end users’ actions in resharing Luvdarts’ content.

The 9th Circuit elaborated on the doctrine of vicarious liability under A&M Records v. Napster.  Vicarious copyright liability only attaches if a party has the “right and ability to supervise the infringing activity” and “‘a direct financial interest’ in the activity.”  Here, the wireless carriers had no way of supervising the use of their networks for the resharing of Luvdarts’ content.  Luvdarts’ allegations—that the wireless carriers could implement a supervisory system—was insufficient to state a claim of vicarious copyright infringement.  In that respect, Luvdarts failed to explain “what that system is, how it would function, or how much implementing such a system would cost.”

The 9th Circuit also summarily dismissed Luvdarts’ assertion of contributory copyright infringement against the wireless carriers, noting that Luvdarts failed to allege that the wireless carriers had the requisite specific knowledge of the resharing of messages.  Luvdarts’ complaint also failed to allege that the wireless carriers took active steps to avoid learning that content was being reshared, apparently under a theory of willful blindness.

Ultimately, the 9th Circuit agreed that Luvdarts’ did not properly plead, and could not prevail, on its claims of vicarious or contributory infringement. 

Practice Note:  A party alleging a claim of vicarious copyright ability must be prepared to specifically identify in its complaint both the exact content that has been infringed and allege that a third party had the requisite level of supervision over the infringement.  On the other hand, third parties that provide platforms where infringement may occur should be protected from vicarious liability if they do not affirmatively supervise infringing activities.