A Host of Problems - US Court of Appeals Decides on Copyright and Hosting User Uploaded Content

This writer fondly remembers the early days of the Internet when it felt like a totally lawless, open and free space where users could do whatever they wished with whatever they wanted. As the Internet has become more ubiquitous and 'corporate' this had to be reined in, and legislation has slowly caught up to how people use the Internet. One still meddling piece that the legislature and the courts have struggled with is user-uploaded content, where the service provider merely provides the platform for uploading content (infringing or not), and does not actively do it itself. With this in mind, where do you draw the line between freedom and intermediary liability when it comes to user-uploaded content? The US Court of Appeals recently issued an important decision trying to take on this issue.

The case of VHT Inc. v Zillow Group Inc. concerned Zillow, an online marketplace for real estate. VHT is a photography company who take professional pictures of houses and apartments that are then used to illustrate the location for sale to prospective buyers. VHT saves these pictures onto a centralized database, where they are given to clients under a license, which Zillow receives from various real estate related sources. VHT subsequently sued Zillow for copyright infringement for its use of VHT's pictures in its "Listing Platform" and "Digs" pages, exceeding the scope of the licenses issued to VHT's customers.

The first aspect of the case dealt with direct infringement, particularly in the context of Zillow's automated systems. While ownership in the copyright of the works can be easily established, infringement requires direction causation, i.e. volitional conduct. What this means is that "...'direct liability must be premised on conduct that can reasonably be described as the direct cause of the infringement'". What remains key here is who the ultimate selector of the content is; Zillow or the end-user. In order for Zillow to have liability VHT would have to "...show [the alleged infringer] exercised control (other than by general operation of [its website]); selected any material for upload, download, transmission, or storage; or instigated any copying, storage, or distribution" of its photos".

Zillow's systems operate on licensed feeds provided by external third parties, and the providers guarantee those licenses are up to date and authorized. The Court considered that this automated system didn't involve any volitional conduct on part of Zillow, not supporting an argument of direct infringement. This and the various rules within Zillow's systems protected it from direct infringement. Even when notices were filed on behalf of VHT, Zillow acted promptly and removed any infringing images. Overall the Court, therefore, rejected VHT's argument of direct infringement.

Even with this in mind, the jury at first instance did, however, find that Zillow's Digs service did infringe directly on VHT's rights. In considering the evidence issued to the jury, the Court overturned the jury verdict of direct infringement, as VHT had not presented substantial evidence of infringement.

The Court then turned to the matter of fair use in relation to the Digs service. As a short primer, fair use allows for the use of copyright-protected works under certain situations. This is assessed looking at four specific factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. In short, the user would have to do something different with the work, and the more it deviates from the original the more likely it is that fair use applies (in essence), i.e. whether it is 'transformative' or not.

How Digs operated was much like a search engine, allowing users to search for photos of apartments in specific styles or configurations. Recent case law has considered search engines to typically be transformative, but that is by no means a panacea to a claim of infringement.

In assessing the Digs service's features in relation to the first factor, the Court considered that it was not a transformative use, since, while the service tagged the photos and organized them, their intended use and nature remained the same; to display space in an apartment in an artful manner. The images didn't serve a different function from what VHT had intended them for.

In terms of the second factor, the Court quickly concluded that the creativity of the photos is critical to their nature, and therefore potentially deserve a higher degree of protection. While this is true, the fact that the photos were published on the listing platform for Zillow to use did work against them in a finding of non-fair use.

For the third and fourth categories, Zillow copied the entire images, which turned the third factor against them. As they were copied in their entirety, they had a direct impact on VHT's market for licensing photos, including to Zillow. The Court, therefore, rejected Zillow's argument of fair use.

The Court then moved onto secondary liability, which can be established if "...a party (1) has knowledge of another's infringement and (2) either (a) materially contributes to or (b) induces that infringement". A material contribution to infringement would require "...actual knowledge that specific infringing material is available using its system, and can take simple measures to prevent further damage to copyrighted works, yet continues to provide access to infringing works".

Most of Zillow's activities around the works were purely passive. Any evidence adduced in relation to those activities would not, according to the Court, fulfill the requirements for the second prong (even with knowledge of infringing materials). VHT argued that Zillow needed to take proactive steps to prevent infringement, including requesting the URLs of infringing works, which the Court promptly rejected. In the end, the Court considered that no jury would be convinced of secondary liability. In equal mesure, the Court rejected VHT's argument on vicarious liability.

The case is a very interesting one, and yet again demonstrates the difficult position internet services and search engines alike are when it comes to copyright infringement.