July 11, 2011 9:05am PT by Eriq Gardner
Florida Judge Tosses a Key MPAA Claim Against Hotfile (Exclusive)
Some higher-ups in the movie industry have identified file-storage "cyberlockers" as being Hollywood's biggest threat in the war against piracy. In February, the MPAA took action with a major lawsuit against Hotfile, one of the most popular websites on the Internet.
So far, the case isn't going perfectly. On Friday, a Florida judge dismissed the claim that Hotfile committed direct copyright infringement. The case now proceeds to determine whether Hotfile holds any secondary liability for inducing copyright infringement by its users.
In February, the movie industry alleged that visitors on Hotfile were up to more than just the storage of files for personal convenience. According to the complaint , thousands of movies and TV shows were being traded by Hotfile users with the encouragement, assistance, and active participation by the company itself. For example, the MPAA accused Hotfile of paying people to put infringing materials on its site so that others would pay for the privilege of downloading these works.
Hotfile controls the servers, the databases, and the software that manages the site. It has a "credit" system that rewards its most popular members. The MPAA argued to a Florida federal court that the encouragement, knowledge, and financial interest in making the infringements happen together constituted "volitional" acts, and thus, Hotfile should be punished for direct infringement.
Florida federal court judge Adalberto Jordan isn't buying it.
"To be sure, (Hotfile founder Anton) Titov and Hotfile allegedly encourage the massive infringement," says Judge Jordan in his decision. "Yet nothing in the complaint alleges that Hotfile or Mr. Titov took direct, volitional steps to violate the plaintiffs' infringement. There are no allegations, say, that Hotfile uploaded copyrighted material. Therefore, under the great weight of authority, the plaintiffs have failed to allege direct copyright infringement."
The judge based his decision on prior case law that established specific causation needed for a direct infringement claim beyond a defendant's system being used by a third party to create a copy.
Hotfile hasn't escaped all claims, however.
Judge Jordan denied its motion to dismiss a charge of secondary, contributory infringement and refused to let Titov off the hook from being personally liable for copyright infringement on Hotfile.
But in narrowing the scope of the case, the judge mitigates any damage award. And as we've seen in the YouTube and Veoh cases thus far, there are DMCA "safe harbor" defenses to secondary infringement claims if a defendant can show it promptly takes down flagged content upon notice from a copyright holder. Hotfile has already signaled it intends to seek safe harbor.
"While the Court dismissed the direct infringement claim based on its view of the law, it made clear that the secondary infringement claims will go forward against all defendants and we are confident that we will be able to establish Hotfile's culpability through those claims," says Karen Thorland, vice president and senior content protection counsel at the MPAA
She adds: "The fact remains that Hotfile and its operators facilitate the theft of copyrighted motion picture and television properties on a staggering scale and profit handsomely from encouraging and providing the means for massive copyright infringement. The theft taking place on Hotfile is unmistakable. In less than two years Hotfile became one of the 100 most trafficked sites in the world - a direct result of the massive digital theft that Hotfile has promoted."