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MPAA Suffers Legal Setback in Big Copyright Decision

Appellate circuit overturns an injunction against a social linking website as the MPAA says it is "studying the ramifications."

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The 7th Circuit Court of Appeal has handed down a potentially important decision in a case dealing with copyright infringement on the Internet. The dispute involved a social video bookmarking site that was sued by the owner of gay erotica. The case aroused the interest of such major players as the MPAA, Google and Facebook, all of which submitted amicus briefs.

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In a unanimous decision Thursday in Flava Works, Inc. v. Gunter authored by Circuit Judge Richard Posner, the appellate circuit has vacated an injunction issued against myVidster, which allowed its users to post embedded links to video streams.

In doing so, with a number of colorful yet strange analogies, Posner potentially has curtailed claims against website operators alleged to be facilitating copyright infringement.

The lawsuit dates to 2010, when Flava Works sued Marques Rondale Gunter, the operator of myVidster. Last year, Illinois federal Judge John Grady ruled in issuing an injunction that the website wasn't eligible for safe harbors under the Digital Millennium Copyright Act because the site hadn't acted beyond minimum requirements.

MyVidster responded to takedown notices, but Grady said it had gone "no further" and said that Gunter "refuses to concern himself with copyright protection" by investigating both socially tabbed content and repeat infringers on its website.

Gunter appealed the decision, and it became one of the hottest cases around.

On one side were companies such as Google and Facebook, which argued that the "continued development and progress of web technology" was at stake with the need for more clarity on direct and secondary liability. On the other side were rightsholder advocates like the MPAA, which pointed to performance rights and concepts like "willful blindness" and supporting strong action against "an unlicensed on-demand, Internet-video service that generated advertising and other revenues by attracting an audience for infringing content."

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In his decision, Posner asks this question: Is myVidster "a contributory infringer if a visitor to its website bookmarks the video and later someone clicks on the bookmark and views the video?"

Posner answers this by analogizing myVidster to a "a telephone exchange connecting two telephones," saying that the website is merely connecting the server that hosts the video and the computer of myVidster’s visitor. Yes, by offering access to an embedded video, myVidster is bypassing the pay wall of the erotica company, but the judge sees it as akin to "stealing a copyrighted book from a bookstore and reading it."

"That is a bad thing to do … but it is not copyright infringement," he says. "The infringer is the customer of Flava who copied Flava’s copyrighted video by uploading it to the Internet."

That doesn't end the issue, however, because Posner also must consider the question of whether myVidster is contributing to those unlawful uploads.

The plaintiff had argued that by providing a connection to websites that contain illegal copies of its copyrighted videos, myVidster was encouraging its subscribers to circumvent Flava’s pay wall, thus reducing Flava’s income. But Posner says myVidster is only displaying addresses of videos hosted elsewhere on the Internet, which he believes "isn’t increasing the amount of infringement" and that someone using those addresses to "watch a copyrighted video for free is no more a copyright infringer than if he had snuck into a movie theater and watched a copyrighted movie without buying a ticket."

The 7th Circuit judge adds that it's irrelevant how the defendant is responding to takedown notices "unless myVidster is contributing to infringement" because "a noninfringer doesn’t need a safe harbor."

Posner also doesn't see any evidence that myVidster is facilitating or participating in violation of performance rights.

"MyVidster is giving web surfers addresses where they can find entertainment," he writes. "By listing plays and giving the name and address of the theaters where they are being performed, the New Yorker is not performing them. It is not 'transmitting or communicating' them."

The judge stopped short of erasing all contributory liability for social linking websites. For example, he writes, "if myVidster invited people to post copyrighted videos on the Internet without authorization or to bookmark them on its website, it would be liable for inducing infringement."

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And as Eric Goldman of Santa Clara University School of Law points out, the decision could be bad news to sites like Pinterest. Goldman writes the decision "does raise a concern about sideloading, i.e., grabbing a remote file that a user links to and making an archive copy of that file for further delivery."

The case now goes forward, and this is clearly not the end, with much more review and fact-finding coming.

The MPAA is still watching this one closely. In a statement to The Hollywood Reporter, the trade group says: "We are studying the ramifications of this decision. This is only a preliminary opinion in what is likely to be a long and complicated case, and the defendants may well be found to be infringers at the end of the day. We are gratified that the court made clear that ‘invit[ing]’ others to post infringing videos, or links to them, is itself a form of copyright infringement.”

The full decision is on the next page.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner