Ten-Year-Old ‘Perfect 10 v. CCBill’ Decision Withstands Test of Time

June marked the ten-year anniversary of the trial court’s Perfect 10 v. CCBill decision, one of the earliest — and still one of the most important — decisions determining Internet Service Providers (“ISP’s”) liability for the content of third parties on hosted sites. I had the privilege of being part of the team representing CCBill in this bet-the-company case, accomplishing a win that helped establish the Internet as the ubiquitous place it is today.

The Internet has afforded astonishing new channels for lawful commerce as well as unlawful activities. Previously, to engage in widespread libel or infringement one needed access to print media. Through the Internet, with a press of a button, a libelous or infringing work can be uploaded and instantly published worldwide. Search sites such as Google and auction sites such as eBay have created new channels for ordinary citizens to search for, purchase and sell millions of goods, including those that may infringe the rights of third parties.

Aggrieved parties who wanted to assert legal claims for wrongs perpetrated through the Internet were unable to identify the wrongdoer, or s/he had no locatable assets.  As a result, infringed copyright holders filed suits against ISPs, the deep pocket intermediaries whose Internet services allegedly provided the conduit or forum for the wrongful actions of their customers.

ISPs complained to Congress that unwarranted expense and potential liability for legal wrongdoing in which they played no direct role threatened their nascent growth. As a result, Congress passed the Communications Decency Act (“CDA”) in 1996 and the Digital Millennium Copyright Act (“DMCA”) in 1998.

The CDA provides ISPs certain immunities against secondary liability for state law claims arising from the content of third parties. The DMCA provides certain safe harbors from liability for copyright infringement arising from the content of third parties.

Perfect 10, Inc. v. CCBill, LLC, 340 F. Supp. 2nd 1077 (C.D. Cal. 2004), aff’d in part, 488 F.3d 1102 (9th Cir. 2007), cert. denied, 129 S. Ct. 709 (2007) was one of the earliest decisions to interpret and apply both the CDA and the DMCA.

In CCBill, Perfect 10 contended that infringing Perfect 10 content was maintained on subscription adult entertainment websites, for which CCBill provided payment processing services and for which co-defendant CWIE provided hosting services.

CCBill and CWIE moved for summary judgment. CCBill contended it was not liable for providing automated payment processing services to websites that may have contained infringing content without CCBill’s knowledge or participation. Both CCBill and CWIE maintained that they had not received proper notification of any infringing content on client sites, and to the extent they had received such notification they took proper action.

In 2004, the trial court agreed, and granted summary judgment in favor of CCBill and CWIE. The federal appellate court largely affirmed the trial court’s decision. The CCBill decision is remains one of the most cited cases interpreting and applying the DMCA and CDA. The case established:

  • CCBill and CWIE implemented reasonable DMCA policies by maintaining and updating a log of DMCA-compliant notifications and responses, even though the log was not perfect;
  • The DMCA places the burden of providing adequate notification of infringement on the copyright owner, and thus neither CCBill nor CWIE were legally bound to respond to purported notifications from Perfect 10 that did not comply with the DMCA’s requirements;
  • Neither CCBill nor CWIE bore an affirmative duty to investigate whether content on client sites was lawful;
  • Information on third party websites would not constitute a “red flag” of infringing activity, depriving the ISP of the protections of the DMCA, unless it was apparent that the website instructed or enabled users to infringe another’s copyright;
  • The CDA provided immunity for all of the state law claims raised by Perfect 10, including claims arising from state law rights of publicity.