2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 1 of 13 Pg ID 1543
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`WILLIAM E. BENNETT,
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`v.
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`Plaintiffs,
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`AMERICA ONLINE, INC.,
`TUCOWS, INC., and JOHN DOE,
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`Defendants.
`_______________________________________/
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`Civil Case Number 06-13221
`Honorable David M. Lawson
`Magistrate Judge Steven D. Pepe
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`OPINION AND ORDER OVERRULING OBJECTIONS TO MAGISTRATE
`JUDGE’S REPORT AND RECOMMENDATION, ADOPTING
`RECOMMENDATION, GRANTING IN PARTMOTION FOR PARTIAL SUMMARY
`JUDGMENT BY DEFENDANT AMERICA ONLINE, INC., DENYING
`DUPLICATE MOTION BY DEFENDANT AMERICA ONLINE, INC. AS MOOT,
`AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
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`The matter is before this Court on the plaintiff’s objections to Magistrate Judge Steven D.
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`Pepe’s recommendation that the plaintiff’s motion for summary judgment be denied, defendant
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`America Online, Inc.’s (now AOL, LLC, referred to hereinafter as AOL) motion for partial summary
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`judgment be granted in part, and a duplicate motion for partial summary judgment filed by defendant
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`AOL be denied as moot. The plaintiff has filed a complaint for copyright infringement against the
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`defendants for allegedly violating the terms of a license he unilaterally imposed as a condition of
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`using two screen saver programs that the plaintiff uploaded for sharing when he was an AOL
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`member. The Court referred the matter to Magistrate Judge Pepe for general case management.
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`Judge Pepe previously recommended that a motion filed by then-defendant Time Warner, Inc. be
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`granted, and the Court adopted that recommendation over the plaintiff’s objection and dismissed
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`Time Warner from the lawsuit. In the meantime, the plaintiff filed a motion for partial summary
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`judgment against all the defendants (including Time Warner) on January 4, 2007; and defendant
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 2 of 13 Pg ID 1544
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`AOL filed a motion for partial summary judgment on February 13, 2007, which apparently was
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`missing some exhibits; so it filed a nearly identical motion with exhibits later that same day. On
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`August 14, 2007, Judge Pepe filed a report recommending that the plaintiff’s motion be denied,
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`AOL’s second motion be granted as to counts one and two of the amended complaint (alleging direct
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`copyright infringement) and denied as to court three (alleging contributory infringement), and
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`AOL’s duplicate motion be denied as moot. The plaintiff filed timely objections, to which AOL
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`responded. Neither AOL nor Tucows, Inc. filed objections of their own. The Court has conducted
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`a de novo review of the matter and now concludes that the plaintiff’s objections to the report and
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`recommendation lack merit; he has not stated a valid claim against defendant AOL for direct
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`infringement because AOL’s actions fell within the scope of the license stated in the 1998 Terms
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`of Service Agreement (which license remains in effect); and the plaintiff has not shown as a matter
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`of law that defendant Tucos infringed his copyright. Therefore, the Court will overrule the
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`objections, adopt the magistrate judge’s recommendation, grant AOL’s motion in part, deny the
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`plaintiff’s motion, and deny AOL’s duplicate motion as moot.
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`I.
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`The plaintiff’s amended complaint filed on October 2, 2006 contains eight counts. Counts
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`one through three allege various instances of copyright infringement against AOL, counts six
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`through eight allege breach of an implied contract against AOL, and counts four and five allege
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`copyright infringement against defendant Tucows. The plaintiff first subscribed to AOL in late
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`December 1995, and he was subject to a Terms of Service Agreement (TOS) that was then in effect.
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`AOL amended its TOS in 1998 and again in August 2003. The plaintiff did not agree with the
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`changes introduced in the 2003 TOS, and he cancelled his membership thereafter, as was his right.
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 3 of 13 Pg ID 1545
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`On July 15, 2003, the plaintiff uploaded the two screen savers to an AOL library accessible
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`by all AOL members. He acknowledges that he uploaded his screen saver files to AOL under the
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`1998 TOS. The 1998 TOS contains the following provision:
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`By submitting Content to any “public area” of AOL (e.g., message boards, forums,
`the Member Directory), you grant AOL, Inc. and its affiliates the royalty-free
`perpetual, irrevocable, non-exclusive right (including any moral rights) and license
`to use, reproduce, modify, adapt, publish, translate, create derivative works from,
`distribute, communicate to the public, perform and display the Contend (in whole or
`in part) worldwide and/or to incorporate it in other works in any form, media or
`technology now known or later developed, for the full term of any rights that exist
`in such content.
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`AOL’s Mot. for Partial Summ. J., Ex B, TOS 4-5,§ 4B. However, the plaintiff contends that when
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`he uploaded his screen savers, he unilaterally imposed the following restrictions:
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`The uploader claims and guarantees to have full and clear copyright to this work.
`This work is for personal use of downloading member and may not be modified,
`distributed, etc. in whole or in part. This work cannot be uploaded to any electronic
`system or BBS or included in any compact disk (CD-ROM) or collection of any kind
`without the written permission from the uploader. To do so places the user at legal
`risk of sever [sic] fines and penalties for copyright infringement.
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`Pl.’s Mot. for Partial Summ. J., Ex. 1. The plaintiff uploaded the files at issue to AOL through his
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`AOL connection, and AOL apparently put these files in what the plaintiff refers to as the “old screen
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`saver libraries.”
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`AOL members also were bound by “Rules of the Road,” which advised subscribers that one
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`“type [of content that can be uploaded to AOL] is content protected by copyright, trademark, moral
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`rights, or other intellectual and proprietary rights, but the holder of those Rights has expressly
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`authorized distribution on AOL or the Internet without restriction.” AOL’s Mot. for Partial Summ.
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`J., Ex. B at 20. AOL reserved the right to “change the TOS at any time,” but if a subscriber objected
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`to the new terms, he or she could terminate the membership before the new TOS became effective.
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 4 of 13 Pg ID 1546
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`Id., Ex. B at 1. The agreement further provides that “[t]he laws of the Commonwealth of Virginia,
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`excluding its conflict-of-law rules, govern the TOS and your membership.” Id., Ex. B at 13.
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`On May 15, 2003, AOL entered into an agreement with defendant Tucows for “outsourced
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`services” with respect to stored material. The services included indexing, categorizing the content,
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`and scanning for viruses in files that originated outside AOL. Performance of these services
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`required Tucows to access and sometimes download temporary copies of files from AOL’s
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`computers. The services were performed under a written agreement. That agreement contained
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`provisions allowing AOL to “provide Tucows, in its sole discretion, certain AOL Files to be
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`indexed, edited and categorized by Tucows for download on the AOL Network.” Id., Ex. C at 1.
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`However, Tucows acquired “no right, title or interest in or to the AOL Material and the intellectual
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`property rights appurtenant thereto.” Id., Ex. C at 3-4. Christopher Tooley, a software engineer at
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`AOL, filed a declaration averring that “Tucows is not permitted to download or otherwise make
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`copies of the content of files embodying the content other than to perform the virus scanning service
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`set forth above and is not permitted to distribute the content or files embodying the content.” Id.,
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`Ex. D at 2. Tucows maintains that it deleted the temporary files when it was finished working on
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`them.
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`According to the plaintiff, on July 22, 2003, AOL destroyed all links to the old screen saver
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`libraries and no longer made those libraries available to its members. AOL created a new
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`upload/download center that was linked to defendant Tucows’ website. The plaintiff believes this
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`violated his copyrights.
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`AOL updated its TOS, to become effective on August 3, 2003, to state that “by posting
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`Content on an AOL Service, you grant AOL, its parent, affiliates, subsidiaries, assigns, agents and
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`licensees the irrevocable, perpetual, worldwide right” to use the file. The plaintiff objected via e-
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`mail to the expansion of who was given the license (from “AOL, Inc. and its affiliates” to the list
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`above) on July 31, 2003. Pl.’s Obj. at 15. He reasons that AOL’s attempt to expand the TOS
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`rescinded the 1998 TOS, and because he rejected the new TOS, there was no license that governed
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`his software. Therefore, any use of the software by AOL or Tucows is an infringement. Dissatisfied
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`with the response to his complaints, the plaintiff cancelled his AOL membership on November 26,
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`2003. He believes that 109 copies of his “Pheasant in Flight” screen saver and 738 copies of his
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`“Solitude” screen saver were unauthorizedly downloaded from the “old” download center by late
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`2003, and seven unauthorized downloads were made in late 2003 from the “new” download center.
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`The plaintiff filed its motion for partial summary judgment on the copyrights counts, seeking
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`judgment as a matter of law against AOL on counts one, two, and three, and against Tucows on
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`counts four and five. The plaintiff’s motion also requested relief against Time Warner. AOL filed
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`an answer in opposition to the motion together with its own motion for partial summary judgment
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`on those counts. Tucows filed an answer opposing the plaintiff’s motion, but it did not file a motion
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`of its own.
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`Magistrate Judge Pepe first concluded that the plaintiff was not entitled to summary
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`judgment against Time Warner, because Time Warner had been dismissed from the case. Next, the
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`magistrate judge concluded that the plaintiff was not entitled to summary judgment against Tucows
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`for copyright infringement because the only facts that the plaintiff had shown relevant to his claim
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`for copyright infringement was that Tucows copied the files for virus scanning. Relying heavily on
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`Automation by Design, Inc. v. Raybestos Prods. Co., 463 F.3d 749 (7th Cir. 2006), Judge Pepe
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`concluded that this act did not amount to copyright infringement, because Tucows acted as AOL’s
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 6 of 13 Pg ID 1548
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`agent when it obtained the files and scanned them and thereby merely undertook actions on behalf
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`of AOL that AOL was itself authorized to do. The magistrate judge also rejected the plaintiff's
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`argument that AOL breached the contract by "sublicensing" the screen savers, since sublicensing
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`does not violate any exclusive right in the copyright owner.
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`The magistrate judge noted that the plaintiff offered only three pieces of evidence supporting
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`his claim that Tucows violated his copyright privileges: a diagram created by the plaintiff illustrating
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`what he believes happens to his files; a screenshot showing his files available for download in the
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`"new" download center; and an e-mail from AOL suggesting his files were available in the new
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`download center. None of these facts establish a copyright infringement against either Tucows or
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`AOL because they do not show Tucows involvement at all, and AOL had an irrevocable license
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`through any applicable TOS to perform any of these acts. The magistrate judge found that it was
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`unimportant which TOS governed the parties, because all versions of the TOS granted a broad
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`license from the plaintiff to AOL that covered AOL's actions. Under the TOS, the defendant AOL
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`could not have committed a copyright violation with the actions shown by the plaintiff, and therefore
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`it was entitled to summary judgment on counts one and two of the amended complaint. However,
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`the magistrate judge denied the defendant AOL’s motion for summary judgment as to contributory
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`infringement because the plaintiff had little opportunity for discovery.
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`The magistrate judge denied as moot defendant AOL’s first motion for summary judgment
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`because it appeared to be a duplicate motion seeking the same relief as its second motion.
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`The plaintiff has interposed four objections:
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`1.
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`2.
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`The Magistrate ruled that Virginia Law governed, but the parties were not
`given the opportunity to argue Virginia’s contract law; and
`The Magistrate decided AOL and Tucows relationship on Indiana’s law and
`NOT Virginia’s; and
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 7 of 13 Pg ID 1549
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`3.
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`4.
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`Under Virginia’s Uniform Computer Information Transactions Act (UCITA),
`Plaintiff has a cause of action on Counts I, through VIII of the Amended
`Complaint #1; and
`Under Virginia’s UCITA, Plaintiff is entitled to Summary Judgment of
`liability on Counts I, through III and against AOL on the admitted facts and
`Plaintiff’s uncontroverted affidavit.
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`Pl.’s Obj. at 2. The plaintiff has not objected to the denial of summary judgment against Time
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`Warner. The defendants have not objected to the report and recommendation.
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`II.
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`Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1).
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`The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection
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`requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be
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`clear enough to enable the district court to discern those issues that are dispositive and contentious.”
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`Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the
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`magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are
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`too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The parties’ failure to file
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`objections to the Report and Recommendation waives any further right to appeal. Smith v. Detroit
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`Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object
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`to the magistrate judge’s report releases the Court from its duty to independently review the motion.
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`Thomas v. Arn, 474 U.S. 140, 149 (1985).
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`A.
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`The plaintiff failed to object to the magistrate judge’s recommended denial of his motion as
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`to defendant Time Warner. AOL faled to object to the recommended denial of its motion for
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`summary judgement on count three of the amended complaint. Those parts of the magistrate judge’s
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`report and recommendation therefore will be adopted.
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 8 of 13 Pg ID 1550
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`B.
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`The plaintiff’s first objection is that the parties were not permitted to argue the effects of
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`Virginia law on the transaction after the magistrate judge concluded that Virginia law governed.
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`Judge Pepe found that the choice-of-law provision in the contract designating Virginia law should
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`be given effect. He discussed that point in footnote 6 on page 12 of his report, where he criticized
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`the plaintiff’s citation to Michigan statutes regarding contract formation. The Court agrees with
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`Judge Pepe’s reasoning on the choice of law issue. The parties were on notice that Virginia law
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`applied: they agreed to that provision in the TOS, and AOL previously sought transfer of this action
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`to the district court in Virginia (which the plaintiff vigorously opposed) partly on the basis of that
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`provision. Moreover, the plaintiff has had an opportunity to cite Virginia state law authority in his
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`objections. The plaintiff’s first objection therefore lacks merit.
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`C.
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`The plaintiff next criticizes the magistrate judge’s report believing that the magistrate judge
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`relied on Indiana law in concluding that AOL’s actions were permitted under the 1998 TOS.
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`Copyright law, of course, is grounded in federal law. Copyright law protects an owner’s rights to
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`creative works of authorship including “literary works.” 17 U.S.C. § 102(a)(1). A computer
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`program is defined under Title 17 as “a set of statements or instructions to be used directly or
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`indirectly in a computer in order to bring about a certain result.” 17 U.S.C. § 101. Computer
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`programs fall within the definition of literary works. Lexmark Int'l, Inc. v. Static Control
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`Components, Inc., 387 F.3d 522, 533 (6th Cir. 2004).
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`A copyright owner has the exclusive rights to do and authorize the following:
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`(1) to reproduce the copyrighted work in copies or phonorecords;
`(2) to prepare derivative works based upon the copyrighted work;
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`(3) to distribute copies or phonorecords of the copyrighted work to the public by sale
`or other transfer of ownership, or by rental, lease, or lending;
`(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes,
`and motion pictures and other audiovisual works, to perform the copyrighted work
`publicly;
`(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes,
`and pictorial, graphic, or sculptural works, including the individual images of a
`motion picture or other audiovisual work, to display the copyrighted work publicly;
`and
`(6) in the case of sound recordings, to perform the copyrighted work publicly by
`means of a digital audio transmission.
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`17 U.S.C. § 106. A plaintiff can establish copyright infringement by showing “(1) ownership of a
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`valid copyright, and (2) copying of constituent elements of the work that are original.” Ellis v. Diffie,
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`177 F.3d 503, 506 (6th Cir.1999) (citation and quotation omitted).
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`An infringing copy of a computer program has been made when an “electronic copy of the
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`signals that tell a computer what to do [are] . . . stored [by an infringer] on a device like a floppy disk
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`or a hard drive.” Wilcom Pty. Ltd. v. Endless Visions, 128 F. Supp. 2d 1027, 1031 (E.D. Mich.
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`1998) (citing Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1248-49 (3d Cir.
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`1983)).
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`“A copyright owner who grants a nonexclusive license to use his copyrighted material
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`waives his right to sue the licensee for copyright infringement.” Graham v. James, 144 F.3d 229,
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`236 (2nd Cir. 1998); see also 17 U.S.C. § 201(d). The plaintiff alleges that defendant AOL
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`exceeded the scope of its licenses. A licensee who exceeds the scope of its copyright license may
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`infringe the licensed copyright. Quinn v. City of Detroit, 23 F. Supp. 2d 741, 749 (E.D. Mich.
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`1998). The burden is on the plaintiff licensor to demonstrate that the licensee exceeded the scope
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`of the license. Ibid. That is, once the existence of a license is established, the copyright owner must
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`show that the acts complained of are not within the scope of the license. Graham, 144 F.3d at 236.
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 10 of 13 Pg ID 1552
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`A license agreement is a contract. See Blue Cross & Blue Shield Mut. of Ohio v. Blue Cross and
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`Blue Shield Ass’n, 110 F.3d 318, 322 (6th Cir. 1997). Therefore, the scope of the license involves
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`an application of state law, to the extent it is not preempted by federal copyright law. SOS, Inc. v.
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`Payday, Inc., 886 F.2d 1081, 1088 (9th Cir. 1989).
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`As noted earlier, when the magistrate judge determined that Tucows was acting as an agent
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`fo AOL, so any copying of the old upload file for utility services fell under AOL’s privileges as a
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`licensee, he relied on a Seventh Circuit case, Automation by Design, Inc. v. Raybestos Prods. Co.,
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`463 F.3d 749 (7th Cir. 2006). That case was decided under federal copyright law, but the court drew
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`from the basic tenets of Indiana contract law as well. The principles for which the magistrate judge
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`cited Automation by Design, however, were not unique to Indiana jurisprudence, and they are shared
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`by Virginia common law. For instance, under Virginia law, “[w]here contracts are ‘plain upon their
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`face, they are to be construed as written, and the language used is to be taken in its ordinary
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`significance unless it appears from the context it was not so intended.” Brizzolara v. Sherwood
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`Memorial Park, Inc., 645 S.E.2d 508, 515 (Va. 2007) (internal quotations and citations omitted).
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`The magistrate judge concluded in this case that the license granted to AOL in the 1998 TOS
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`permitted it to employ an agent to work on uploaded files in the same manner as if AOL could
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`perform the work itself under the terms of the license. That is hardly a novel proposition, and the
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`happenstance that Automation by Design referred to Indiana law to support the rudimentary principle
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`of contract construction that is common to most states does not undermine the magistrate judge’s
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`conclusion or give merit to the plaintiff’s second objection.
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`D.
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`The plaintiff’s third and fourth objections are premised on the application of provisions
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`contained in Virginia’s Uniform Computer Information Transactions Act (UCITA). Those
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`objections lack merit because that act was not adopted until 2000, and the magistrate judge
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`determined – correctly – that the events in this case are governed by the 1998 TOS. A secton of that
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`act states: “Contracts that are enforceable and rights of action that accrue before the effective date
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`of this chapter are governed by the law then in effect unless the parties agree to be governed by this
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`chapter.” Va. Code § 59.1-509.2. The enactment of the UCITA, therefore, had no effect on the
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`1998 TOS.
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`Nonetheless, even under that act, contracts may be performed through a delegate, unless “(1)
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`the contract prohibits delegation or subcontracting; or (2) the other party has a substantial interest
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`in having the original promissor perform or control the performance.” Va. Code § 59.1-505.5. The
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`statute defines the rights under a license as follows:
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`(a) A license grants:
`(1) the contractual rights that are expressly described; and
`(2) a contractual right to use any informational rights within the licensor’s control
`at the time of contracting which are necessary in the ordinary course to exercise the
`expressly described rights.
`(b) If a license expressly limits use of the information or informational rights, use in
`any other manner is a breach of contract. In all other cases, a license contains an
`implied limitation that the licensee will not use the information or informational
`rights otherwise than as described in subsection (a). However, use inconsistent with
`this implied limitation is not a breach if it is permitted under applicable law in the
`absence of the implied limitation.
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`Va. Code § 59.1-503.7.
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`The license granted in the 1998 TOS was quite broad. nothing in this statute limited AOL’s
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`right to organize, catalog, or scan for viruses in uploaded files or to contract to a third party to
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`provide those services.
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`The magistrate judge concluded that the plaintiff’s direct copyright infringement claims fail
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`because he either has not provided any evidentiary support for his claims or because he granted AOL
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`a broad, irrevocable license to use the files. The Court agrees. The plaintiff has shown no more than
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`that his uploaded screen savers were scanned for viruses and organized for display in a reorganized
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`section of the AOL member site by Tucows. Contrary to the plaintiff's claim, AOL had a license
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`in 2003 that permitted it to make available his uploaded files for download. Even if the plaintiff is
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`correct that he effectively rejected the terms of AOL’s revised TOS and license in 2003, AOL’s
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`proposed revision to the contract does not rescind the pre-existing, irrevocable license granted under
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`the 1998 TOS.
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`The plaintiff did not establish as a matter of law that he is entitled to free upload time from
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`AOL. He does not point to a particular portion of the TOS that confers such upload time, and he
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`argues no more than that benefit was “implied.” Fact issues preculed judgment in his favor on those
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`claims. The argument that the breach of this alleged implied contract somehow negates the TOS
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`finds no support in the law. Nor is the TOS invalid for want of consideration, as the plaintiff
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`benefitted from having a forum for his files and access to AOL content and the Internet as a
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`subscriber.
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`III.
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`The plaintiff’s objections to Magistrate Judge Pepe’s report and recommendation lack merit.
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`The Court agrees with the magistrate judge’s recommendations.
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`2:06-cv-13221-DML-SDP Doc # 100 Filed 09/28/07 Pg 13 of 13 Pg ID 1555
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`Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt
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`#95] is ADOPTED, and the plaintiff’s objections [dkt #97] are OVERRULED.
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`It is further ORDERED that the plaintiff’s motion for partial summary judgment [dkt #51]
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`is DENIED.
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`It is further ORDERED that the motion for partial summary judgment by defendant America
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`Online, Inc. [dkt #67] is GRANTED IN PART. Counts one and two of the plaintiff’s amended
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`complaint is DISMISSED WITH PREJUDICE.
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`It is further ORDERED that the motion for partial summary judgment by defendant America
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`Online, Inc. [dkt #61] is DENIED as moot.
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`s/David M. Lawson
`DAVID M. LAWSON
`United States District Judge
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`Dated: September 28, 2007
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`PROOF OF SERVICE
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`The undersigned certifies that a copy of the foregoing order was served
`upon each attorney or party of record herein by electronic means or first
`class U.S. mail on September 28, 2007.
`
`s/Felicia M. Moses
`FELICIA M. MOSES
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