Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 1 of 12
`
`No. 18-55615
`
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`_______________________________________
`
`ALS SCAN INC.,
`
`Plaintiff - Appellant,
`
`vs.
`
`STEADFAST NETWORKS, LLC,
`
`Defendant - Appellee.
`_______________________________________
`
`Appeal from the United States District Court
`For the Central District of California
`Hon. George Wu
`2:16-cv-05051 GW AFM
`_______________________________________
`
`APPELLANT’S OPPOSITION TO
`MOTION FOR ATTORNEYS’ FEES
`_______________________________________
`
`
`
`Jay M. Spillane (Bar No. 126364)
`jspillane@spillaneplc.com
`SPILLANE TRIAL GROUP PLC
`468 N. Camden Drive, Second Floor
`Beverly Hills, CA 90210-4507
`Tel: (424) 217-5980
`Fax: (888) 590-1683
`
`
`Attorneys for Plaintiff - Appellant
`ALS SCAN INC.
`
`
`
`
`
`No. 18-55615
`
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`_______________________________________
`
`ALS SCAN INC.,
`
`Plaintiff - Appellant,
`
`vs.
`
`STEADFAST NETWORKS, LLC,
`
`Defendant - Appellee.
`_______________________________________
`
`Appeal from the United States District Court
`For the Central District of California
`Hon. George Wu
`2:16-cv-05051 GW AFM
`_______________________________________
`
`APPELLANT’S OPPOSITION TO
`MOTION FOR ATTORNEYS’ FEES
`_______________________________________
`
`
`
`Jay M. Spillane (Bar No. 126364)
`jspillane@spillaneplc.com
`SPILLANE TRIAL GROUP PLC
`468 N. Camden Drive, Second Floor
`Beverly Hills, CA 90210-4507
`Tel: (424) 217-5980
`Fax: (888) 590-1683
`
`
`Attorneys for Plaintiff - Appellant
`ALS SCAN INC.
`
`
`
`
`
`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 2 of 12
`
`TABLE OF CONTENTS
`
`
`SUMMARY OF OPPOSITION ..................................................................... 1
`FACTUAL AND PROCEDURAL HISTORY .............................................. 1
`ARGUMENT .................................................................................................. 5
`THE RELEVANT FACTORS MILITATE AGAINST AN AWARD
`I.
`OF ATTORNEYS’ FEES. ................................................................... 5
`A.
`ALS Took a Reasonable Position. ......................................... 5
`B.
`No Other Factors Tilt in Favor of an Award of Attorneys’
`Fees. ………………………………………………………………7
`CONCLUSION ............................................................................................... 8
`
`
`
`
`
`
`
`i
`
`
`
`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 3 of 12
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`TABLE OF AUTHORITIES
`
`Cases
`Columbia Pictures v. Fung, 710 F.3d 1020 (9th Cir. 2013) ............................ 6
`Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004) ....................................... 6
`Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) ............................................... 5
`Fonovisa v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996) ................. 6, 7
`Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016) ............. 5, 7, 8
`Lieb v. Topstone Indus., Inc., 788 F.2d 151 (3rd Cir. 1986) .......................... 5
`Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc.,
`658 F.3d 936 (9th Cir. 2011) ..................................................................... 3, 6
`Perfect 10 v. Amazon, Inc., 508 F.3d 1146 (9th Cir. 2007) ............................. 6
`Perfect 10, Inc. v. Giganews, 847 F.3d 657, 671 (9th Cir. 2017) .................. 7
`Perfect 10 v. Visa, Inc., 494 F.3d 788 (9th Cir. 2007) ..................................... 6
`Statutes
`17 U.S.C. § 505 ............................................................................................... 5
`Other Authorities
`Manual of Model Civil Jury Instructions, No. 17.21...................................... 6
`
`ii
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`
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`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 4 of 12
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`SUMMARY OF OPPOSITION
`Steadfast received 1,517 notices of infringement on imagebam.com, a
`site it hosted, including 185 notices from ALS of infringement on
`imagebam.com of some 37,000 ALS works. ALS adduced evidence that
`imagebam.com was a “pirate” site, one dedicated to hosting infringing
`copyrighted content. While the specific infringing content in ALS’s
`notifications came down, inevitably another stolen gallery of ALS images
`appeared on imagebam.com shortly thereafter. While Steadfast published a
`policy of zero tolerance for infringement, including the right to terminate
`services, Steadfast refused to terminate service to imagebam.com.
`Steadfast’s motion for attorneys’ fees is laden with adjectives and
`conclusions free of support in the evidence or law. ALS had reasonable cause
`to believe the copyright law would support a claim against a service provider
`which ceased to terminate services to a customer that chronically infringed
`copyright. Contrary to Steadfast’s assertion that ALS ignored “clear legal
`precedent,” neither side had a case on all fours – what a service provider needed
`to do if the direct infringer removed infringing content upon demand but
`engaged in a clear pattern of infringement. The lack of clear precedent is
`underscored by the District Court’s decision, which agreed with ALS on nearly
`all issues, and the panel’s 2-1 decision, from which Judge Clifton dissented.
`That ALS incurred years of litigation only to learn that it had no recourse
`against a service provider that refused to terminate a client who engaged in
`regular infringement is punishment enough. To pile on an award of attorneys’
`fees would be unjust.
`FACTUAL AND PROCEDURAL HISTORY
`ALS produces proprietary adult content. ALS’s content is available on
`secure webpages, access to which ALS limits to its paying members. ALS
`registers its works with the Copyright Office. ALS also owns a registered
`
`1
`
`
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`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 5 of 12
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`trademark, “ALS Scan,” that appears on its websites and on all of its proprietary
`content. (ER 12.)
`Steadfast is a “hosting” company providing dedicated servers, data
`centers and related services. (ER 12-13.) Steadfast’s terms said “[a]ny illegal
`activity may result in your site being suspended immediately, without
`notification. . . . Steadfast will be the sole arbiter as to what constitutes a
`violation of this provision.” (ER 736-37, 847-64.) Steadfast also provides that
`it “responds to notices of alleged copyright infringement and terminates
`accounts of repeat infringers.” (ER 838.)
`Steadfast contracted with a third party, Flixya, to store a website,
`www.imagebam.com, on Steadfast’s servers. (ER 12-13.)
`Steadfast admitted to receiving a total of 1,517 notifications of
`infringement on imagebam.com since 2013. (ER 741.) ALS’s agent, Steve
`Easton, sent Steadfast 185 notices of infringement of infringement of ALS
`works on imagebam.com. Each notice referred to dozens, if not two hundred or
`more, infringing ALS works, and included hyperlinks showing the exact
`location of each infringing work. Easton gave notice of infringement on
`imagebam.com of some 37,000 ALS works in total. (ER 12, 725, 728-31, 733-
`34, 877, 888-1308.)
`Though the specific images in Easton’s notices came down, inevitably
`another set of stolen ALS content reappeared on imagebam.com. Steadfast
`made no effort to contact Flixya about the chronic infringement notices. (ER
`810-11.) Steadfast made no effort to discover whether Flixya was terminating
`its own repeat infringers. (ER 815-17.) Steadfast did not terminate Flixya’s
`account; indeed, Steadfast has never terminated an account for repeat
`infringement. (ER 737, 869-70.)
`ALS’s problems with imagebam.com were consistent with its battle with
`“pirate sites,” websites with no apparent function but to serve as free hosts to
`
`2
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`
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`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 6 of 12
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`stolen copyrighted content. ALS sends a notice of infringement one day, that
`particular content goes down and another stolen content gallery goes up the
`next day. Where the service provider will not terminate services to the pirate,
`this relegates ALS to play an endless game of “whack-a-mole” with no
`abatement in the pattern of repeat infringement. (ER 724-25.)
`Imagebam.com has been one of the worst sites for chronic infringement
`of ALS content. Imagebam.com bore multiple hallmarks of a pirate site. (ER
`878-85, 1309-1368.)
`ALS filed a Complaint for contributory copyright and trademark
`infringement against Steadfast and another defendant, Cloudflare, which
`similarly continued to provide “content delivery” services to sites which had
`been the subject of numerous notices of infringement, without termination of
`services by Cloudflare.
`When Cloudflare moved for summary judgment, the District Court
`denied its motion. “The simple answer as to whether Cloudflare could have
`done something simple to stop the infringement is ‘yes’: Cloudflare can, but
`does not, end its business relationship with websites that it knows (or arguably
`knows) are serial infringers.” (ER 109.)
`Then Steadfast moved for summary judgment.
`The District Court acknowledged the line of authority that a third party
`may materially contribute to infringement by providing server space for online
`infringement. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d
`936, 943 (9th Cir. 2011). (ER 15-20.)
`The District Court found triable issues of disputed fact concerning
`whether Steadfast had actual or constructive knowledge of infringement
`occurring on its servers, on the imagebam.com site. (ER 20-22.)
`The District Court found triable issues of disputed fact concerning
`whether Steadfast “could have, and failed to take simple measures to block
`
`3
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`access to the infringing images on imagebam.com.” “Steadfast continued to
`lease servers to Flixya after learning that thousands of infringing images
`appeared on imagebam.com over a three year span. Furthermore, Steadfast
`admits it could shut down Flixya’s servers and that its terms of service gave it
`the right to do so.” (ER 14-16, 22-26.)
`The District Court found “a jury could certainly conclude that Steadfast
`was generally aware that infringement would likely continue to occur on
`imagebam.com given the past history of the website.” (ER 28.)
`The District Court also held a jury could conclude that Steadfast lost its
`safe harbors under the DMCA for failure to reasonably implement a policy of
`repeat infringement.
`
`“[A] reasonable jury could conclude, based on certain undisputed
`facts, that Steadfast did not reasonably implement its repeat
`offender policy. First, Steadfast admits that it never terminated a
`customer’s account for repeat infringement. Steadfast also admits
`it received over 800 emails from Easton about allegedly infringing
`material on imagebam.com. Steadfast also admits that it did not
`click on any of the links in Easton’s emails or otherwise seek to
`independently investigate the veracity of the allegations therein.
`Additionally, Steadfast never terminated Flixya’s account, or ever
`considered doing so. Based on these facts, a reasonable trier of fact
`could conclude that Steadfast failed to reasonably implement its
`repeat offender policy.”
`(ER 32.)
`However, despite all of these findings, the District Court focused on the
`fact that terminating services to imagebam.com would not remove the particular
`images in ALS’s notices, as those had come down, and Steadfast supposedly
`had no burden to terminate services to imagebam.com because of “generalized
`knowledge that future acts of infringement are almost certain to occur on that
`customer’s platform.” (ER 28-29.)
`
`4
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`
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`I.
`
`ARGUMENT
`THE RELEVANT FACTORS MILITATE AGAINST AN AWARD
`OF ATTORNEYS’ FEES.
`Pursuant to 17 U.S.C. § 505, a court has discretion to award costs and
`reasonable attorney’s fees to the prevailing party in a copyright action. In 1994,
`the Supreme Court approved of “several nonexclusive factors that courts should
`consider in making awards of attorney’s fees” pursuant to § 505. These factors
`included “‘frivolousness, motivation, objective unreasonableness (both in the
`factual and in the legal components of the case) and the need in particular
`circumstances to advance considerations of compensation and deterrence’ . . .
`so long as such factors are faithful to the purposes of the Copyright Act.”
`Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994) (quoting Lieb v.
`Topstone Indus., Inc., 788 F.2d 151, 156 (3rd Cir. 1986)). In 2016, the Court,
`“seeing a need for some additional guidance respecting the application of §
`505,” emphasized that a court should “giv[e] substantial weight to the
`reasonableness of [the losing party’s] litigating position, but also tak[e] into
`account all other relevant factors.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S.
`Ct. 1979, 1985, 1989 (2016).
`A. ALS Took a Reasonable Position.
`The evidence was undisputed that Steadfast stored, “hosted,”
`imagebam.com on its servers, and provided related maintenance services. The
`evidence was undisputed that Steadfast received 1,517 notices of infringement
`on imagebam.com, 185 of which came from ALS. ALS provided evidence that
`imagebam.com was a “pirate” site, in the business of offering stolen
`copyrighted content. Though imagebam.com took infringing content down in
`response to a notice, inevitably another set of infringing ALS material appeared
`on the site. Steadfast maintained a policy of zero tolerance of infringement and
`
`5
`
`
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`reserved the right to terminate services yet refused to cease providing hosting
`services to imagebam.com.
`In concluding that it had cause to sue Steadfast for secondary
`infringement, ALS reasonably relied on Fonovisa v. Cherry Auction, Inc., 76
`F.3d 259 (9th Cir. 1996), where this Court established the bedrock rule that a
`business can become contributorily liable for infringement by continuing to
`provide the “site and facilities” for infringement after notice of infringing
`conduct by clients. Fonovisa is not outdated. It was not replaced by the
`DMCA. In this Court’s Manual of Model Civil Jury Instructions, No. 17.21,
`contributory copyright infringement, Fonovisa is the first case cited in the
`Comments. Fonovisa has been cited repeatedly by this Court in Internet cases.
`Perfect 10 v. Visa, Inc., 494 F.3d 788, 795-99 (9th Cir. 2007); Ellison v.
`Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004); Perfect 10 v. Amazon, Inc., 508
`F.3d 1146, 1171 (9th Cir. 2007); Columbia Pictures v. Fung, 710 F.3d 1020,
`1044 n.21 (9th Cir. 2013) (referring to Fonovisa as the “starting point” for
`subsequent decisions on online vicarious infringement).
`This Court confirmed that a website host that continues to provide online
`site and facilities to direct infringers after knowledge of their infringing conduct
`could become secondarily liable for copyright infringement. Louis Vuitton,
`supra.
`ALS reasonably relied on BMG Rights Management v. Cox
`Communications, Inc., 199 F.Supp.3d 958 (E.D. Va. 2016), aff’d in part, 881
`F.3d 293 (4th Cir. 2018), where Cox was secondarily liable for failure to
`terminate services to repeat copyright infringers.
`Neither side had a case directly on point, namely, what are the duties of a
`service provider when a direct infringer removes infringing content upon
`receipt of notice but appears to be engaged in a recurring pattern of copyright
`infringement.
`
`6
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`This is illustrated by the District’s Court decision, which agreed with
`ALS’s position on nearly every issue save the final one, whether Steadfast had a
`duty to terminate services to imagebam.com because of the likelihood of future
`infringement, though the infringing content in specific notices had been
`removed.
`This is also illustrated by the split nature of the panel’s opinion. Judge
`Clifton supported ALS’s reliance on Fonovisa, supra, and agreed with ALS on
`the lesson from Perfect 10, Inc. v. Giganews, 847 F.3d 657, 671 (9th Cir. 2017),
`requiring service provider to take “simple measures” to ”prevent future damage
`to copyrighted works.”
`The copyright law does not require, indeed does not permit, reflexive
`awards of attorneys’ fees to prevailing parties. Instead, as the Supreme Court
`emphasized in Kirtsaeng, supra, copyright plaintiffs should be not discouraged
`from taking reasonable positions to vindicate their rights, even where the claim
`is ultimately unsuccessful, through an award of the defendant’s attorneys’ fees.
`Though Steadfast won, the outcome could not be predicted from existing
`precedent. ALS should not be punished by seeking redress where there is no
`dispute that its rights were chronically violated by Steadfast’s customer.
`B. No Other Factors Tilt in Favor of an Award of Attorneys’
`Fees.
`Steadfast cites no other factors that would overcome the reasonableness
`of ALS’s position, and tilt the scales back toward an award of Steadfast’s fees.
`It is not clear to ALS how the Kirtsaeng touchstone of “reasonableness”
`differs from traditional factors such as “frivolousness” and “motivation.”
`Nevertheless, Steadfast’s arguments on these factors rely on adjectives without
`evidence. Steadfast has no evidence that ALS harbored doubts about the merits
`of its claim or engaged in sanctionable or malicious conduct. Steadfast
`complains about large potential damage figures, but these were simply a
`
`7
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`product of the number of works infringed times the available range of statutory
`damages.
`Steadfast quotes the classic factor of “compensation and deterrence,” but
`it is clear after Kirtsaeng that copyright owners should be not “deterred” from
`taking reasonable, albeit unsuccessful, copyright positions, nor should
`defendants be “compensated” for defending a copyright case that had
`reasonable grounds.
`Finally, Steadfast cites degree of success and the purposes of the
`Copyright Act. Granted, Steadfast succeeded, but this is the only factor in
`Steadfast’s favor. Steadfast claims that its defense clarified the scope of
`liability for secondary copyright infringement, however the case turned on its
`specific facts, and the unpublished and split nature of the panel’s opinion makes
`it doubtful the case will have much precedential value.
`CONCLUSION
`The Court should deny Steadfast’s motion for attorneys’ fees.
`
`
`
`By: _____/s/ Jay M. Spillane _________
`
`
`Jay M. Spillane
`Attorneys for Plaintiff - Appellant
`ALS SCAN INC.
`
`
`8
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`DATED: September 25, 2020 SPILLANE TRIAL GROUP PLC
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`Case: 18-55615, 09/25/2020, ID: 11836897, DktEntry: 65, Page 12 of 12
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`
`
`CERTIFICATE OF SERVICE
`FOR DOCUMENTS FILED USING CM/ECF
`I hereby certify that on September 25, 2020 I electronically filed the
`document to which this certificate is attached with the Clerk of the Court for the
`Ninth Circuit by using the CM/ECF system.
`I further certify that parties of record to this appeal who are either
`registered CM/ECF users, or who have registered for electronic notice, nor who
`have consented in writing to electronic service, will be served through the
`CM/ECF system.
`
`September 25, 2020
`/s/ Jay M. Spillane
`
`
`
`
`
`
`
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