Determining Infringement Liability of P2P Software Platform Providers

Issue 25 By Zhou Bo,[Copyright]

Facts

Plaintiff:  Digital Heritage Publishing Limited (DHP)
Defendant:  Baidu Company (Baidu), Huang Yimeng (Huang)

On August 27, 2003, DHP registered its copyright with the Copyright Office of the PRC (NCAC) for “the original image and full text/title search v1.0 of the Electronic Version of Siku Quanshu (Wenyuange Edition),” which was first published on January 1, 2000. This right was obtained through original acquisition, all rights reserved.

DHP staff members logged on to the Internet on several occasions of November 3, 2005, March 3, 2006, and May 2, 2006, and detected the relevant access catalog using Baidu’s search engine by entering the words “Wenyuange Siku Quanshu.”  They then entered the webpage of Verycd.com after clicking the Complete Library in Four Branches of Literature Text Data CD-ROM, and there they were prompted to use eMule to download the disk. According to the “Introduction” on the disk, the disk was the original image and full-text search version of Siku Quanshu: “storing over 4.7 million pages of scanned images of original scripts and providing full-text retrieval functions of 700 million Chinese characters. To accommodate the needs of different users, two types of disk versions are available:  single-user version and concurrent version. The latter is for simultaneous use by multi authorized users. Quantity of the disks: 182 (single-user version)… Suggested price: HK$85,000/US$11050 (Price negotiable for concurrent version).”  At the bottom of the webpage was the notice “Record No: Hu ICP 05001009, ©2003-2005 VeryCD.com Some Rights Reserved.”

DHP conducted an inquiry into Verycd.com on July 6, 2006, by using the Ministry of Information Industry’s ICP/IP Address Information Record Keeping & Control System and obtained the following result: “Full name of ICP: Huang Yimeng; Website URL: www.emule.org.cn; Record No.: Hu ICP 05001009; Approval Date: April 15, 2005.” The Shenzhen Notary Public Office of Guangdong province notarized DHP’s inquiry process and on July 6, 2006, issued a Notarial Certificate, Shen Zheng Zi, No. 81738 (2006).

To prove that business cooperative relations existed between the two defendants, DHP preserved the relevant web pages of Baidu’s www.baidu.com on April 21, 2006, which showed that Baidu had launched a campaign called “Baidu Theme Promotion Services,” which allowed any participating website host to share its distribution interests. Defendant Huang joined in this activity by publishing Baidu’s “Baidu Theme Promotion Services” advertisement on its Verycd.com website.

Based on its inquiry, DHP filed an action before the Beijing No.1 Intermediate People’s Court, claiming that Baidu, via Baidu.com, and Huang, via Verycd.com, provided links and induced network visitors to illegally download and duplicate all of DHP’s works using eMule, which seriously violated DHP’s copyrights in computer software. DHP requested a court order for injunction against the two defendants, an apology to DHP, and damages for DHP in the amount of 500,000 Yuan.

In responding to the above allegations, defendant Baidu argued that it, as a professional search engine provider, merely provided a tool for network inquiry, i.e. the search engine, and did not participate in activities such as uploading, communicating or copying information. The mere providing of a search engine, it argued, was not sufficient to be deemed as participating in the infringing activities of network dissemination. It further argued that upon the rights holder’s objection to such use, Baidu immediately cut off the links so as to bar further links and use by the actors. Therefore, Baidu moved to dismiss the plaintiff’s claim.

Defendant Huang raised the issue of standing for both plaintiff and defendant.  Moreover, pursuant to the Regulation on the Protection of the Right to Network Dissemination of Information (Regulation), before filing suit, the rights holder should give notice to the network service provider of Verycd.com requesting that it disconnect the link to the infringing works.  However, in this case, the plaintiff failed to give such a warning before initiating litigation, which was inconsistent with the law.  Therefore, Huang argued, the court should set aside the plaintiff’s claims.

After inspecting and examining DHP’s Electronic Version of Siku Quanshu Wenyuange Edition and after the compressed disk at issue was preserved through notarization, the court found that ware illegally copied and disseminated the alleged infringing works through Verycd.com.

Judgment

At trial, the Beijing No.1 Intermediate People’s Court found that Baidu and Huang disseminated DHP’s software works, the Electronic Version of Siku Quanshu Wenyuange Edition, via the internet without permission from DHP.  The Court also found that Baidu had disconnected the link addresses related to the works after learning that DHP claimed a copyright over those software works, and thus would not bear any compensatory liability.  Huang, as a network operator, failed to disconnect the links after DHP’s complaint, which constituted an infringing act by providing links with the knowledge that the works being linked were infringing works, which breached DHP’s right to network dissemination of that information as the copyright holder of the software works under law, and its right to gain remuneration. Accordingly, the Court ruled that Huang was civilly liable and must stop the infringement and pay compensation for the losses incurred.

Baidu’s participation in the “Baidu Theme Promotion Services,” which was initiated by Baidu, was not for the purpose of this present case. There was also no necessary connection between placing the complete price information onto the website and the present case.  Therefore, the presumption that there was a joint intent on the part of Baidu and Huang to commit infringement was unsupported by evidence, which the Court did not admit into evidence. The claim that the two defendants should assume joint and several liabilities was, thus, not sustained.

Both DHP and Huang were dissatisfied with the judgment of the first instance court and appealed to the Beijing High People’s Court.

The Beijing High People’s Court found that Huang provided eMule on Verycd.com for users to download, and also specified that the purpose of downloading the software was to download the contents listed in the website’s resources channel. Moreover, by creating the resources channel, Huang provided users with classifications to make searching for information more convenient, and introduced and publicized the resources, which provided a facility for users to upload and download the alleged works. The alleged infringing works were then duplicated and communicated illegally. Thus, objectively, Huang participated in and assisted the users in their dissemination of the infringing works.

It should be pointed out that Huang’s commission of the aforesaid infringing acts through Verycd.com was not a “linking” act. The phrase “provide links” used by the court of first instance was inappropriate and should be corrected. Yet, the alleged acts, along with the term “link” in the usual sense, were used to provide a facility for internet users to download the contents of the relevant resources.

According to the relevant judicial interpretation, a network service provider shall be held contributorily liable for infringement if he participates in a copyright infringement with others via the Internet, or aided and abetted others to commit a copyright infringement via the Internet. In the present case, Huang, in the process of providing its website platform, arranged and classified the contents of the resources exchanged on his website Verycd.com based on his own will, which indicates that he had the ability to predict and judge whether a search result would involve infringement. Verycd.com disclosed in detail in its introduction to the Text Database Disk of Siku Quanshu Wenyuange Edition on its webpage the file capacity as well as the reference price of the software. It is an obvious fact that the software has a large capacity and a higher price. However, users can obtain it free of charge using the platform and facility provided by Verycd.com. Therefore, Huang should have known that the transmission of the Text Database Disk of Siku Quanshu Wenyuange Edition via the Verycd.com communication platform was not authorized by the copyright holder. Also, Huang failed to submit evidence in this case that the upload user of the alleged works was legally authorized to do so, nor did he prove that he had taken any measures to avoid the illegal transmission of the alleged works through his communication platform. Thus, Huang acted with intent and committed contributory infringement, and should, under the law, cease and desist such infringement and pay damages. To sum up, the court of first instance was clear in the factual determination and correct in the judgment. The appeals of DHP and Huang were rejected and the original judgment sustained.

Analysis of the judgment

With the development of science and technology, the use of P2P software has become more and more popular. It has also become a new, hot issue in network IP cases. After reviewing the rulings of the above court decisions, it is clear that the judiciary understanding of P2P software infringement is also deepening.

1. P2P software

P2P, short for “peer-to-peer,” is a network among equal peer nodes. IBM defines P2P as a P2P system comprised of several interconnected computers and characterized by at least one of the following:  the system depends on the initiative and collaboration of peripheral equipment (non-central server), and each member benefits directly from other members, rather than from the participation of the server; the members in the system concurrently function as both “servers” and “clients” to the other nodes on the network; or the users of the system are able to be aware of the presence of each other, constituting a virtual or real group. Put simply, P2P directly links people together and allows people to directly interconnect with each other through the Internet. Because the application of P2P does not rely on a specific server, the traditional method of network management seems incompetent. Thus, the control and management of P2P applications becomes particularly important.1 From the perspective of judicial practice at home and abroad, whether it is in western countries such as America, Japan, Holland, and Australia, or in Taiwan and Hong Kong of China, the majority of P2P software developers in P2P software infringement cases have been held liable for infringement, and some have even been subject to substantial criminal penalties.2

The present case is a typical P2P software infringement case.

2. Two modes of P2P software

Up to now, the development of P2P technology has experienced two stages3:
1) Centralized P2P networks such as Napster. In this mode, user A searches through a central server for the file he is going to download, in which the central server acts as a medium. User A, once he determines that the file he plans to download can be obtained from user B, may connect with user B and conduct the file transfer. In this type of case, the website operator, i.e., the provider of the central server, tends to be held accountable for committing contributory infringement.4

2) Unstructured P2P networks such as Gnutella. The file transfer in this mode does not rely on a central server as a medium, i.e., there is no central management as to its operation, and the actors who transfer the files are located everywhere.  This easily gives rise to divergence as to whether a P2P software provider should be held responsible. For example, two divergent rulings were made in two Taiwan courts of equal status. In the ezPeer case, the Shihlin District Court held that no law provided that a P2P provider is responsible for the contents transferred by consumers on the Internet and the P2P provider himself did not copy or publicly transfer another’s work, and therefore was not guilty.5  Whereas, in the Kuro case, the Taipei District Court convicted the Kuro software provider of duplicating another’s work without authorization and sentenced the president and the founders of Kuro to prison terms ranging from two to three years.6

Generally speaking, compared to an unstructured P2P infringement case, it is relatively easy to determine the nature of a centralized P2P infringement case as well as the nature of contributory infringement of the P2P software provider. This has been widely acknowledged in practice and the present case is a typical example. However, there is no last word with respect to unstructured P2P infringement cases. It is difficult to reach a consensus in such cases, even in western countries. For instance, in October 2001, Buma/Stemra, a Dutch copyright organization, filed an action against Kazaa B.V., a private company with limited liability, on the grounds that Kazaa’s unstructured P2P software “Kazaa Media Desktop” infringed upon its copyrights. On November 29, 2001, the Amsterdam District Court issued a judgment against Kazaa, ordering it to close down its website or face a fine of US$ 40,000 daily.  Both parties appealed the judgment. The Amsterdam Court of Appeals reversed the judgment of the lower court on March 28, 2002, ruling that Kazaa may distribute its file sharing software on the Internet. The court took the position that:  1) the infringing acts were committed by those who used the computer program, and not by Kazaa, 2) the Kazaa computer program had other uses and was not exclusively used for downloading copyrighted works; and 3) it is not possible to technically detect which files are copyrighted and which are not. Thus, it is not possible for Kazaa to incorporate a blockage system to prevent the unlawful exchange of files. It was unreasonable to consider as unlawful Kazaa’s act of providing a litigious computer program that may infringe on copyrighted works. Buma/Stemra appealed to the Supreme Court of the Netherlands. On December 29, 2003, the Supreme Court rendered a final judgment rejecting the appeal and affirming the Court of Appeals judgment.7 However, in another unstructured P2P software infringement case,8 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, the nine justices of the United States Supreme Court unanimously ruled that a website that realized file sharing by using P2P software should be held liable for its users’ copying of copyrighted works without authorization.9

3. Nature of infringement liability

In terms of P2P software infringement cases, the determination of infringement liability is very complicated and full of controversies. However, from the existing cases in China and abroad, we may conclude that the imposition of infringement liability on a party occurs not merely when the party offered P2P software, but when the party offered a P2P network platform and provided help on this platform for P2P software end-users to commit infringement. Therefore, the so-called P2P software infringement in the usual sense should, if expressed literally, be referred to as “the infringement liability of P2P software platform providers.”

As far as the P2P software itself is concerned, it only provides software users with a fast and convenient way to download files in an interactive way. It is not designed for the purpose of infringement and can be used for non-infringing purposes. Thus, pursuant to the “substantial non-infringing use” doctrine established by the Supreme Court of the United States in the Sony case,10 a P2P software provider should not be held accountable for infringement by merely providing users with P2P software.

After reviewing the current cases in which P2P software infringement liability was established in various countries, the main grounds for courts to hold P2P software providers liable was that the P2P software providers operated relevant websites, which served as the platform for P2P software end-users to commit copyright infringement. More importantly, they facilitated and assisted the end-users in their commission of the infringing acts by providing content on their websites such as classification, information ranking, and content introduction, which satisfied the constituting requirements of contributory infringement.

In this sense, the expression “infringement liability of P2P software platform providers” better reflects the fundamental reasons for holding actors liable than the simple phrase “P2P software infringement.”

4. Legal basis for the determination of infringement liability of P2P software platform providers

Some people hold the view that the liability imposed on a P2P platform provider is a “contributory liability,”11 while others maintain that it is a vicarious liability.12 However, generally, it is an indirect liability, which is premised on the existence of direct infringement. For example, the United States Court of Appeals for the Ninth Circuit stated that three requirements must be met for those who contributed to an infringement to be held for contributory liability: (1) there must be an infringement committed by the primary infringing actor; (2) the secondary party must have knowledge of the infringing activity; and (3) the secondary party must materially contribute to the infringing activity. Thus, if a court cannot establish that a P2P software end-user committed copyright infringement, there will be no basis for the P2P software platform provider to be held as a contributory infringer. Yet, this basis was distinguished by the decision made on April 29, 2008, in the case of Atlantic Recording Corp. v. Howell.13

Nevertheless, in China’s current legal system, there is no barrier to a court’s determination that the uploading and downloading of another’s copyrighted works by a P2P software end-user is infringement. Pursuant to Paragraph 1 (12) of Article 10 of the Copyright Law, copyright includes the right to the network dissemination of information. Article 2 of the Regulation on the Protection of the Right to Network Dissemination of Information (Regulation) provides that: “Any organization or individual who uploads other persons’ works, performances, sound and visual recordings through the information network for public access must obtain authorization from and pay remuneration to the right holders, except where otherwise provided for by laws and administrative regulations.” Meanwhile, the Regulation defines the content of the right of information network dissemination. Article 26 (1) thereof provides: “Right to network dissemination of information refers to the right to present works, performances, sound and visual recordings to the public in the cable or wireless form so that members of the public can get access to the works, the performances or the sound and visual recordings at the time and site selected on their own.” Hence, the uploading and downloading of other persons’ copyrighted works by a P2P software end-user should be held as infringing on the other persons’ right to the network dissemination of information. The existence of direct infringement forms the grounds for attaching indirect liability on a P2P software platform provider.

Additionally, Article 3 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases in Relation to Copyright Disputes over Computer Network14 (Interpretation) provides a direct basis for imposing indirect liability on a P2P software platform provider. It states: “a network service provider who participates in the copyright infringement with others via the Internet, or abets or aids others via the Internet to commit copyright infringement shall be held by the people’s court for contributory liability together with other infringers or infringers who directly commit the infringement in accordance with Article 130 of the General Principles of the Civil Law of the PRC.”

The present case involving DHP was heard on May 23, 2006, which was before the Regulation had taken effect. However, the relevant provisions of the Copyright Law and the Interpretation15 are sufficient in terms of the application of law. Therefore, there are legal grounds for China’s courts to hold a P2P software platform provider contributorily liable for infringement in such cases.

Endnotes:
1. Zhang Qing & Lu Xiaofeng, Realization of P2P Flow Control by Making Use of Netfilter Framework and TC, Information Network Security, 2008, 3rd issue, p.56.
2. Shan Tiyu, Introduction and Characteristics of P2P Software Copyright Infringement Cases in China and Abroad, Information Network Security, 2008, 2nd issue, pp.71-73.
3. See Xu Yahui, An Analysis of the Relevant Issues over Online Music — With the Download of MP3 Music via P2P technology as the Core, Essay for Masters Degree, Lingdong University of Science and Technology (Taiwan), 2006, p.10-11. Of course, there are other more complicated classification manners for reference for P2P technology, See Chen Jian, Copyright Protection in Various Countries in P2P Environment, Information Network Security, 2006, 3rd issue, p.49-50.
4. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).
5. (Taiwan) The Criminal Judgment (1992) Su Zi No.728 of the Shihlin District Court.
6. (Taiwan) The Criminal Judgment (1992) Su Zi No.2146 of the Taipei District Court.
7. Shan Tiyu, Introduction and Characteristics of P2P Software Copyright Infringement Cases in China and Abroad, Information Network Security, 2008, 2nd issue, p.71.
8. The original expression of the judgment is “not through central servers.”
9. METRO-GOLDWYN-MAYER STUDIOS INC. ET AL. V. GROKSTER, LTD., ET AL., 545 U.S. 913 (2005), No. 04.480.
10. Sony Corporation of America et al. v. Universal Studios, Inc., et al., 464 U.S. 417 (1984).
11. See Wang Qian, The Contributory Liability of P2P Software Providers — Commentary on the Judgment of the United States Supreme Court in Grokster Case, Electronics Intellectual Property, 2005, 9th issue, pp.52-56.
12. Fonovisa, Inc. v. Cherry Auction, Inc., 76 F. 3d 259 (9th. Cir. 1996). See also Ian C. Ballon (US), E-Business and Internet Law, translated by School of Intellectual Property, Peking University, China Fangzheng Press, 2005, pp.8-73.
13. 554 F.Supp.2d 976 (D. Ariz. 2008).  In this case, Judge Neil V. Wake pointed out that based on the doctrine established in A&M Records, Inc. v. Napster, Inc. [ 239 F. 3d 1004, 1013 (9th. Cir. 2001)] the plaintiffs must satisfy two requirements to present a prima facie case of direct infringement: (1) they must show ownership of copyrights to the allegedly infringed material and (2) they must demonstrate that the defendants violate at least one exclusive right granted to copyright holders under 17 U.S.C. § 106.” Under 17 U.S.C. §106, the plaintiffs can only claim at this time that their distribution rights were violated. However, the general rule, supported by the great weight of authority, is that “infringement of the distribution right requires an actual dissemination of either copies or phonorecords.” [Nat’l Car Rental Sys. v. Computer Assocs. Int'l, Inc., 991 F. 2d 426, 434 (8th. Cir. 1993). See also Perfect 10, Inc. v. Amazon.com, Inc., 487 F. 3d 701, 718 (9th. Cir. 2007)]. The plaintiff failed to prove this point, and therefore failed to prove that the defendant infringed his right. Hence, Judge Neil V. Wake eventually rejected the plaintiff’s claim.
14. The second revision of November 20, 2006.
15. It took effect as of December 11, 2000.

About the author:
 Zhou Bo is a judge from the Beijing No.1 Intermediate People’s Court, IP Division.
                                      

(Translated by Zhang Meichang)

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