Mavrix Photographs, LLC v. LiveJournal, Inc.

          Argued Submitted October 7, 2016 Pasadena, California

         Appeal from the United States District Court for the Central District of California D.C. No. 8:13-cv-00517-CJC-JPR Cormac J. Carney, District Judge, Presiding

          Peter Afrasiabi (argued), Christopher W. Arledge, and John Tehranian, One LLP, Newport Beach, California, for Plaintiff-Appellant.

          Wayne Mitchell Barsky (argued), Blaine H. Evanson, and Brandon J. Stoker, Gibson Dunn & Crutcher LLP, Los Angeles, California, for Defendant-Appellee.

          Before: Harry Pregerson, Richard A. Paez, and Morgan Christen, Circuit Judges.

         SUMMARY^[*]

         Digital Millennium Copyright Act

         The panel (1) reversed the district court's holding, on summary judgment, that the defendant was protected by the safe harbor of the Digital Millennium Copyright Act from liability for posting the plaintiff's photographs online and (2) vacated a discovery order.

         The panel held that the safe harbor set forth in 17 U.S.C. § 512(c) would apply if the photographs were posted at the direction of users. The defendant, a social media platform, posted the photographs after a team of volunteer moderators, led by an employee of the defendant, reviewed and approved them. The panel held that whether the photographs were posted at the direction of users depended on whether the acts of the moderators could be attributed to the defendant. Disagreeing with the district court, the panel held that the common law of agency applied to the defendant's safe harbor defense. Because there were genuine factual disputes regarding whether the moderators were the defendant's agents, the panel reversed the district court's summary judgment and remanded the case for trial.

         The panel also discussed the remaining elements of the safe harbor affirmative defense. If an internet service provider shows that the infringing material was posted "at the direction of the user, " it must then also show that (1) it lacked actual or red flag knowledge of the infringing material; and (2) it did not financially benefit from infringements that it had the right and ability to control. The panel held that to fully assess actual knowledge, the fact finder must consider not only whether the copyright holder has given notice of the infringement, but also the service provider's subjective knowledge of the infringing nature of the posts. The panel held that to determine whether the defendant had red flag knowledge, the fact finder would need to assess whether it would be objectively obvious to a reasonable person that material bearing a generic watermark or a watermark referring to the plaintiff's website was infringing. When assessing the service provider's right and ability to control the infringements, the fact finder should consider the service provider's procedures that existed at the time of the infringements and whether the service provider had "something more" than the ability to remove or block access to posted materials.

         Finally, the panel vacated the district court's order denying discovery of the moderators' identities.

          OPINION

          PAEZ, Circuit Judge

         Plaintiff Mavrix Photographs ("Mavrix") appeals the district court's summary judgment in favor of Defendant LiveJournal. Mavrix sued LiveJournal for posting twenty of its copyrighted photographs online. The district court held that the Digital Millennium Copyright Act's ("DMCA") § 512(c) safe harbor protected LiveJournal from liability because Mavrix's photographs were posted at the direction of the user. 17 U.S.C. § 512(c).

         To be eligible at the threshold for the § 512(c) safe harbor, LiveJournal must show that the photographs were posted at the direction of the user. Although users submitted Mavrix's photographs to LiveJournal, LiveJournal posted the photographs after a team of volunteer moderators led by a LiveJournal employee reviewed and approved them. Whether these photographs were truly "posted at the direction of the user, " or instead whether LiveJournal itself posted the photographs, depends on whether the acts of the moderators can be attributed to LiveJournal. The issue we must decide is whether the common law of agency applies to LiveJournal's safe harbor defense. The district court ruled that the common law of agency does not apply to this analysis. We disagree and conclude that it does. As there are genuine factual disputes regarding whether the moderators are LiveJournal's agents, we reverse the district court's summary judgment and remand for trial.

         Because the district court ruled on the remaining elements of the safe harbor, we also proceed to discuss those elements in order to provide guidance to the district court and parties on remand. Finally, we vacate the district court's order denying discovery of the moderators' identities because the agency determination may affect this analysis.

         I. LiveJournal^[1]

         LiveJournal is a social media platform. Among other services, it allows users to create and run thematic "communities" in which they post and comment on content related to the theme. LiveJournal communities can create their own rules for submitting and commenting on posts.

         LiveJournal set up three types of unpaid administrator roles to run its communities. "Moderators" review posts submitted by users to ensure compliance with the rules.^[2]"Maintainers" review and delete posts and have the authority to remove moderators and users from the community. Each community also has one "owner" who has the authority of a maintainer, but can also remove maintainers.

         LiveJournal protects against copyright infringement in its communities through various mechanisms. LiveJournal follows the formal notice and takedown procedures outlined in the DMCA by designating an agent and form to report infringement, and by promptly removing infringing posts and prohibiting repeat abusers from the community. 17 U.S.C. § 512(c)(1)(C). LiveJournal's Terms of Service instructs users not to "[u]pload, post or otherwise transmit any Content that infringes any patent, trademark, trade secret, copyright or other proprietary rights."

         Oh No They Didn't! ("ONTD")

         ONTD is a popular LiveJournal community which features up-to-date celebrity news. Users submit posts containing photographs, videos, links, and gossip about celebrities' lives. ONTD moderators review and publicly post some of the submissions. Other users engage in conversations about the celebrity news in the comments section of each post. For example, one of the ONTD posts at issue contained photographs that Mavrix had taken which appeared to show that super-celebrity Beyoncé was pregnant. Users speculated in the comments section of that post that Beyoncé was indeed pregnant.^[3]

         Like other LiveJournal communities, ONTD created rules for submitting and commenting on posts. ONTD's rules pertain to both potential copyright infringement and substantive guidance for users. For example, one rule instructs users to "[i]nclude the article and picture(s) in your post, do not simply refer us off to another site for the goods." Another rule provides "Keep it recent. We don't need a post in 2010 about Britney Spears shaving her head." ONTD's rules also include a list of sources from which users should not copy material. The sources on the list have informally requested that ONTD stop posting infringing material. ONTD has also automatically blocked all material from one source that sent ONTD a cease and desist letter.

         ONTD has nine moderators, six maintainers, and one owner. ONTD users submit proposed posts containing celebrity news to an internal queue. Moderators review the submissions and publicly post approximately one-third of them. Moderators review for substance, approving only those submissions relevant to new and exciting celebrity news. Moderators also review for copyright infringement, pornography, and harassment.

         When ONTD was created, like other LiveJournal communities, it was operated exclusively by volunteer moderators. LiveJournal was not involved in the day-to-day operation of the site. ONTD, however, grew in popularity to 52 million page views per month in 2010 and attracted LiveJournal's attention. By a significant margin, ONTD is LiveJournal's most popular community and is the only community with a "household name." In 2010, LiveJournal sought to exercise more control over ONTD so that it could generate advertising revenue from the popular community. LiveJournal hired a then active moderator, Brendan Delzer, to serve as the community's full time "primary leader." By hiring Delzer, LiveJournal intended to "take over" ONTD, grow the site, and run ads on it.^[4]

         As the "primary leader, " Delzer instructs ONTD moderators on the content they should approve and selects and removes moderators on the basis of their performance. Delzer also continues to perform moderator work, reviewing and approving posts alongside the other moderators whom he oversees. While Delzer is paid and expected to work full time, the other moderators are "free to leave and go and volunteer their time in any way they see fit." In his deposition, Mark Ferrell, the General Manager of LiveJournal's U.S. office, explained that Delzer "acts in some capacities as a sort of head maintainer" and serves in an "elevated status" to the other moderators. Delzer, on the other hand, testified at his deposition that he does not serve as head moderator and that ONTD has no "primary leader."

         Mavrix

         Mavrix is a celebrity photography company specializing in candid photographs of celebrities in tropical locations. The company sells its photographs to celebrity magazines. According to Mavrix, infringement of its photographs is particularly devastating to its business model. Since

         Mavrix's photographs break celebrity news, such as the pregnancy of Beyoncé, infringing posts on sites like ONTD prevent Mavrix from profiting from the sale of the photographs to celebrity magazines.

         Procedural History

         Mavrix filed an action for damages and injunctive relief against LiveJournal alleging copyright infringement on the basis of twenty Mavrix photographs posted on ONTD. ONTD posted the photographs in seven separate posts between 2010 and 2014. Some of these photographs contained either a generic watermark or a specific watermark featuring Mavrix's website "Mavrixonline.com." To the best of his recollection, Delzer did not personally approve the seven posts. LiveJournal has no technological means of determining which moderator approved any given post. Mavrix did not utilize LiveJournal's notice and takedown procedure to notify LiveJournal of the infringements. When Mavrix filed this lawsuit, LiveJournal removed the posts.^[5]

         During discovery, Mavrix filed two motions to compel responses to its interrogatories seeking the identity of the ONTD moderators. The magistrate judge denied the first motion, finding that Mavrix had not met and conferred with LiveJournal in good faith. The magistrate judge denied the second motion to compel because Mavrix failed to notify the anonymous parties of the pending motion. Mavrix moved the district court for review of the magistrate judge's ...