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CoStar Group, Inc., v. LoopNet, Inc.: ISP Not Liable for Copyright Infringement

A federal appellate court has considered whether an Internet Service Provider who allowed its subscribers to post commercial property listings with photographs was liable for violations of the copyright laws when subscribers posted photographs infringing a third party’s copyrights.

CoStar Group, Inc. and CoStar Realty Information, Inc. (“Owner”) is a national provider of commercial real estate information. The Owner maintains a database of information about commercial real estate properties and also a large number of property photographs. The Owner has copyrighted most of the photographs found in the database. The Owner gives its customers access to its database but does not give the customers permission to reproduce the copyrighted works found in the database.

LoopNet (“ISP”) is an Internet Service Provider which allows its subscribers to post listing information about commercial real estate on its site. The ISP estimated that it has over 100,000 listings on its site, adding about 2200 listings per day. The ISP allows property photographs to be posted on the site, with approximately one third of all listings having photographs. The ISP requires that all of its subscribers agree to not post photographs on the site without first obtaining the required permission. Additionally, whenever a subscriber does post a photograph on the site, it must complete an additional form warranting that he/she has the necessary authorizations to use the photograph. Prior to the photograph becoming live on the site, an employee of the ISP quickly reviews the photograph to make sure it depicts commercial real estate and also is not obviously copyrighted by a third party, such as having a copyright notice on the photograph itself. If the photograph passes this review, it is then allowed onto the site.

In 1998, the Owner became aware that its copyrighted photographs were being posted on the ISP by the ISP’s subscribers without the proper permission. Whenever the Owner identified to the ISP a photograph which was improperly posted on the ISP, the ISP’s employees immediately removed the offending photograph. In September 2001, the Owner identified over 300 infringing photographs on the ISP. The Owner filed a lawsuit against the ISP alleging copyright infringement. The trial court ruled in favor of the ISP, and the Owner appealed.

The United States Court of Appeals for the Fourth Circuit affirmed the trial court. The trial court had based its decision on an earlier court case which had determined that an internet service provider was not liable for direct copyright infringement when its subscribers were engaged in copyright infringement, due to the passive role of the internet service provider. The Owner argued that decision had been overruled by the federal Digital Millennium Copyright Act (Act”) and under the Act, the ISP was liable for the infringing behavior of its subscribers.

The court first considered whether an internet service provider could be liable for direct infringement, based on the conduct of its subscribers. The court looked at the federal copyright laws and found that in order to be liable for direct copyright infringement, a party’s conduct must in some meaningful way contribute to the infringing behavior. For direct infringement liability, something more than mere ownership of the mechanism used for infringement must be shown; a party must instead establish a connection between the infringing behavior and the ownership of the mechanism. Here, the ISP merely was a conduit for information provided by the subscribers and so could not be liable for direct copyright infringement. Thus, the court found that the trial court had correctly ruled that the ISP could not be liable for direct infringement.

Next, the court considered the Owner’s argument that the Act had overruled the earlier decision and had created a new framework under which an internet service provider could be liable for infringement, even when the internet service provider’s role in the infringement was passive. The Act provides a safe harbor for internet service providers, but the ISP did not qualify for the safe harbor provision. Therefore, the Owner argued that the ISP was liable under the Act for infringement.

The court disagreed with the Owner’s argument that the Act replaced existing copyright law in its entirety. Instead, the court determined that the Act and its safe harbor were not intended by Congress to cover all infringement actions against internet service providers, as a section of the Act specifically stated that other defenses were available to internet service providers for infringement allegations. Since prior case law supported the ISP’s argument that it was not liable for direct infringement and Congress had not specifically overruled the case relied upon by the trial court, the court affirmed the ruling of the trial court in favor of the ISP.

The Owner also argued that the ISP was not passive because the ISP’s employees reviewed all photos prior to posting on the ISP site. The court stated that the safeguards employed by the ISP were designed to prevent copyrighted works from being posted on the site and did not involve the ISP in any infringing activity. The court stated that it would be unfair to hold the ISP liable for making an extra effort to prevent works which were obviously copyrighted from being uploaded onto its site, and suggested that perhaps the Owner could make its copyright obvious on its photos if it did not want its photos posted on the ISP.

CoStar Group, Inc., v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004).