infringement.^2119 Unlike contributory infringement, knowledge is not an element of vicarious
liability.^2120
(a) The Netcom Case and its ProgenyIn the Netcom case, the court refused to impose liability on Netcom under a theory of
vicarious liability. The court found that there was a genuine issue of material fact as to whether
Netcom had the right and ability to control the activities of its subscribers, in view of the fact that
Netcom’s expert testified that with an easy software modification Netcom could identify postings
containing particular words or from particular individuals, and Netcom had acted to suspend
subscribers’ accounts on over one thousand occasions.^2121
However, the court held that the second prong of the test was not satisfied, because there
was no evidence that Netcom received a direct financial benefit from the infringing postings, or
that such postings enhanced the value of Netcom’s services to subscribers or attracted new
subscribers.^2122
In refusing to impose vicarious liability because it found Netcom received no direct
financial benefit from the infringing postings, the court in Netcom relied on the district court’s
decision in Fonovisa, Inc. v. Cherry Auction, Inc.,^2123 which found no direct financial benefit
despite an argument that lessees at a swap meet included many vendors selling counterfeit goods
and that clientele sought “bargain basement prices.”^2124 It should be noted that the Ninth Circuit
subsequently reversed Fonovisa, and appears to have adopted a less demanding standard for
financial benefit for purposes of vicarious liability, which may undermine the strength of the
Netcom decision as precedent on this point. The Ninth Circuit held that adequate financial
benefit was alleged by virtue of the fact that the operator of the swap meet received financial
benefits through admission fees, parking fees, and sales at concession stands.^2125 A copyright
holder seeking to hold an OSP or BBS operator vicariously liable might argue under Fonovisa
that the subscription fees paid by the infringers should be sufficient financial benefit, just as were
the admission fees, parking fees, and concession stand sales in Fonovisa. In addition, as
discussed above, in the Napster case, the Ninth Circuit ruled that Napster had received a
(^2119) E.g., Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 306 (2d Cir. 1963).
(^2120) Religious Technology Center v. Netcom On-Line Communication Servs., 907 F. Supp. 1361, 1375 (N.D. Cal.
1995); R. Nimmer, Information Law ¶ 4.11, at 4-40 (2001).
(^2121) Religious Technology Center v. Netcom On-Line Communication Servs., 907 F. Supp. 1361, 1376 (N.D. Cal.
1995).
(^2122) Id. at 1377. The plaintiffs argued that the financial benefit prong was satisfied based on “Netcom’s
advertisements that, compared to competitors like CompuServe and America Online, Netcom provides easy,
regulation-free Internet access. Plaintiffs assert that Netcom’s policy attracts copyright infringers to its system,
resulting in a direct financial benefit. The court is not convinced that such an argument, if true, would
constitute a direct financial benefit to Netcom from Erlich’s infringing activities.” Id. (emphasis in original).
(^2123) 847 F. Supp. 1492 (E.D. Cal. 1994).
(^2124) Id. at 1496.
(^2125) Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).