defendant in making the copies in order to establish direct liability. Here the hotfile.com web
site merely allowed users to upload and download copyrighted material without volitional
conduct on the part of the defendants.^185 The court found unpersuasive two cases relied on by
the plaintiffs, the Mp3Tunes^186 and Usenet.com^187 cases, to support their argument that the
defendants, by creating a plan that induced infringement, were liable for direct infringement.
Although the court noted that the two cases supported the plaintiffs’ argument, the court stated
that it believed the cases were not correctly decided. The court also rejected the plaintiffs’
attempt to distinguish Netcom on the ground that it applied only where a defendant violated a
copyright holder’s right to reproduce – but not to distribute. The court noted that the Netcom
court stated it considered the copyright holder’s right to distribute in its analysis. The court also
rejected the plaintiffs’ argument that they had alleged a volitional act in the form of Hotfile’s
making of additional copies once the copyrighted material was uploaded to its server, because
courts had repeatedly held that the automatic conduct of software, unaided by human
intervention, is not volitional.^188
The court found, however, that the plaintiffs had adequately pled claims for inducement,
contributory, and vicarious liability. Inducement and contributory infringement were adequately
pled by allegations that hotfile.com was a web site that Hotfile used to promote copyright
infringement and that Hotfile took affirmative steps to foster the infringement by creating a
structured business model that encouraged users to commit copyright infringement. Vicarious
liability was adequately pled by allegations that Hotfile had complete control over the servers
that users employed to infringe, had the technology necessary to stop the infringement, refused to
stop the massive infringement, and actually encouraged the infringement because the
infringement increased its profits.^189
The court’s subsequent rulings upon various motions for summary judgment with respect
to the DMCA safe harbors and secondary liability are discussed in Sections III.C.3(s), III.C.4(f)
and III.C.6(b)(1)(iii).x below.
In Dec. 2013, the MPAA announced a settlement under which the district court had
awarded damages of $80 million to the plaintiffs and ordered Hotfile to either shut down its
(^185) Id. at 1307-08.
(^186) Capitol Records, Inc. v. Mp3Tunes, LLC, 2009 U.S. Dist. LEXIS 96521 (S.D.N.Y. Oct. 16, 2009), which held,
without much analysis, that a company’s knowledge of massive infringement plausibly alleged volitional
conduct.
(^187) Arista Records LLC v. Usenet.com, Inc. 633 F. Supp. 2d 124 (S.D.N.Y. 2009), which held that a company,
having a policy encouraging infringement plus the ability to stop that infringement, was liable for direct
copyright infringement.
(^188) Hotfile, 798 F. Supp. 2d at 1307-09.
(^189) Id. at 1301.