With respect to the issue of knowledge, the district court found Perfect 10’s notifications
to CWIE of infringement to be deficient under Section 512(c) because they identified only the
web sites containing allegedly infringing material, but did not identify the URLs of the infringing
images or which of Perfect 10’s copyrights were being infringed.^2515 With respect to whether
CWIE had constructive notice of infringement, the court noted that the kind of constructive
notice Congress contemplated under Section 512(c) was that of “red flag” web sites from which
infringements would be apparent based on a cursory review of the web site. Under this test,
although some of CWIE’s affiliate web sites advertised images of celebrities, they did not
contain obvious infringements because the web sites did not advertise themselves as pirate web
sites. Accordingly, the court concluded that Perfect 10 had not raised a genuine issue of material
fact that CWIE had actual or constructive knowledge of infringements on its clients’ web
sites.^2516
With respect to the issue of control, the court noted that CWIE’s right and ability to
control infringing activity was limited to disconnecting its webmasters’ access to CWIE’s
service. Citing the case of Perfect 10 v. Cybernet Ventures, Inc.,^2517 the court ruled that the mere
ability to terminate services to a web site was not sufficient control for purposes of the Section
512(C) safe harbor. Nor was the fact that CWIE reviewed its sites to look for blatantly illegal
and criminal conduct sufficient to close the safe harbor, for the DMCA was intended to
encourage OSPs to work with copyright owners to locate and stop infringing conduct.
Accordingly, the court ruled that CWIE was entitled to summary judgment on the Section 512(c)
safe harbor.^2518
On appeal, the Ninth Circuit, for the reasons discussed above in Section III.C.6(b)(1)(i).d
above, agreed with the district court’s rulings that Perfect 10’s notices of infringement were
insufficient to comply with the requirements of Section 512(c)(3) or to provide CWIE with
knowledge or awareness within the standard of Section 512(c)(1)(A).^2519 The remaining
question was therefore whether Perfect 10 had raised a genuine issue of material fact concerning
whether CWIE received a direct financial benefit from the infringing activity.^2520 The Ninth
Circuit held that “’direct financial benefit’ should be interpreted consistent with the similarly-
worded common law standard for vicarious liability. ... Thus, the relevant inquiry is ‘whether
the infringing activity constitutes a draw for subscribers, not just an added benefit.’”^2521 The
court noted that Perfect 10 had alleged only that CWIE hosted websites for a fee, and such
allegation was insufficient to show that the infringing activity was a draw. The court also noted
that legislative history of Section 512 stated that receiving a one-time set-up fee and flat, periodic
payments for service from a person engaging in infringing activities would not constitute
(^2515) Id. at 1100-01.
(^2516) Id. at 1103-04.
(^2517) 213 F. Supp. 1146, 1181 (C.D. Cal. 2002).
(^2518) Perfect 10, Inc. v. CCBill, 340 F. Supp. 2d at 1104-05.
(^2519) Perfect 10, Inc. v. CCBill, 481 F.3d 751, 766 (9th Cir.), cert. denied, 552 U.S. 1062 (2007).
(^2520) Id.
(^2521) Id. at 767 (quoting Ellison v. Robertson, 357 F.3d 1072, 1078-79 (9th Cir. 2004)).