eligible for the safe harbor by virtue of the financial benefit/right to control prongs, and failure of
the financial benefit/right to control prongs is sufficient to deny the safe harbor generally for all
infringing activity on the web site.^2807
Turning to the financial benefit and right to control prongs, the court first observed that
the statutory language of Section 512(c)(1)(B) sets out as the requirement that the service
provider not receive a financial benefit directly attributable to the infringing activity, then states
the “right and ability to control” language in a dependent clause. Accordingly, the court
concluded that the lack of direct financial benefit requirement is central, with the right to control
prong being secondary.^2808
With that as background, the court noted it was an issue of first impression what
constitutes a financial benefit directly attributable to the infringing activity where the service
provider’s revenue is derived from advertising and not from users. The court held that in this
case the connection between the infringing activity and the defendants’ income stream derived
from advertising was sufficiently direct to meet the financial benefit prong by virtue of the fact
that the defendants promoted advertising by pointing to infringing activity, obtained advertising
revenue that depended on the number of visitors to their sites, attracted primarily visitors who
were seeking to engage in infringing activity, as that is mostly what occurred on their sites, and
encouraged that infringing activity.^2809
With respect to the control prong, the court noted that in UMG Recordings it had adopted
the Second Circuit’s interpretation in Viacom that in order to have the right and ability to
control, the service provider must also exert substantial influence on the activities of users. Here,
the defendants’ ability to control infringing activities on their web sites went well beyond merely
locating and terminating users’ access to infringing material. The court again noted the
defendants’ activities to induce infringement, and stated that, although such inducement actions
did not categorically remove them from the Section 512(c) safe harbor, they demonstrated the
substantial influence the defendants exerted over their users’ infringing activities, and thereby
supplied one essential component of the right to control exception to the Section 512(c) safe
harbor. Accordingly, because the defendants met both prongs of Section 512(c)(1)(B), they were
not eligible for protection under the Section 512(c) safe harbor.^2810
Lastly, the court observed that it had no difficulty concluding that where the Section
512(c)(1)(B) safe harbor requirements are not met, the service provider loses protection with
regard to any infringing activity using the service on the following rationale. To satisfy the
control prong, there must be substantial influence on the infringing activities of users, indicating
that it is the overall relationship between the service provider and infringing users that matters.
Also, to the degree the financial benefit/right to control prongs had their origin in vicarious
liability concepts, those concepts rest on the overall relationship between the defendant and the
(^2807) Id. at 1043 n.20.
(^2808) Id. at 1045.
(^2809) Id.
(^2810) Id. at 1045-46.