material that is claimed to be infringing or to be the subject of infringing activity.” Second,
under Section 512(i)(1)(A), it must adopt and reasonably implement, and inform subscribers of, a
policy “that provides for the termination in appropriate circumstances of subscribers and account
holders of the service provider’s system or network who are repeat infringers.”
The court ruled that factual issues on each of these two issues precluded summary
judgment: CoStar claimed that LoopNet had failed to remove several photographs after being
notified that they were infringing and that several photographs had been posted more than once
after notification. CoStar also alleged that there was no evidence LoopNet had ever terminated
any user’s access despite the fact that some of them had an extensive history as repeat
infringers.^2451 LoopNet countered that its “Terms and Conditions” for its site included the
removal of listings alleged to be infringing and the possibility of termination. LoopNet also
claimed that it promptly removed photographs once it received notice of alleged infringement,
sent an email to brokers explaining the potential consequences of repeat infringement and
investigated brokers it suspected to be repeat infringers. It also claimed to have implemented
additional precautions to avoid reposting of infringing photographs in the future. In addition, the
court noted that because LoopNet’s take down and termination policies had changed over time,
to resolve the issue of the adequacy of those procedures, a factfinder would have to focus on
each photograph alleged to be infringing and the policy in effect before the posting of each
photograph.^2452
Financial Benefit. To begin its analysis of the financial benefit prong of the Section
512(c) safe harbor, the court, in a significant ruling, noted that, “[r]egardless of whether LoopNet
complied with the ‘take down’ requirements, a finding that it received a direct financial benefit
from the infringement automatically would remove it from the safe harbor. ... Basically, the
DMCA provides no safe harbor for vicarious infringement because it codifies both elements of
vicarious liability.”^2453 The ruling that the DMCA provides no safe harbor for vicarious
infringement seems to contradict the Ninth Circuit’s ruling in the Napster I case, discussed in the
next subsection, in which the Ninth Circuit noted that “[w]e do not agree [with the district
court’s ruling] that Napster’s potential liability for contributory and vicarious infringement
renders the Digital Millennium Copyright Act inapplicable per se.”^2454
The court held that LoopNet did not meet either element of the test for vicarious liability.
CoStar had not asserted that LoopNet had any right to control its users beyond its mere ability to
control or block access to its site. The court, citing the Hendrickson v. eBay case, held that such
ability to block access could not constitute sufficient “right and ability” to control for vicarious
liability. The court noted that otherwise one would have the illogical result that the very policy
of blocking access and terminating infringers mandated by the DMCA in Section 512(c)(1)(C)
would force service providers to lose their immunity by violating § 512(c)(1)(B).^2455 The court
(^2451) Id.
(^2452) Id. at 703-04.
(^2453) Id. at 704 (citing 3 M. Nimmer & D. Nimmer, Nimmer on Copyright, § 12B.04[A][2], at 12B-38 (2001)).
(^2454) A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1025 (9th Cir. 2001).
(^2455) CoStar, 164 F. Supp. 2d at 704 & n.9.