suit based on Hotfile’s system and business model as they existed before the complaint and that
post-complaint damages were not part of this dispute.^2818
Although concluding that Hotfile was not entitled to the safe harbor because of its failure
to reasonably implement a repeat infringer policy, the court went on to address two other bases
the plaintiffs alleged disqualified Hotfile from the safe harbor – registration and notification of a
copyright agent and red flag knowledge. With respect to the first, Hotfile had a “report abuse”
form on its web site and provided an email address where users could report infringing content.
It did not register a DMCA agent with the Copyright Office until December 2009, did not
identify an agent on its web site until May 2010, and had not provided a proper mailing address
for its registered agent insofar as it listed only a post office box. Based on these facts, the court
concluded that Hotfile would be ineligible under Section 512(c)(2) at least through May 2010,
the date on which it published its agent’s contact information, leaving open the question whether
the failure to provide a full address and not a post office box, as required by Copyright Office
regulations at 37 C.F.R. § 201.38(c) for purposes of registration of an agent, would also
disqualify the safe harbor.^2819
With respect to the issue of red flag knowledge, the court decided that the testimony,
documents and evidence submitted created an issue of fact for a jury as to whether Hotfile knew
or blinded itself to actual infringement of particular works on a small or large scale. Hotfile’s
policy prior to the litigation to store only a master file copy when multiple copies of the same file
were uploaded by users could mean that Hotfile was attuned to the infringing nature of files, but
merely disabled the offending link rather than removing the file itself. Because a significant
number of the DMCA notices concerned the plaintiffs’ works, a jury could conclude that Hotfile
understood that it was continuing to make particular infringing content available to the public or
that, at the very least, it should have investigated those files. Similarly, to the extent that
communications with users should have alerted Hotfile to the infringing nature of files on its
system that were owned by the plaintiffs (such as users seeking technical assistance who
indicated that their difficulties were owing to the illegal nature of their activity), Hotfile might be
deemed to have possessed red flag knowledge. A jury would need to resolve these issues of
material fact.^2820
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
operations or use digital fingerprinting technology to prevent copyright infringement by its
users.^2821
y. Capitol Records v. Vimeo(^2818) Id. at 79-81.
(^2819) Id. at 81-84.
(^2820) Id. at *87-90.
(^2821) “Hotfile To Pay $80M to MPAA, Studios In Copyright Suit,” Law360 (Dec. 3, 2013), available as of Dec. 7,
2013 at http://www.law360.com/ip/articles/493076?nl_pk=be5fde4e-8dc1-4d81-b621-
f0352bcdff74&utm_source=newsletter&utm_medium=email&utm_campaign=ip.