Copyhype

The problem of online piracy remains acute, and enforcement is particularly challenging against for-profit operations which often operate anonymously and off-shore. ¹See generally, Good Money Gone Bad, Digital Citizens Alliance (Feb. 2014). Even if a particular site can be successfully shut down, a new version can appear in a different location, sometimes within hours.

MovieTube is a particularly brazen example of such an operation. The MovieTube sites openly admit that “many movies we linked are pirated movies” but “Luckily we are not a US company so we do not need to respect US laws.” The operators exert full control over the sites—the complaint alleges, “All content streamed from the MovieTube Websites is selected, aggregated, organized, streamed and made available for viewing by the MovieTube Websites’ operators—Defendants—only.” Defendants market their sites heavily and profit off them through online advertising.

The major motion picture studios sued the MovieTube websites—consisting of a network of at least 29 different sites—on July 24, 2015 for direct and secondary copyright infringement, federal trademark infringement, and unfair competition and false designation of origin. The studios sought, among other remedies, injunctive relief against the MovieTube websites, as well as an order that “(i) registries and registrars disable the domains to the MovieTube Websites and (ii) third-party service providers cease providing services to the MovieTube Websites and Defendants in relation to the Infringing Copies.” Injunctive relief against third-party services that facilitate the operation of infringing sites gives effect to the legal judgment of the court while minimizing the “whac-a-mole” problem discussed above.

While this approach is relatively new in the context of online piracy, it is based on established and long-standing legal provisions and principles.

Active Concert or Participation

The Copyright Act provides copyright owners with a number of remedies they can seek against infringers, including common remedies such as damages and injunctions. Specifically, 17 USC § 502(a) provides that a court may “grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.”

Temporary injunctions—which includes both temporary restraining orders and preliminary injunctions in federal courts—are granted before judgment on the merits of a case, and their purpose is to preserve the status quo during litigation and prevent irreparable harm to a party’s rights before final judgment. ²Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F. 2d 1415, 1422 (9th Cir. 1984).

A court will grant a preliminary injunction if a plaintiff has demonstrated a likelihood of success on the merits, irreparable harm in the absence of an injunction, a balance of equities in her favor, and consistency with the public interest. ³Winter v. Natural Resources Defense Council, Inc., 129 S. Ct. 365, 374 (2008). Courts also require plaintiffs to post a bond when seeking a preliminary injunction. ⁴FRCP 65(c). The bond ensures that defendants are covered for any harm incurred in the event that an injunction is erroneously granted. ⁵Thomas Patterson, Litigation: The bond requirement for preliminary injunctions, Inside Counsel, September 5, 2013.

Under the Federal Rules of Civil Procedure, an injunction binds “(A) the parties; (B) the parties’ officers, agents, servants, employees, and attorneys; and (C) other persons who are in active concert or participation with anyone described in … [](A) or (B).” The Supreme Court has explained that this rule (present in substantially the same form since the Rules were first promulgated in 1938) “is derived from the common-law doctrine that a decree of injunction not only binds the parties defendant but also those identified with them in interest, in ‘privity’ with them, represented by them or subject to their control. In essence it is that defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the original proceeding.” ⁶Regal Knitwear Co. v. NLRB, 324 US 9, 14 (1945).

In recent years, a number of companies have relied on serving injunctions on aiders and abettors of infringing sites given the difficulty of hailing the operators of such sites into court and the ease with which they can evade judgment. The practice has become routine for sites involving counterfeit goods and trademark infringement. ⁷See, e.g., Belstaff Group SA v. Doe, Temporary Restraining Order No. 15-cv-2242 (S.D.N.Y. Apr. 8, 2015); Richemont Int’l SA v. Xiao, Temporary Restraining Order, No. 13-cv-9071 (S.D.N.Y. Dec. 23, 2013); Tory Burch LLC v. Doe, No. 12 C 7163 (N.D. Ill. Oct. 2, 2012); Richemont Int’l SA v. Chen, Temporary Restraining Order, No. 12-cv-6689 (S.D.N.Y. Sept. 4, 2012); Burberry v. Doe, No. 12 Civ. 0479 (TPG) (S.D.N.Y. May 15, 2012); Hermès v. Doe, No. 12 Civ. 1623 (DLC) (S.D.N.Y. Apr. 30, 2012); The North Face Apparel Corp. v. Fujian Sharing Imp. & Exp. Ltd. Co., No. 10 Civ. 1640 (AKH) (SDNY June 24, 2011); The Nat’l Football League v. Chen, Temporary Restraining Order, No. 11-Civ-0344 (WHP) (S.D.N.Y. Jan. 19, 2011). More recently, courts have granted similar injunctions in cases involving copyright infringement. For example, in May, ABS-CBN, a media and entertainment company in the Philippines, sued a network of pirate sites that were alleged to provide unauthorized, on-demand streaming of its television shows and films. The court granted an injunction against the sites, and ordered domain name registrars used by the sites to transfer registration to ABS-CBN and privacy protection services used by the sites to disclose the identity of the defendants. Similar injunctions have been granted on a number of other occasions. ⁸Arista Records, LLC v. Tkach, Memorandum & Order, 15-CV-3701 (SDNY June 3, 2015); Showtime Networks, Inc. v. Doe 1, Temporary Restraining Order and Order to Show Cause, No. 15-CV-3147 (CD Cal. April 30, 2015); Warner Bros. Ent., Inc., v. Doe, Preliminary Injunction Order, No. 14-CV-3492 (SDNY May 29, 2014); AACS-LA v. Shen, Order, No. 14-CV-1112 (SDNY Mar. 4, 2014).

Active concert or participation is a fact-specific inquiry. “In order to show that a non-party ‘aided and abetted’ a party subject to the decree,” say courts, “the plaintiff must show that the non-party had actual knowledge of the judicial decree and violated it, and that the challenged action was taken for the benefit of, or to assist, a party subject to the decree.” ⁹Adcor Indus., Inc. v. BEVCORP, LLC, 411 F. Supp. 2d 778, 796 (ND Ohio 2005).

Upon notice of an injunction, a non-party can challenge the order in court. A non-party who does not comply with an injunction after having been served notice can be the subject of a contempt proceeding. Here, the non-party can also raise the argument that it is not in active concert or participation with the defendant.

CloudFlare and Grooveshark

One can see this process in action in recent litigation involving Grooveshark and CloudFlare. ¹⁰Arista Records, LLC v Vita Tkach, Memorandum & Order, 15-CV-3701 (SDNY June 3, 2015).

Following a finding that music streaming site Grooveshark was liable for copyright infringement, and a permanent injunction against the site’s operators, a “copycat” version of Grooveshark appeared online. The plaintiff record labels immediately sought a temporary restraining order against the operators of the copycat and “any persons acting in concert or participation with them or third parties providing services used in connection with Defendants’ operations.” The plaintiffs served notice of the TRO on Namecheap, a domain name registrar that defendants registered their domains with. Namecheap complied with the order, and defendants subsequently registered new domain names through a new registrar, Dynadot. Dynadot complied with the order after it was served notice. Defendants then registered another domain name with a registrar in Switzerland. Plaintiffs consequently turned their attention to CloudFlare, “an internet service provider that provides authoritative domain name system servers for its customers as a means of providing content delivery network and reverse-proxy services.” CloudFlare’s services had been used by each of the copycat domain names discussed above.

Plaintiffs then requested a court order requiring CloudFlare to comply with the TRO. Cloudflare argued that it is not in active concert or participation with the defendants and “should not be bound by the injunction because its service is ‘passive’ and not necessary for the operation of the Grooveshark sites.” The court rejected both of CloudFlare’s arguments. Cloudflare had knowledge of the TRO and subsequently permitted its services to be used for one of the copycat domain names. This conduct, said the court, “benefits Defendants and quite fundamentally assists them in violating the injunction because, without it, users would not be able to connect to Defendants’ site unless they knew the specific IP address for the site.” The court also said that it is not required to show that CloudFlare is necessary for the operation of Defendants’ site, only that it is in active concert or participation with Defendants.

Due Process

Civil litigation, of course, accords full due process to parties. But it’s important to note that binding nonparties to injunctions, as described above, is also fully consonant with due process. As the First Circuit has explained:

[T]he adjudicative framework surrounding contempt proceedings fully protects nonparties’ constitutional rights. If contempt proceedings are in fact undertaken, the forum court will resolve the fact-specific question of whether the cited nonparty was in active concert or participation with the named defendant. If so, the named defendant will be deemed the nonparty’s agent, and the nonparty’s right to due process will have been satisfied vicariously. If, however, the party prosecuting the contempt proceeding fails to show active concert or participation, a finding of contempt will not lie.

We explain briefly why, in either of these events, due process is not at risk. Contempt proceedings operate to ensure that nonparties have had their day in court. In order to hold a nonparty in contempt, a court first must determine that she was in active concert or participation with the party specifically enjoined (typically, the named defendant). This means, of course, that the nonparty must be legally identified with that defendant, or, at least, deemed to have aided and abetted that defendant in the enjoined conduct. The existence of such a linkage makes it fair to bind the nonparty, even if she has not had a separate opportunity to contest the original injunction, because her close alliance with the enjoined defendant adequately assures that her interests were sufficiently represented.

The coin, however, has a flip side. A nonparty who has acted independently of the enjoined defendant will not be bound by the injunction, and, if she has had no opportunity to contest its validity, cannot be found in contempt without a separate adjudication. This tried and true dichotomy safeguards the rights of those who truly are strangers to an injunctive decree. It does not offend due process. ¹¹Microsystems Software v. Scandinavia Online AB, 226 F. 3d 35, 42-43 (1st Cir. 2000).

In short, the process involves a court determining that the defendant in question is likely infringing copyright after hearing from both parties. If so, it may grant a preliminary injunction. The plaintiff serves notice of the injunction on a service provider, which requires them to stop facilitating the conduct of a party that a court has determined breaks the law (and in most instances violates the service provider’s own terms of service). A service provider who receives notice can challenge the order in court.

The court has ordered defendants here to show cause why a preliminary injunction should not issue by tomorrow, August 7.