## Facts

- Perfect 10, Inc. owned copyrights in large numbers of adult images that appeared in Usenet posts accessible through defendants’ services.
- Giganews operated Usenet servers and sold subscribers access to content stored on its servers and content available through other Usenet providers.
- Livewire did not operate servers but sold subscribers access to Usenet content stored on Giganews’s servers.
- Usenet content was largely user-generated: users uploaded posts (including encoded image files) to newsgroups, and the system automatically propagated and made content accessible.
- Through Giganews’s “Mimo” interface, users could open posts containing encoded files, which were decoded and displayed to the user.
- Perfect 10 sent notices to Giganews asserting infringement; some notices demanded broad searches for infringing material, while others provided Message-IDs.
- When Perfect 10 provided legible, machine-readable Message-IDs, Giganews removed the identified messages; when Message-IDs were illegible, Giganews requested readable identifiers and Perfect 10 did not supply them.

## Issues

1. Whether a prima facie claim of direct copyright infringement against service providers required proof of “volitional conduct” (causation) by the defendant, and whether Perfect 10 produced sufficient evidence.
2. Whether defendants were secondarily liable for user infringement under contributory infringement or vicarious infringement theories.
3. Whether the district court abused its discretion in awarding defendants attorney’s fees and costs under the Copyright Act and denying supplemental fee requests.
4. Whether the district court erred in declining to add Perfect 10’s sole shareholder as a judgment debtor under an alter-ego theory.

## Decision

- The Ninth Circuit affirmed the district court’s partial dismissal and summary judgment for defendants on direct infringement.
- The court held that “volitional conduct” by the defendant is an element of direct infringement and Perfect 10 failed to show defendants initiated or selected the infringing content.
- The court affirmed summary judgment for defendants on contributory and vicarious infringement claims.
- The court affirmed the award of approximately $5.6 million in attorney’s fees and costs to defendants and upheld denial of supplemental fees.
- The court affirmed denial of the request to add Perfect 10’s sole shareholder to the judgment as an alter ego.

## Legal Principles

- Direct copyright infringement by an online service provider requires proof of causation/“volitional conduct,” not merely ownership or operation of an automated system used by others to infringe.
- Automated storage, copying, transmission, or display that occurs in response to user uploads, without the provider’s selection or initiation of infringing material, does not alone establish volitional conduct for direct liability.
- Contributory and vicarious infringement claims require evidence supporting the respective elements (including actionable knowledge/material contribution for contributory liability and the right and ability to supervise plus direct financial benefit for vicarious liability); inadequate identification of specific infringements may defeat such showings on summary judgment.
- Attorney’s fee awards under the Copyright Act are reviewed for abuse of discretion; denial of supplemental fee requests is likewise discretionary.
- Adding an individual as a judgment debtor under an alter-ego theory requires a strong factual basis to disregard the corporate form; denial is reviewed for clear error.

## Conclusion

The Ninth Circuit held that the Usenet providers were not directly liable absent evidence they volitionally caused the infringing copying or display, and Perfect 10’s record did not support contributory or vicarious liability; the court also upheld the fee award to defendants and rejected efforts to expand the judgment to the company’s sole shareholder.


Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657 (9th Cir. 2017)