Last month, a New York district court refused to dismiss most of the copyright infringement claims asserted against a website operator based on an allegation that the website linked to an infringing copy of plaintiff’s software stored on a third-party’s servers. (Live Face on Web, LLC v. Biblio Holdings LLC, 2016 WL 4766344 (S.D.N.Y., September 13, 2016)).

The software at issue allows websites to display a video of a personal host to welcome online visitors, explaining the website’s products or services and, ideally, capturing the attention of the visitor and increasing the site’s “stickiness.” A website operator/customer implements the software by embedding an HTML script tag to its website code to link the website to a copy of the software on the customer’s server or an outside server. When a user’s browser retrieves a webpage, a copy of the software is allegedly stored on the visitor’s computer in cache.

The plaintiff claimed that the defendant used an infringing version of its software to display the welcome video on its website. The defendant countered that, in good faith, it hired a web developer to implement this functionality, that the developer represented that it had exclusive rights to its software, and that the software was not hosted by the defendant.

At this early stage of the litigation, the court allowed the claim of direct copyright infringement to go forward. Based upon the allegations in the complaint, the court reasoned that the infringing software was automatically saved into the cache or RAM of website visitors that resulted in the display of the spokesperson video on their screens – actions that sufficiently allege distribution of the infringing software.

The court noted, however, that defendant may have a viable defense (based on the landmark 2007 Perfect 10 decision) that the act of inline linking to infringing copies of software hosted and distributed by a third party does not constitute direct infringement – in essence, because the infringing software was stored and distributed from a third-party web developer’s servers, defendant cannot be deemed a direct infringer. However, the court felt that the issue was not adequately briefed and required additional discovery. Another issue that required additional discovery was defendant’s argument that any storage of the infringing software on users’ systems was only for a “transitory duration” and not sufficiently “fixed” as to create an infringing copy under controlling Second Circuit precedent; again, the court stated that “to the extent that the duration of storage on users’ systems is relevant, it presents an issue of fact.”

Regarding secondary liability, the court dismissed the plaintiff’s contributory infringement claim, finding nothing in the complaint suggesting that defendant had knowledge it was using an infringing version of plaintiff’s software or that it otherwise materially contributed to the infringing conduct. Yet, the court allowed the vicarious liability claim to proceed, finding that the complaint plausibly alleged that defendant controlled the allegedly unlawful distribution of software to website visitors and arguably benefited from the increased web traffic.

The dispute is an interesting one, as it highlights some of the more evolving areas of copyright law that crop up when content or software is delivered over the web or from remote servers. As mentioned by the court, the involvement of defendant’s outside web developer “may be significant in determining defendants’ ultimate liability,” particularly in determining any potential damages and whether plaintiff might only garner a minimal statutory award.

Ultimately, the lesson is that lawyers need to be in synch with tech developers as new initiatives are developed. Although it is not clear from the opinion, one would expect that the defendant’s contract with its developer might have contained appropriate intellectual property representations and indemnities. Even so, as a practical matter, this case illustrates the value of doing reasonable diligence when third party software will be an important part of one’s online presence.