United States Court of Appeals for the Seventh Circuit, Decision of 2 August 2012, No. 11-3190, Flava Works, Inc. v. Gunter

The Seventh Circuit became the third federal appellate court in the United States to rule that courts must consider the public interest before issuing a preliminary injunction in a copyright infringement action. Further, a so-called "social bookmarking" site did not commit or facilitate infringement by allowing users to post embedded videos hosted on third-party servers.

Marques Gunter owns and operates a website called myVidster.com. The site, known as a social-bookmarking site, allows users to share videos and other files with fellow users of the site. A myVidster user finds a pleasing video on the Internet and clicks a button on the myVidster interface to "bookmark" the video. At that point, the site pulls the "embed code" from the server hosting the selected video. The video thereafter appears on that user’s myVidster.com page in a thumbnail view, and the embed code provides a behind-the-scenes link to the host server. But myVidster never makes a copy of the shared video. When other users click on the video to watch, the video is streamed from the host server.

Flava Works, a producer of themed pornography, claimed that more than 300 of its copyrighted videos appeared on myVidster and sent a series of takedown notices to Gunter. The notices were ignored, and Flava Works brought an action for copyright infringement. The District Court determined that myVidster’s operation constituted committed contributory copyright infringement and issued a preliminary injunction against the site.

The Seventh Circuit reversed the decision and vacated the injunction. The court determined that the District Court erred by presuming that Flava Works would suffer irreparable harm in the absence of an injunction. Rather, the lower court should have considered the public interest before issuing an injunction in accordance with the Supreme Court’s decision in eBay, Inc. v. MercExchange, L.L.C.,[1] a ruling in a patent infringement action. The Seventh Circuit joined the Second and Ninth Circuits in extending the MercExchange case into another area of intellectual property law, signaling that U.S. courts may be coming to consensus on this issue.

myVidster Not Direct or Contributory Infringer

The Seventh Circuit also found that the preliminary record did not support a finding that myVidster had committed direct or contributory infringement under the Copyright Act. On direct infringement, the court found that those Flava Works customers who illegally uploaded copies of videos to other Internet sites in the first place had infringed. myVidster’s method of linking to and streaming content from the host server meant that it had not made any illegal copies of protected works. Likewise, the myVidster users who directed the site to pull embed code off the host servers made no copies of the protected works. The court found there was no evidence that myVidster was encouraging the direct infringers or inducing their infringement. MyVidster did not explicitly promote its site as a home for illegal copies of copyrighted works.

The Seventh Circuit also concluded that myVidster had not infringed Flava Works’ public performance rights in their copyrighted works. The site did not publicly perform a protected work by streaming the video from a third party server, and neither did a myVidster user viewing the streamed video on a computer screen. Only the server hosting the illegal copy of a Flava Works video could be said to publicly perform the work.

The decision provides broad legal support for Internet businesses built upon embedding and linking to content found elsewhere on the Internet. But the Seventh Circuit also suggested that an archiving service previously offered by myVidster, in which the site made copies of videos bookmarked by users, constituted direct infringement and could have justified a preliminary injunction. Alhough the court did not offer a full analysis of that issue, its suggestion could be troubling to websites that make backup copies of embedded or linked content.