USDC E.D. Pennsylvania, March 17, 2009

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The district court denied defendant Howard Stern Productions’ motion to dismiss plaintiff’s vicarious copyright infringement claim, but granted defendant’s motion to dismiss plaintiff’s contributory infringement and state law unjust enrichment and conspiracy claims.

Plaintiff Live Face on Web alleged that the defendants infringed its copyright in a proprietary software that allows a company to display a “live” salesperson or spokesperson superimposed on the company’s web site. This spokesperson can be configured to explain a company’s products or services and to direct a visitor’s attention to a particular product or aspect of the web site. The software is powered by video streaming software that the plaintiff licenses to businesses and individuals throughout the United States.

According to the plaintiff, four of the named defendants misappropriated the plaintiff’s software and offered it to Howard Stern Productions (HSP) for use on HSP’s web site. The plaintiff claimed that HSP and the individual defendants jointly arranged to and did record video footage of Howard Stern Show personalities, digitized the footage, and caused the files to be uploaded to the Howard Stern web site, and that HSP also embedded a hyperlink on the Howard Stern web site allowing the presentations to be displayed each time the web site was visited by a user.

The plaintiff sued HSP for contributory copyright infringement, vicarious copyright infringement, unjust enrichment and conspiracy. To state a claim of contributory copyright infringement, a plaintiff must allege: (1) direct copyright infringement by a third party; (2) knowledge of the third-party infringement; and (3) a material contribution to the infringement. See Columbia Pictures Indus., Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d Cir. 1984).

HSP disputed the second element of the plaintiff’s claim, contending that the plaintiff did not show that HSP knew or should have known of the individual defendants’ direct infringement. The court agreed with HSP, explaining that the complaint only established that HSP created the presentations in a “collaborative effort” with the individual defendants, and that HSP “controlled the technology” that permitted the video presentations to appear on the Howard Stern web site. According to the court, these allegations do not suffice to show that HSP knew the individual defendants were engaged in unlawful copyright infringement.

To state a claim of vicarious copyright infringement, a plaintiff must allege (1) direct copyright infringement by a third party; (2) an obvious and direct financial interest in the exploitation of the copyrighted materials; and (3) the right and ability to supervise the infringing activity. See Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004). In its motion to dismiss, HSP contested the existence of the “direct financial interest” element. HSP argued that the plaintiff did not state a direct financial interest because (1) the plaintiff did not allege that visitors were drawn to HSP’s web site because of the ability to infringe by visiting the web site; and (2) even if the plaintiff was not required to make such a showing, an allegation merely linking advertising revenue to the number of web site users is insufficient to satisfy the direct financial interest element.

According to the court, HSP interpreted the law of vicarious infringement in the Ninth Circuit too stringently. The court explained that Ninth Circuit case law does not require a plaintiff to allege that users were drawn to a web site specifically because of the ability to infringe. Instead, showing that potential customers are drawn to the ability to infringe is merely one way of showing direct financial interest (citing Arista Records, Inc. v. Flea World, No. 03-2670, 2006 WL 842883, at *12 (D.N.J. Mar. 31, 2006); In re Aimster Copyright Litig., 252 F. Supp. 2d 634, 655 (N.D. Ill. 2002)).

The court also noted that the plaintiff’s complaint states that each of HSP’s media products, including the web site, mutually reinforce one another; that the unauthorized presentations on the HSP web site were designed to and did draw and prolong visitors’ attention to the web site and to other Howard Stern media promoted on the web site; that the presentations increased the amount of time users would spend on the web site; and that the presentations enhanced visitors’ online experience, thus reinforcing and advancing the brand and image of the Howard Stern Show and HSP’s products and services. The complaint also alleged that the video spokesperson presentations directed visitors to particular products or other aspects of the Howard Stern web site, and that the software featured a “click on me” functionality that directed a user to a predetermined web page that promoted HSP’s goods or services or reinforced the image and brand of the company. According to the court, these allegations are sufficient at this stage to withstand a motion to dismiss.

The court also held that the plaintiff’s state law unjust enrichment and conspiracy claims are preempted by the Copyright Act.