“While it is certainly disappointing to see Cloudflare score a victory here against Mon Cheri in the district court, its position ultimately is wrong: There is no Ninth Circuit loophole that allows service providers to knowingly host and distribute infringing content without incurring contributory liability.”
One recurring thorn in the side of copyright owners is Cloudflare, the San Francisco-based web performance, optimization, and security company. Cloudflare offers many services to its customers, including a content delivery network that utilizes hundreds of servers around the world to cache its customers’ content. When an end user requests content from one of Cloudflare’s customers, it is delivered to that user from the cached copy on the nearest Cloudflare server—not the customer’s own web host server. This saves on bandwidth costs, improves security, and decreases page load times. It also raises important questions about Cloudflare’s liability for contributory copyright infringement when it knowingly allows infringing content to remain on its cache servers. Under Ninth Circuit precedent, web hosting services like Cloudflare can be held contributorily liable for assisting in the infringement under the material contribution theory. However, a recent district court decision misconstrued the case law to conclude otherwise in Mon Cheri v. Cloudflare.
The plaintiff, Mon Cheri, manufactures and sells premium wedding dresses to authorized resellers, and it promotes its brand by spending millions of dollars each year to develop images of its collections. Mon Cheri went after counterfeiters using the images to sell inexpensive knockoffs, but copycat sites popped up in their place. It then notified Cloudflare that its customers were using its service to infringe, but Cloudflare refused to remove the images from its cache servers. Mon Cheri sued Cloudflare for contributory copyright infringement, arguing that it is liable for knowingly continuing to host the infringing content. Cloudflare has denied any role in the piracy, instead invoking the Shaggy defense: “It wasn’t me.” Cloudflare claims that it does not materially contribute to the infringement—despite hosting and serving the infringing images—and that it should be allowed to continue providing services to infringing customers because end users could just get the images elsewhere.
Cloudflare’s position on why it does not facilitate copyright infringement perhaps takes the cake in the have-your-cake-and-eat-it-too department. When talking to customers, it touts its world-leading technologies that host and distribute content faster, safer, and more reliably than other services. But when copyright owners complain, it claims to do very little—certainly nothing legally cognizable. These arguments have not fared well when Cloudflare claimed it was not helping its enjoined infringing customers, such as Grooveshark and MP3Skull. Indeed, Cloudflare’s unwillingness to stop infringement without a court order may explain why obvious pirate sites, such as The Pirate Bay, flock to its service. While it is certainly disappointing to see Cloudflare score a victory here against Mon Cheri in the district court, its position ultimately is wrong: There is no Ninth Circuit loophole that allows service providers to knowingly host and distribute infringing content without incurring contributory liability.
Ninth Circuit Case Law on Material Contribution
The liability of a service provider for contributory copyright infringement is remarkably well developed in the Ninth Circuit. Two different theories of the doctrine are recognized, both of which require intentionality: inducement and material contribution. Inducement liability lies when a provider offers a service that is used to infringe with the object of promoting its infringing use as shown by clear expression or affirmative steps to foster it. By contrast, material contribution liability—which Mon Cheri only claims here with Cloudflare—turns on whether the provider intentionally assists infringement on its service as shown by its knowing continuation of access to the content instead of taking simple measures to prevent further damage. The Ninth Circuit has described the requisite assistance as “material” or “substantial,” but the case law is clear that hosting and distributing infringing content suffices.
The seminal case is RTC v. Netcom, which came in 1995 from Judge Whyte of the Northern District of California. The issue was Netcom’s contributory liability for knowingly hosting infringing content that was uploaded to its server. Judge Whyte held that Netcom could be contributorily liable “since its failure to simply cancel” the infringing content “and thereby stop an infringing copy from being distributed worldwide constitutes substantial participation” in the underlying infringement. Because it could “take simple measures to prevent further damage” by removing the infringing content from its servers, Judge Whyte reasoned that “it is fair . . . to hold Netcom liable” for continuing to aid in the infringement. In 2001, the Ninth Circuit adopted Judge Whyte’s analysis in A&M Records v. Napster: “We agree that if a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement.”
In 2007, the Ninth Circuit expanded the doctrine even further in Perfect 10 v. Amazon to hold that material contribution includes a search engine that merely points to infringing content hosted elsewhere: “There is no dispute that Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing materials.” The court noted that service providers “that facilitate access to websites throughout the world can significantly magnify the effects of otherwise immaterial infringing activities.” And it again held that contributory liability turns on whether a service provider “has actual knowledge that specific infringing material is available using its system . . . and can take simple measures to prevent further damage to copyrighted works . . . yet continues to provide access to infringing works.”
The extent of the material contribution theory was explored that same year in Perfect 10 v. Visa. The Ninth Circuit held that credit card companies do not materially contribute when they process payments to infringing websites because there is “no direct connection to that infringement”—that is, they do not provide links or otherwise help end users to find and obtain infringing content. While payment processors may “make it easier for infringement to be profitable,” the court explained, they do not materially contribute by providing the “site and facilities” for the infringing activity. A few years later, in Louis Vuitton v. Akanoc, the Ninth Circuit drove the point home that a service provider that operates the servers where the infringement takes place substantially assists in that infringement: “There is no question that providing direct infringers with server space satisfies that standard” because the “servers are an essential step in the infringement process.”
District Court Misapplies Material Contribution Doctrine
In the decade since Louis Vuitton, the Ninth Circuit has continued to apply the material contribution doctrine in cases such as Luvdarts v. AT&T, Perfect 10 v. Giganews, and VHT v. Zillow. The test has not changed: A service provider is contributorily liable under the material contribution theory if it knows that specific infringing content is available on its system, and yet it continues to provide access to that content rather than taking simple measures to prevent further damage. The knowing refusal to act evinces the necessary intent, and the provision of access constitutes the requisite assistance. Under the Ninth Circuit’s test, it seems clear that Cloudflare materially contributed to the infringement of Mon Cheri’s copyrights by knowingly hosting and distributing the infringing content instead of simply deleting it from its cache servers. However, Judge Chhabria of the Northern District of California did not agree—but only after misapplying the doctrine on summary judgment to find that Cloudflare does not materially contribute to the underlying infringement of its customers.
Judge Chhabria appears to be a fan of brevity—the order denying Cloudflare’s motion to dismiss clocked in at two pages, and the order on the cross-motions for summary judgment constituted just three—and his perfunctory analysis fails to adequately engage the relevant Ninth Circuit precedent. More fundamentally, Judge Chhabria seems to have been duped by Cloudflare’s framing of its service as merely providing incidental performance and security enhancements. While it is true that Cloudflare helps its customers to host and deliver content quickly and securely, the fact remains that the infringing content is available on Cloudflare’s own cache servers. The material contribution itself is the provision of access to the infringing content on its servers; the enhancements are just icing on the cake. Judge Chhabria mistakenly concludes that there is no material contribution because Cloudflare does not “significantly magnify” the infringement under Amazon nor provide an “essential step” in the infringing activity under Louis Vuitton.
The district court’s befuddlement is understandable given Cloudflare’s confused recitation of the doctrine in its briefs. For example, in its motion to dismiss, Cloudflare conflated the inducement standard, which requires expressed intent, and the material contribution theory, where intent can be imputed, to argue that Mon Cheri must meet the more stringent test. Cloudflare also, rather boldly, claimed that the devastating Louis Vuitton decision—where the Ninth Circuit expressly held that providing server space constitutes substantial assistance—should be disregarded because it “sow[s] confusion” and “is not good law.” In support, Cloudflare cited the Ninth Circuit’s decision in Erickson v. Kast, which does indeed note an “apparent tension” between Louis Vuitton and other Ninth Circuit precedent. But that “tension” concerns only whether the knowledge factor includes a “should have known” standard in addition to actual knowledge. Mon Cheri argues that Cloudflare had actual knowledge, and thus the intra-circuit split on constructive knowledge is irrelevant.
On summary judgment, Judge Chhabria held as a matter of law that Cloudflare does not materially contribute to the infringement taking place over its servers. He reasons that there is no “evidence that faster load times . . . would be likely to lead to significantly more infringement” and that Cloudflare’s services are not “an essential step in the infringement process” because the content would still be available from the web host server. Neither holds water. The Ninth Circuit has never held that the alleged contributory infringer must magnify the infringement beyond what it otherwise would have been in some counterfactual reality. Its statement in Amazon merely recognized the fact that “services . . . that facilitate access to websites throughout the world can significantly magnify the effects of otherwise immaterial infringing activities.” Cloudflare’s global network of cache servers does precisely this, and so too does the direct infringer’s web host server. Likewise, Cloudflare is an “essential step” because it is, in fact, directly part of the causal chain of infringement that actually occurred—not the infringement that might have occurred another way with the web host server.
Cloudflare May Be Running Out of Luck
While there may be questions as to whether Cloudflare can claim safe harbor under Section 512 of the Digital Millennium Copyright Act (DMCA) or whether it took “simple measures” to prevent further damage by forwarding Mon Cheri’s notices to its customers, one thing remains clear: Cloudflare substantially assists in the infringement when it in fact hosts and serves the infringing content. And as Mon Cheri pointed out, “Cloudflare’s network is the only way for the general public to access the infringing material” when its “required and recommended settings are enabled.” Thankfully, Cloudflare’s luck may be running out soon. One district court recently found as a matter of law that Cloudflare provided substantial assistance, though other issues prevented summary judgment and the case was quickly settled. Another rejected Cloudflare’s attempt to dismiss the material contribution claim against it, but then the plaintiffs voluntarily dismissed the suit. For copyright owners like Mon Cheri, going after the common element of these infringements—Cloudflare—may present the only chance they have to stop further damage to their copyrights. Hopefully, Cloudflare’s egregious position that it can knowingly assist others to infringe without liability will soon be rejected outright on the merits.