Case: 1:10-cv-06517 Document #: 44 Filed: 05/10/11 Page 1 of 17 PageID #:693

10-6517.111-JCD May 10, 2011

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

FLAVA WORKS, INC., )

)
Plaintiff, )
)
v. ) No. 10 C 6517
)
MARQUES RONDALE GUNTER d/b/a )
myVidster.com; SALSAINDY, LLC; )
VOXEL DOT NET, INC., and )
JOHN DOES 1-26, )
)
Defendants. )

MEMORANDUM OPINION

Before the court is the motion of defendants Marques Rondale

Gunter and SalsaIndy, LLC to dismiss plaintiff’s first amended

complaint. For the following reasons, the motion is granted in

part and denied in part.

BACKGROUND

Plaintiff, Flava Works, Inc., is a company that produces and

distributes adult entertainment products, including DVDs, streaming

video, magazines, photographs, and internet website content.

Defendant Marques Rondale Gunter created, owns, and operates a

website called myVidster.com (“myVidster”). The complaint

describes myVidster as a social networking website through which

site members can store and “bookmark” video files and post links to

third-party websites on which the files are available. Defendant

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SalsaIndy, LLC (“SalsaIndy”) is an entity “formed, owned,

controlled, managed, and/or operated by . . . Gunter in some

connection with myVidster.” (First Am. Compl. ¶ 5.) Defendant

Voxel Dot Net, Inc. (“Voxel”) is a company that provides web-

hosting services to myVidster.1

Plaintiff owns several registered copyrights and trademarks.

It alleges that members and/or users of myVidster (including the

John Doe defendants) have, without plaintiff’s permission, uploaded

plaintiff’s copyrighted videos and images, or links to those

videos, to myVidster. The videos and images are then available for

other myVidster users to view and/or download. MyVidster

encourages users to invite others to view uploaded and bookmarked

videos; the website states, “While bookmarking videos can be a fun

and addictive activity, it is more enjoyable in the company of like

minded friends. The form below will send invites to your friends

telling them about myVidster and you will be given the option to

provide a link to your video collection.” (First Am. Compl. ¶ 24.)

MyVidster offers inexpensive storage space for videos.

In plaintiff’s view, Gunter has, by offering low-cost storage

space and encouraging users to share and view videos, “purposefully

created a system that makes it more difficult for copyright owners

1/
Voxel recently provided plaintiff with a sworn declaration that it no
longer hosts myVidster, and plaintiff has withdrawn its pending motion for a
preliminary injunction as to Voxel. (The motion is still pending against Gunter
and SalsaIndy, and a hearing is scheduled for May 18, 2011.)
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to monitor the site for infringement.” (First Am. Compl. ¶ 25.)

Plaintiff alleges that after a number of its copyrighted movies

and/or portions of its movies were posted on myVidster, it sent to

Gunter and his web-hosting companies (including Voxel) “takedown

notices” pursuant to § 512 of the Digital Millennium Copyright Act

(“DMCA notices”). These notices of copyright infringement

specified the infringing material and demanded that it be

immediately removed from myVidster. The notices also identified

users that plaintiff suspects to be repeat infringers. Between May

2010 and December 2010, Plaintiff sent Gunter seven DMCA notices.

Plaintiff does not allege that defendants failed to remove the

material from myVidster, but does allege that after the notices

were sent, the website “continued to be updated with more and more

infringing material from its members.” (First Am. Compl. ¶¶ 54-

57.) According to plaintiff, myVidster “does not have in place any

filters or identifiers to prevent” its copyrighted material from

being re-posted by repeat infringers, and it “took no action toward

stopping, reprimanding, or banning” repeat infringers. (First Am.

Compl. ¶¶ 61-62.)

The First Amended Complaint contains seven counts: direct

copyright infringement (Count I); contributory copyright

infringement (Count II); vicarious copyright infringement (Count

III); inducement of copyright infringement (Count IV); false

designation of origin in violation of the Lanham Act (Count V);

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trademark and trade dress infringement in violation of the Lanham

Act (Count VI); and common-law trademark infringement and unfair

competition (Count VII).

Gunter and SalsaIndy (“defendants”) move to dismiss the

complaint.

DISCUSSION

The purpose of a Rule 12(b)(6) motion to dismiss is to test

the sufficiency of the complaint, not to resolve the case on the

merits. 5B Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure § 1356, at 354 (3d ed. 2004). Under federal

notice-pleading standards, a complaint need not contain “detailed

factual allegations,” but it must have more than mere “labels and

conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007). A plaintiff is obligated to provide the factual grounds of

his entitlement to relief, and a “formulaic recitation” of the

elements of a claim will not do. Id. The complaint must contain

sufficient facts to raise a plaintiff’s right to relief above a

“speculative” level, id. at 555, and the claim must be “plausible

on its face,” id. at 570. “A claim has facial plausibility when

the plaintiff pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the

misconduct alleged.” Ashcroft v. Iqbal, --- U.S. ----, ----, 129

S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). When evaluating a

motion to dismiss a complaint, we must accept as true all factual

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allegations in the complaint, but not its legal conclusions. Id.

at 1949-50.

A. Direct Copyright Infringement (Count I)

To state a claim for direct copyright infringement, plaintiff

must allege (1) ownership of a valid copyright and (2) defendants’

unauthorized copying of the constituent elements of the work that

are original. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499

U.S. 340, 361 (1991); Harbor Motor Co. v. Arnell Chevrolet-Geo,

Inc., 265 F.3d 638, 644 (7th Cir. 2001).

Defendants contend that plaintiff has failed to sufficiently

plead the second element of direct infringement because it alleges

merely that myVidster is a conduit for its users’ acts of

unauthorized copying. Defendants cite a handful of decisions

holding that internet service providers are not liable for direct

infringement where their role is limited to operating a website

that others use to create and/or exchange unauthorized copies of

works. Plaintiff responds: “By allowing users to store and

reproduce the copyrighted materials, Defendants have engaged in

unauthorized copying.” (Pl.’s Resp. at 2.) Plaintiff also points

to its allegations that Defendants “posted” its copyrighted

materials.

Plaintiff cites no apposite authority for its broad

interpretation of “copying.” The decisions cited by defendants

stand for the proposition that to establish liability for direct

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copyright infringement, a plaintiff must demonstrate that the

defendant engaged in volitional conduct that causes a copy to be

made. See CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 555

(4th Cir. 2004) (“[W]e hold that [internet service providers], when

passively storing material at the direction of users in order to

make that material available to other users upon their request, do

not ‘copy’ the material in direct violation of § 106 of the

Copyright Act.”); Religious Tech. Ctr. v. Netcom On-Line Commc’n

Servs., Inc., 907 F. Supp. 1361, 1370 (N.D. Cal. 1995) (“Although

copyright is a strict liability statute, there should still be some

element of volition or causation which is lacking where a

defendant’s system is merely used to create a copy by a third

party.”); see also Parker v. Google, Inc., 242 F. App’x 833, 836-37

(3d Cir. 2007) (citing CoStar and Netcom).

The first amended complaint does not allege that defendants

themselves made copies of plaintiff’s works. The vague allegation

that defendants “posted” the works is not equivalent to an

allegation that they caused copies of the works to be made,

especially considering the remaining allegations, where the only

volitional copying is alleged to have been done by myVidster users,

not its operators. (First Am. Compl. ¶¶ 27, 74 (Count I).)

Because there is no allegation that defendants caused copies of

plaintiff’s copyrighted works to be made, plaintiff fails to state

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a claim for direct copyright infringement, and Count I will be

dismissed.

B. Contributory Copyright Infringement (Count II)

“[O]ne who, with knowledge of the infringing activity,

induces, causes or materially contributes to the infringing conduct

of another, may be held liable as a ‘contributory’ infringer.”

Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d

1159, 1162 (2d Cir. 1971); see also Metro-Goldwyn-Mayer Studios

Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). Thus, to state

a claim for contributory infringement, a plaintiff must plead (1)

a third party directly infringed a copyrighted work; (2) the

defendant knew of the infringement; and (3) the defendant

materially contributed to the infringement. Monotype Imaging, Inc.

v. Bitstream Inc., 376 F. Supp. 2d 877, 883 (N.D. Ill. 2005).

Knowledge, for purposes of contributory copyright

infringement, encompasses both actual and constructive knowledge.

In re Aimster Copyright Litig., 334 F.3d 643, 650 (7th Cir. 2003)

(“Willful blindness is knowledge, in copyright law (where indeed it

may be enough that the defendant should have known of the direct

infringement) . . . .”). Defendants contend that the allegation

that they received DMCA notices, without more, is insufficient to

impute knowledge for a contributory infringement claim. They cite

the district court’s opinion in the CoStar litigation, CoStar Group

Inc. v. LoopNet, Inc., 164 F. Supp. 2d 688, 707 (D. Md. 2001), as
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well as Netcom, 907 F. Supp. at 1374, which explain that the

receipt of a DMCA (or similar) notice might not automatically imply

knowledge. A useful discussion of the distinction can be found in

Emily Zarins, Comment, Notice Versus Knowledge Under the Digital

Millennium Copyright Act’s Safe Harbors, 92 Calif. L. Rev. 257,

287-88 (2004) (“Knowledge for purposes of contributory infringement

refers to a service provider’s knowledge of actual infringement,

while notification communicates to a service provider a claim of

alleged infringement. . . . Contributory infringement seeks to

punish a party for knowingly continuing to assist infringement;

[DMCA] notification aims to provide an effective warning to give

rise to a duty to investigate.”)

Plaintiff cites to four decisions in support of its argument

that the multiple DMCA notices it sent to defendants are sufficient

for knowledge. Two of the decisions are inapposite because neither

involved a contributory copyright infringement claim. See Olan

Mills, Inc. v. Linn Photo Co., 23 F.3d 1345, 1348 (8th Cir. 1994);

Wildlife Express Corp. v. Carol Wright Sales, Inc., 18 F.3d 502,

512 (7th Cir. 1994). In the single case involving DMCA

notifications, there was additional evidence of knowledge. See A

& M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1020 n.5 (9th

Cir. 2001) (defendant had actual knowledge because a document

authored by defendant’s co-founder mentioned the “need to remain

ignorant” of users’ real names and IP addresses “since they are

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exchanging pirated music” and because Napster had been notified of

more than 12,000 infringing files, some of which were still

available, and had constructive knowledge for four additional

reasons). There was also additional evidence of knowledge in

Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 261-64 (9th

Cir. 1996). The defendant, which operated a swap meet, knew that

swap-meet vendors were selling counterfeit recordings not only

because it had been notified about the sale of infringing materials

but also because the sheriff had raided the swap meet and seized

counterfeit recordings.

We will assume for this discussion that to allege knowledge,

plaintiff must allege something more than defendants’ receipt of

the DMCA notices. The issue is whether plaintiff has alleged facts

that allow us to draw a reasonable inference that defendants

actually or constructively knew of copyright infringement occurring

on myVidster. We believe that it has done so. “The knowledge

element for contributory copyright infringement is met in those

cases where a party has been notified of specific infringing uses

of its technology and fails to act to prevent future such

infringing uses, or willfully blinds itself to such infringing

uses.” Monotype, 376 F. Supp. 2d at 886 (citing Aimster, 334 F.3d

at 650, and Fonovisa, 76 F.3d at 264). Here, plaintiff has alleged

that it sent not just one DMCA notice, but seven notices over a

seven-month period. The DMCA notices attached to the complaint

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identify specific infringing files and users as well as specific

repeat infringers. Moreover, while plaintiff does not allege that

defendants failed to remove the infringing material from myVidster,

it does allege that defendants failed to take any action to stop,

reprimand, or ban the repeat infringers listed in the DMCA notices

and that defendants failed to implement filters or identifiers to

prevent repeated infringing conduct. (First Am. Compl. ¶¶ 61-62.)

Because plaintiff alleges not just the receipt of DMCA notices but

also that after having received the notices defendants failed to

act to prevent future similar infringing conduct, it has

sufficiently alleged the knowledge element of contributory

copyright infringement.

Defendants also argue that plaintiff has failed to adequately

allege that they materially contributed to the infringing activity

of myVidster’s users. They contend that the “mere allegation that

additional unidentified infringing material was uploaded to

[myVidster] following [defendants’] receipt of the takedown notices

is not an allegation that [defendants] materially contributed to

the specific acts of infringement that Plaintiff addressed in the

takedown notices.” (Defs.’ Mem. at 5.) But that is not all that

plaintiff alleges. It alleges that defendants provide a website

that stores infringing material, allows backup copies to be made,

and encourages sharing. It also alleges that myVidster has no

filters or identifiers in place to prevent repeat infringers and

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that it took no action to stop or ban the repeat infringers who

allegedly posted plaintiff’s copyrighted works. These allegations

are more than sufficient to allege material contribution. See,

e.g., Napster, 239 F.3d at 1022 (holding that defendant materially

contributed to direct infringement by providing the website and

support services to enable users to locate music files); Fonovisa,

76 F.3d at 264 (holding that defendant materially contributed to

direct infringement by providing the location and support services

for the vendors selling counterfeit recordings).

The motion to dismiss will be denied as to Count II.

C. Vicarious Copyright Infringement (Count III)

“[A] defendant is variously liable for copyright infringement

if it has the right and ability to supervise the infringing

activity and also has a direct financial interest in such

activities.” Hard Rock Cafe Licensing Corp. v. Concession Servs.,

Inc., 955 F.2d 1143, 1150 (7th Cir. 1992) (internal quotation marks

omitted). This theory allows the imposition of liability even if

the defendant initially lacked knowledge of the infringement.

Grokster, 545 U.S. at 930 n.9.

Defendants assert that plaintiff has failed to allege that

defendants have the right and ability to supervise the infringing

activity. Plaintiff cites Napster, 239 F.3d at 1023, and Fonovisa,

76 F.3d at 262, for the proposition that the ability to block

infringers’ access to the environment in which the infringing

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activity occurs is evidence of the right and ability to supervise.

In Napster, the Court observed that the defendant reserved the

right to control access to its system, but failed to police its

virtual “premises,” thus satisfying this element of vicarious

liability. 239 F.3d at 1023-24.

In its brief, plaintiff contends that defendants “have the

right and ability to supervise myVidster users: MyVidster Terms of

Service.” (Pl.’s Resp. at 11.) But the amended complaint fails to

include this allegation or even refer to the myVidster’s terms of

service. We are also unpersuaded by plaintiff’s suggestion that,

from its allegation that Gunter owns and operates myVidster, we can

infer that defendants “can block an infringer’s access to the

website and from posting infringing materials.” (Pl.’s Resp. at

11.) To sufficiently allege the element of “right and ability to

supervise,” plaintiff will have to allege more than the mere

ownership and operation of myVidster. However, we reject

defendants’ contention that plaintiff must allege “pervasive

participation” in the infringing activity. In Fonovisa, “pervasive

participation” was found to be amply sufficient to satisfy the

control element. 76 F.3d at 263. But it is not the standard, and

the phrase is not part of the “right and ability to supervise” test

as articulated by the Seventh Circuit.

Defendants also contend that plaintiff fails to allege that

defendants had a direct financial interest in the infringing

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activity. “Financial benefit exists where the availability of

infringing material acts as a draw for customers.” Napster, 239

F.3d at 1023 (internal quotation marks omitted). In defendants’

view, plaintiff must allege that customers either subscribed to

myVidster because of the available infringing material or cancelled

their subscriptions because infringing materials were no longer

available. Defendants cite no case law in support of this overly-

demanding standard. All plaintiff need allege is that the

availability of infringing material on myVidster is a draw for

customers. See, e.g., Ellison v. Robertson, 357 F.3d 1072, 1078-79

(9th Cir. 2004). For example, in Fonovisa, 76 F.3d at 263,

allegations that the defendant swap-meet operator gained benefits--

the payment of a daily rental fee by the infringing vendors,

customer admission fees, and incidental customer fees--from the

infringing sales occurring at the meet were found to be sufficient

to allege direct financial benefit.

Although plaintiff’s pleading burden with respect to the

second aspect of vicarious liability is a low hurdle, it has not

managed to clear it. While the complaint does allege that that

inexpensive storage space and the ability to share videos attracts

customers to myVidster, it does not allege that the presence of the

infringing material on the site enhances the site’s attractiveness

or draws customers. Therefore, it does not adequately plead that

defendants had a direct financial interest in the infringement.

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Count III will be dismissed, and plaintiff will be given leave

to file an amended complaint that adequately alleges vicarious

copyright infringement, if it can do so.

D. Inducement of Copyright Infringement (Count IV)

In Grokster, 545 U.S. at 936-37, the Supreme Court adopted an

“inducement rule” for copyright, holding that “one who distributes

a device with the object of promoting its use to infringe

copyright, as shown by clear expression or other affirmative steps

taken to foster infringement, is liable for the resulting acts of

infringement by third parties.” The Court explained that “mere

knowledge of infringing potential or of actual infringing uses

would not be enough . . . to subject a distributor to liability,”

nor would ordinary acts incident to product distribution, such as

offering customers technical support. Id. at 937. The rule,

instead, “premises liability on purposeful, culpable expression and

conduct.” Id.

Plaintiff pleads merely a formulaic recitation of inducement

but no facts that plausibly suggest that it is entitled to relief

on this theory. It is not enough to allege that myVidster provides

storage for video files and encourages sharing (or even that it

also knew that the website could be used to infringe). No clear

expression of an infringing purpose is alleged, and no active steps

taken to foster infringement, such as advertising an infringing use

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or instructing how to engage in an infringing use, are alleged.

Accordingly, Count IV will be dismissed.

E. False Designation and Trademark Infringement (Counts V-VII)

Counts V and VI are claims for false designation of origin and

trademark and trade dress infringement in violation of the Lanham

Act, 15 U.S.C. §§ 1125 and 1114, respectively. Count VII is a

common-law trademark infringement and unfair competition claim.

Section 32 of the Lanham Act, 15 U.S.C. § 1114(1), imposes

civil liability on

[a]ny person who . . . without the consent of the

registrant . . . use[s] in commerce any reproduction . .
. [or] copy . . . of a registered mark in connection with
the sale, offering for sale, distribution, or advertising
of any goods or services on or in connection with which
such use is likely to cause confusion . . . .

15 U.S.C. § 1114(1)(a) (emphasis added). Section 43 of the Lanham

Act imposes liability on

[a]ny person who, on or in connection with any goods or

services . . . uses in commerce any word, term, name,
symbol, or device, or any combination thereof, or any
false designation of origin . . . which . . . is likely
to cause confusion . . . as to the origin, sponsorship,
or approval of . . . goods, services, or commercial
activities by another person.

15 U.S.C. § 1125(a)(1)(A) (emphasis added). A mark is “deemed to

be in use in commerce” for services when “it is used or displayed

in the sale or advertising of services and the services are

rendered in commerce . . . .” 15 U.S.C. § 1127. The analysis of

plaintiff’s common-law trademark infringement and unfair

competition claim is the same as that of its Lanham Act claims.

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See Specht v. Google Inc., --- F. Supp. 2d ----, 2010 WL 5288154,

at *24 (N.D. Ill. Dec. 17, 2010).

Defendants contend that plaintiff has failed to allege that

defendants used plaintiff’s marks in commerce. We agree. The

complaint alleges only that plaintiff’s copyrighted material

posted to myVidster without plaintiff’s permission “often

contains” its trademarks or trade dress and that defendants’

unauthorized distribution of the material causes confusion about

its origin. (First Am. Compl. ¶ 28.) It does not allege that

defendants used plaintiff’s marks at all or that they used the

marks in commerce. Counts V, VI, and VII will therefore be

dismissed.

CONCLUSION

For the foregoing reasons, the motion of Marques Rondale

Gunter and SalsaIndy, LLC to dismiss the first amended complaint

[12] is granted in part and denied in part. Counts I, III, IV, V,

VI, and VII are dismissed. Plaintiff is given leave to file a

second amended complaint by May 16, 2011 that cures Count III’s

deficiencies, if it can do so. The motion is denied as to Count

II.
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DATE: May 10, 2011

ENTER: _____________________________________________

John F. Grady, United States District Judge