ONLINE SHOPPING has become increasingly popular in recent years. E-commerce sales surpassed $6.5 trillion in 2023 and are expected to total over $8.1 trillion by 2026.1 Convenience of product variety and online competition have contributed to this trend, as many retailers have also expanded their online presence to meet the growing demand for virtual shopping experiences. Ten years ago, for example, retail leader Swedish company H&M Group had physical stores in 83 percent of its target markets.2 Today, 78 percent of its target markets feature a combination of both offline and online stores.3 The spike in online shopping means more merchants and more transactions via online marketplaces, exposing e-commerce platforms like Amazon, eBay, and Alibaba to increased potential liability for intellectual property violations.
Online platforms are exposed to potential liability when they directly violate intellectual property rights and, under certain circumstances, when merchants operating on these platforms engage in intellectual property violations. Copyright, trademark, and patent law come into play, requiring these platforms to act on infringing products and images on their websites. Still, certain safe harbors and exceptions may shield e-commerce companies from liability. This nuanced legal landscape ultimately makes it challenging for intellectual property owners to hold e-commerce platforms liable for intellectual property violations. E-commerce platforms often face copyright- infringement lawsuits because the Copy right Act safeguards the exclusive rights of copyright owners, including the rights to reproduce, distribute, per - form, display, and create derivative works of copyrighted works, which can be particularly relevant when listing products or showcasing images on e-commerce platforms.4 In protecting a copyright owner's exclusive entitlement to this bundle of rights, the Copyright Act "expressly creates liability only for direct copyright infringers."5 Direct infringement occurs when a party violates at least one of these exclusive rights granted to a copyright owner.6 However, others can be held liable through two copyright doctrines that establish secondary liability: contributory infringement (the intentional inducement or encouragement of direct infringement) and vi carious liability (profiting from direct infringement while declining to exercise a right to stop or limit it).7 In sum, copyright infringement may be direct, contributory, or vicarious, providing a plaintiff with three discrete pathways to demonstrate an alleged infringer's liability.
DMCA as an Affirmative Defense
E-commerce companies are often shielded from copyright liability under the Digital Millenium Copyright Act (DMCA) safeharbor provisions.8 Signed into law in 1998, the DMCA provides a framework for addressing copyright infringement on the Internet and contains a safe harbor that protects online service providers, including e-commerce platforms, from liability for copyright infringement commit - ted by their users. The Ninth Circuit has characterized the DMCA as "plac[ing] the burden of policing copyright infringement... squarely on the owners of the copyright."9 E-commerce defendants commonly raise the DMCA as an affirmative defense in copyright-infringement lawsuits because eligible defendants cannot be held liable for infringement.10
To qualify for DMCA safe-harbor protection, a service provider must meet threshold conditions, including that the service provider 1) implements a policy with a working notification system that allows it to terminate users who repeatedly violate the rules, 2) informs users about its policy, and 3) does not actively prevent copyright owners from collecting information needed to issue notifications.11 Providers must also meet additional conditions determined by the type of online material at issue.12
Section 512(c) of the DMCA, which immunizes a service provider from liability for copyright infringement stemming from its "storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider," is commonly at issue in cases involving e-commerce platforms. To be eligible for protection under Section 512(c), a service provider must also establish that it does not have knowledge that material on its network is infringing, does not receive a financial benefit directly attributable to any infringing activity that it has the right and ability to control, has expeditiously disabled access to allegedly infringing material, and has a designated agent to receive notifications of claimed infringement.
Rosen v. eBay, Inc. is illustrative. There, e-commerce giant eBay successfully invoked the DMCA safe-harbor defense under Section 512(c). Plaintiff Barry Rosen sued eBay for infringing his copyright on photographs offered for sale by third-party merchants on eBay.13 Rosen argued that although eBay had implemented a termination policy for repeat infringers, eBay had not provided documentation showing terminations for such offenders and had not adequately informed users of the terms of its policy because users did not know "specifically what eBay's policy is."14 The court, however, found that a declaration from eBay that it suspended repeat of - fenders was sufficient to evidence terminations and that eBay sufficiently put users on notice that they face exclusion from eBay if they repeatedly violate copyright laws. The DMCA "does not require that a service provider reveal its decision-making criteria to its users," and "implementation of a policy need not be perfect" to qualify a service provider for protection under the DMCA.15
Rosen also argued that eBay received a financial benefit from infringing activity that it could control and, therefore, was not eligible for protection under Section 512(c).16 The court disagreed, finding that eBay did not control the infringing activity because eBay "does not direct users what to list, does not come into contact with the items being posted, and beyond the basic content requirements, has no control over what its users list until the listing is complete."17 As a result, the court granted summary judgment on the grounds that eBay was eligible for safe-harbor protection under Section 512(c).
Direct Infringement
Direct copyright infringement occurs when a party violates one of the exclusive rights granted to a copyright owner,18 but a party cannot be held liable unless they have committed a "volitional act" that facilitates the infringement.19 An act of volition is established by the active participation in, or exercise of control over, the infringing activities, such as "selecting" copyright works for upload, download, transmission, or storage, or "instigating" any copying, storage, or distribution of copyrighted works.20 General operation of a website and activities instigated by others may not meet the threshold.21
This issue arose in VHT, Inc. v. Zillow Group, Inc., in which photography studio VHT sued real-estate-marketplace web - site Zillow for copyright infringement of its photographs.22 The Ninth Circuit affirmed that Zillow did not directly infringe VHT's copyright because Zillow did not engage in "volitional conduct."23
Zillow had received VHT's photos through feed providers, which were displayed on Zillow's website.24 The Ninth Circuit was persuaded that the feed providers, not Zillow, selected and uploaded every photo and that Zillow therefore did not "exercise control" over these photos beyond generally operating the website.25
Notably, in the same case, a jury found, the district court upheld, and Zillow did not appeal that Zillow directly infringed on a separate set of VHT photographs displayed elsewhere on Zillow's site.26 For those photographs, Zillow employed moderators to manipulate certain photographs to make them searchable 27 This active conduct and exercise of control met the volitional-conduct requirement.28
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Footnotes
1 Manaferra, E-Commerce statistics To Know In 2024, https://www.manaferra.com/ecommerce-statistics (last accessed Feb. 23, 2024); Anna Baluch, 38 E-Commerce Statistics of 2023, FORBES, Feb. 8, 2023, available at https://www.forbes.com/advisor/business/ecommerce -statistics.
2 Antonia Tönnies, H&M's Offline-Online Evolution: A Look at Global Retail Expansion, ECDB, Oct. 11, 2023, available at https://ecommercedb.com/insights /h-ms-offline-online-evolution-a-look-at-global-retail -expansion/4660.
3 Id.
4 17 U.S.C. §§102, 106.
5 John Wiley & Sons, Inc. v. DRK Photo, 882 F. 3d 394, 402 (2d Cir. 2018).
6 Perfect 10, Inc. v. Amazon.com, Inc., 508 F. 3d 1146, 1159 (9th Cir. 2007).
7 John Wiley, 882 F. 3d at 402; Ticketmaster L.L.C. v. Prestige Entm't W., Inc., 315 F. Supp. 3d 1147, 1165 (C.D. Cal. 2018).
8 17 U.S.C. §512.
9 Perfect 10, Inc. v. CCBill LLC, 488 F. 3d 1102, 1109 (9th Cir. 2007).
10 17 U.S.C. §512(a)-(d).
11 Rosen v. eBay, Inc., No. CV 13-6801 MWF, 2015 WL 1600081, at *7 (C.D. Cal. Jan. 16, 2015) (citing 17 U.S.C. §512 (i)); see also CCBill LLC, 488 F. 3d at 1109.
12 17 U.S.C. §512 (a)-(d).
13 Rosen, No. CV 13-6801 MWF, 2015 WL 1600081 at *6.
14 Id. at *7-9.
15 Id. at *8 (citing Corbis Corp. v. Amazon.com, Inc., 351 F. Supp. 2d 1090, 1102 (W.D. Wash. 2004)). 16 Rosen, No. CV 13-6801 MWF, 2015 WL 1600081 at *12 ("Both elements must be established for safe harbor coverage to be denied.") (citing Corbis Corp., 351 F. Supp. 2d at 1090); see also 17 U.S.C. §512(c).
17 Rosen, No. CV 13-6801 MWF, 2015 WL 1600081 at *13.
18 Perfect 10, Inc. v. Amazon.com, Inc., 508 F. 3d 1146, 1159 (9th Cir. 2007).
19 Religious Tech. Ctr. v. Netcom On-Line Commc'n Svcs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). 20 VHT, Inc. v. Zillow Group, Inc., 918 F. 3d 723, 732 (9th Cir. 2019).
21 Id. at 732 (citation omitted).
22 Id.
23 Id.
24 Id.
25 Id. at 733.
26 Id. at 736.
27 Id.
28 Id
Originally published in the Los Angeles Lawyer – March 2024
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