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Marobie-FL, Inc. d/b/a Galactic Software v. National Association of Fire Equipment Distributors and Northwest Nexus, Inc.

Plaintiff holds federal copyrights in three compilations of clip art. Defendant National Association of Fire Equipment Distributors ("NAFED") operated a web site hosted on computers owned by defendant Northwest Nexus Inc. ("Northwest"). Northwest also provided connections from those computers, and hence NAFED's site, to the Internet.

Without plaintiff's permission or authorization, the administrator of defendant NAFED's site obtained copies of plaintiff's copyrighted clip art and uploaded those files onto Northwest's computers as part of NAFED's website. This made plaintiff's clip art compilations available to those utilizing the Internet. An Internet user who wanted to download these files contacted Northwest's computers, on which NAFED's site was hosted. Those computers, in turn, made a copy of these files into their Random Access Memory ("RAM"), from which they were forwarded to the Internet user.

Plaintiff commenced this suit, charging defendants with copyright infringement and unfair competition. The Court granted in part and denied in part plaintiff's motion for summary judgment. In so holding, the court found defendant NAFED guilty of direct copyright infringement. The Court further held that Northwest was not guilty of either direct or vicarious copyright infringement. Nor was either defendant guilty of unfair competition, because the claim as stated in plaintiff's complaint was preempted by section 301 of the Federal Copyright Act. Lastly, the court held that issues of fact precluded summary judgment as to defendant Northwest's liability for contributory infringement.

"To establish direct infringement ... plaintiff need only demonstrate that it owns a valid copyright and that NAFED violated one or more of its exclusive rights as copyright owner." These rights include the exclusive right to reproduce the copyrighted material. The court held that NAFED violated plaintiff's reproduction right by copying the copyrighted material onto the hard drive of both defendant NAFED's and defendant Northwest's computers. In reaching this result, the court cited with approval Nimmer on Copyright, Section 8.08[A(1)]("input of a work into a computer results in the making of a copy, and hence ... such unauthorized input infringes the copyright owner's reproduction right.").

The court rejected NAFED's contentions that it was an innocent infringer. To establish such a defense, the court stated, required NAFED to prove that it utilized an authorized copy of plaintiff's work from which a copyright notice had been omitted. NAFED obtained the compilation in question by responding to an e-mail from an allegedly unknown person who agreed to provide the clip art if NAFED forwarded him blank disks. NAFED forwarded the disks -- when they were returned, the clip art was on them. No copyright notice was contained on either the disks or the clip art itself. The court held that "the absence of copyright notices, as well as the suspicious manner in which the files were obtained, constitute ample evidence that the copies were unauthorized.

The court also rejected defendant's NAFED's contentions that its use constituted fair use of the works. Under 17 U.S.C. Section 107:

the fair use of a copyrighted work ... for purposes such as criticism, comment, new reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include - (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

Of particular interest is the court's analysis of factors 1 and 2, cited above. Even though NAFED is a non-profit organization that did not derive any direct revenue from the sale of the clip art in question, its use of the art on the site was deemed commercial by the court. "It is ... undisputed that NAFED uses its web page for the commercial purpose of promoting the association (whose members pay dues) and generating advertising revenue. The clip art files enhanced the Web page and furthered these commercial purposes ... ".

The court also held that the compilations were creative works, even though plaintiff used diagrams and images from outside sources to make the compilations in question. Said the court "the clip art compilations are clearly creative works; it is undisputed that [plaintiff] (1) selected only some of the many images he gathered; (2) converted the images into electronic format by 'scanning' them; (3) named the scanned images; (4) edited and modified each image, pixel by pixel, to achieve the appearance he desired; (5) colored each of the images; and (6) organized the images by placing the files into various directories."

The Court held that Northwest was not guilty of either direct or vicarious infringement. The court followed the holding of MAI Systems Corp. v. Peak Computer, Inc., 991 F. 2d 511 (9th Cir. 1993) that the creation of a copy of a copyrighted work in a computer's RAM constitutes copying, even if the entire work is never contained at one time in the computer's RAM -- instead, a copy is created even though only certain portions of the work are "copied" piecemeal in the RAM for the purposes of retransmission.

However, Northwest was not guilty of direct infringement because it did not initiate the copying of plaintiff's work. Instead, its systems were merely used to create a copy by a third party. Said the court: "Northwest only provided the means to copy, distribute or display plaintiff's work, much like the owner of a public copying machine used by a third party to copy protected material. Like a copying machine owner, Northwest did not actually engage in any of these activities itself. Accordingly, Northwest may not be held liable for direct infringement."

Nor was Northwest a vicarious infringer. "A defendant is vicariously 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." NAFED paid Northwest a one-time set up fee for its hosting service, and a subsequent flat quarterly payment thereafter. "[T]he fee Northwest receives has never changed based on how many people visit NAFED's web page or what is accessed. In other words, NAFED's infringement did not financially benefit Northwest." As such, NAFED was not a vicarious infringer.

The full text of this decision can be found on a website maintained by David J. Loundy.