ALS Scan, Inc. v. Cloudflare, Inc. et al

MEMORANDUM in Opposition to NOTICE OF MOTION AND MOTION to Dismiss Case Pursuant to Rule 12

C.D. Cal.October 3, 2016

Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Jay M. Spillane (Bar No. 126364) jspillane@spillaneplc.com SPILLANE TRIAL GROUP PLC 468 N. Camden Drive Second Floor Beverly Hills, CA 90210 (424) 217-5980 (888) 590-1683 (fax) Attorneys for Plaintiff ALS Scan, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ALS SCAN, INC., a Maryland corporation, Plaintiff, vs. CLOUDFLARE, INC., a Delaware corporation, et al., Defendants. Case No.: 2:16-cv-05051-GW-AFM PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO DISMISS BY DEFENDANT CLOUDFLARE, INC. [Filed Concurrently: Spillane Declaration] Date: October 24, 2016 Time: 8:30 a.m. Place: Courtroom 10 312 N. Spring Street Los Angeles, CA Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 1 of 31 Page ID #:1028 i Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Table of Contents SUMMARY OF OPPOSITION ........................................................................... 1 STATEMENT OF ALLEGED FACTS................................................................ 2 MOTION TO DISMISS STANDARDS .............................................................. 7 CONFERENCE OF COUNSEL ........................................................................... 8 ARGUMENT ........................................................................................................ 8 I. ALS HAS PLAUSIBLY PLEADED A CLAIM AGAINST CLOUDFLARE FOR CONTRIBUTORY COPYRIGHT INFRINGEMENT. 8 A. ALS Has Adequately Pleaded “Material Contribution” to Direct Infringement. ................................................................................................... 8 B. ALS Has Adequately Pleaded “Inducement” of Direct Infringement. ..14 II. ALS HAS PLAUSIBLY PLEADED CLAIMS FOR VICARIOUS COPYRIGHT INFRINGEMENT. ...................................................................16 A. ALS Has Plausibly Averred Right and Ability to Supervise. ................16 B. ALS Has Plausibly Averred Direct Financial Benefit. ..........................16 III. ALS HAS PLAUSIBLY AVERRED DIRECT COPYRIGHT INFRINGEMENT. ...........................................................................................17 IV. ALS HAS PLAUSIBLY AVERRED CLAIMS FOR SECONDARY TRADEMARK INFRINGEMENT. ................................................................19 A. ALS’s Copyright Claims Do not Bar its Trademark Claims. ................19 B. ALS Has Plausibly Averred Inducement of Trademark Infringement. .21 C. ALS Has Adequately Pleaded a Claim for Material Contribution to Trademark Infringement. ...............................................................................22 D. ALS Has Plausibly Pleaded Direct Trademark Infringement. ...............23 Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 2 of 31 Page ID #:1029 ii Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V. ALS CONSENTS TO DISMISSAL OF THE CLAIM FOR UNFAIR COMPETITION ...............................................................................................24 CONCLUSION ...................................................................................................24 Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 3 of 31 Page ID #:1030 iii Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Table of Authorities Cases A&M Records, Inc. v. Napster, Inc., 114 F.Supp.2d 896 (N.D. Cal. 2000), aff’d 239 F.3d 1004 (9th Cir. 2001) ..................................................................17 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ....... 8, 15, 16 Adobe Sys. Inc. v. Christenson, 809 F.3d 1071 (9th Cir. 2015) .........................22 Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124 (S.D.N.Y. 2009) ................................................................10 Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009) .....................................17 BMG Rights Management (US) LLC v. Cox Communications, Inc., 149 F.Supp.3d 634 (E.D. Va. 2015) ................................................................... 8 BWP Media USA Inc. v. Hollywood Fan Sites LLC, 115 F.Supp.3d 397 (S.D.N.Y. 2015) ................................................................11 Capitol Records, Inc. v. MP3tunes, LLC, 48 F.Supp.3d 703 (S.D.N.Y. 2014) ..11 Coach v. Sapatis, 27 F.Supp.3d 239 (D.N.H. 2014) ..........................................20 Columbia Pictures Industries Inc. v. Fung, 710 F.3d 1020 (9th Cir. 2013)........13 Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) .. 18, 19 Designer Skin, LLC v. S & L Vitamins, Inc., 560 F. Supp. 2d 811 (D. Ariz. 2008) ................................................................22 Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004) .................................... 10, 16 Gershwin Publ'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir.1971) .............................................................................. 8 Gucci America, Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228 (S.D.N.Y. 2010) ................................................................20 Inwood Lab. V. Ives Lab., 456 U.S. 844 (1982) .................................................20 Lions Gate Entertainment, Inc. v. TD Ameritrade, CV-15-05024 (3/14/16 C.D. Cal.) ...........................................................................................19 Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 4 of 31 Page ID #:1031 iv Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980 (9th Cir. 1999) .............................................................................21 Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936 (9th Cir. 2011) ..................................................................... passim Microsoft Corp. v. Atek 3000 Computer Inc., No. 06 CV 6403, 2008 WL 2884761, *5 (E.D.N.Y. July 23, 2008) ............................................20 OSU Student Alliance v. Ray, 699 F.3d 1053 (9th Cir. 2012) .............................17 Perfect 10 v. Amazon, Inc., 508 F.3d 1146 (9th Cir. 2007) ......................... passim Perfect 10 v. Visa Intern. Service Ass’n, 494 F.3d 788 (9th Cir. 2007) ... 1, 11, 15 Perfect 10, Inc. v. CCBill, LLC, 488 F.3d 1102 (9th Cir. 2007) .........................23 Phoenix Entertaiment Partners, LLC v. Rumsey, 15-2844 (7th Cir. 2016) .........19 Playboy Enterprises, Inc. v. Frena, 829 F.Supp. 1552 (M.D. Fla. 1993) ..........11 Religious Technology Center v. Netcom, 907 F.Supp.1361 (N.D. Cal. 1995) ..............................................................9, 10 Sebastian International, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073 (9th Cir.1995) .............................................................................23 Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378 (9th Cir.1984) ..........................21 Slep-Tone Entm’t Corp. v. Canton Phoenix Inc., No. 3:14-CV-00764, 2014 WL 5817903, at *3 (D. Or. Nov. 7, 2014) ..............................................19 Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984) ...........14 Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) ........................................................ 7 Stevo Design, Inc. v. SBR Mktg. Ltd., 919 F. Supp. 2d 1112 (D. Nev. 2013) ....22 United States v. Ziegler, 474 F.3d 1184 (9th Cir.2007) ....................................... 4 Viacom Intern. Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012) .....................10 Zadrozny v. Bank of N.Y. Mellon, 720 F.3d 1163 (9th Cir. 2013) ....................... 7 Statutes 17 U.S.C. § 106 ...............................................................................................1, 11 Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 5 of 31 Page ID #:1032 v Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Other Authorities Ninth Circuit Manual of Model Civil Jury Instructions 15.18 ...........................20 Ninth Circuit Manual of Model Civil Jury Instructions 17.20 ............................. 8 Rules Fed R. Civ. P. 12(i) .................................................................................... 2, 7, 15 Fed R. Civ. P. 15(a)(2) .....................................................................................2, 7 Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 6 of 31 Page ID #:1033 - 1 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SUMMARY OF OPPOSITION The Court should deny the motion by Defendant CloudFlare, Inc. (“CloudFlare”) to dismiss the First Amended Complaint (“FAC”) filed by Plaintiff ALS Scan, Inc. (“ALS”). Cloudflare creates multiple copies of client websites that CloudFlare “caches,” “stores” and “serves” on Cloudflare’s many servers throughout the world, essentially a mirror hosting service. Cloudflare does this so that consumers can access and view copies of these websites cached, stored or served - i.e. mirror hosted -- on the closest Cloudflare server. Cloudflare continued to copy, cache, store and serve websites even after being notified, hundreds of times, that certain CloudFlare client sites contained infringing ALS images. If Cloudflare had terminated services to its clients - “pulled the plug” - the multiple infringing copies of ALS’s works on CloudFlare’s servers would have been removed from the Internet. Cloudflare’s inaction, with actual and constructive notice of infringement, materially assisted direct violations of ALS’s exclusive rights to reproduce, display and distribute its copyrighted works. 17 U.S.C. § 106(1), (3), (5). Cloudflare could have, but did not, “take simple measures to prevent further damage to [ALS’s] copyrighted works.” Perfect 10 v. Amazon, Inc., 508 F.3d 1146, 1172 (9th Cir. 2007). Cloudflare materially contributed to - indeed effectuated - infringement upon ALS’s rights of “reproduction, . . . display and distributionof [ALS’s] images over the Internet.” Perfect 10 v. Visa Intern. Service Ass’n, 494 F.3d 788, 796 (9th Cir. 2007). ALS has therefore stated a plausible claim for contributory coyright infringement. Though Cloudflare has not distributed a device, it may be liable for inducing coypright infringement by providing services. Here, Cloudflare induced infringement by relying on high volume signups to increase profits, famously providing services to pirate websites such as The Pirate Bay, Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 7 of 31 Page ID #:1034 - 2 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 informing clients that Cloudflare would continue to copy, cache and store infringing content after notification of infringement by copyright owners and by encouraging pirates to conceal their identities and those of their primary host through Cloudflare’s domain name service. ALS has averred a plausible claim for vicarious copyright infringement. CloudFlare can remove its cached, stored or served copies of infringing materials from the Internet, and directly benefits financially from growth in its user base. The bootleg copies of ALS works on pirate sites displayed the ALS mark. ALS has averred a plausible claim for secondary trademark infringement, because CloudFlare continued to copy, cache, store and serve bootleg ALS works bearing the ALS mark after receiving multiple notices of trademark infringement. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936 (9th Cir. 2011). In the unlikely event the Court concludes that ALS has not plausibly averred its claims against Cloudfare, ALS moves for leave to amend, Fed R. Civ. P. 15(a)(2), or deferral on ruling until after discovery. Fed R. Civ. P. 12(i). STATEMENT OF ALLEGED FACTS CloudFlare teases select words from the FAC and spins them to claim CloudFlare does nothing more than make the Internet faster. The results of CloudFlare’s copying, caching, storing and serving activities may be a faster Internet, but the Court should accept as true ALS’s averments and all inferences favorable to ALS, not CloudFlare’s minimalist recast of those averments. ALS Background ALS was founded in 1996. ALS owns a substantial library of adult entertainment works. ALS charges consumers fees to access ALS’s adult content on ALS’s secure Internet sites. ALS displays its trademark and copyright information on its works. (FAC ¶ 20.) Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 8 of 31 Page ID #:1035 - 3 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ALS has submitted hundreds of registrations for its copyrighted works to the U.S. Copyright Office, including registrations covering all of the works referenced in the notices of infringement submitted in connection with this motion. (FAC ¶ 21, Ex. 1.) ALS is the owner of registered trademarks for the mark “ALS Scan” in connection with adult entertainment. (FAC ¶ 22, Ex. 2.) The Challenge Posed by Infringement on the Internet One of the most significant business threats faced by ALS is widespread infringement of its copyrighted works and trademarks on the Internet. (FAC ¶ 24.) The observed growth of infringing content on these networks coincided with noticeable decline in ALS’s profits. (FAC ¶ 25.) “Pirate” sites - those with largely infringing material - would not be able to thrive were it not for third party service providers who provide valuable services to these sites. These third party providers include services such as those provided by Cloudflare. (FAC ¶¶ 26-28.) CloudFlare’s Internet Services to Infringing Sites CloudFlare offers: (1) a content delivery network (“CDN”); (2) web content optimization; (3) website security; (4) DDoS (denial of service) protection; and (5) a managed domain name system (DNS) network. (FAC ¶ 29.) CloudFlare Copies, Caches, Displays and Distributes Client Content CloudFlare’s CDN is essentially a mirror hosting service offered to primary website hosts and operators. CloudFlare’s services do much more than make the Internet go faster. CloudFlare creates multiples copies of websites that are cached, stored or served on CloudFlare servers. CloudFlare thus enables and effectuates reproduction, display and distribution of content on websites. CloudFlare says: “Once your website is a part of the CloudFlare community, its web traffic is routed through our intelligent global network.” Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 9 of 31 Page ID #:1036 - 4 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (FAC ¶ 30.) “CloudFlare caches your content across our global network, bringing it closer to visitors from every region.” https://www.cloudflare.com/cdn/.1 (Spillane Decl. Ex. B.) “CloudFlare operates out of 86 data centers around the world. Our CDN automatically caches your static files at our edge nodes so these files are stored closer to your visitors while delivering your dynamic content directly from your web server. CloudFlare then uses a technology called Anycast to route your visitors to the nearest data center. The result is that your website, on average, loads twice as fast for your visitors regardless of where they are located.” (FAC ¶ 32.) “A content delivery network (CDN) takes your static content and stores a copy closer to your visitors.” https://www.cloudflare.com/website- optimization/ (Spillane Decl. Ex. C.) “CloudFlare’s Service is offered as a platform to cache and serve web pages and websites.” https://www.cloudflare.com/terms/ (Spillane Decl. Ex. D.) CloudFlare’s managed domain name (DNS) service aids infringers by helping them conceal information concerning the owner and primary host of a website with infringements. The domain registration information for some of the pirate sites referenced in the FAC indicates that the sites reside on a CloudFlare server in Phoenix, Arizona. When presented with a notice of infringement, however, CloudFlare asserts that it supposedly has legal immunities even if it does not terminate services to its clients and refuses to disclose the identity of the primary host and site owner. In this fashion 1 ALS requests that the Court take judicial notice of the contents of CloudFlare’s website, captures of which are attached to the Spillane Declaration. Fed. R. Evid. 201. CloudFlare quoted from its own website in its motion to dismiss, evidencing CloudFlare’s belief that its website may be judicially noticed. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 10 of 31 Page ID #:1037 - 5 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CloudFlare acts as a firewall protecting pirate sites and their hosts from legal recourse by copyright owners. (FAC ¶ 33.) CloudFlare opens its brief by touting an impressive client list. However, CloudFlare continues to provide services to The Pirate Bay, even though The Pirate Bay has been raided by authorities and the site’s owner has been arrested for chronic copyright infringement. (FAC ¶ 37.) The Digital Citizens Alliance, a Hollywood-affiliated group, has published a report highly critical of CloudFlare’s role in providing invaluable services and cover for pirate sites. (FAC ¶ 38.) CloudFlare Alters Client Websites CloudFlare does not copy client websites without modification, but rather reserves the right to modify its clients’ sites. “CloudFlare may modify the content of your site. For example, CloudFlare may detect any email addresses and replace them with a script in order to keep it from being harvested, or CloudFlare may insert code to improve page load performance or enable a Third Party App.” https://www.cloudflare.com/terms/ CloudFlare may “[a]dd cookies to your domain to track visitors” and “[a]dd script to your pages to, for example, add services, Apps, or perform additional performance tracking.” Id. CloudFlare’s Terms of Service CloudFlare’s Terms of Service provides that it retains the right to investigate its customers, their sites and “the materials comprising the sites” at any time. The Terms further provide that any violation of law will justify termination of CloudFlare’s services. “CloudFlare’s policy is to investigate violations of these Terms of Service and terminate repeat infringers.” (FAC ¶ 31.) Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 11 of 31 Page ID #:1038 - 6 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cloudflare Relies on High Volume, Rapid Signups and Growth in Userbase CloudFlare touts its “Growing Global Network Built for Scale: 10 Tbps Capacity and 100 Data Center Global Footprint.” https://www.cloudflare.com/ (Spillane Decl. Ex. E.) CloudFlare says “Setting up CloudFlare is Easy,” over a video showing how a webmaster can place its site on a CloudFlare domain server with a few points and clicks. Id. “Set up a domain in less than 5 minutes. Keep your hosting provider. No code changes required.” Id. “CloudFlare makes more than 4,000,000 Internet properties faster and safer. Join today!” Id. CloudFlare tells its clients “Everyone’s Internet application can benefit from using CloudFlare. Pick a plan that fits your need.” https://www.cloudflare.com/plans/ (Spillane Decl. Ex. F.) CloudFlare has a teaser “free” plan “[f]or personal websites.” Id. CloudFlare touts a “Pro” plan, $20 per month per domain, for “professional websites,” and a “Business” plan, $200 per month per domain, for “small eCommerce websites and businesses requiring advanced security and performance . . .” Id. Notices of Infringement to CloudFlare; CloudFlare Won’t Terminate Services to Repeat Infringers ALS’s agent for infringement notifications, Mr. Easton, sent numerous notices to CloudFlare and others of infringement of ALS works on sites wherein publicly available information reflected that the sites resided on a server maintained by CloudFlare. (FAC ¶¶ 34, 81.) One of the worst offenders was imgchili.net, a site that was the subject of 195 infringement notifications and which pays users to upload infringing content. (FAC ¶¶ 53, 66-68, 81.) CloudFlare has persisted in offering CDN and related services to pirate websites, notwithstanding numerous notifications of infringement on such sites. (FAC ¶ 35.) When CloudFlare learned about this lawsuit, it contacted counsel Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 12 of 31 Page ID #:1039 - 7 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 for ALS and offered to reveal its information concerning the owner(s) of the sites of which ALS complained, but only in exchange for a release of liability in favor of CloudFlare. (FAC ¶ 36.) To the extent CloudFlare claims a safe harbor under 17 U.S.C. § 512, it has lost that safe harbor through failure to reasonably implement a repeat infringer policy. (FAC ¶ 87.) The Infringements Include ALS’s Trademarks The infringing ALS works that are the subject of the notifications averred above bear the registered ALS Scan trademarks. The pirate sites listed above have directly infringed ALS’s trademarks by using ALS’s registered marks without ALS’s knowledge or consent in a manner likely to cause confusion among ordinary consumers as to the source, sponsorship, affiliation or approval of such works. The works being published by the direct infringers are counterfeits bearing the ALS marks without authority. (FAC ¶ 85.) MOTION TO DISMISS STANDARDS The Court must “accept as true all well pleaded facts in the complaint and construe them in the light most favorable to the nonmoving party.” Zadrozny v. Bank of N.Y. Mellon, 720 F.3d 1163, 1167 (9th Cir. 2013). When a pleading’s allegations are susceptible of more than one inference, the court must adopt whichever plausible inference supports a valid claim. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). If the court believes that any defect in the pleadings may be cured by amendment, leave to amend should be freely granted. Fed R. Civ. P. 15(a)(2). Additionally, if the conduct of discovery could help a plaintiff plead a plausible claim, the Court may defer ruling on a motion under Rule 12(b) until later in the case or to trial. Fed R. Civ. P. 12(i). Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 13 of 31 Page ID #:1040 - 8 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CONFERENCE OF COUNSEL The conference of counsel did not take place on “September 19 and 20, 2016,” as CloudFlare says in its motion. (Spillane Decl.) ARGUMENT I. ALS HAS PLAUSIBLY PLEADED A CLAIM AGAINST CLOUDFLARE FOR CONTRIBUTORY COPYRIGHT INFRINGEMENT. ALS has plausibly pleaded claims against CloudFlare for both the “material contribution” prong and the “inducement” prong of contributory copyright infringement. BMG Rights Management (US) LLC v. Cox Communications, Inc., 149 F.Supp.3d 634, 671 (E.D. Va. 2015) (inducement and material contribution are two branches of contributory infringement); Ninth Circuit Manual of Model Civil Jury Instructions 17.20 (inducement and material contribution are alternatives). A. ALS Has Adequately Pleaded “Material Contribution” to Direct Infringement. “[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.” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019 (9th Cir. 2001), citing Gershwin Publ'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir.1971); Fonovisa v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996) (“[P]roviding the site and facilities for known infringing activity is sufficient to establish contributory liability”). 1. CloudFlare Concedes the Knowledge Element. CloudFlare concedes that ALS has adequately pleaded CloudFlare’s knowledge of direct infringement by pirate sites. CloudFlare contends solely that ALS has not pleaded the second element, material contribution. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 14 of 31 Page ID #:1041 - 9 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. ALS has Adequately Pleaded Material Contribution. Cloudflare “copies,” “caches,” “stores” and “serves” websites. A “cache” is “a computer memory with very short access time used for storage of frequently or recently used instructions or data.” United States v. Ziegler, 474 F.3d 1184, 1186 n. 3 (9th Cir.2007) (quoting MERRIAM- WEBSTER'S COLLEGIATE DICTIONARY 171 (11th ed.2003)). In Perfect 10 v. Amazon, Inc., supra, the court talked about two types of caches - browser caches maintained by Google’s computers to efficiently organize and index web pages and user caches, copies of recently viewed web pages on a user’s computer. 508 F.3d at 1156 n.3. Here, it does not appear that CloudFlare uses the term “cache” in either of these two senses. CloudFlare stores - for extended time periods - multiple copies of a client’s static website content on as many as 86 servers. This would explain Cloudflare’s alternate use of the terms “cache,” “store” and “serve.” CloudFlare’s services may best be described as mirror hosting. A system providing for automated copying and storage of content, not unlike that offered by CloudFlare, was addressed in Religious Technology Center v. Netcom, 907 F.Supp.1361 (N.D. Cal. 1995). The plaintiff owned copyrights in the works of L. Ron Hubbard, infringing copies of which were uploaded by Erlich to an Internet “Bulletin Board Service” maintained by Klemesrud. Netcom maintained services that automatically copied and stored the infringing material: “Erlich . . . transmits his messages to Klemesrud's computer, where they are automatically briefly stored. According to a prearranged pattern established by Netcom's software, Erlich's initial act of posting a message to the Usenet2 results in the automatic copying 2 “USENET is an abbreviation of ‘user network.’ This term refers to an international collection of organizations and individuals (known as ‘peers’) Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 15 of 31 Page ID #:1042 - 10 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of Erlich's message from Klemesrud's computer onto Netcom's computer and onto other computers on the Usenet. In order to ease transmission and for the convenience of Usenet users, Usenet servers maintain postings from newsgroups for a short period of time-eleven days for Netcom's system and three days for Klemesrud's system. Once on Netcom's computers, messages are available to Netcom's customers and Usenet neighbors, who may then download the messages to their own computers. Netcom's local server makes available its postings to a group of Usenet servers, which do the same for other servers until all Usenet sites worldwide have obtained access to the postings, which takes a matter of hours.” 907 F.Supp. at 1367-68. The court held, first, that digital “copies” were made of the plaintiff’s works within the meaning of the Copyright Act. “Even though the messages remained on their systems for at most eleven days, they were sufficiently ‘fixed’ to constitute recognizable copies under the Copyright Act.” 907 F.Supp. at 1368. The court held that Netcom could be secondarily liable for copyright infringement for continuing to enable copying and distribution of plaintiff’s works. “[I]t is fair, assuming Netcom is able to take simple measures to prevent further damage to plaintiffs' copyrighted works, to hold Netcom liable for contributory infringement where Netcom has knowledge of Erlich's infringing postings yet continues to aid in the accomplishment of Erlich's purpose of publicly distributing the postings.” 907 F.Supp. at 1375. The Ninth Circuit reached a similar result in Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004), where AOL copied and temporarily stored files on Usenet news groups containing allegedly infringing works. “[A] reasonable trier of fact could conclude that AOL materially contributed to the copyright infringement by storing infringing copies of Ellison’s works on its USENET whose computers connect to one another and exchange messages posted by USENET users.” Ellison v. Robertson, 357 F.3d 1072, 1074 n.1 (9th Cir. 2004). Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 16 of 31 Page ID #:1043 - 11 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 groups and providing the groups’ users with access to those copies.” 357 F.3d at 1078. Numerous other courts have held that copying, serving, storing, caching, displaying or distributing online files can be a material contribution to direct infringement. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936 (9th Cir. 2011) (web host liable for contributory copyright and trademark infringement by ignoring notices of infringements on hosted sites); Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124, 155 (S.D.N.Y. 2009) (music files stored and distributed through the Internet); Viacom Intern. Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012) (host of video upload site potentially secondarily liable for copyright infringement if acting with requisite knowledge); Capitol Records, Inc. v. MP3tunes, LLC, 48 F.Supp.3d 703 (S.D.N.Y. 2014) (Internet service provider secondarily liable for maintaining online “storage lockers” into which users could upload infringing files); BWP Media USA Inc. v. Hollywood Fan Sites LLC, 115 F.Supp.3d 397 (S.D.N.Y. 2015) (defendants hosting celebrity sites with infringing images not entitled to DMCA safe harbors). In short, those who copy, cache, store and serve Internet content have long been seen as providing the “site and facilities” for infringement. Fonovisa v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996) If Cloudflare had terminated services to its clients - “pulled the plug” - the infringing copies of ALS’s works - as many as 86 copies on CloudFlare servers throughout the world - would have been removed from the Internet. Cloudflare’s inaction, with actual and constructive notice of infringement, materially assisted direct violations of ALS’s exclusive rights to reproduce, Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 17 of 31 Page ID #:1044 - 12 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 display and distribute its copyrighted works. 17 U.S.C. § 106(1), (3), (5).3 Cloudflare could have, but did not, “take simple measures to prevent further damages to [ALS’s] copyrighted works.” Perfect 10 v. Amazon, Inc., 508 F.3d 1146, 1172 (9th Cir. 2007). Cloudflare materially contributed to - indeed effectuated - infringement upon ALS’s rights of “reproduction, . . . display and distribution of [ALS’s] images over the Internet.” Perfect 10 v. Visa Intern. Service Ass’n, 494 F.3d 788, 796 (9th Cir. 2007). Additionally, CloudFlare’s domain name service enables both infringers and their primary hosts to conceal their identity from copyright owners. When ALS looked up publicly available information concerning the pirate sites in question, the information was that the site was hosted by a CloudFlare server in Phoenix, Arizona. When CloudFlare was contacted by Steve Easton, it denied that it was the primary host but would not disclose the identity of the primary host or site owner. When this suit was filed, CloudFlare conditioned disclosure of the owners of the sites in question on a release of liability. CloudFlare’s services provider site owners and hosts with cover to infringe in anonymity. CloudFlare’s key defense is that “If CloudFlare’s services were completely unavailable to the allegedly infringing websites, those websites would still exist.” CloudFlare Memo. p.6. What CloudFlare is saying is that even if it removed the 86 copies of infringing material that it caches, stores and serves throughout the world, one copy would still remain, that on the primary host. CloudFlare fails to cite a single case holding that it has immunity from secondary copyright liability if removing infringing copies of works from its own site and facilities won’t eradicate every single infringing copy of the work on the Internet. Under CloudFlare’s theory, a primary host and a mirror host 3 Playboy Enterprises, Inc. v. Frena, 829 F.Supp. 1552, 1556-57 (M.D. Fla. 1993) (display of Playboy images on Internet “bulletin board service” infringed Playboy’s display and distribution rights). Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 18 of 31 Page ID #:1045 - 13 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 like CloudFlare could cross-immunize themselves from secondary liability by arguing that neither had the right to eradicate all copies of infringing works from the Internet. That is not the law. CloudFlare’s sole published authority on material contribution, Perfect 10 v. Amazon, Inc., supra, 508 F.3d at 1172, CloudFlare Memo. p. 6, concerned material contribution through searches, not caching, storing or serving websites. CloudFlare’s sole published citation works against its argument. Google could not remove infringements from the Internet. It could, however, take measures to stop helping people find them. Courts have never afforded immunity from secondary liability to service providers because they could not eradicate all direct infringement. Ultimately direct infringers can move on to another service provider if services are terminated due to repeat infringement or if the service provider shuts down. In Fonovisa, supra, Cherry Auction could not stop sale of bootleg records, but was liable because it failed to eject vendors selling bootleg records from its site and facilities. 76 F.3d at 264. After Napster was enjoined from contributing to infringement, A&M Records, Inc. v. Napster, Inc., supra, consumers could still copy and swap infringing music files directly, or with the aid of next generation peer-to-peer or bit torrent services. Metro-Golden-Mayer Studios, Inc. v. Grokster, Ltd. 545 U.S. 913, 125 S.Ct. 2764 (2005) (peer-to-peer provider could be liable for inducing infringement); Columbia Pictures Industries Inc. v. Fung, 710 F.3d 1020, 1033 (9th Cir. 2013) (Fung contributorily liable by providing torrent files that enabled users to search for and download infringing works stored on other’s computers). Neither Napster, Grokster nor Fung could reach into other people’s computers and delete infringing files, but they were liable because they helped people reproduce and distribute infringing files. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 19 of 31 Page ID #:1046 - 14 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Here, CloudFlare could reject infringers on its own site and facilities, even if it did not control all other sites and facilities on which infringement occurred. ALS has plausibly averred material contribution to direct infringement. B. ALS Has Adequately Pleaded “Inducement” of Direct Infringement. “’Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts.’” Perfect 10 v. Amazon, Inc., supra, 508 F.3d at 1170, citing Grokster, supra. “[A]n actor may be contributorily liable for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct infringement.” Id. at 1171. Here, Cloudflare relies on “high volume use.” Fung, supra, 710 F.3d at 1035, citing Grokster, supra, 545 U.S. at 940. CloudFlare says webmasters can sign up for its service in five minutes and that it has 4,000,000 users. CloudFlare makes no effort to use “filtering tools or other mechanisms” to detect infringing activity by its clients. 710 F.3d at 1035, citing Grokster, 545 U.S. at 939. CloudFlare further induced infringement by maintaining a network with a reinforcing cycle of encouragement for pirate sites, enticed by CloudFlare’s promise of anonymity through its domain name service, to continue to draw traffic through the lure of infringement. CloudFlare famously maintained services to Pirate Bay, one of the most notorious infringers on the Internet. CloudFlare teaches its pirate site clients that its Terms of Service are for show only, and that CloudFlare will continue to provide services to repeat infringers. Once word was out that CloudFlare would not enforce its terms of service, others looking to earn money through the draw of infringement became CloudFlare clients. This self-reinforcing cycle was particularly evident in the Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 20 of 31 Page ID #:1047 - 15 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 case of imgchili.net, which paid users to continuously upload infringing content. CloudFlare confuses the issue before the Court by making reference to Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442, 456 (1984) and the “staple article of commerce” doctrine. Sony does not apply. Sony sold Betamax video recorders, devices used by some consumers to infringe copyright. Once Sony sold a recorder the device was out of its hands, and thus Sony could not terminate services to consumers who infringed copyrights. Under that fact pattern, it made sense to determine whether Sony knew it was selling an infringement machine, or whether the recorder was “capable of substantial non-infringing uses.” Here, by contrast, CloudFlare is not selling goods to consumers, but services to clients using equipment owned by CloudFlare. “Nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault based liability derived from the common law. . . . [W]here evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony 's staple article rule will not preclude liability.” Grokster, supra, 545 U.S. at 934-35. In Fung, Fung did not distribute a product or device, but was liable for inducing infringement by continuing to provide service to repeat infringers. Fung, supra, 710 F.3d at 1032-33. ALS has not yet discovered communications between CloudFlare and its clients. Quoting communications not discovered is not ALS’s burden at the pleading stage. ALS is entitled to all inferences in its favor. From the facts averred, it is reasonable to assume that discovery would adduce communications between CloudFlare and its clients inducing infringement. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 21 of 31 Page ID #:1048 - 16 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In the unlikely event that the Court does not believe ALS has plausibly averred inducement liability, ALS prays that this question be deferred until after discovery. Fed. R. Civ. Proc. 12(i). II. ALS HAS PLAUSIBLY PLEADED CLAIMS FOR VICARIOUS COPYRIGHT INFRINGEMENT. Vicarious copyright liability exists where a defendant “’has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.’” Napster, 239 F.3d at 1022, quoting Fonovisa, 76 F.3d at 262. A. ALS Has Plausibly Averred Right and Ability to Supervise. CloudFlare can eliminate up to 86 copies of infringing works that CloudFlare “caches,” “stores” and “serves” on the Internet. If CloudFlare did so, it would cease its involvement in the reproduction, display and distribution of infringing works. CloudFlare can “remove [copies of] those websites from the Internet” and can “block distribution” of the infringing works on its mirror server system. Perfect 10, Inc. v. Visa, supra, 494 F.3d at 805. CloudFlare can “exert substantial influence on the activities of users,” Fung, supra, 710 F.3d at 1045, by deleting the 86 copies of infringing works that CloudFlare caches, stores and serves. ALS has therefore plausibly averred right and ability to supervise. B. ALS Has Plausibly Averred Direct Financial Benefit. “Financial benefit exists where the availability of infringing material ‘acts as a “draw” for customers.’” Napster, 239 F.3d at 1023, quoting Fonovisa, 76 F.3d at 263-64. Further, financial benefit exists where future revenues depend upon “increases in user base.” Id. Here, ALS has averred that CloudFlare’s revenues are related to growth in its user base, which growth relates to the draw of infringing content. CloudFlare entices new users with fast signup and pricing plans for Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 22 of 31 Page ID #:1049 - 17 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “professional websites” and “eCommerce websites.” CloudFlare encourages pirate sites to flock to CloudFlare. CloudFlare retained services to The Pirate Bay, the owner of which was arrested for chronic copyright infringement. CloudFlare’s toleration of pirate sites spurred a Hollywood group to publish a report highly critical of CloudFlare’s role in providing services and cover to pirate sites. CloudFlare encourages pirate site clients by offering anonymity to not only the pirate site but its primary host. CloudFlare further encourage pirates by tacitly communicating to its client base that CloudFlare’s Terms are merely for public consumption and the CloudFlare will do nothing to terminate repeat infringers. These averment are sufficient to plausibly plead direct financial benefit from infringement. CloudFlare’s lead case, Ellison v. Robertson, supra, does not support CloudFlare on this issue. CloudFlare Memo. p.9. First, the Ellison court followed the holdings of Napster, supra, and Fonovisa, supra, that the requisite financial benefit exists for purposes of vicarious infringement where the defendant’s revenues grow through the draw of infringement. 357 F.3d at 1078. Second, Ellison confirms that the increase in revenue due to infringement need not be “substantial,” but must merely exist. 357 F.3d at 1079. Ellison’s case was disposed of on summary judgment, not a motion to dismiss. Ellison’s problem was that he did not offer evidence that AOL’s subscriber base related at all to the draw of infringement. 357 F.3d at 1079. Here, ALS has plausibly averred the CloudFlare has increased its user base through toleration, if not encouragement, of a pirate site client base. Thus is sufficient for pleading purposes. III. ALS HAS PLAUSIBLY AVERRED DIRECT COPYRIGHT INFRINGEMENT. CloudFlare argues that ALS has not plausibly averred direct copyright infringement because ALS has not stated, in exhaustive detail, which picture set Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 23 of 31 Page ID #:1050 - 18 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was displayed on which page of which pirate site on which day. CloudFlare Memo. 11-12. Not surprisingly, CloudFlare fails to cite a single published case holding that meeting the plausible averment standard requires pleading one’s case in full evidentiary detail. To survive a motion to dismiss, a plaintiff need not make its case against a defendant by pleading specific evidentiary facts supporting each element of each cause of action. OSU Student Alliance v. Ray, 699 F.3d 1053, 1078 (9th Cir. 2012). There Oregon State students challenged an alleged university policy to dump a student newspaper from newsbins, and that university official Martorello enforced the policy. The plaintiff plausibly averred Martorello’s alleged role even though it did not “prove the case on the pleadings.” Id. “All that matters at this stage is that the allegation nudge this inference ‘across the line from conceivable to plausible.’” Id., citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1951 (2009). Napster users were sharing approximately 10,000 music files per second. A&M Records, Inc. v. Napster, Inc., 114 F.Supp.2d 896, 902 (N.D. Cal. 2000), aff’d 239 F.3d 1004 (9th Cir. 2001). The plaintiffs found that 87.1% of sampled files were owned or adminstered by plaintiffs or other music copyright holders. 114 F.Supp.2d at 903 n.6. Would the court have dismissed the copyright owners’ pleading under the Iqbal standard assuming they did not list each work infringed? It seems impossible. Surely a general averment that the plaintiffs owned thousands of copyrighted works that were traded through the Napster system would have sufficed. Here, ALS has averred that it has spent twenty years amassing a large library of adult works, reflected in hundreds of copyright registrations. ALS has averred that it sent hundreds of notifications of infringements of its works to CloudFlare and others, each notification containing numerous hyperlinks to numerous webpages each containing galleries of ALS works. The scale of Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 24 of 31 Page ID #:1051 - 19 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 infringement in this case is massive. To plead which model was shown on which web page on which site on which day would render the pleading hundreds of pages long. ALS need only plausibly aver direct infringement, not plead detail sufficient to avoid a motion for judgment as a matter of law at trial. ALS has done so. IV. ALS HAS PLAUSIBLY AVERRED CLAIMS FOR SECONDARY TRADEMARK INFRINGEMENT. A. ALS’s Copyright Claims Do not Bar its Trademark Claims. CloudFlare says that where defendants are secondarily involved in trafficking in bootleg wares that infringe both copyright and trademark, the owner must supposedly elect between a copyright and a trademark claim. CloudFlare Memo. 13-14. CloudFlare’s authority, Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) says no such thing. The Dastar line of cases deal with attempts to circumvent time-barred copyright claims through a source of origin theory. Here ALS’s copyright claim is not time- barred, nor is ALS pleading source of origin confusion. In Dastar Fox failed to renew a registration on a “Crusade in Europe” television series, which lapsed into the public domain. Dastar then released a video set containing elements from the Fox “Crusade” series. Fox worked around the barred copyright claim by complaining under 15 U.S.C. § 1125(a) [“Section 43(a)”] of the Lanham Act that Dastar failed to credit Fox as the “origin” of the material. The problem the Court addressed was how the term “origin” worked in that context. On the pages cited by CloudFlare, 33 and 34, the court said that copyright law’s specific provision that a work in the public domain may be copyrighted without attribution trumped the Lanham Act’s more general definition of “origin.” Nowhere did the Dastar court say that where works protected under both copyright and trademark are infringed and Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 25 of 31 Page ID #:1052 - 20 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 counterfeited, copyright preempts trademark or that the owner must elect remedies.4 ALS has not plead source of origin confusion under Section 43(a), but rather infringement of a registered mark and trademark counterfeiting. Further, ALS is not using trademark law to work around expired copyright protection. The Dastar issue simply doesn’t exist in this case. Numerous courts, including the Ninth Circuit post-Dastar, have held that where a defendant directly or secondarily traffics in stolen works embodying both the plaintiff’s copyright and trademark, the owner may sue under both copyright and trademark. Fonovisa, supra (swap meet owner liable for contributory copyright and trademark infringement); Perfect 10 v. Cybernet Ventures, supra (age verification service liable for both copyright and trademark infringement); Microsoft Corp. v. Atek 3000 Computer Inc., No. 06 CV 6403, 2008 WL 2884761, *5 (E.D.N.Y. July 23, 2008) (preliminary injunction for copyright and trademark infringement for sale of bootleg Microsoft software); Louis Vuitton, supra (web host secondarily liable for copyright and trademark infringement from sale of counterfeit Louis Vuitton goods); Coach v. Sapatis, 27 F.Supp.3d 4 CloudFlare’s unpublished cases discuss Lanham Act Section 43(a) and the Dastar “origin” issue, but this is not an issue in this case. None hold that copyright preempts trademark or that owners of works protected by both copyright and trademark must elect remedies. Both Phoenix Entertaiment Partners, LLC v. Rumsey, 15-2844 (7th Cir. 2016) and Slep-Tone Entm’t Corp. v. Canton Phoenix Inc., No. 3:14-CV-00764, 2014 WL 5817903, at *3 (D. Or. Nov. 7, 2014) involve claims by Slep-Tone that defendants passed off bootleg copies of Slep-Tone karaoke files as genuine tracks when played on a karaoke machine. The problem with Slep-Tone’s theory was that the karaoke machines correctly displayed Slep-Tone as the source of the track, thus there could be no source confusion. In Lions Gate Entertainment, Inc. v. TD Ameritrade, CV-15- 05024 (3/14/16 C.D. Cal.) the court read Dastar as holding that trademark law cannot be used to extend copyright or patent rights that have expired. Here ALS is not asserting expired copyrights. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 26 of 31 Page ID #:1053 - 21 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 239 (D.N.H. 2014) (denying defense motion for summary judgment on claims for copyright and trademark infringement for sale of counterfeit Coach goods). B. ALS Has Plausibly Averred Inducement of Trademark Infringement. One may be secondarily liable for trademark infringement by inducing direct infringement. Inwood Lab. V. Ives Lab., 456 U.S. 844, 853-54 (1982); Ninth Circuit Manual of Model Civil Jury Instructions 15.18. In Gucci America, Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228, 248-49 (S.D.N.Y. 2010), involving sales of fake Gucci products, a claim for inducement of trademark infringement was stated against Durango, which specialized in obtaining credit card processing facilities for “high risk merchant accounts,” including those who sell “replica products,” statements calculated to induce business from those selling counterfeit products. Here, the same averments that plausibly plead CloudFlare induced copyright infringement also plausibly plead CloudFlare induced trademark infringement. In Gucci America, supra, Gucci did not have to plead that Durango posted a sign saying “trademark infringement welcome.” Rather, reference to “high risk merchant accounts” and “replica products” was coded language calculated to welcome clients that trafficked in or turned a blind eye to counterfeit goods. Here, CloudFlare has signaled to the Internet marketplace its welcoming approach to pirate sites. CloudFlare has retained services to a site as infamous as The Pirate Bay, and has informed its client base that its Terms are meaningless by failing to terminate services to even the most abject repeat infringers. ALS has not had an opportunity to discover communications by CloudFlare that may further evidence inducement, but for purposes of a motion to dismiss, ALS has plausibly plead a theory of inducement. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 27 of 31 Page ID #:1054 - 22 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. ALS Has Adequately Pleaded a Claim for Material Contribution to Trademark Infringement. One may also be contributorily liable for trademark infringement by continuing to provide goods or services to the direct trademark infringer with actual or constructive knowledge of the infringement. Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1382 (9th Cir.1984) ("[I]f a manufacturer or distributor . . . continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer is contributorily responsible for any harm done as a result of the deceit"); Fonovisa, supra, 76 F.3d at 265 (flea market turned a blind eye to continuous trademark infringement by its vendors, and thus plaintiff stated a claim for contributory trademark infringement). A defendant has “direct control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark,” Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999) where it can remove copies of infringements from the Internet. Louis Vuitton, supra, 658 F.3d at 942-43 (defendants liable for contributory trademark infringement for continuing to host sites with infringing products). Here, CloudFlare was put on notice that it was copying, caching, storing and serving works that infringed ALS’s trademarks. CloudFlare could have removed those infringing works from up to 86 of its servers, but it failed to do so. CloudFlare essentially argues that if it removed its 86 copies of infringing works from its own servers, one copy would remain on the primary host. However, ALS has plausibly averred that CloudFlare enjoys “direct control and monitoring” of the 86 copies of websites CloudFlare caches, stores and serves. No case CloudFlare cites supports its theory that CloudFlare needed to have “direct control and monitoring” of all infringing works on the Internet to have secondary liability for trademark infringement. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 28 of 31 Page ID #:1055 - 23 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. ALS Has Plausibly Pleaded Direct Trademark Infringement. ALS has plausibly pleaded direct trademark infringement with sufficient detail for pleading purposes. ALS need not list each and every direct trademark infringement, but plausibly aver that the infringement occurred. ALS has done so. CloudFlare has not shown that ALS’s trademark claims are facially barred by a nominative fair use defense. CloudFlare misrepresents ALS’s contention. ALS has not alleged that its trademark has been placed on genuine ALS works. Its trademark has been placed on stolen ALS works - knockoffs - copied, displayed, cached, served, stored and distributed by CloudFlare. The fact that images on the Internet can be stolen with a right-click of a mouse, resulting in copies that are indistinguishable from the original, does not mean the stolen copy is genuine. If in Louis Vuitton, supra, the knockoffs sold by the pirate had been created by a “Star-Trek” style replicator, the defendants would still have been liable for contributory trademark infringement even though the articles sold would have been indistinguishable from a real Louis Vuitton. CloudFlare’s nominal fair use authorities are off point. Adobe Sys. Inc. v. Christenson, 809 F.3d 1071 (9th Cir. 2015), Stevo Design, Inc. v. SBR Mktg. Ltd., 919 F. Supp. 2d 1112 (D. Nev. 2013) and Designer Skin, LLC v. S & L Vitamins, Inc., 560 F. Supp. 2d 811 (D. Ariz. 2008) all involved resale of genuine goods. “[A] reseller of branded goods - who does not materially change the good - is not a trademark infringer.” Stevo Design, 919 F.Supp.2d at 1122, citing Sebastian International, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073, 1074 (9th Cir.1995). CloudFlare is not a reseller of genuine goods. CloudFlare enables reproduction, display and distribution of stolen goods. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 29 of 31 Page ID #:1056 - 24 - Opposition to CloudFlare Motion to Dismiss 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V. ALS CONSENTS TO DISMISSAL OF THE CLAIM FOR UNFAIR COMPETITION ALS disagrees with all but one of CloudFlare’s unfair competition arguments. ALS does agree that its state unfair competition claim is disposed of by the Communications Decency Act as interpreted in Perfect 10, Inc. v. CCBill, LLC, 488 F.3d 1102, 1107 (9th Cir. 2007), and thus will dismiss that claim for relief. CONCLUSION CloudFlare’s motion to dismiss should be denied. In the unlikely event the Court does not believe ALS has plausibly averred its claims, ALS prays for leave to amend. Additionally, ALS moves that the questions raised by CloudFlare be deferred until after ALS has been able to conduct discovery. DATED: October 3, 2016 SPILLANE TRIAL GROUP PLC By: _____________________________ Jay M. Spillane Attorneys for Plaintiff ALS Scan, Inc. Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 30 of 31 Page ID #:1057 PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this action. My business address is: 468 N. Camden Drive, Second Floor, Beverly Hills, CA 90210-4507. A true and correct copy of the foregoing document entitled (specify): PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO DISMISS BY DEFENDANT CLOUDFLARE, INC. will be served or was served (a) on the judge in chambers in the form and manner required by Local Rules and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and Local Rules, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date) October 3, 2016, I checked the CM/ECF docket for this action and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: Gary L. Bostwick- gbostwick@B1Law.com Kevin S. Toll - kevin@silversteinlegal.com Lawrence G. Walters - larry@firstamendment.com Corey D. Silverstein - corey@silversteinlegal.com Rachel H. Kassabian - rachelkassabian@quinnemanuel.com Carolyn M. Homer - carolynhomer@quinnemanuel.com Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On (date) _______________, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) October 3, 2016, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. Served by Overnight Mail Hon. George H. Wu U.S. District Court 312 N. Spring Street Courtroom 10 - Spring St. Floor Los Angeles, CA 90012 Service information continued on attached page I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. 10/3/2016 Jessie Gietl Date Printed Name Signature Case 2:16-cv-05051-GW-AFM Document 51 Filed 10/03/16 Page 31 of 31 Page ID #:1058