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

REPLY in support of NOTICE OF MOTION AND MOTION to Dismiss First Amended Complaint for Failure to State a Claim on which Relief can be Granted 35

C.D. Cal.September 19, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Gary L. Bostwick (Cal. Bar. No. 79000) gbostwick@B1Law.com BOSTWICK LAW 12400 Wilshire Blvd., Ste. 400 Los Angeles, CA 90025 (310) 979-6059 Corey D. Silverstein (admitted pro hac vice) corey@silversteinlegal.com Kevin S. Toll (admitted pro hac vice) kevin@silversteinlegal.com SILVERSTEIN LEGAL 30150 Telegraph Rd., Ste. 444 Bingham Farms, MI 48025 (248) 290-0655 Lawrence G. Walters (admitted pro hac vice) larry@firstamendment.com WALTERS LAW GROUP 195 W. Pine Ave. Longwood, FL 32750 (407) 975-9150 Attorneys for Defendant Tiger Media Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION ALS SCAN, INC., ALS, v. CLOUDFLARE, INC., et al., Defendants. Case No. 2:16-cv-05051-GW-AFM Reply in Support of Motion by De- fendant Tiger Media Inc. to Dismiss ALS’s First Amended Complaint for Failure to State a Claim Date: October 3, 2016 Time: 8:30 a.m. Place: Courtroom 10 Judge: Hon. George H. Wu Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 1 of 26 Page ID #:960 i 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Table of Contents Table of Authorities ............................................................................................... ii Introduction ............................................................................................................ 1 Argument............................................................................................................... 2 I. The Opposition fails to rebut Tiger’s argument that ALS’s secondary copyright infringement claims fail as a matter of law .................................... 2 A. ALS fails to state a claim for contributory infringement ..................... 2 B. ALS fails to state a claim for inducement infringement ..................... 11 C. ALS fails to state a claim for vicarious infringement .......................... 14 II. The Opposition fails to support ALS’s claims for secondary trademark infringement ............................................................................................... 17 A. ALS fails to state a claim for inducing infringement .......................... 17 B. ALS fails to state a claim for contributory infringement .................... 19 III. The Opposition confirms ALS’s unfair competition claim fails .................. 20 Conclusion ............................................................................................................ 21 Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 2 of 26 Page ID #:961 ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Table of Authorities Cases A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ..................................................................... passim Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 14 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................................... 14 Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020 (9th Cir. 2013) ....................................................................... 11, 13 Elsevier Ltd. v. Chitika, Inc., 826 F. Supp. 2d 398 (D. Mass. 2011) ............................................................... 7, 8 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996) .......................................................................... 2, 3, 4 Frenzel v. AliphCom, 76 F. Supp. 3d 999 (N.D. Cal. 2014) ................................................................. 12 Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir. 1971) ............................................................................ 2, 8 Gucci Am., Inc. v. Frontline Processing Corp., 721 F. Supp. 2d 228 (S.D.N.Y. 2010) ..................................................... 17, 18, 19 Hart v. Massanari, 266 F.3d 1155 (9th Cir. 2001) ............................................................................. 16 Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 3 of 26 Page ID #:962 iii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Intamin, Ltd. v. Magnetar Tech. Corp., 623 F. Supp. 2d 1055 (C.D. Cal. 2009) .............................................................. 16 Livnat v. Lavi, No. 96-4967, 1998 WL 43221 (S.D.N.Y. Feb. 2, 1998) ........................................ 2 Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 F.3d 936 (9th Cir. 2011) ............................................................................. 20 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) .............................................................................. 3, 4, 11, 13 Papasan v. Allain, 478 U.S. 265 (1986) ............................................................................................ 6 Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701 (9th Cir. 2007), amended by 508 F.3d 1146 (9th Cir. 2007) .......... 3, 4 Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) ..................................................................... passim Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002) ...................................................... 9, 10, 16 Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788 (9th Cir. 2007) ...................................................................... passim Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, No. 04-0371, 2004 WL 1773349 (N.D. Cal. Aug. 5, 2004) ................................. 5* * In its previous filings (Docs. 36 and 41), Tiger inadvertently identified the district court in Perfect 10, Inc. v. Visa Int’l Serv. Ass’n as the Central District instead of the Northern District. Tiger apologizes for this error. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 4 of 26 Page ID #:963 iv 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995) ..................................................................... 2 Routt v. Amazon.com, Inc., 584 F. App’x 713 (9th Cir. 2014) ............................................................ 14, 15, 17 Schneider v. Cal. Dep’t of Corrections, 151 F.3d 1194 (9th Cir. 1998) ............................................................................. 12 Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F. Supp. 399 (S.D.N.Y. 1966) .................................................................... 8, 9 Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984) ........................................................................................... 12 Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125 (C.D. Cal. 2011) .............................................................. 20 Stitt v. Citibank, N.A., 942 F. Supp. 2d 944 (N.D. Cal. 2013) .............................................................. 6, 7 Statutes 17 U.S.C. § 106 ................................................................................................... 5, 9 Rules Fed. R. Civ. P. 8 ................................................................................................... 14 Fed. R. Civ. P. 11 ................................................................................................... 14 Fed. R. Civ. P. 12 .................................................................................................. 12 Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 5 of 26 Page ID #:964 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Introduction ALS’s Opposition to Tiger’s Motion to Dismiss (“Opposition”) fails to grasp the importance of the key aspects of Tiger’s business-even as described by ALS: (1) Tiger does not promote or otherwise control infringing content on publisher web- sites; (2) Tiger only brokers the sale of advertisements that lead users away from the allegedly infringing content; and (3) none of the products or services promoted by Tiger’s advertisers are claimed to be infringing. As a result, Tiger cannot be held liable for infringement by third parties. The Opposition further rests on a profound misreading of the caselaw, unpled allegations, and on wishful thinking applied to aggressive, but inadequate, pleading. While ALS has made some conclusory allegations in its First Amended Complaint (“FAC”) to try to overcome deficiencies in its original complaint, ALS still cannot state a viable claim on any of its theories. ALS fails to allege that Tiger actually participates in, supervises, or supports any infringing activity. ALS confuses the difference between infringing activities and ad networks. Tiger, by operating an ad network and serving ads on third-party sites, does not insert itself into or control infringements. ALS’s characterization of Juicy- Ads as providing “valuable services” does not support Tiger’s liability for the con- duct of third-party sites. ALS’s flawed opposition cannot withstand Tiger’s motion, and it furnishes no reason to believe that ALS can ever adequately plead any of the causes of action it has asserted. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 6 of 26 Page ID #:965 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Argument I. The Opposition fails to rebut Tiger’s argument that ALS’s secondary copyright infringement claims fail as a matter of law A. ALS fails to state a claim for contributory infringement ALS misinterprets the law when it argues that Tiger “materially contributes” to third-party publishers’ infringement. Contributory liability does not arise here be- cause Tiger does not “directly contribute[ ] to another’s infringement,” Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996); “engage[ ] in personal conduct that encourages or assists the infringer,” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019 (9th Cir. 2001); “materially contribute[ ] to the infringing con- duct,” Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 907 F. Supp. 1361, 1375 (N.D. Cal. 1995) (quoting Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)); or “act in concert with the direct infringer,” Livnat v. Lavi, No. 96-4967, 1998 WL 43221, at *3 (S.D.N.Y. Feb. 2, 1998). By ignoring the material contribution to the infringing conduct requirement, ALS advocates a standard that would hold anyone contributorily liable who provides a useful service to a known infringer. Such a far-reaching theory of liability should not be countenanced by this Court. The Opposition ignores the prevailing law on what constitutes a material contri- bution. Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788 (9th Cir. 2007), is squarely on point and cannot be ignored. In Visa, Perfect 10 “sued because Defend- ants continue[d] to process credit card payments to websites that infringe[d] Perfect 10’s intellectual property rights after being notified by Perfect 10 of infringement by Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 7 of 26 Page ID #:966 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 those websites.” Id. at 792. The Ninth Circuit held that “[t]he credit card companies cannot be said to ma- terially contribute to the infringement in this case because they have no direct con- nection to that infringement.” Id. at 796 (emphasis added). It explained that “the infringement rests on the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet.” Id. “Perfect 10 has not alleged that any infringing material passes over Defendants’ payment networks or through their payment pro- cessing systems, or that Defendants’ systems are used to alter or display the infring- ing images.” Id. The court distinguished Fonovisa, Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701 (9th Cir. 2007), amended by 508 F.3d 1146 (9th Cir. 2007), Napster, and Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005): In Fonovisa, the infringing material was physically located in and traded at the defendant’s market. Here, it is not. Nor are Defendants’ systems used to locate the infringing images. The search engines in Amazon.com provided links to specific infringing images, and the services in Napster and Grokster allowed users to locate and obtain infringing material. Here, in contrast, the services provided by the credit card companies do not help locate and are not used to distribute the infringing images. While Perfect 10 has alleged that Defendants make it easier for websites to profit from this infringing activity, the issue here is reproduction, al- teration, display and distribution, which can occur without payment. Even if infringing images were not paid for, there would still be infringe- ment. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 8 of 26 Page ID #:967 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Visa, 494 F.3d at 796. Visa is dispositive of ALS’s contributory infringement claim. Tiger “cannot be said to materially contribute to the infringement in this case because [it] ha[s] no direct connection to that infringement.” Id. As in Visa, “the infringement rests on the reproduction, alteration, display and distribution of [ALS’s] images over the In- ternet.” Id. As in Visa, ALS has not alleged that any infringing material passes over [Tiger’s ad network] or through [its] … systems, or that [Tiger’s] systems are used to alter or display the infringing images.” Id. Unlike Fonovisa and like Visa, “the in- fringing material [is not] physically [or virtually] located in and traded [on] [Tiger’s ad network].” Id. Nor, as in Visa, is Tiger’s “system[ ] used to locate the infringing images,” id., notwithstanding ALS’s conclusory “allegations” to the contrary.1 As the Ninth Circuit explained in Visa, “The search engines in Amazon.com provided links to specific infringing images, and the services in Napster and Grokster allowed users to locate and obtain infringing material.” Id. (emphasis added). In contrast, here, as in Visa, “the services provided by [JuicyAds] do[es] not help locate and are not used to distribute the infringing images.” Id. As in Visa, “While [ALS] has al- leged [at least implicitly] that [Tiger] make[s] it easier for [publisher] websites to profit from this infringing activity, the issue here is reproduction, alteration, display and distribution, which can occur without [ad revenue from third-party ads].” The Opposition tries to distinguish Visa by emphasizing facts immaterial to its 1 ALS’s factual description of the “search” functions on JuicyAds demonstrates that the network does not provide the ability to actually locate infringing material, but at most, permits advertisers to filter limited metric data and technical information as- sociated with publisher sites. FAC ¶ 49. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 9 of 26 Page ID #:968 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 holding. For example, ALS emphasizes that “Visa2 was three steps removed from merchants with allegedly infringing works.” Opp’n 18:3-4. The opinion does not say Visa or any other defendant was “three steps removed from merchants with alleg- edly infringing works.” Moreover, the allegation that “Tiger has direct contractual and business relationships with Publishers and Advertisers,” id. at 18:13-14, is not a fact distinguishing this case from Visa because that does not materially contribute, substantially assist, or have a direct connection to the alleged infringing activities of the publisher websites.3 ALS argues that, unlike “Visa,” “Tiger maintained a network including Publish- ers with infringing works, serving as the central hub without which the network would cease to exist.” Id. at 18:14-16. This assertion is not alleged in the FAC and does not establish that Tiger materially contributes to the alleged infringing activi- ties of the third-party publishers. All infringing activities occur outside of and inde- pendent of the JuicyAds ad network. Next, ALS alleges that unlike “Visa,” “Tiger can ‘remove or block access to ma- terial that it believes in good faith to be copyrighted material that has been illegally 2 Visa was not the only defendant involved in Visa. Besides Visa, First Data Corp. (“FDC”), Cardservice International, Inc. (“CSI”), Humboldt Bank, and Master- card International, Inc. were also defendants. Indeed, defendants FDC and CSI were Independent Service Organizations, which “can act in lieu of an acquiring bank [which contract with merchants] as an agent for member banks.” Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, No. 04-0371, 2004 WL 1773349, at *3 (N.D. Cal. Aug. 5, 2004). Thus, FDC and CSI were not “three steps removed.” 3 Significantly, ALS failed to plead any conduct by Tiger that contributes to a viola- tion of any of the exclusive rights of the copyright holder listed in 17 U.S.C. § 106: Tiger is not alleged to contribute to reproduction of works; preparation of derivative works; distribution of copies to the public by sale or other transfer of ownership, or by rental, lease, or lending; public display; or public performance of ALS’s works. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 10 of 26 Page ID #:969 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 copied and distributed.’” Id. at 18:17-18. Even accepting this conclusory and con- flicting allegation as true (compare FAC ¶ 47, with FAC ¶ 63), it is not alleged that Tiger claimed it can remove or block access to third-party material residing on third- party websites located on systems and servers outside of its control. Tiger can only logically remove or block access to material that is located on (or passes through) its system or servers, and the FAC fails to allege that any of the infringing content at issue is located on (or passes through) Tiger’s system or servers. Indeed, ALS admits “neither Tiger nor Visa served or transmitted infringing works.” Opp’n 18:9. ALS also claims that “Tiger maintains search functions on its website that can ‘assist or enable Internet users to locate infringing material.’” Id. at 18:19-20 (quot- ing Visa, 494 F.3d at 797). This allegation-which found its way into the FAC (see FAC ¶ 63) from the argument section of ALS’s preliminary injunction memorandum (see Pl.’s Mem. Supp. Prelim. Inj. 18:23-24)-is unsupported by ALS’s own docu- mentary evidence as Tiger explains in its opposition to that motion. See Tiger’s Mem. Opp’n Prelim. Inj. 10-11 n.5. Regardless, “mere conclusions couched in fac- tual allegations are not sufficient to state a cause of action.” Stitt v. Citibank, N.A., 942 F. Supp. 2d 944, 951 (N.D. Cal. 2013) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also n.1, supra. Similarly, ALS draws from Visa to claim that “‘“it would be difficult for the [Pub- lishers’] infringing activity to take place in the massive quantities alleged without the support services provided by [Tiger].”’” Opp’n 18:21-23 (quoting Visa, 494 F.3d at 798). Again, this conclusory allegation (see FAC ¶ 63) lacks the factual support re- quired to plausibly state a claim. ALS fails to identify a single service that materially Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 11 of 26 Page ID #:970 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 contributes, substantially assists, or has a direct connection to the alleged infringing activities of the publisher sites. Serving ads for non-infringing products or services on third-party sites does not directly (or substantially) assist third-party publishers in reproducing, altering, displaying, or distributing ALS’s works. Finally, ALS reproduces language from Visa to claim that “Tiger created a ‘vir- tual’ ‘centralized place … where infringing works could be collected, sorted [and] found,’” id. at 18:24-25 (quoting Visa, 494 F.3d at 799), and that “Tiger ‘adver- tise[s] [and] otherwise promote[s]’ its Publisher websites,” id. at 18:26-27 (quoting Visa, 494 F.3d at 800). While these bare bones statements appear in the FAC, see FAC ¶ 63, “mere conclusions couched in factual allegations are not sufficient to state a cause of action.” Stitt, 942 F. Supp. 2d at 951. ALS alleges no facts that even hints at an inference that Tiger created any “virtual” “centralized place” “where infringing works could be collected, sorted, [and] found[.]” It is worth repeating: ALS admits that Tiger does not serve or transmit infringing works. See Opp’n 18:9. Likewise, ALS fails to allege any facts showing that Tiger advertises or otherwise promotes the infringing content, let alone the infringing websites. The remaining alleged distinctions between Visa and this case-that “Tiger served ads on the Publisher sites,” id. at 18:27-28; “transported traffic driven to its servers from Publisher sites to purchasing Advertisers,” id. at 18:28-19:1; “directly paid Publishers,” id. at 19:1-2; and “directly retained monies paid by Advertisers for traffic from sites drawn through the lure of infringing content,” id. at 19:2-3-do not change the result. Indeed, the district court in Elsevier Ltd. v. Chitika, Inc., 826 F. Supp. 2d 398 (D. Mass. 2011), had no trouble extending the reasoning of Visa to an Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 12 of 26 Page ID #:971 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 online advertising network similar to JuicyAds.4 See id. at 405-06 (stating belief that materiality had not been met, but basing decision on lack of knowledge). ALS relies on Gershwin and Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F. Supp. 399 (S.D.N.Y. 1966), for the proposition that “[c]ourts have long held that advertising or promotional services to direct infringers can be a material contribution for purposes of contributory liability.” Opp’n 11:27-28. Neither of these decades-old decisions support ALS. In Gershwin, the Second Circuit found ma- terial contribution in the defendant’s “pervasive participation in the formation and direction of [an] association” that put on concerts at which copyrighted musical compositions were performed. 443 F.2d at 1163. The defendant organized the con- certs, helped select and book artists, prepared budgets and artist contracts, created publicity kits, held one-week membership campaigns, and compiled a report of the proceeds of the concerts. Id. at 1160-61. Nothing Tiger does is comparable. Moreo- ver, the promotional activities in Gershwin directly related to the infringing musical compositions. Here, Tiger promotes the sale of ad space, not infringing content. In Screen Gems, the district court denied summary judgment to an ad agency that placed ads for the sale of infringing records, a radio station which broadcast the ads 4 ALS also claims that this case is distinguishable from Visa because “Tiger admitted into its network a site that proclaimed it published infringing content,” Opp’n 19:4- 5; “said it would terminate repeat infringers,” id. at 19:5; and “ignored its own pol- icy,” id. at 19:6. Tiger does not “admit” sites into its network. Publishers signup for JuicyAds.com and add their websites. ALS admits in the FAC that its employee planted the “site that proclaimed it published infringing content.” See FAC ¶¶ 55- 56. As to ALS’s claims that “Tiger said it would terminate repeat infringers” and that “Tiger ignored its own policy,” these conclusory allegations are not only imma- terial to the Ninth Circuit’s holding in Visa, but the Ninth Circuit explicitly rejected them in the vicarious liability context. Visa, 494 F.3d at 804. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 13 of 26 Page ID #:972 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 for the sale of infringing records, and a packaging agent that shipped the infringing records. 256 F. Supp. at 401-02, 404-05. Here, again, JuicyAds did not place ads for the sale of infringing images (or otherwise promote the infringing images), let alone advertise (or otherwise promote) the infringing sites. ALS’s argument inaccurately compares the JuicyAds ad network to “the net- works maintained by … Napster, Grokster, Lime Group and Fung.”5 Opp’n 17:18- 19. The differences between those “networks” and JuicyAds is stark: in those “net- works,” the act of infringement could not have taken place in the manner it did with- out the assistance of those networks; in the JuicyAds ad network,” the act of in- fringement takes place without JuicyAds’s assistance because the JuicyAds ad net- work has nothing to do with the act of infringement. ALS argues that without “Tiger’s assistance,” “the JuicyAds network would cease to exist.” Id. at 17:22-23. Of course that is true, but it does not follow that the infringing activity would cease to exist on the publisher websites or be impacted in any way. ALS cannot allege that Tiger provides a “site and facilities”-either literal or metaphorical-for infringing activity, and it cannot allege that Tiger provides any tools or instruments for viola- tions of the § 106 rights of a copyright owner. An examination of the facts of Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002), illustrates that case is inapposite. In Cybernet, the court preliminarily ruled that Cybernet, an adult age-verification company that sold memberships to a network of adult sites, “will succeed in establishing Cybernet’s 5 ALS includes a reference to “Cybernet Ventures,” but Cybernet’s business model is factually distinct from the peer-to-peer business models of Napster, Grokster, Lime Group, and Fung. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 14 of 26 Page ID #:973 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 material contributions to the infringing activity.” Id. at 1170. The court found that “Cybernet markets the Adult Check brands through advertising, it pays webmasters commissions directly based upon the number of Adult Check users that register through the site, it provides technical and content advice, it reviews sites, and it at- tempts to control the quality of the ‘product’ it presents to consumers as a unified brand.” Id. According to the court, “Cybernet’s entire business model is premised on harnessing the competitive pressures between individual webmasters into a coop- erative system that benefits the webmasters by increasing the overall value to con- sumers.” Id. Thus, the court concluded that “Cybernet’s hand in Adult Check, and in particular its steady payments to infringing sites along with its advertising, mate- rially contribute to the growth and proliferation of any infringement.” Id. at 1171. Accord Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1172 (9th Cir. 2007) (“Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing ma- terials.”). Unlike in Cybernet, Tiger provides content-neutral services. There is no allega- tion that Tiger promotes the content of publisher websites to consumers, let alone sends traffic to those websites. Tiger does not have content-specific regulations with which publishers must comply before using JuicyAds’s services as Cybernet did. Further, Tiger does not hold out certain publishers as being providers of a particular quality of product. Finally, Tiger does not sell memberships to consumers to view publishers’ content as Cybernet did. Instead, Tiger is concerned solely with serving ads and brokering the purchase and sale of ad space. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 15 of 26 Page ID #:974 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 The Opposition fails to demonstrate how Tiger directly contributed to any pub- lisher’s infringement, engaged in personal conduct that encourages or assists any in- fringer, materially contributed to the infringing conduct, or acted in concert with any direct infringer. Thus, ALS fails to state a claim for contributory infringement. B. ALS fails to state a claim for inducement infringement In its Opposition, ALS argues that Tiger is liable for inducing infringement of its copyrighted works relying on Grokster and Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020 (9th Cir. 2013). But Grokster found inducement liability based on facts not alleged or present here-clear evidence of “culpable intent” and “a patently illegal objective.” 545 U.S. at 934-35, 939-41. The Grokster defendants operated peer-to- peer services through which users committed “staggering” amounts of copyright infringement, especially of copyrighted music files. Id. at 923. Their intent to induce that infringement through their services was “unmistakable.” Id. at 940. In particu- lar, the defendants operated their businesses to attract the large base of infringing users of the “notorious”-and enjoined-Napster peer-to-peer service. Id. at 924. Among other facts demonstrating this intent, “Grokster’s” name was derived from Napster; the defendants had created ads appealing to the base of former Napster users (e.g., “‘[w]hen the lights went off at Napster … where did the users go?’”), id. at 924-25; and each defendant “showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.” Id. at 939. While the Court held that this intentional, culpable conduct could give rise to secondary liability, the Court reaffirmed a holding of a precondition cru- cially missing here-that simply designing or distributing a device that may be used Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 16 of 26 Page ID #:975 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 to infringe cannot in and of itself create copyright liability. ALS claims “Tiger induced infringement by maintaining a network with a rein- forcing cycle of encouragement to Publishers to build traffic through the lure of in- fringement.” Opp’n 20:1-3. According to ALS, “Tiger induced high speed ac- ceptance of Publishers into its network with no scrutiny whatsoever.”6 Id. at 20:3-4. ALS reasons that “Tiger’s systems encouraged Publishers to increase traffic to their sites, so as to command their higher payments from Advertisers.” Id. at 20:4-6. Yet none of this (including lines 7 through 15) is alleged in the FAC; it is a conclusory creation of the Opposition and not allowable. See Schneider v. Cal. Dep’t of Correc- tions, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) (“‘new’ allegations” in an opposition brief “are irrelevant” to a Rule 12(b)(6) motion; a court may not look beyond the complaint to an opposition brief); Frenzel v. AliphCom, 76 F. Supp. 3d 999, 1010 (N.D. Cal. 2014) (complaint may not be amended by briefs in opposition). Moreover, the FAC does not allege a single fact suggesting that Tiger ever in- tended for anyone to infringe an ALS copyright. The most that ALS can be said to allege is that Tiger deployed an ad network that some publishers with infringing con- tent on their sites may use to earn revenue even though many other publishers with- out infringing content on their sites use it for legitimate and entirely authorized pur- poses. That does not constitute a claim of inducement liability. See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 441 n.21 (1984) (calling it “extraordinary to suggest” that a technology may be subject to liability “simply because [it] may be used to infringe copyrights”). 6 No support exists in the FAC for the claim that Tiger uses “no scrutiny whatso- ever.” Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 17 of 26 Page ID #:976 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next, ALS claims in its Opposition-but does not allege in the FAC-that Tiger induced infringement because “Tiger made no effort to use ‘filtering tools or other mechanisms’ to detect infringing activity by Publishers.” Opp’n 20:17-18 (quoting Fung, 710 F.3d at 1035). But this claim is insufficient even if it was alleged in the FAC. ALS included this claim to parrot the Supreme Court’s holding in Grokster and the Ninth Circuit’s holding in Fung that the Grokster and Fung defendants’ fail- ure “to develop filtering tools” was indicative of their intent to induce. See Grokster, 545 U.S. at 939; Fung, 710 F.3d at 1036. But ALS ignores the Supreme Court’s ad- monition that “‘in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirma- tive steps to prevent infringement.’” Fung, 710 F.3d at 1035 (quoting Grokster, 545 U.S. at 939 n.12). Here, there are no allegations of evidence of intent. Thus, ALS’s attempt to “plead” inducement based on lack of filtering fails. ALS also claims-but does not allege in the FAC-that “as in Grokster and Fung, Tiger ‘“makes money by selling advertising space”’ and thus relies on ‘“high-vol- ume use.”’” Opp’n 20:21-23 (quoting Fung, 710 F.3d at 1035). Again, this is a trans- parent attempt to quote Grokster’s conclusion. See 545 U.S. at 939-40. But ALS does not allege any facts that show that Tiger developed a business model to profit based on the infringement of ALS’s works (or anyone else’s works for that matter). More- over, ALS again ignores the Supreme Court’s caution that “[t]his evidence alone would not justify an inference of unlawful intent.” Id. at 940. Tiger’s business is claimed to profit from high-volume use, but unlike Grokster and Fung, there is not even a plausible contention that those profits depend on high-volume infringing Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 18 of 26 Page ID #:977 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 uses. And nothing establishes that “JuicyAds encouraged Publishers to join its net- work in droves,” Opp’n 20:24, to commit copyright infringement. Claiming that discovery will show facts ALS has not pled is contrary to federal pleading standards requiring a plaintiff to have a factual basis for its complaint before filing it. See Fed. R. Civ. P. 11(b). If a court can only infer a “mere possibility of mis- conduct,” the complaint fails to state a plausible claim for relief on its face and must be dismissed. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 561 (2007) (the “prospect of unearthing direct evidence” in the future is not sufficient to state a claim). This is because while “Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era,” “it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 556 U.S. at 678-79; see also Twombly, 550 U.S. at 559. C. ALS fails to state a claim for vicarious infringement ALS has not alleged that Tiger exercises the control over third-party publishers necessary to establish vicarious copyright liability under binding Ninth Circuit prec- edent. ALS admits such claims require that a defendant have “‘the right and ability to supervise the infringing activity and also ha[ve] a direct financial interest in such activities.’” Opp’n 21:21-23 (quoting Napster, 239 F.3d at 1022). More specifically, Tiger must have “both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Amazon.com, 508 F.3d at 1173; see also Routt v. Amazon.com, Inc., 584 F. App’x 713, 715 (9th Cir. 2014) (“A defendant has control over a third party’s infringing conduct when the defendant can directly put an end to that conduct.”). ALS has not made any such allegation because the facts are to Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 19 of 26 Page ID #:978 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the contrary.7 Instead, ALS claims that Tiger can remove or block access to material that it be- lieves to be copyrighted material illegally copied and distributed. Even if Tiger could do what ALS claims, the FAC does not allege that Tiger has the “legal right” and the “practical ability” to “remove or block access to material” on third-party sites. If ALS knew facts showing that, it could easily have alleged them; it did not. The express language of the TOS demonstrates that Tiger does not have the “le- gal right” and the “practical ability” to “remove or block access to material” on third-party websites. Under the TOS, the “[u]ser is solely responsible for the devel- opment, operation and maintenance of their website and all materials that appear on [u]sers’ websites used in connection with the JuicyAds service.” TOS ¶ XIII. Noth- ing in the TOS grants Tiger the right to remove or block access to content on pub- lisher websites. Failing that, ALS has to argue that Tiger’s power of termination of services and ejection of a publisher is sufficient to show the “right and ability to supervise” ele- ment of vicarious liability. Opp’n 22:3-5. But two published Ninth Circuit cases and one unpublished Ninth Circuit case have squarely rejected this argument-Ama- zon.com, 508 F.3d at 1173-75; Visa, 494 F.3d at 803-06; and Routt, 584 F. App’x at 715-16-as a “radical step we do not take.” Visa, 494 F.3d at 803. In support of its claim that Tiger’s power to terminate services and eject a pub- lisher from the JuicyAds network satisfies the right and ability to supervise element, 7 ALS offers nothing but its speculative claims that Tiger generally sought to increase its business and revenues to support the financial benefit element of this test, but the Court can and should grant the motion without reaching this issue. Opp’n 23:2-16. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 20 of 26 Page ID #:979 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ALS relies on a decision from this District issued years before the Ninth Circuit’s decisions squarely rejecting this theory-Cybernet. But this Court is bound by the Ninth Circuit decisions directly on point not Cybernet. Hart v. Massanari, 266 F.3d 1155, 1175 (9th Cir. 2001) (“district court bound by circuit authority … has no choice but to follow it”); Intamin, Ltd. v. Magnetar Tech. Corp., 623 F. Supp. 2d 1055, 1075 (C.D. Cal. 2009) (“district court decisions are not binding precedent and need not be followed, particularly where circuit authority holds otherwise”). The only other case ALS relies on is Napster. ALS argues that “even though Nap- ster could not reach into user’s [sic] computers to delete infringing files, Napster acted as the essential connection without which users could not connect to exchange infringing files.” Opp’n 22:10-13. According to ALS, “If Napster terminated users from its system, those users would be deprived of Napster’s connections.” Id. at 22:13-14. Thus, ALS theorizes that Tiger is “akin” to Napster. ALS is wrong. This case is vastly different from Napster as the Ninth Circuit explained in Ama- zon.com, 508 F.3d at 1174 and Visa, 494 F.3d at 803-04. In Napster, the Ninth Circuit found that Napster could control its users’ transmission of pirated music because it had the ability to block access to its software, thus ending the users’ ability to trans- mit the infringing files. Id. at 1023-24. This stands in stark contrast to this case, where “Tiger’s ability to eject Publishers from its network” does not end those pub- lishers’ ability to copy, reproduce, distribute, or display infringing content. ALS does not (nor could it) allege the contrary. Instead, it argues that “eject[ed] users … will not have Tiger’s network with which to trade traffic drawn through the lure of in- fringement.” Opp’n 22:19-21. But the issue is “the right and ability to stop or limit Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 21 of 26 Page ID #:980 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the infringing activities of third party websites,” Amazon.com, 508 F.3d at 1173, not the right or ability to stop or limit “trad[ing] [non-infringing] traffic drawn through the lure of infringement.” As in Amazon.com, Tiger “cannot stop any of the third- party websites from reproducing, displaying, and distributing unauthorized copies of [ALS’s] images because that infringing conduct takes place on third-party websites. [Tiger] cannot terminate those third-party websites or block their ability to ‘host and serve infringing full-size images’ on the Internet.” Id. at 1174. Accord Routt, 584 F. App’x at 715-16. II. The Opposition fails to support ALS’s claims for secondary trademark infringement A. ALS fails to state a claim for inducing infringement In the Opposition, ALS ignores Tiger’s argument that ALS “has not alleged suf- ficient facts that would lend support to a claim that Tiger has intentionally induced any publisher to use-much less infringe-any ALS trademark.” Tiger’s Mem. Supp. 22:23-23:2. Instead, ALS argues that inaction by Tiger was in its interests be- cause it expanded membership in the JuicyAds network and Tiger’s commissions. Opp’n 24:10-15. These conclusory “averments” are not alleged in the FAC and are insufficient to state a claim that Tiger intentionally induced any publisher to infringe ALS’s trademarks. Gucci Am., Inc. v. Frontline Processing Corp., 721 F. Supp. 2d 228 (S.D.N.Y. 2010), does not support ALS here. There, Durango-whose “business is predicated on as- sisting merchants in setting up credit card processing services with institutions that provide credit card merchant accounts,” id. at 237-“reache[d] out” via its website Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 22 of 26 Page ID #:981 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 “to ‘high risk merchant accounts,’ including those who sell ‘replica products.’” Id. at 248. Durango’s website “boast[ed] that 95% of merchant accounts are approved and that Durango ‘specialize[s] in hard to acquire accounts.’” Id. As the court rea- soned, because the “complaint suggests that Durango bills itself as a company that sets up a certain quality of business with credit card processing services that accepts these ‘high risk’ clients,” the “allegations can fairly be construed as Durango’s at- tempt to induce less savory businesses, like those who sell counterfeit ‘replicas’ of luxury goods.” Id. Gucci further alleged that “Durango’s sales representative … specifically discussed Laurette’s [the direct infringer] difficulty in finding a credit card processor because they were ‘replica’ merchants, which Gucci argue[d] was synonymous on the internet for a counterfeiter.” Id. The court found that “Durango ‘communicated an inducing message to [its] … users,’ and while there [was] of yet no evidence that they expressly sought out counterfeiters, Gucci has pled sufficient facts to infer that Durango crafted ‘advertisement[s] or solicitation[s] that broad- cast[ ] a message designed to stimulate others to commit violations.’” Id. at 248-49 (quoting Visa, 494 F.3d at 801). Significantly, the court in Gucci found that Gucci “failed to plausibly support a claim that either Woodforest [a bank that provides credit card processing services] or Frontline [a nationwide provider of credit card processing and electronic payment services] intentionally induced Laurette to sell counterfeit products.” Id. As the court explained, “Durango, not Woodforest or Frontline, helped set up the Laurette Counterfeiters with credit card processing services.” Id. According to the court, “Though both companies allegedly advertised for high risk merchants, they did not Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 23 of 26 Page ID #:982 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 bring Laurette to the table the way Durango allegedly did.” Id. In reaching this con- clusion, the court did not find significant Gucci’s claims “that [Woodforest and Frontline] both charged higher fees for processing high risk merchants, and that Frontline reviewed the language of the aforementioned acknowledgement of receipt of a replica product” because “[t]hese claims … are not enough to suggest that ei- ther Woodforest or Frontline took the affirmative steps necessary to foster infringe- ment.” Id. (citing Visa, 494 F.3d at 801). The FAC does not allege facts suggesting that Tiger intentionally induced any publisher to engage in trademark infringement. Unlike Durango, Tiger’s website does not reach out to publishers who infringe trademarks. The FAC does not allege that Tiger’s ad network specializes in “high risk” publishers. The TOS states that publishers, not Tiger, are “solely responsible for the development, operation and maintenance of their website and all materials that appear on [u]sers’ websites used in connection with the JuicyAds service.” TOS ¶ XIII. ALS has failed to plead suf- ficient facts to infer that Tiger “crafted ‘advertisement[s] or solicitation[s] that broadcast[ ] a message designed to stimulate others to commit violations,’” Gucci, 249 F. Supp. 2d at 249, let alone suggesting “affirmative steps taken to foster in- fringement” or “that [Tiger] promoted [its] [ad] network as a means to infringe.” Visa, 494 F.3d at 800-01. Thus, ALS’s inducing trademark infringement claim fails. B. ALS fails to state a claim for contributory infringement ALS’s position on its contributory trademark infringement claim is also flawed. In Tiger’s opening brief, Tiger argues that “ALS fails to adequately allege ‘direct control and monitoring.’” Tiger’s Mem. Supp. 23:12. In the Opposition, ALS does Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 24 of 26 Page ID #:983 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 not substantively respond to this point, and thus ALS should be found to have waived this argument. A party that fails to raise an argument in opposition to a motion waives the argument. Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 2011). Instead of responding, ALS claims that “ALS has more than adequately plead [sic] that Tiger, with actual and constructive knowledge of ongoing trademark infringement by Publishers, refused to terminate such Publishers from its network and continued to provide such Publishers with payment, support and services.” Opp’n 25:1-4. Even if true, this is insufficient state a claim for con- tributory infringement as a matter of law because ALS must allege facts showing “that Tiger ‘had “[d]irect control and monitoring of the instrumentality used by a third party to infringe”’ ALS’s marks.” Tiger’s Mem. Supp. 23:9-11 (quoting Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 F.3d 936, 942 (9th Cir. 2011)). No- where does ALS allege in the FAC that Tiger had direct control and monitoring of the instrumentality used by any third-party publisher to infringe ALS’s trademarks. Indeed, ALS fails to allege that Tiger’s ad network was used to infringe on ALS’s trademarks. Any infringement apparently occurred on publisher websites. Thus, ALS fails to state a claim for contributory trademark liability as a matter of law. III. The Opposition confirms ALS’s unfair competition claim fails ALS concedes that if its trademark infringement claims fail, the Court must also dismiss its unfair competition claim as well. See Opp’n 25:7-9. Because ALS’s sec- ondary trademark infringement claims fail for the reasons stated above, this Court must also dismiss ALS’s unfair competition claim. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 25 of 26 Page ID #:984 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Conclusion For these reasons, Tiger’s Motion to Dismiss should be granted and the FAC dismissed with prejudice. Dated: September 19, 2016 Respectfully submitted, By: /s/Kevin S. Toll KEVIN S. TOLL (admitted pro hac vice) SILVERSTEIN LEGAL Attorneys for Defendant Tiger Media Inc. Case 2:16-cv-05051-GW-AFM Document 46 Filed 09/19/16 Page 26 of 26 Page ID #:985