United States: Copyright's Long Arm: Foreign Website Found to Infringe U.S. Copyright Law by Providing U.S. Viewers Access to Site Content

If a web server located outside the United States hosts video content that can be viewed by Internet users located in the United States, does a public performance result under U.S. copyright law?

This has been a topic of hot debate for a surprisingly long time, with little or no direct guidance from the courts—until now. A recent decision from the D.C. Circuit, Spanski Enterprises v. Telewizja Polska, addresses this issue head-on, with the court finding that the uploading of video content in which a party held exclusive U.S. public performance rights and the subsequent directing of the content to U.S. viewers upon their request to be an infringing "performance" under the U.S. Copyright Act.

Telewizja Polska ("Polska") is Poland's national TV broadcaster that owns, operates and creates content for several Polish TV channels. Polska and Spanski Enterprises ("Spanski"), a Canadian corporation, entered into a licensing agreement granting Spanski exclusive broadcasting rights in North and South America to TVP Polonia, one of Polska's TV channels. Polska provides online access to its programming through a video-on-demand feature on its Poland-based website and, to protect Spanski's rights, Polska used geoblocking technology to block North and South American IP addresses from accessing the copyrighted content. The territorial restrictions were either incorporated into the digital video formats of the episodes themselves or assigned through a content management system.

In late 2011, however, Spanski's attorneys discovered 51 episodes were not properly geoblocked and thus were viewable by North American users, at least in part, on Polska's website. Spanski then sued Polska in a U.S. district court for copyright infringement under U.S. law. The district court found Polska liable for its employees' volitional actions in removing the episodes' territorial restrictions and creating non-geoblocked digital formats of the episodes. Because the episodes at issue were viewed within the United States, the infringement was not found to be "wholly extraterritorial." The court awarded statutory damages of $60,000 per episode for a total of $3,060,000 due to Polska's willful and intentional infringement.

Polska appealed the lower court's ruling, arguing that only the end user of a fully automated video-on-demand service can be held liable for copyright infringement, and not the party hosting the service from outside the country. Polska also argued that because the conduct occurred exclusively in Poland, the lower court's decision was an impermissible extraterritorial application of the U.S. Copyright Act.

On appeal, the D.C. Circuit relied on U.S. Supreme Court precedent in American Broadcasting Companies v. Aereo to confirm that Polska had committed an infringing public performance. In the decision, Aereo had offered paying subscribers broadcast TV programming over the Internet virtually as the programming was being aired, but did not own copyrights in or hold licenses to the works. Customers could select the programming they wished to view, and Aereo would tune a dedicated antenna to the relevant station, capture the signal and retransmit the signal to the requesting customer. The Supreme Court found that because Aereo's activities were substantially similar to those of cable television companies, which the Transmit Clause (17 U.S.C. §101) was added by Congress to specifically cover, Aereo "performed" or "transmitted" the programming. Regardless of whether Aereo transmitted the same or separate private copies to each user, it performed the same work and its subscribers constituted "the public." The Supreme Court's holding established an exception to the bright-line volitional conduct test that is traditionally applied, which requires a provider to act as an agent or independently make choices about what to transmit. The Supreme Court, however, left open the question of when to apply the Aereo test, and many read the decision as a narrow holding only applicable to cable TV lookalikes.

In the Spanski dispute, the D.C. Circuit declined to read Aereo so narrowly, and pointed to the basic legal principle every law student learns that judicial opinions establish "precedential principles that apply to materially similar factual scenarios arising in future cases." In this case, the court found that the Aereo principle that a viewer's decision to access an infringing television program does not relieve a broadcaster from liability for showing the program's images and making the program's sounds audible also applied to Spanski. Both Polska, the broadcaster and the viewer can be liable for the same performance.

The court reasoned that, if Aereo's indiscriminate retransmission of third-party content upon a user's request resulted in an infringing public performance by Aereo, Polska's transmission of copyrighted episodes that were purposely selected and uploaded to its web server must also result in an infringing public performance, especially given Polska's more active role in selecting the content available for transmission.

In response to the possibility of sweeping liability resulting from its decision, the D.C. Circuit pointed to statutory protections such as Section 512 of the U.S. Copyright Act (the so-called "DMCA safe harbors"), and declined to follow the lead of other courts in reading a volitional conduct or proximate cause requirement into the U.S. Copyright Act. No matter what the scope of Aereo's requirement may be, the court concluded, Polska's conduct constituted copyright infringement under U.S. law, violating Spanski's exclusive rights within the United States (rights which, ironically, it had received from Polska).

In addressing the extraterritoriality issue, the court looked to the test established in RJR Nabisco, Inc. v. European Community: "If the conduct relevant to the statute's focus occurs in the U.S., then the case involves a permissible domestic application even if other conduct occurred abroad." To determine the Copyright Act's "focus," the court followed the U.S. Supreme Court's approach in Morrison v. National Australian Bank Ltd. to determine the U.S. Copyright Act's focus of "protecting the exclusivity of the rights it guarantees." Although Polska uploaded and digitally formatted the episodes in Poland, the infringing performances (and relevant conduct) "occurred on the computer screens in the United States" and were thus actionable in the United States. The court noted that, were it to hold otherwise, large-scale criminal copyright pirates could avoid U.S. copyright liability simply by locating their servers outside the United States. Accordingly, Congress could not have meant to prevent domestic copyright holders from enforcing their rights against foreign broadcasters who transmit infringing performances into the United States.

While the D.C. Circuit's Spanski decision makes clear that storing infringing content on foreign servers does not necessarily shield an Internet actor from liability if the content is ultimately transmitted to and viewed in the United States, the court left open the question of whether geoblocking of U.S. IP addresses can protect a provider like Polska from liability. In the wake of the decision, geoblocking may now be a best practice for foreign website operators seeking to reduce their U.S. copyright liability exposure, although it may not be sufficient to avoid infringement, as some commentators have noted.

While Polska deliberately halted its geoblocking efforts, in its appeal, it did raise the hypothetical of an American user circumventing a foreign website operator's territorial restrictions to view content domestically. The court refused to "prejudge such situations," but noted that, in such situations, a foreign web operator may have alternative defenses against liability, such as lack of personal jurisdiction. Such an approach is supported by recent holdings in Triple Up Limited v. Youku Tudou Inc. and Carsey-Werner Company, LLC v. BBC, which relied on a website's "affirmative geoblocking efforts" to "weigh against the exercise of personal jurisdiction."

Going forward, we will have to see how courts clarify the full impact of geoblocking with respect to copyright liability under U.S. law. Foreign website operators that host and stream content for which they do not have U.S. public performance rights, and that choose not to geoblock access by U.S. IP addresses to such content, will want to carefully review the Spanksi decision and potentially available liability defenses under U.S. copyright law.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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