Perfect 10, Inc. v. Giganews, Inc. , 847 F.3d 657 ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PERFECT 10, INC., No. 15-55500
Plaintiff-Appellant,
D.C. No.
v. 2:11-cv-07098-AB-SH
GIGANEWS, INC.; LIVEWIRE
SERVICES, INC.,
Defendants-Appellees.
PERFECT 10, INC., a No. 15-55523
California corporation,
Plaintiff-Counter-Defendant- D.C. No.
Appellant, 2:11-cv-07098-AB-SH
v.
GIGANEWS, INC., a Texas
corporation; LIVEWIRE
SERVICES, INC., a Nevada
corporation,
Defendants-Counter-
Claimants-Appellees.
2 PERFECT 10 V. GIGANEWS
PERFECT 10, INC., a No. 15-56026
California corporation,
Plaintiff-Counter-Defendant- D.C. No.
Appellee, 2:11-cv-07098-AB-SH
v.
OPINION
DR. NORMAN ZADA,
Third Party-Appellee,
GIGANEWS, INC., a Texas
corporation; LIVEWIRE
SERVICES, INC., a Nevada
corporation,
Defendants-Counter-
Claimants-Appellants.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Argued and Submitted December 5, 2016
Pasadena, California
Filed January 23, 2017
Before: Harry Pregerson, Dorothy W. Nelson,
and John B. Owens, Circuit Judges.
Opinion by Judge D.W. Nelson
PERFECT 10 V. GIGANEWS 3
SUMMARY*
Copyright
The panel affirmed the district court’s judgment in favor
of the defendants in a copyright case involving the Usenet, an
international collection of organizations and individuals
whose computers connect to one another and exchange
messages posted by Usenet users.
Defendant Giganews, Inc., owns and operates several
Usenet servers and provides its subscribers with fee-based
access to content stored on its own servers as well as content
stored on the servers of other Usenet providers. Defendant
Livewire Services, Inc., provides its subscribers with access
to the Usenet content stored on Giganews’s servers. Plaintiff
Perfect 10, Inc., owns the exclusive copyrights to tens of
thousands of adult images, many of which have been illegally
distributed over Giganews’s servers.
The panel affirmed the district court’s partial dismissal
and partial grant of summary judgment on Perfect 10’s direct
copyright infringement claim. The panel held that causation,
also referred to as “volitional conduct,” by the defendant is
one of the elements of a prima facie case of direct
infringement. The panel held that the volitional conduct
requirement was not met on Perfect 10’s theories that the
defendants directly infringed its display rights and
distribution rights. The panel concluded that the evidence
showed only that Giganews’s actions were akin to passively
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 PERFECT 10 V. GIGANEWS
storing material at the direction of users in order to make that
material available to other users upon request, or
automatically copying, storing, and transmitting materials
upon instigation by others. The volitional conduct
requirement also was not met as to the claim that Giganews
directly infringed on Perfect 10’s right to reproduce by
uploading infringing content onto the Usenet or Giganews’s
servers.
The panel held that Giganews was not liable for
contributory copyright infringement because Perfect 10 failed
to raise a triable issue of fact as to whether Giganews
materially contributed to or induced infringement of Perfect
10’s copyrights. The panel held that there were no simple
measures available that Giganews failed to take to remove
Perfect 10’s works from its servers.
The panel affirmed the district court’s summary judgment
on Perfect 10’s vicarious infringement claim. The panel held
that Perfect 10 failed to demonstrate a causal link between the
infringing activities and a financial benefit to Giganews.
The panel affirmed the district court’s award of attorney’s
fees to the defendants under the Copyright Act and its denial
of defendants’ request for supplemental fees. The panel also
affirmed the district court’s denial of defendants’ request to
amend the judgment to add a judgment debtor as Perfect 10’s
alter ego.
COUNSEL
David N. Schultz (argued), Law Offices of David N. Schultz,
Los Angeles, California; Eric J. Benink, Krause Kalfayan
PERFECT 10 V. GIGANEWS 5
Benink & Slavens LLP, San Diego, California; for Plaintiff-
Counter-Defendant-Appellant/Cross-Appellee and Third
Party-Appellee.
Andrew Phillip Bridges (argued), Jedediah Wakefield, Joseph
S. Belichick, and Todd R. Gregorian, Fenwick & West LLP,
San Francisco, California, for Defendants-Appellees/Cross-
Appellants.
Thomas G. Hentoff (argued) and Nicholas G. Gamse,
Williams & Connolly LLP, Washington, D.C.; George M.
Borkowski, Recording Industry Association of America Inc.,
Washington, D.C.; for Amicus Curiae Recording Industry
Association of America, Inc.
Kelly A. Woodruff, Deepak Gupta, and Anthony P.
Schoenberg, Farella Braun + Martel LLP, San Francisco,
California, for Amici Curiae Electronic Frontier Foundation,
Public Knowledge, American Library Association,
Association of College and Research Libraries, and
Association of Research Libraries.
Corynne McSherry, Electronic Frontier Foundation, San
Francisco, California, Of Counsel to Amicus Curiae
Electronic Frontier Foundation.
Jonathan Band, Policybandwidth, Washington, D.C., Of
Counsel to Amici Curiae American Library Association,
Association of College and Research Libraries, and
Association of Research Libraries.
Charles Duan, Public Knowledge, Washington, D.C., Of
Counsel to Amicus Curiae Public Knowledge.
6 PERFECT 10 V. GIGANEWS
Seth D. Greenstein, Robert S. Schwartz, and Leigh O.
LaMartina, Constantine Cannon LLP, Washington, D.C., for
Amici Curiae i2Coalition, Internet Association and Computer
& Communications Industry Association.
OPINION
D.W. NELSON, Senior Circuit Judge:
Appellant Perfect 10, Inc. (“Perfect 10” or “P10”)
challenges the district court’s partial dismissal of its direct
copyright infringement claim and grant of summary judgment
in favor of Appellees Giganews, Inc. (“Giganews”) and
Livewire Services, Inc. (“Livewire”) as to all remaining
claims. Perfect 10 also appeals the district court’s award of
attorney’s fees and costs under the Copyright Act. On cross-
appeal, Giganews and Livewire contend the district court
erred by denying their request for supplemental fees and
failing to add Perfect 10’s sole shareholder and founder,
Norman Zada (“Zada”), to the judgment as Perfect 10’s alter
ego. For the reasons set forth below, we affirm the district
court.
BACKGROUND
1. The Usenet and Appellees’ Operations
The heart of this complex copyright dispute revolves
around the Usenet (or USENET), “an international collection
of organizations and individuals (known as ‘peers’) 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). “To obtain access to the
PERFECT 10 V. GIGANEWS 7
USENET, a user must gain access through a commercial
USENET provider, such as Defendant [Giganews], or an
internet service provider.” Arista Records LLC v.
Usenet.com, Inc., 633 F. Supp. 2d 124, 130 (S.D.N.Y. 2009).
Giganews owns and operates several Usenet servers and
provides its subscribers with fee-based access to content that
Giganews stores on its own servers as well as content stored
on the servers of other Usenet providers. Unlike Giganews,
Livewire does not own any Usenet servers, but instead
provides its subscribers with access to the Usenet content
stored on Giganews’s servers.
The Usenet content offered through Giganews’s servers
is almost exclusively user-driven, in that USENET users
upload the majority of the content stored on a USENET
provider’s server. This content is posted via text-based
articles to online bulletin boards called newsgroups. Each
article is associated with a unique Message-ID. Giganews
and Livewire contend that the only way to accurately identify
a specific Usenet message is with that Message-ID. Although
these articles are posted as text files, other types of files such
as images, songs, and movies may be encoded into the bodies
of the articles as binary files. Through Giganews’s browser
application, known as “Mimo,” or “the Mimo Reader,” users
can open the binary files, which are then decoded and
displayed in their original format.
By using a “peering process,” messages posted on one
Usenet server can automatically propagate to other Usenet
servers, which then propagate the messages to another Usenet
server, and so on. More specifically,
when an individual user with access to a
USENET server posts a message to a
8 PERFECT 10 V. GIGANEWS
newsgroup, the message is automatically
forwarded to all adjacent USENET servers
that furnish access to the newsgroup, and it is
then propagated to the servers adjacent to
those servers, etc. The messages are
temporarily stored on each receiving server,
where they are available for review and
response by individual users. The messages
are automatically and periodically purged
from each system after a time to make room
for new messages. Responses to messages,
like the original messages, are automatically
distributed to all other computers receiving
the newsgroup or forwarded to a moderator in
the case of a moderated newsgroup. The
dissemination of messages to USENET
servers around the world is an automated
process that does not require direct human
intervention or review.
Am. Civil Liberties Union v. Reno, 929 F. Supp. 824, 835
(E.D. Pa. 1996). This peering process only occurs after two
Usenet access providers enter into peering agreements to
accept materials from each other. The servers are then able
to synchronize their information so their content mirrors one
another’s. Thus, only after Giganews engages in a peering
agreement can its servers exercise any control over the
messages copied from other servers. However, this control
is minimal.
As the District Court explained, for example, Giganews
servers “compare[] the unique Message-IDs of messages on
peer servers to ensure that Giganews does not copy duplicate
articles to its servers.” Perfect 10, Inc. v. Giganews, Inc., No.
PERFECT 10 V. GIGANEWS 9
CV-11-07098-AB (SHx), 2014 WL 8628034, at *3 (C.D. Cal.
Nov. 14, 2014). Similarly, “if a peer server contains an
article with a Message-ID that Giganews has already deleted
from its servers,” the Giganews servers will not then copy
that article. Id. In addition, because Giganews is a member
of the Internet Watch Foundation, which tracks individual
articles by Message-ID or entire newsgroups that contain
child pornography, certain articles and newsgroups may
automatically be deleted or blocked from peering from
Giganews’s servers. Id.“Other than setting those basic parameters, Giganews
does not select any of the content available on its servers.”
Id. Indeed, “Giganews itself did not post any of the articles
at issue in this action . . . to any Usenet server, and all such
articles were posted by Usenet users. Nor does Giganews tell
any third parties what to upload to the Usenet, including
Giganews’[s] Usenet servers.” Id. (internal citations
omitted). Similarly, because Livewire “merely contracts with
Giganews for access to [its] servers,” Livewire also has no
control over the uploaded, downloaded, transmitted, or stored
content on Giganews’s servers. Id. And Livewire itself has
neither uploaded material onto the Usenet nor directed
anyone else to do so.
2. Perfect 10 Images on the Usenet
Perfect 10 owns the exclusive copyrights to tens of
thousands of adult images, many of which have been illegally
distributed over Giganews’s servers. Upon locating
infringing materials on those servers, Perfect 10 sent
Giganews numerous letters fashioned as takedown notices
pursuant to the Digital Millennium Copyright Act
(“DMCA”), 17 U.S.C. § 512, et seq. While some of these
10 PERFECT 10 V. GIGANEWS
notices merely instructed Giganews to “locate all of the
infringing messages and images . . . by doing [a] mimo
search” for a particular term, others attached screen shots of
the Mimo application that displayed posts in which Perfect
10’s copyrighted images were distributed. When Perfect 10
sent Giganews machine-readable Message-IDs, Giganews
quickly removed those messages from its servers. When
Perfect 10 faxed Giganews notices containing illegible
Message-IDs, Giganews responded with a letter asking
Perfect 10 to provide the Message-IDs in a legible, machine-
readable format. Perfect 10 repeatedly declined to do so.
3. Procedural History
On April 28, 2011, Perfect 10 brought suit against
Giganews and Livewire in the U.S. District Court for the
Central District of California, alleging direct and indirect
copyright infringement claims as well as trademark and state
law claims. Only the copyright infringement claims are the
subject of this appeal.
On March 8, 2013, the district court denied Defendants-
Appellees’ motion to dismiss Perfect 10’s indirect copyright
infringement claims against Giganews and granted their
motion to dismiss those claims against Livewire with leave to
amend. The district court also granted the motion to dismiss
the direct copyright infringement claims against both
Giganews and Livewire with leave to amend, explaining that
direct infringement requires “volitional conduct” and finding
that Perfect 10 had not alleged that Appellees “were the direct
cause of, or actively engaged in, [such] infringement.”
Perfect 10 v. Giganews, Inc., No. CV11-07098 AHM (SHx),
2013 WL 2109963, at *7 (C.D. Cal. Mar. 8, 2013).
PERFECT 10 V. GIGANEWS 11
On July 10, 2013, the district court granted in part and
denied in part Appellees’ motion to dismiss Perfect 10’s First
Amended Complaint (“FAC”). While the district court
allowed Perfect 10 to move forward on its direct infringement
claim against Livewire and on its direct infringement claim
against Giganews on the theory that Giganews violated
Perfect 10’s exclusive right to reproduce its copyrighted
works by itself uploading infringing content, the court
dismissed Perfect 10’s indirect infringement claims against
Livewire.
The parties filed eight separate motions for partial
summary judgment. In three separate orders, the district
court granted Appellees’ motions for summary judgment as
to the direct and indirect copyright infringement claims and
denied Perfect 10’s “mirror-image” motions as moot. In an
earlier order, the district court denied Perfect 10’s motion for
summary judgment in which it argued, among other things,
that its takedown notices complied with the DMCA and
Appellees were ineligible for safe harbor protection under the
DMCA.
On March 24, 2015, upon entering a judgment in favor of
Appellees, the district court ordered Perfect 10 to pay
$5,213,117.06 in attorney’s fees and $424,235.47 in non-
taxable costs. Subsequently, the district court denied
Appellees’ motion to amend the judgment to add Zada as an
additional judgment debtor and for a supplemental award of
attorney’s fees. Perfect 10 timely appealed.
STANDARD OF REVIEW
We review a district court’s grant of summary judgment
and grant of a motion to dismiss de novo. Perfect 10, Inc. v.
12 PERFECT 10 V. GIGANEWS
CCBill LLC, 488 F.3d 1102, 1109 (9th Cir. 2007);
Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522, 526
(9th Cir. 2008). “The district court’s interpretations of the
Copyright Act are also reviewed de novo.” CCBill LLC,
488 F.3d at 1109. “We review a district court’s decision to
grant or deny attorney’s fees under the Copyright Act for
abuse of discretion,” CCBill LLC, 488 F.3d at 1109, “but any
elements of legal analysis and statutory interpretation which
figure in the district court’s decision are reviewable de novo,”
Fantasy, Inc. v. Fogerty, 94 F.3d 553, 556 (9th Cir. 1996)
(“Fogerty II”) (citation and quotation marks omitted).
Application of the alter ego doctrine is reviewed for clear
error. Towe Antique Ford Found. v. IRS, 999 F.2d 1387,
1391 (9th Cir. 1993).
DISCUSSION
1. Direct Infringement
Perfect 10 argues the district court erred in concluding
that neither Giganews nor Livewire directly infringed Perfect
10’s copyrights. We disagree.
a. Elements of a Direct Infringement Claim
To establish a prima facie case of direct infringement, a
plaintiff “must show ownership of the allegedly infringed
material” and “demonstrate that the alleged infringers
violated at least one exclusive right granted to copyright
holders under 17 U.S.C. § 106.” A&M Records, Inc. v.
Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001). In
addition, direct infringement requires the plaintiff to show
causation (also referred to as “volitional conduct”) by the
PERFECT 10 V. GIGANEWS 13
defendant. See Fox Broad. Co., Inc. v. Dish Network L.L.C.,
747 F.3d 1060, 1067 (9th Cir. 2013).
We wish to emphasize that the word “volition” in this
context does not really mean an “act of willing or choosing”
or an “act of deciding,” which is how the dictionary defines
the term. Volition, Webster’s Third New International
Dictionary (1986). Rather, as used by the court in Religious
Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 907 F.
Supp. 1361, 1370 (N.D. Cal. 1995), it “simply stands for the
unremarkable proposition that proximate causation
historically underlines copyright infringement liability no less
than other torts.” 4 Melville B. Nimmer & David Nimmer,
Nimmer on Copyright, § 13.08[C][1] (2016) (Matthew
Bender, Rev. Ed.); see also Dallas T. Bullard, Note, The
Revolution Was Not Televised: Examining Copyright
Doctrine After Aereo, 30 Berkeley Tech. L.J. 899, 922–23
(2015) (“While most courts have focused on the language of
‘volitional conduct,’ the key analytical weight is best derived
from ‘causation[,]’” because where it is clear that
infringement has occurred, courts must determine “who is
close enough to the [infringing] event to be considered the
most important cause.”). As the district court cogently
explained:
[T]he so-called “volition” element of direct
infringement is not a judicially-created
element of intent or knowledge; it is a basic
requirement of causation. As its name
suggests, direct liability must be premised on
conduct that can reasonably be described as
the direct cause of the infringement[.]
14 PERFECT 10 V. GIGANEWS
Perfect 10, Inc., 2014 WL 8628034 at *7 (emphasis in
original).
Contrary to Perfect 10’s contention, this requirement of
causation remains an element of a direct infringement claim.
In Fox Broadcasting, we explained that “[i]nfringement of
the reproduction right requires copying by the defendant,
which comprises a requirement that the defendant cause the
copying.” 747 F.3d at 1067 (internal citation and quotation
marks omitted). In using this language, we indicated that
causation is an element of a direct infringement claim.
In his dissent in American Broadcasting Cos., Inc. v.
Aereo, Inc., Justice Scalia construed our decision in Fox
Broadcasting as adopting the volitional-conduct requirement,
noting that the Supreme Court’s “cases are fully consistent
with” such a requirement. 134 S. Ct. 2498, 2513 (2014)
(Scalia, J., dissenting); id. at 2512 (Scalia, J., dissenting)
(“Every Court of Appeals to have considered an automated-
service provider’s direct liability for copyright infringement
has adopted [the volitional-conduct requirement.]” (citing
Fox Broad., 747 F.3d at 1066–68)). District courts
interpreting Fox Broadcasting have reached the same
conclusion. See Fox Broad. Co. v. Dish Network LLC, 160 F.
Supp. 3d 1139, 1160 (C.D. Cal. 2015); Gardner v. CafePress
Inc., No. 3:13-CV-1108-GPC-JLB, 2014 WL 6890934, at *3
(S.D. Cal. Dec. 4, 2014) (“There are three elements to a prima
facie case of direct infringement: (1) ownership of the
allegedly infringed material, (2) violation of at least one
exclusive right granted to copyright holders under 17 U.S.C.
§ 106, and (3) volitional conduct by the defendant.”
(emphasis added)). Other circuits have adopted the volitional
conduct requirement as well. See Cartoon Network LP v.
CSC Holdings, Inc., 536 F.3d 121, 131 (2d Cir. 2008)
PERFECT 10 V. GIGANEWS 15
(“[V]olitional conduct is an important element of direct
liability . . . .”); CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d
544, 550 (4th Cir. 2004) (“[T]he Copyright Act . . . requires
conduct by a person who causes in some meaningful way an
infringement.” (emphasis in original)); Parker v. Google,
Inc., 242 F. App’x 833, 837 (3d Cir. 2007) (per curiam)
(“[T]o state a direct copyright infringement claim, a plaintiff
must allege volitional conduct on the part of the defendant.”).
The volitional-conduct requirement is consistent with the
Aereo majority opinion, in which the Supreme Court held that
Aereo, a service that streamed broadcast television
programming to subscribers over the Internet, “perform[ed]
publicly” as defined by the Transmit Clause. 134 S. Ct. at
2503, 2510. First, the Aereo Court did not expressly address
the volitional-conduct requirement for direct liability under
the Copyright Act, nor did it directly dispute or comment on
Justice Scalia’s explanation of the doctrine. Thus, as one
court in the Central District of California subsequently
opined, because “[t]he volitional conduct doctrine is a
significant and long-standing rule, adopted by all Courts of
Appeal to have considered it, . . . it would be folly to presume
that Aereo categorically jettisoned it by implication.” Fox
Broad., 160 F. Supp. 3d at 1160.
Second, the Aereo Court’s analysis can be reconciled with
the volitional-conduct requirement. Indeed, the Court
distinguished between an entity that “engages in activities
like Aereo’s,” and one that “merely supplies equipment that
allows others” to perform or transmit. Aereo, 134 S. Ct. at
2504. Further, although the Court held that Aereo was “not
just an equipment supplier and that Aereo ‘perform[s][,]’” it
also noted that “[i]n other cases involving different kinds of
service or technology providers, a user’s involvement in the
16 PERFECT 10 V. GIGANEWS
operation of the provider’s equipment and selection of the
content transmitted may well bear on whether the provider
performs within the meaning of the Act.” Id. at 2507. Thus,
“the distinction between active and passive participation
remains a central part of the analysis of an alleged
infringement.” Fox Broad., 160 F. Supp. 3d at 1160.
Because Aereo did not expressly address the volitional-
conduct requirement and the Court’s analysis can be
reconciled with it, we conclude that the requirement was left
intact and that the district court did not err in requiring
Perfect 10 to satisfy it.
b. Perfect 10’s Direct Infringement Claim
Only one theory of direct liability as to Giganews
survived the pleadings stage. In its July 10, 2013 order on
Appellees’ motion to dismiss the FAC, the district court
rejected Perfect 10’s theories that Giganews directly infringed
Perfect 10’s display rights and distribution rights, concluding
that the volitional-conduct requirement was not met.
However, the district court denied Appellees’ motion as to the
claim that Giganews directly infringed on Perfect 10’s right
to reproduce by uploading infringing content onto the Usenet
or Giganews’s servers. Subsequently, the district court
granted summary judgment on the direct infringement claim,
concluding Perfect 10 failed to prove volitional conduct with
respect to either Giganews or Livewire. On appeal, Perfect
10 challenges the district court’s motion to dismiss and
summary judgment orders.
i. Display Rights
Under the Copyright Act, the owner of a copyright has the
exclusive right to display its work. 17 U.S.C. § 106(5).
PERFECT 10 V. GIGANEWS 17
“[D]isplay” means “to show a copy of [a work], either
directly or by means of a film, slide, television image, or any
other device or process[.]” Id. § 101. Relying primarily on
Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir.
2007), Perfect 10 claims Giganews is directly liable for
displaying Perfect 10’s images and thumbnails via the Mimo
reader. Specifically, Perfect 10 asserts its evidence showed
Giganews was not merely a passive host, but rather directly
caused the display of Perfect 10 images by making copies of
those images and displaying them using its Mimo reader.
As a preliminary matter, we note that the district court
concluded Perfect 10’s display rights-based direct
infringement claim failed at the pleadings stage. Thus,
Perfect 10’s argument on appeal that the district court
“ignored P10’s evidence” is irrelevant. Instead, the pertinent
question is whether the FAC alleged “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). As the district court
correctly concluded, the allegation that Giganews directly
infringes Perfect 10’s display rights through the Giganews
Mimo reader does not state a claim because the fact that
“users may use Giganews’s reader to display infringing
images does not constitute volitional conduct by Giganews.”
Perfect 10, Inc. v. Giganews, Inc., No. CV-11-7098 ABC
(SHx), 2013 WL 3610706, at *2 (C.D. Cal. July 10, 2013).
This is because “Mimo is just a reader, a piece of software
that allows a user to view an image,” and therefore, “[t]o the
extent that Mimo is used to view infringing images, this is
done by the user.” Id.Moreover, even if we were to consider Perfect 10’s
evidence, the claim would still fail. The sole evidence Perfect
10 points to in support of its argument that Giganews was not
18 PERFECT 10 V. GIGANEWS
merely a passive host shows only that images and thumbnails
were accessed through the Giganews platform. The evidence
does not demonstrate that Giganews – as opposed to the user
who called up the images – caused the images to be
displayed.
Further, our decision in Amazon does not render
Giganews liable for direct infringement of Perfect 10’s
display rights. In Amazon, there was “no dispute that
Google’s computers store[d] thumbnail versions of Perfect
10’s copyrighted images and communicate[d] copies of those
thumbnails to Google’s users.” Amazon, 508 F.3d at 1160.
We concluded Perfect 10 established “a prima facie case that
Google’s communication of its stored thumbnails directly
infringe[d] Perfect 10’s display right.” Id. However, citing
CoStar, we also noted that “[b]ecause Google initiates and
controls the storage and communication of these thumbnail
images, we do not address whether an entity that merely
passively owns and manages an Internet bulletin board or
similar system violates a copyright owner’s display and
distribution rights when the users of the bulletin board or
similar system post infringing works.” Id. at 1160 n.6.
This case falls into the category of cases we declined to
address in Amazon. The evidence before us shows only that
Giganews’s actions were akin to “passively storing material
at the direction of users in order to make that material
available to other users upon request,” or automatically
copying, storing, and transmitting materials upon instigation
by others. CoStar, 373 F.3d at 555.
Accordingly, we affirm the district court’s dismissal of
Perfect 10’s display rights-based direct infringement claim.
PERFECT 10 V. GIGANEWS 19
ii. Distribution Rights
Perfect 10 also contends Giganews and Livewire directly
violated its exclusive distribution rights under 17 U.S.C.
§ 106(3), emphasizing that its evidence showed that, at the
request of their subscribers, Giganews and Livewire delivered
content to download, including copies of Perfect 10 images.
As with Perfect 10’s display rights-based theory of direct
liability, the district court concluded Perfect 10’s distribution
rights-based theory as to Giganews failed at the pleadings
stage. Again, the proper inquiry is whether Perfect 10’s
complaint alleged “enough facts to state a claim to relief that
is plausible on its face.” Twombly, 550 U.S. at 570. As the
district court correctly held, the allegation “that Giganews
directly distributes [Perfect 10’s] images when a user requests
images from Giganews’s servers . . . does not state a claim,
because this distribution happens automatically,” meaning
that “Giganews has not engaged in volitional conduct by
which it ‘causes’ the distribution.” Perfect 10, Inc., 2013 WL
3610706, at *3.
However, even if we were to consider the evidence with
respect to Giganews, we would still conclude there was no
direct infringement of Perfect 10’s distribution rights because
Perfect 10 failed to show that the distribution does not happen
automatically. Indeed, an analysis of Perfect 10’s evidence
shows only that users uploaded infringing content onto
Giganews servers, not that Giganews played any sort of
active role in causing the distribution.
With respect to Livewire, we similarly conclude there was
no evidence that Livewire had any direct role in any act of
infringement, “let alone any act of infringement relating to
20 PERFECT 10 V. GIGANEWS
Perfect 10’s copyrighted works.” Perfect 10, Inc., 2014 WL
8628034, at *10. First, the evidence Perfect 10 cites – the
same evidence cited in support of its distribution rights-based
claim against Giganews – does not demonstrate any volitional
conduct by Livewire. Again, there is no indication that the
distribution does not happen automatically. Second, we are
unpersuaded by Perfect 10’s argument that Livewire engaged
in volitional conduct because it sold access to Giganews
servers, including infringing Perfect 10 images, for a monthly
fee. As the district court concluded, “the undisputed evidence
affirmatively shows Livewire sells access to all the content
available on Giganews’ servers. There is no evidence that
Livewire sells any of Perfect 10’s copyrighted material.” Id.(emphasis in original).
Contrary to Perfect 10’s assertion, New York Times Co.,
Inc. v. Tasini, 533 U.S. 483 (2001), does not establish that
Giganews or Livewire directly violated Perfect 10’s
distribution rights by selling access to infringing images on
Giganews’s servers. As the district court noted, the question
“is not whether posting content online is a ‘distribution’ but
rather, even assuming there was a distribution, whether the
Defendants can be regarded as having committed the
distribution, as opposed to, or in addition to, the third party
users who actually uploaded the infringing content onto
USENET.” Perfect 10, Inc., 2013 WL 2109963, at *9 n.7;
see also Aereo, 134 S. Ct. at 2512 n.1 (Scalia, J., dissenting)
(“[Tasini] dealt with the question whether the defendants’
copying was permissible, not whether the defendants were the
ones who made the copies.”).
Accordingly, we affirm the district court’s rejection of
Perfect 10’s distribution rights-based direct infringement
claim.
PERFECT 10 V. GIGANEWS 21
iii. Reproduction Rights
With respect to the final purported basis for direct
infringement, the district court correctly held that Giganews
did not infringe Perfect 10’s exclusive reproduction rights
under 17 U.S.C. § 106(1). As the Fourth Circuit held,
agreeing with the reasoning of Netcom, “automatic copying,
storage, and transmission of copyrighted materials, when
instigated by others, does not render an [Internet service
provider] strictly liable for copyright infringement[.]”
CoStar, 373 F.3d at 555; see also Netcom, 907 F. Supp. at
1369 (“Netcom’s act of designing or implementing a system
that automatically and uniformly creates temporary copies of
all data sent through it is not unlike that of the owner of a
copying machine who lets the public make copies with it.
Although some of the people using the machine may directly
infringe copyrights, courts analyze the machine owner’s
liability under the rubric of contributory infringement, not
direct infringement.”).
Here, Perfect 10 argues it satisfied the volitional-conduct
requirement because Giganews itself instigated the copying,
storage, and distribution of Perfect 10’s images. We disagree.
The evidence Perfect 10 cites does not demonstrate “copying
by [Giganews].” Fox Broad., 747 F.3d at 1067; see also id.
(“[O]perating a system used to make copies at the user’s
command does not mean that the system operator, rather than
the user, caused copies to made.”). Perfect 10 provides no
evidence showing Giganews exercised control (other than by
general operation of a Usenet service); selected any material
for upload, download, transmission, or storage; or instigated
any copying, storage, or distribution. Accordingly, the
district court correctly held there was no triable issue of
22 PERFECT 10 V. GIGANEWS
material fact as to Perfect 10’s claim that Giganews directly
infringed Perfect 10’s reproduction rights.
In sum, the district court correctly rejected Perfect 10’s
direct infringement claim because Giganews was not the
proximate cause of any infringement in this case. We affirm
the district court’s motion to dismiss and summary judgment
rulings in favor of Appellees as to the direct infringement
claim.
2. Contributory Infringement
Perfect 10 also claims Giganews is liable for contributory
copyright infringement, “a form of secondary liability with
roots in the tort-law concepts of enterprise liability and
imputed intent.” Perfect 10, Inc. v. Visa Int’l Serv., Ass’n,
494 F.3d 788, 794–95 (9th Cir. 2007). “[O]ne contributorily
infringes when he (1) has knowledge of another’s
infringement and (2) either (a) materially contributes to or
(b) induces that infringement.” Id. at 795. Because the
district court held that Giganews did not know of the alleged
infringement at issue in this case, it concluded that Giganews
was not liable for contributorily infringing Perfect 10’s
copyrights without addressing the second prong of the test.
We decline to reach the issue of whether the district court
erred in finding that Giganews lacked actual knowledge,
because we find that Perfect 10 failed to establish that
Giganews materially contributed to or induced infringement
of Perfect 10’s copyrights. See Summers v. A. Teichert &
Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997) (“The district
court’s grant of summary judgment may be affirmed if it is
supported by any ground in the record, whether or not the
district court relied upon that ground.”).
PERFECT 10 V. GIGANEWS 23
a. Material Contribution to or Inducement of
Infringing Activities
As the district court held that Giganews lacked actual
knowledge of infringement, it declined to address whether
Giganews materially contributed to or induced the
infringement at issue. Because we find the issues of material
contribution and inducement to be dispositive, it is
unnecessary to determine whether the district court correctly
found that Giganews lacked knowledge. Even assuming that
Perfect 10’s takedown notices were sufficient to confer actual
knowledge on Giganews, Perfect 10 failed to raise a triable
issue of fact as to whether Giganews materially contributed
to or induced infringement.
i. Material Contribution
In the online context, we have held that a “computer
system operator” is liable under a material contribution
theory of infringement “if it has actual knowledge that
specific infringing material is available using its system, and
can take simple measures to prevent further damage to
copyrighted works, yet continues to provide access to
infringing works.” Amazon, 508 F.3d at 1172 (internal
citations and quotation marks omitted).
According to Perfect 10, Giganews could have used
search terms that Perfect 10 recommended in several of its
takedown notices to extract machine-readable Message-IDs
“in mere seconds” and remove the infringing material.
Perfect 10 also claims that other Usenet operators processed
Perfect 10 takedown notices that were essentially the same as
those sent to Giganews “in as little as one day.” According
to Giganews, however, absent machine-readable Message-
24 PERFECT 10 V. GIGANEWS
IDs, there were no simple measures available to remove
infringing material. Giganews also disputes whether other
Usenet operators were able to take such simple measures
based on the takedown notices provided by Perfect 10, and
cites the district court’s conclusion that “the evidence . . . is
undisputed that the only method for consistently identifying
a specific Usenet message that Giganews could promptly
remove is the post’s Message-ID.” Perfect 10, Inc. v.
Giganews, Inc., No. CV-11-07098 AB SHX, 2014 WL
8628031, at *8 (C.D. Cal. Nov. 14, 2014).
Reviewing this issue de novo, we hold that there were no
simple measures available that Giganews failed to take to
remove Perfect 10’s works from its servers. Giganews
presented sufficient evidence that Perfect 10’s proposed
method for locating infringing messages was onerous and
unreasonably complicated. Indeed, Giganews spent more
than 20 hours processing 565 Message-IDs from Perfect 10
because they were not machine-readable. Giganews
calculates that Perfect 10’s method would therefore require
354,000 hours of manual work for every 10 million Message-
IDs – the number of Message-IDs that Giganews receives
every month. Moreover, the record is clear that when
Giganews did receive machine-readable Message-IDs, it
immediately processed them and subsequently removed the
messages from its servers.
Perfect 10 asserts that its evidence demonstrates the
simplicity of its proposed method and that Perfect 10 only
learned of the automated Message-ID feature after sending its
takedown notices. Perfect 10 does not dispute, however, that
Giganews can easily remove infringing content if it is
provided with automated Message-IDs, and Perfect 10’s
evidence only appears to relate to its argument that, by
PERFECT 10 V. GIGANEWS 25
providing search results and search terms, Giganews could
have searched for and found Message-IDs. Yet, as Giganews
argues and the district court agreed, this method is unreliable
and burdensome and therefore is not a “reasonable and
feasible means” of “prevent[ing] further damage to Perfect
10’s copyrighted works.” Amazon, 508 F.3d at 1172.
Accordingly, although the district court did not address
the issue, we conclude that Giganews was not able to take
simple measures to remove infringing materials from its
servers. We therefore reject Perfect 10’s first theory of
contributory infringement liability.
ii. Inducement
Perfect 10 has also failed to demonstrate that Giganews
induced any infringement of Perfect 10’s copyrighted works.
With respect to this alternate theory of contributory
infringement liability, the Supreme Court has held that “one
who distributes a device with the object of promoting its use
to infringe copyright, as shown by clear expression or other
affirmative steps taken to foster infringement, is liable for the
resulting acts of infringement by third parties.” Metro-
Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913,
936–37 (2005). We have described the inducement theory as
having “four elements: (1) the distribution of a device or
product, (2) acts of infringement, (3) an object of promoting
its use to infringe copyright, and (4) causation.” Columbia
Pictures Indus., Inc. v. Fung, 710 F.3d 1020, 1032 (9th Cir.
2013). Based on the record, no reasonable juror could
conclude Giganews distributed its product “with the object of
promoting its use to infringe copyright.” Cf. Grokster,
545 U.S. at 936.
26 PERFECT 10 V. GIGANEWS
Perfect 10 points to entirely inconclusive evidence of any
such objective to infringe copyrights. For example, Perfect
10 identifies Giganews’s advertising materials, which state
that its product “has built-in MP3 and File Locators that
search all Giganews newsgroups for music, pictures, and
movies without having to download millions of messages.”
Perfect 10 also points to a web page where a Giganews
advertisement appears next to text written by another entity,
which states that Giganews “provide[s] an uncensored news
feed with up to 20 ssl encrypted connection and over 460
days worth of retention. That is over a years [sic] worth of
access to downloadable music, movies and games.”
However, neither of these advertisements nor any other
evidence in the record indicates that Giganews itself
promoted its product “with the object” of infringing
copyright.
Perfect 10 further argues that Giganews has the object of
promoting infringement because it: (1) “offers 25,000
terabytes of copyrighted materials . . . without permission,”
(2) “continues to commercially exploit the content of known
repeat infringers,” and (3) “advertises that it does not keep
track of subscriber downloads, effectively encouraging
infringement.” Even if true, none of this conduct suggests
that Giganews clearly expressed an intent to promote
infringement or took “affirmative steps . . . to foster
infringement.” Cf. Grokster, 545 U.S. at 936–37.
For the foregoing reasons, we affirm the district court’s
grant of summary judgment in favor of Giganews as to
Perfect 10’s contributory infringement claim.
PERFECT 10 V. GIGANEWS 27
3. Vicarious Infringement
Perfect 10 also argues that the district court erred in
granting summary judgment to Giganews on Perfect 10’s
vicarious infringement claim by (1) applying an incorrect
legal standard as to financial benefit, and (2) concluding there
was insufficient evidence to find Giganews vicariously liable.
We hold that the district court applied the correct legal
standard and properly granted summary judgment on the
vicarious infringement claim in favor of Giganews.
To prevail on a claim for vicarious infringement, a
plaintiff must prove “the defendant has (1) the right and
ability to supervise the infringing conduct and (2) a direct
financial interest in the infringing activity.” Visa, 494 F.3d
at 802 (footnote omitted). With respect to the second element
– the only element the district court addressed – we have
explained that a “[f]inancial benefit exists where the
availability of infringing material acts as a draw for
customers.” Ellison, 357 F.3d at 1078 (citation and internal
quotation marks omitted). Further, as the district court
correctly stated, “[t]he size of the ‘draw’ relative to a
defendant’s overall business is immaterial.” Perfect 10, Inc.,
2014 WL 8628031, at *3. Indeed, “[t]he essential aspect of
the ‘direct financial benefit’ inquiry is whether there is a
causal relationship between the infringing activity and any
financial benefit a defendant reaps, regardless of how
substantial the benefit is in proportion to a defendant’s
overall profits.” Ellison, 357 F.3d at 1079.
Therefore, Perfect 10 must demonstrate a causal link
between the infringing activities and a financial benefit to
Giganews. As the district court noted, “[t]his action is a
specific lawsuit by a specific plaintiff against a specific
28 PERFECT 10 V. GIGANEWS
defendant about specific copyrighted images; it is not a
lawsuit against copyright infringement in general on the
Usenet.” Perfect 10, Inc., 2014 WL 8628031, at *4. Thus,
the direct financial benefit prong of the vicarious
infringement test “demands more than evidence that
customers were ‘drawn’ to Giganews to obtain access to
infringing material in general.” Id.In Ellison, we rejected a plaintiff’s vicarious copyright
infringement claim based on the uploading of copyrighted
material to a Usenet newsgroup because the plaintiff failed to
show the defendant “received a direct financial benefit from
the infringement in this case.” Ellison, 357 F.3d at 1079 n.10.
The district court correctly interpreted the references to “the
infringing activity” and “the infringement in this case,” id.(emphasis added), to mean infringement of the plaintiff’s
copyrighted material, rather than general infringement. This
interpretation is supported not only by our repeated use of the
definite article (“the infringing activity”) in Ellison, but also
by our analysis in that decision. In Ellison, after receiving the
plaintiff’s complaint, AOL blocked access to the specific
newsgroup that contained the infringing material at issue in
the complaint. Id. at 1075. In our discussion of the “direct
financial benefit” prong, we concluded “[t]he record lacks
evidence that AOL attracted or retained subscriptions because
of the infringement or lost subscriptions because of AOL’s
eventual obstruction of the infringement.” Id. at 1079.
Particularly given AOL’s actions upon receipt of the
plaintiff’s complaint – blocking access to the newsgroup at
issue – the phrase “AOL’s eventual obstruction of the
infringement” logically refers to the infringement of the
plaintiff’s material, rather than to general copyright
infringement. Therefore, contrary to Perfect 10’s suggestion,
Ellison does not compel the Court to hold a defendant
PERFECT 10 V. GIGANEWS 29
vicariously liable regardless of whether there is any causal
link between the infringement of the plaintiff’s own
copyrighted works and any profit to the service provider.
Perfect 10’s view of vicarious infringement is not only
inconsistent with Ellison, but also difficult to reconcile with
Article III’s standing requirements. Standing under Article
III requires that a plaintiff have “(1) suffered an injury in fact,
(2) that is fairly traceable to the challenged conduct of the
defendant, and (3) that is likely to be redressed by a favorable
judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540,
1547 (2016).
Here, Perfect 10 argues for a rule that would allow a court
to hold Giganews liable under a theory of vicarious liability
by showing only that Giganews benefits financially from the
infringement of another’s works, regardless of whether
Giganews received any financial benefit from the specific
infringement alleged. Such a rule would allow cases to be
built on the rights of owners and the actions of users not
before the court. At the very least, Perfect 10’s proposed rule
is in significant tension with Article III’s standing
requirement. At most, Perfect 10’s view runs counter to the
requirement that there be a “causal connection between the
injury and the conduct complained of[.]” Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560 (1992).
Accordingly, we reject Perfect 10’s formulation of the
direct financial benefit inquiry and hold that Perfect 10 was
required to provide evidence that customers were drawn to
Giganews’s services because of the infringing Perfect 10
material at issue. We also conclude that there was no
evidence indicating that anyone subscribed to Giganews
because of infringing Perfect 10 material. See Ellison,
30 PERFECT 10 V. GIGANEWS
357 F.3d at 1079. Indeed, Perfect 10 provides evidence that
suggests only that some subscribers joined Giganews to
access infringing material generally; Perfect 10 does not
proffer evidence showing that Giganews attracted
subscriptions because of the infringing Perfect 10 material.
As the district court noted, “[t]hat a Giganews customer may
have posted or accessed copyrighted Perfect 10 material as
‘an added benefit’ to a subscription is insufficient.” Perfect
10, Inc., 2014 WL 8628031, at *4; see Ellison, 357 F.3d at
1079 (“There are . . . cases in which customers value a
service that does not ‘act as a draw.’ . . . [T]he central
question of the ‘direct’ financial benefit’ inquiry . . . is
whether the infringing activity constitutes a draw for
subscribers, not just an added benefit.”).
Because the district court did not err in finding that
Giganews did not receive a direct financial benefit from the
infringement in this case, “we need not address whether
[Giganews] had the right and ability to supervise the
infringing conduct.” Ellison, 357 F.3d at 1079 n.10.
Perfect 10 apparently does not appeal the dismissal of its
vicarious infringement claim against Livewire at the
pleadings stage. Indeed, Perfect 10 does not mention
Livewire in the sections of its brief devoted to its vicarious
infringement claim. Nonetheless, to the extent Perfect 10
appeals this dismissal and its argument is not waived, we hold
that the district court correctly dismissed the vicarious
infringement claim against Livewire because Perfect 10 failed
to adequately plead that Livewire exercised the requisite
control over the infringing activity of its clients.
PERFECT 10 V. GIGANEWS 31
4. Fee Award
In its fee award order, the district court concluded that
Giganews and Livewire were the prevailing parties and found
that an award of attorney’s fees would serve the purposes of
the Copyright Act. The district court also awarded attorney’s
fees pursuant to California Civil Code § 3344(a) because
Appellees successfully defended against Perfect 10’s
common right of publicity claim. Ultimately, the district
court awarded Giganews and Livewire a total of
$5,213,117.06 in attorney’s fees and $424,235.47 in non-
taxable costs. Perfect 10 argues the district court abused its
discretion in awarding attorney’s fees under the Copyright
Act because (1) the fee award was contrary to the purposes of
the Act, (2) the district court made erroneous findings of fact
regarding the factors outlined in Fogerty v. Fantasy, Inc.,
510 U.S. 517 (1994) (“Fogerty I”), and (3) the total award
was not reasonable. We reject these arguments and affirm the
fee award.
The Copyright Act provides that, in a copyright action,
“the court in its discretion may allow the recovery of full
costs by or against any party other than the United States,”
including “a reasonable attorney’s fee to the prevailing party
as part of the costs.” 17 U.S.C. § 505.
“The Supreme Court [has] identified the following non-
exclusive list of factors to guide the award or denial of
attorney’s fees: ‘frivolousness, motivation, objective
unreasonableness (both in the factual and in the legal
components of the case), and the need in particular
circumstances to advance considerations of compensation and
deterrence.’” Ets-Hokin v. Skyy Spirits, Inc., 323 F.3d 763,
766 (9th Cir. 2003) (quoting Fogerty I, 510 U.S. at 534 n.19).
32 PERFECT 10 V. GIGANEWS
We have “added as additional considerations: the degree of
success obtained, the purposes of the Copyright Act, and
whether the chilling effect of attorney’s fees may be too great
or impose an inequitable burden on an impecunious plaintiff.”
Id. (citing Fogerty II, 94 F.3d at 559–60). These factors
“may be considered but are not exclusive and need not all be
met.” Fogerty II, 94 F.3d at 558.
We conclude that the district court did not abuse its
discretion in awarding fees to Appellees because “the reasons
given by the district court . . . are well-founded in the record
and are in keeping with the purposes of the Copyright Act.”
Id. at 560. The district court’s decision appropriately
recognized “the important role played by copyright
defendants.” Fogerty I, 510 U.S. at 532 n.18; see also Perfect
10, Inc. v. Giganews, Inc., No. CV 11-07098-AB (SHx), 2015
WL 1746484, at *3 (C.D. Cal. Mar. 24, 2015). In this vein,
[b]ecause copyright law ultimately serves the
purpose of enriching the general public
through access to creative works, it is
peculiarly important that the boundaries of
copyright law be demarcated as clearly as
possible. To that end, defendants who seek to
advance a variety of meritorious copyright
defenses should be encouraged to litigate
them . . . . Thus a successful defense of a
copyright infringement action may further the
policies of the Copyright Act every bit as
much as a successful prosecution of an
infringement claim by the holder of a
copyright.
Fogerty I, 510 U.S. at 527.
PERFECT 10 V. GIGANEWS 33
Further, we are unpersuaded by Perfect 10’s arguments
that the district court made clearly erroneous findings of fact
regarding the Fogerty factors and the other factors articulated
by this circuit. The district court did not give undue weight
to the degree of success Appellees obtained. Nor did the
district court abuse its discretion in finding that Perfect 10
had an improper motivation, that the “objective
unreasonableness” factor weighed slightly in Appellees’
favor, that considerations of compensation and deterrence
weighed in favor of a fee award, and that it would not be
inequitable to award attorney’s fees to Appellees.
Finally, we conclude that the district court did not abuse
its discretion in awarding fees and costs in the total amount
of $5,637,352.53. “Although opposing counsel’s billing
records may be relevant to determining whether the
prevailing party spent a reasonable number of hours on the
case, those records are not dispositive,” and “[a court] has the
discretion not to rely on them.” Gonzalez v. City of
Maywood, 729 F.3d 1196, 1202 (9th Cir. 2013). The district
court did not abuse its discretion in concluding that the hours
Perfect 10 spent litigating the case were not a good barometer
of whether Appellees’ billed hours were reasonable, nor did
it abuse its discretion by finding that there was no basis to
impose a 50 percent across-the-board cut.
For the foregoing reasons, we affirm the district court’s
fee award.
5. Supplemental Fee Request
On cross-appeal, Appellees argue that the district court
erred in denying their request for supplemental fees. We
disagree.
34 PERFECT 10 V. GIGANEWS
Federal Rule of Civil Procedure 54 provides that a request
for attorney’s fees “must be made by motion[,] . . . [and]
[u]nless a statute or court order provides otherwise, the
motion must[] . . . be filed no later than 14 days after the
entry of judgment.” Fed. R. Civ. P. 54(d)(2)(A)–(B)(i).
“Although the 14-day period is not jurisdictional, the failure
to comply [with Rule 54] should be sufficient reason to deny
the fee motion, absent some compelling showing of good
cause.” Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877,
889–90 (9th Cir. 2000) (citation and internal quotation marks
omitted) (alteration in original). Further, under Rule 54,
motions for attorney’s fees must “state the amount sought or
provide a fair estimate of it,” Fed. R. Civ. P. 54(d)(2)(B)(iii);
however, the fee motion need not “be supported at the time of
filing with the evidentiary material bearing on the fees.” Fed.
R. Civ. P. 54, 1993 Advisory Comm. Notes.
Here, the parties do not dispute that the request for
supplemental fees was filed after the deadline for motions for
attorney’s fees set by the court. Instead, Appellees contend
their supplemental fee request was timely because, in their
original (timely) fee motion, they asked the district court “to
set a date for [Appellees] to supplement their request with
‘later fees and costs’ for inclusion in a final award.” We
agree with the district court that this amorphous request is
inadequate under Rule 54(d)(2)(B)(iii), which at minimum
requires a party to “provide a fair estimate” of the amount of
fees sought. See Johnson v. Leading Edge Recovery Sols.,
L.L.C., No. 12-CV-03103-CMA-CBS, 2013 WL 5313255, at
*2 (D. Colo. Sept. 23, 2013) (“[T]he Court declines to grant
attorney fees because Plaintiff did not include a fair estimate
of fees in his initial motion, making the instant motion
untimely.”); King v. Midland Credit Mgmt., Inc., No. 11-CV-
02808-CMA-BNB, 2013 WL 2236934, at *2 (D. Colo. May
PERFECT 10 V. GIGANEWS 35
21, 2013), aff’d, 549 F. App’x 791 (10th Cir. Dec. 10, 2013)
(“Although Plaintiff’s motion requested ‘any additional
amounts as determined by the Court’, this language is
insufficient as it specifies neither the impetus for, nor any
calculation of, such ‘additional amounts.’” (internal citation
omitted)).
We are unpersuaded by Appellees’ argument that because
“[p]redicting future fees in litigation is notoriously difficult,”
Appellees could not have provided a “fair estimate” of their
future fees in their initial motion. As the district court
emphasized, at the time of their original fee motion,
Appellees “could have reasonably anticipated that they would
file a reply to the fees motion, continue litigating the
sanctions motion which was already pending before
Magistrate Judge Hillman at the time, seek to add [Norman]
Zada to the judgment, and respond to various post-judgment
proposals.” Perfect 10, Inc. v. Giganews, Inc., No. 734 CV
11-07098-AB SHX, slip op. at 11 (C.D. Cal. June 3, 2015).
“Simply put, [Appellees] did not face an insurmountable
obstacle in providing an estimate in [their] first [fee] motion.”
King v. Midland Credit Mgmt., Inc., 549 F. App’x 791, 794
(10th Cir. Dec. 10, 2013).
We also note that, as the district court explained, the vast
majority of Appellees’ “supplemental fees and expenses . . .
were incurred, and therefore known to [Appellees], prior to
the district court’s” March 24, 2015 order granting in part
Appellees’ original motion for attorney’s fees. United States
v. Eleven Vehicles, Their Equip. & Accessories, 200 F.3d
203, 210 (3d Cir. 2000). Thus, to the extent that Appellees
incurred fees that were unforeseeable or impossible to
estimate when they filed their original fee request, they
“could and should have supplemented their fee request prior
36 PERFECT 10 V. GIGANEWS
to the court’s decision [on the original fee motion].” Id.Appellees did not do so.
In sum, we conclude that the supplemental fee request
was untimely and that Appellees failed to make a
“compelling showing of good cause” to excuse this
untimeliness. Kona Enters., 229 F.3d at 889–90. We affirm
the district court’s denial of Appellees’ supplemental fee
request.
6. Alter Ego Liability
Lastly, Appellees argue that the district court erred in
denying Appellees’ request to amend the judgment to add
Norman Zada as Perfect 10’s alter ego. We affirm the district
court’s decision not to add Zada as an additional judgment
debtor.
Under Federal Rule of Civil Procedure 69, district courts
enforce money judgments in accordance with the procedures
of the states where they are located. Fed. R. Civ. P. 69(a)(1).
In California, a judgment can be amended to add a nonparty
as a judgment debtor if the new party (1) is the alter ego of
the old party, and (2) controlled the litigation. In re
Levander, 180 F.3d 1114, 1121 (9th Cir. 1999). An alter ego
relationship is established under California law when
“(1) there is such a unity of interest and ownership that the
individuality, or separateness, of the said person and
corporation has ceased, and (2) an adherence to the fiction of
the separate existence of the corporation . . . would sanction
a fraud or promote injustice.” S.E.C. v. Hickey, 322 F.3d
1123, 1128 (9th Cir. 2003) (internal quotation marks and
emphasis omitted).
PERFECT 10 V. GIGANEWS 37
However, mere “[d]ifficulty in enforcing a judgment or
collecting a debt does not satisfy” the injustice standard for
alter ego liability. Sonora Diamond Corp. v. Superior Court,
83 Cal. App. 4th 523, 539 (2000). “The alter ego doctrine . . .
instead affords protection where some conduct amounting to
bad faith makes it inequitable for the corporate owner to hide
behind the corporate form.” Id. (emphasis added).
Insolvency or inadequate capitalization may satisfy this
standard “when a corporation is so undercapitalized that it is
unable to meet debts that may reasonably be expected to arise
in the normal course of business.” Laborers Clean-Up
Contract Admin. Trust Fund v. Uriarte Clean-Up Serv., Inc.,
736 F.2d 516, 525 (9th Cir. 1984) (internal quotation marks
omitted); see also Automotriz del Golfo de California S. A. de
C. V. v. Resnick, 47 Cal. 2d 792, 797 (1957) (“If the capital is
illusory or trifling compared with the business to be done and
the risks of loss, this is a ground for denying the separate
entity privilege.”).
Here, Giganews has not demonstrated that an injustice
would result if Zada is not added to the judgment. As the
district court explained, in its nearly 20 years of operations,
Perfect 10 has always been able to satisfy judgments against
it, and the corporation maintained approximately $1.7 million
in net assets and equity when it sued Giganews and Livewire
in 2011. The district court further noted that Perfect 10’s
ability to sell some or all of its intellectual property could also
help the corporation satisfy any judgment against it.
Attempting to undermine these findings, Giganews
essentially argues that Perfect 10’s admission that it could not
currently pay the judgment against it, combined with Zada’s
history of removing capital from Perfect 10 and the fact that
Perfect 10 operates under a risky business model, should have
38 PERFECT 10 V. GIGANEWS
resulted in alter ego liability for Zada. But Giganews misses
the point.
Nothing in the record suggests that Perfect 10 was so
undercapitalized that it could not meet its reasonably
expected debts, and particularly in light of Perfect 10’s ability
to satisfy past judgments against it, there is no evidence of
bad faith. Indeed, this is not a case where a sole shareholder
operated a company with little or no assets, nor is this a case
where a company was stripped of its assets to shield its sole
shareholder from adverse judgments. And finally, although
Giganews argues that the district court erred in referring to
the value of Perfect 10’s intellectual property as evidence of
potential assets with which Perfect 10 could satisfy a
judgment against it, the fact remains that Perfect 10 has
regularly maintained enough capital to consistently pay its
debts for almost 20 years. Therefore, regardless of the
alleged illiquidity of some of Perfect 10’s assets, the district
court did not clearly err in holding that Perfect 10 is not the
“empty corporate shell” that Appellees argue it is.
Accordingly, we affirm the district court’s order declining to
add Zada to the judgment against Perfect 10.
We decline to take judicial notice of certain post-
judgment debtor examination transcripts in this case that
occurred after the district court ruled on the motion to amend
the judgment and after this appeal was filed. However, even
if we were to grant Appellees’ request, those transcripts
would not alter our conclusion that the district court did not
clearly err.
PERFECT 10 V. GIGANEWS 39
CONCLUSION
In sum, we conclude the district did not err in dismissing
much of Perfect 10’s direct infringement claim at the
pleadings stage, nor did it err in granting summary judgment
in favor of Giganews and Livewire on the direct, vicarious,
and contributory infringement claims. We further conclude
that the district court did not abuse its discretion in awarding
fees to Appellees and denying Appellees’ supplemental fee
request. Finally, we hold that the district court did not clearly
err in refusing to add Zada to the judgment against Perfect 10.
AFFIRMED.