The 9th Circuit Shows Luvdarts No Love

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Last week, the 9th Circuit affirmed the district court’s decision in Luvdarts, LLC, et al. v. AT&T Mobility, LLC, et al.,1 dismissing with prejudice the vicarious and contributory infringement claims brought by Luvdarts, LLC and Davis-Reuss, Inc. (collectively, “plaintiffs”) against the four major mobile wireless carriers—AT&T, Verizon, Sprint, and T-Mobile (collectively, the “carriers”). Because the plaintiffs’ factual allegations failed to overcome the threshold required by Iqbal v. Ashcroft2 and Bell Atlantic Corp. v. Twombly,3 the Court concluded that plaintiffs could not pursue their attempt to hold the carriers liable (under theories of secondary liability) for the alleged infringement of plaintiffs’ copyrighted content by third-party mobile device users.4

Plaintiffs produce and sell multimedia, greeting-card-style messages intended to be shared mobile2mobile on most mobile devices using multimedia messaging service networks (“MMS”) created by the carriers.5 Importantly, plaintiffs’ business model presupposed that an individual luvdart message would be shared between mobile device users only once, and  plaintiffs attached a notice to that effect to the content that they sold.6 Plaintiffs allege, however, that  there is no technical impediment prohibiting a mobile device user from sending a luvdart message to multiple recipients, or preventing those recipients from forwarding that message to other users.7

For this reason, plaintiffs contacted the carriers demanding “a statement of accountability” for the mobile device users’ allegedly infringing conduct.8 As the carriers did not respond (or otherwise react to  plaintiffs’ subsequent cease and desist correspondence), plaintiffs brought an action against the carriers in the U.S. District Court for the Central District of California, asserting claims for contributory and vicarious infringement.9 According to plaintiffs’ allegations, the carriers’ MMS system encourages the direct infringement of  plaintiffs’ copyrighted content.

The carriers moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), and the district court granted the motion, dismissing the First Amended Complaint ("FAC") with prejudice.10 Plaintiffs appealed, and the 9th Circuit addressed the vicarious and contributory infringement claims, in turn.

The 9th Circuit held that plaintiffs’ FAC failed to state a claim for vicarious infringement because it did not contain a plausible factual showing that the carriers have the right and ability to supervise the allegedly infringing conduct.
To state a claim for vicarious infringement, a plaintiff must allege facts sufficient to show plausible grounds to believe that the defendant had (1) the “right and ability to supervise the infringing activity”; and (2) “a direct financial interest” in the allegedly infringing activity.11 Plaintiffs conceded that “the carriers presently have no way of supervising the use of their networks for copyright infringement[,]” but argued that the FAC should survive a motion to dismiss because it alleged that the carriers could establish a system that enables such supervisory capability.12 The 9th Circuit flatly rejected this argument, explaining that “resting vicarious liability on the carriers’ failure to change their behavior would tend to blur the distinction between contributory liability and vicarious liability.”13 The Court reaffirmed its holding in A&M Records, Inc. v. Napster Inc. that “right and ability to supervise should be evaluated in the context of the system’s current architecture.”14

But even assuming the existence of an affirmative duty to acquire supervisory capacity, the Court concluded that the bare allegations in plaintiffs’ FAC that the carriers should “establish a metadata system of digital rights management” failed to plausibly show that the carriers could implement an effective DRM system, let alone that they could do so “at a low-enough cost to justify imposition of vicarious liability.”15 As a result, the Court affirmed the dismissal of plaintiffs’ vicarious infringement claim.16

The 9th Circuit determined that the claim for contributory infringement also failed because plaintiffs’ FAC failed to allege that the carriers had the requisite specific knowledge of the allegedly infringing conduct.
To state a claim for contributory infringement, a plaintiff must allege sufficient facts to show plausible grounds to believe that the defendant (1) had “actual knowledge of specific acts of infringement”; and (2) induced, caused, or materially contributed to the allegedly infringing conduct.17 The 9th Circuit found that plaintiffs failed to meet the first element, rejecting each theory plaintiffs advanced on the “actual knowledge” prong.

As an initial matter, the Court found “plainly insufficient” plaintiffs’ “conclusory allegation that the carriers had the required knowledge of infringement.”18 Nor was the Court persuaded by plaintiffs’ contention that the carriers were “willfully blind” to the alleged infringement. While the Court acknowledged that “willful blindness” can establish the requisite mental state in this context, the Court found that plaintiffs’ FAC did not allege sufficient facts from which the Court could infer that the carriers “took active steps to avoid acquiring knowledge.”19 At most, the Court noted, plaintiffs alleged that the carriers “proceeded with the development and operation of the MMS networks indifferent to the risk of copyright infringement.”20 The Court held that those allegations fell “far short of establishing a plausible inference of willful blindness.”21

The Court also found that the allegations in the FAC discussing  plaintiffs’ notices to the carriers demanding “accountability” were not sufficient to show the carriers’ “actual knowledge.”22 Those notices failed to identify the titles that allegedly were infringed, the alleged infringers, or the dates of the alleged infringement.23 As such, the notices merely evidenced the type of “generalized” knowledge of possible infringement that is insufficient as a matter of law to establish contributory infringement.24 For these reasons, the Court also affirmed the dismissal of  plaintiffs’ contributory infringement claim.25

Conclusion
The 9th Circuit’s decision in Luvdarts provides a few noteworthy lessons. First, the Court’s decision illustrates the critical eye with which courts applying the Iqbal/Twombly standard will scrutinize a plaintiff’s allegations to ensure that the complaint contains a plausible basis from which to reasonably infer that each cause of action rises above the speculative level.

Second, the decision shows that the 9th Circuit will not hesitate to affirm a dismissal with prejudice where, as here, a plaintiff fails to request leave to amend in the district court.  Plaintiffs in Luvdarts included an informal, one-sentence request for leave to amend in the “notice” portion of their opposition to the carriers’ 12(b)(6) motion, but never filed a motion to amend or discussed the issue of amendment in their opposition. At oral argument before the 9th Circuit, plaintiffs’ then-counsel (who had taken over the case on appeal) was left to explain to a very curious panel why  plaintiffs had not made a formal request in the district court to file a second amended complaint. While the 9th Circuit’s opinion in Luvdarts does not explicitly mention plaintiffs’ failure to formally request amendment, the Court’s affirmance of the district court’s dismissal of plaintiffs’ claims with prejudice speaks volumes.

Finally, the Court’s decision in Luvdarts may have left open the possiblity of a future plaintiff trying to state a claim for vicarious and/or contributory copyright infringement against mobile wireless carriers arising from the unauthorized sharing of content by third-party mobile device users on the MMS platform. Whether such a claim could be made is, of course, open to question, but the Court has not finally and conclusively barred the door to such claims.

FOOTNOTES
1 2013 U.S. App. LEXIS 5879 (9th Cir. Mar. 25, 2013).
2 129 S. Ct. 1937, 1940-1947 (2009).
3 550 U.S. 544, 555 (2007).
4 2013 U.S. App. LEXIS 5879, at *10.
5 See id. at *2-*3.
6 See id. at *2.
7 See id.
8 See id. at *2-*3.
9 Plaintiffs’ First Amended Complaint (“FAC”) also included a claim for violation of California’s unfair competition laws, but plaintiffs subsequently waived that state law claim. See id. at *3.
10 Luvdarts, 2013 U.S. App. LEXIS 5879, at *3.
11 Id. at *4.
12 Id.
13 Id. at *5 (emphasis in original).
14 239 F. 3d 1004, 1024 (9th Cir. 2001).
15 Luvdarts, 2013 U.S. App. 5879, *6.
16 See id.
17 See id. at *7.
18 Id. at *8.
19 Id. at *9.
20 Id.
21 Luvdarts, 2013 U.S. App. 5879, at *10.
22 Id. at *9.
23 Id.
24 Id.
25 Id.