Norm Zada wants to single-handedly save the movie industry, record companies, major newspapers--virtually all content-based businesses. If only the courts will let him.
For the past decade content companies have been fighting an uphill battle against massive online copyright infringement. Although companies have brought thousands of lawsuits against those directly responsible for infringements, online piracy continues to grow.
Zada, the founder of Perfect 10, thinks he's found the perfect solution. His company, which publishes an adult magazine and
operates an adult Web site, has sued several major search engines and credit card companies for allegedly helping users locate infringing materials online and enabling them to buy that content. That, Zada says, makes these companies liable for contributory copyright infringement.
Perfect 10's suit against two search engine firms, Google and Amazon, is now before a district court in California. The company's suit against Visa and MasterCard ran into a major hurdle when the 9th Circuit threw it out July 3. Zada has appealed the ruling. If he wins his battle against the credit card firms, copyright owners may find it much easier to protect their works online, and businesses may suddenly find themselves liable for their customers' infringements.
IC: How much has online copyright infringement hurt Perfect 10?
Zada: We started the magazine [which features models who haven't had cosmetic surgery] in 1996. It was closed in 2007 due to rampant copyright infringement. The Web site is still operating, but I've had to lay off many employees--many of whom are my friends. And so far I've lost $55 million.
Why aren't you suing those directly responsible for selling unauthorized copies of Perfect 10's photos?
We have sued at least 15 direct infringers. But we have had no success because they are all over the world, and even if we win our lawsuits, it is virtually impossible to stop them from just reopening under new names. ... It is almost impossible to get relief against [foreign] direct infringers.
So how can copyright owners protect themselves against online infringements?
There are only two entities from which a copyright owner can get relief. First, credit card companies that allow thieves to open merchant accounts. ... Without the ability to have a merchant account--which allows you to process credit cards and electronic checks--none of these infringing sites could stay in business. The other parties to sue are search engines, which help people find the infringing items.
Why should the credit companies be liable for their customers' actions?
There's no reason why our banking system should be facilitating the sale of stolen movies, songs, photos, etc. The credit card companies don't process payments for child pornography, illegal drug sales or online gambling.
How difficult would it be for them to stop doing business with infringers?
Only a tiny percentage of MasterCard and Visa merchants do these things. The credit card companies know who they are and charge them more money, putting them in a high-risk category. It would be easy for them to refuse to do business with these criminals. But enabling these transactions is causing horrendous damage to IP owners.
The 9th Circuit ruled 2-1 that the credit card companies were not liable for contributory copyright infringement because they did not "materially contribute" to the infringements. What is wrong with this reasoning?
Some of panel just doesn't get it. It is not the policy of the U.S. to aid and abet those who profit from massive theft. ... We know what happens to someone who is fencing stolen property. There is civil and criminal liability. But if you are fencing $50 billion of stolen IP, you don't even have any civil liability, according to this panel.
It is unbelievable. ... According to the majority of the panel, this doesn't contribute to infringement, even though we allege that these infringing Web sites wouldn't be in business without these credit card systems. ... The ruling makes no sense and is a horrific departure from prior interpretations of contributory infringement. The standard here would vitiate contributory liability.
What are the ramifications of the 9th Circuit's ruling in this case?
They are encouraging and allowing a lot more infringement, and the last thing IP owners need is more infringement. ?? 1/2 [Unless the online infringement stops,] it will destroy all movie studios, music companies, TV companies, magazines, newspapers--everyone who is trying to make an honest buck on the Internet.
What will you do if the 9th Circuit doesn't reverse this ruling en banc?
We have a Supreme Court consultant who thinks that if we don't win on rehearing in the 9th Circuit, the Supreme Court will hear this case because it is so important.