Small Justice LLC v. Xcentric Ventures LLC
873 F.3d 313
1st Cir.2017Background
- Xcentric operates RipoffReport.com, which lets users post complaints; posting requires checking a box next to text saying posts are irrevocable and giving Ripoff Report rights to post, while full terms were in a scrollable "Terms and Conditions" box users need not view.
- DuPont posted two reports critical of attorney Richard Goren; Goren obtained a Massachusetts default judgment against DuPont that (1) enjoined further publication by DuPont and (2) transferred copyrights in the posts to Goren, who assigned them to Small Justice.
- Plaintiffs (Goren, Small Justice, DuPont) sued Xcentric in federal court seeking declaratory relief as to copyright ownership, copyright infringement, and state-law claims (libel, interference, and chapter 93A violations); Xcentric invoked CDA § 230 immunity and moved to dismiss; district court granted partial dismissal.
- After discovery, district court granted Xcentric summary judgment: it held DuPont had granted Xcentric an irrevocable nonexclusive license to display the posts via the site’s browsewrap/checkbox mechanism (so no infringement), and dismissed remaining chapter 93A theory for lack of causation; later clarified Xcentric was not copyright owner but held an irrevocable nonexclusive license.
- Xcentric obtained dismissal of its counterclaim and then moved for attorney’s fees under 17 U.S.C. § 505; the district court ultimately awarded fees and costs; plaintiffs appealed both merits and the fee/bond orders; First Circuit affirmed all rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Xcentric lost CDA §230 immunity by becoming an "information content provider" (ICP) for DuPont's posts | Xcentric became an ICP by claiming copyright ownership and by directing search engines to cache and display the posts | Xcentric is an interactive computer service (ICS) and did not create or develop the user content; mere copyright claim or directing caching does not make it an ICP | Court held §230 immunity applies; Xcentric not an ICP because it did not create or specifically encourage the content (affirming dismissal of libel and interference claims) |
| Whether DuPont validly transferred copyright/ownership to Xcentric via site terms (browsewrap) | Plaintiffs: no valid signed transfer under 17 U.S.C. § 204; browsewrap insufficient; state default judgment transfer to Goren supports plaintiff ownership | Xcentric relied on site terms and user assent to convey at least broad rights; site posting process provided inquiry notice | Court concluded district court properly ruled Xcentric was not owner (footnote), but that DuPont granted an irrevocable nonexclusive license to display the posts, so no infringement (summary judgment affirmed) |
| Whether the nonexclusive irrevocable license was valid and whether Xcentric exceeded its scope (consideration/public policy) | License invalid for lack of consideration and contrary to public policy (would immunize libel) | Posting/performance constituted consideration; nonexclusive license enforceable; license does not immunize libel but precludes infringement claim within license scope | Court held posting/performance supplied sufficient consideration; public-policy argument failed; Xcentric possessed an irrevocable nonexclusive license and did not infringe |
| Whether district court erred in awarding attorney's fees under 17 U.S.C. § 505 (timeliness, prevailing party, Fogerty factors) | Fees motion untimely; Xcentric not a "prevailing party"; district court misapplied Fogerty factors | Initial fees motion timely; renewal allowed after court's "without prejudice" order; Xcentric prevailed; Fogerty factors properly applied | Court affirmed: renewed motion timely under district court order; Xcentric a prevailing party; district court did not abuse discretion in applying Fogerty factors and awarding fees |
Key Cases Cited
- Universal Commc'n Sys., Inc. v. Lycos, Inc., 478 F.3d 413 (1st Cir.) (broad §230 immunity test: ICS status, claim based on third-party content, and treatment of defendant as publisher)
- Zeran v. Am. Online, Inc., 129 F.3d 327 (4th Cir. 1997) (policy favoring broad §230 immunity for intermediaries)
- Kimzey v. Yelp! Inc., 836 F.3d 1263 (9th Cir. 2016) (directing search engines to cache third-party content does not make a site the ICP)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (nonexclusive factors for awarding copyright fees: frivolousness, motivation, objective unreasonableness, compensation/deterrence)
- Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598 (2001) (defining "prevailing party" concepts referenced in fee-award analysis)
- Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016) (§505 confers broad discretion to district courts in awarding fees)
- John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 322 F.3d 26 (1st Cir. 2003) (uses within scope of a nonexclusive license do not constitute infringement)