Zillow ruling provides practice tips for copyright claimants

On March 15, the 9th U.S. Circuit Court of Appeals released its opinion in the case VHT, Inc. v. Zillow Group, Inc., 2019 DJDAR 2144, a comprehensive and thorough examination into an internet service provider's liability for direct copyright infringement of material posted online at the direction of users. While Zillow does not represent a sea change in the law, it is helpful in delineating the line beyond which a website's operator's conduct passes from the passive to the volitional, triggering liability.

Zillow follows a line of authority from the 9th Circuit generally declining to hold internet service providers liable for the infringement of copyrights in material that is uploaded by users. In so doing, the 9th Circuit has been tracking the priority set by Congress (as evidenced by legislation beginning with the Digital Millennium Copyright Act) of giving the companies which provide platforms to users online a wide berth to experiment and innovate without fear of copyright liability. Copyright owners of content that finds its way onto these platforms should be thoughtful, therefore, when deciding against whom to pin liability when they find their content infringed online.

Zillow Group, Inc., runs the popular real-estate information website Zillow.com. Zillow makes real-estate listings, such as those found on the Multiple Listing Service, available for free to the public on its "Listing Platform." The Listing Platform features photographs of "most homes in America" in its individual listings. Zillow also runs, separately, the "Digs" service, a platform for users to search and select photos of homes with appealing designs.

VHT, Inc., is a real-estate photography company. It creates, with its own photographers, high-quality photos of properties listed for sale. The VHT photos are saved to VHT's online library and are licensed out to its clients (real-estate professionals). VHT's license only authorizes its clients to use VHT photos "in relation to the sale" of a property. So, when property brokers and agents uploaded photos to Zillow's Listing Platform, those photos were only allowed to be displayed under license before the house in question was sold. VHT brought suit for direct and indirect copyright infringement when it discovered that Zillow continued to display over 50,000 VHT photos online after the subject homes had been sold.

The claims and legal theories were not uniform, however. Certain photos were displayed on Zillow's Listing Platform, and others were displayed on Zillow's Digs platform. Some VHT photos on Digs were hosted online but not displayed on any particular page; some VHT photos on Digs had been meta-tagged for searchability by Zillow. The trial court, the U.S. District Court for the Western District of Washington, dispensed with certain claims in summary judgment, and allowed others to go to a jury, later overturning the jury's verdict of liability and reducing an award for $8.27 million in damages to $4 million. On appeal, the 9th Circuit reviewed de novo a wide spectrum of liability theories asserted against Zillow: direct infringement, both for the Listing Platform and Digs; indirect infringement under vicarious and contributory theories for Digs; Zillow's fair use defense; Zillow's potential willfulness; as well as the appropriate measure of damages for compilations of work.

On the issue of direct infringement for 54,257 Listing Platform VHT photos, the 9th Circuit concluded that Zillow could not be held liable when its users failed to properly notify Zillow of the terms of their licenses with VHT. Zillow employs an automatic filtering system to manage the vast library of photos it accepts from users: Photos are either "deciduous," meaning their authorization for use expires when the property's sales listing does; or "evergreen," meaning the photos can be used without time restriction. Deciduous photos were automatically removed from Zillow's Listing Platform as soon as the underlying property was no longer offered for sale, and evergreen photos were automatically used in their place, when available.

The court found that Zillow had not engaged in volitional conduct necessary to trigger direct infringement. Zillow did not choose which photos were uploaded; its users did. Zillow's automated evergreen and deciduous filtering system was appropriately designed with the protection of copyright. Any failure of that system was not the result of Zillow's volitional conduct, but rather that of Zillow's users in failing to properly identify the license of an uploaded VHT photo. The 9th Circuit again reinforced that it is unwilling to hold websites liable for direct infringement for automated behavior where there is a system in place that ostensibly considers the copyrights of others.

VHT's argument that Zillow incurred direct liability by failing to take down the infringing photos after receiving notice from VHT also failed. VHT's takedown notice failed to identify individual claimed photos by URL. When asked to provide the underlying licenses between VHT and its clients, VHT sent Zillow only an unsigned "form" license. Copyright holders should take heed: Takedown or cease-and-desist notices should provide adequate information for a recipient to evaluate a claim, or there will be little recourse for a direct infringement claim.

On direct infringement of the Digs photos, the court broke down VHT's photos into categories. First, the court considered VHT photos that were not actively displayed on Zillow.com, and held that there is no right to "make available for display" contained within the Copyright Act's right of display. Without evidence that Zillow displayed these photos on accessible web pages, Zillow could not be held directly liable under any theory.

The next subset of photos were displayed Zillow's Digs platform, but were placed there at the direction of users who had selected them from the Listing Platform. Zillow sometimes had a moderator look at these photos to determine whether they should be given search metatags and publicly displayed -- but this subset of photos had not been moderated. The court held that the potential for moderation and volitional conduct by Zillow did not meet the threshold for direct infringement liability. Nor did Zillow's automatic caching functionality constitute volitional conduct, following a steady line of cases distinguishing between the conduct of users and the conduct of platform providers.

Zillow did not prevail, however, on the final subset of Digs photos: Those which had been tagged by Zillow employees with search tags in order to make photos searchable by users. Zillow mounted a defense of fair use. The 9th Circuit, however, held that Zillow's use was not transformative under the first fair-use factor, drawing a line from a series of search-engine cases which had allowed fair use when coupled with searching functions (particularly Authors Guild v. Google, 804 F.3d 202 (2d Cir. 2015)). Drawing contrast to the broad, comprehensive search functionality of Google Books, the court found Zillow's mere tagging of keywords to VHT's unaltered photographs lacked Google's transformative qualities. Accordingly, the remaining fair use factors became weightier and, given Zillow's clear usurping of the market for VHT's photos in the interior-design market, clearly denied Zillow the fair-use defense.

VHT could not show contributory liability for indirect infringement. Zillow had no simple measures available to identify VHT photos that were being infringed, because VHT only provided the property address related to the photos rather than the discrete photo ID or URL -- any particular home listing may have many different versions of photos which may or may not be infringing. Nor did Zillow induce infringement, because its online tools were not specifically aimed at promoting infringement.

Finally, Zillow was free from vicarious liability because "[o]nce VHT photos were uploaded to the Listing Platform with appropriate certification of rights, ferreting out claimed infringement through use on Digs was beyond hunting for a needle in a haystack."

The 9th Circuit remanded the issue of statutory damages, holding that there was insufficient factual record to determine whether any VHT photos could be considered a "compilation" for purposes of 17 U.S.C. Section 504(c)(1), which has significant implications for the measure of damages. The court suggested to the trial court that VHT's registration of the photos as compilations with the Copyright Office should be given due weight in this consideration.

The last issue addressed in the decision concerned willfulness. The panel found no substantial evidence to support the jury's finding of willful infringement against Zillow. First, VHT's bare-bones notice of infringement did not automatically render any subsequent infringement willful. Second, Zillow's lack of responsive measures did not demonstrate willfulness because VHT was particularly unhelpful and provided only minimal information to identify particular photos before filing suit. These facts did not render Zillow actually aware of any particular infringement. Nor did Zillow willfully blind itself to the infringing nature of the VHT photos when it did not have access to the underlying licenses between VHT and its clients.

Zillow provides copyright holders with some valuable practice tips when enforcing their rights. The 9th Circuit has made clear that obfuscation of a claimant's underlying rights will undercut that claimant's later allegations of notice and willfulness; it therefore behooves copyright claimants to be open and forthcoming with potential defendants in the run-up to litigation.

The case further cements the safe harbor from liability enjoyed by online content providers: "volitional conduct" standard remains the controlling test, and it will not be satisfied by automated procedures which are ostensibly aimed at preventing copyright infringement, even if those systems are less than perfect. 