Copyright Law

US Web Hosting Company Sued for Contributing to Infringement

By DrewWilson

You would think that the DMCA safe harbour provision would protect a web hosting company from the actions of their customers. That’s not what a judge and jury found as one web hosting company was dinged $32 million for hosting a website with trademark infringing material.

Prosecutors are calling it a landmark decision when they successfully sued two web hosting companies and the owner of the websites for trademark infringement. The web hosting companies that were sued are Akanoc Solutions Inc. and Managed Solutions Group Inc.

Apparently, the web hosting companies were contacted by trademark owners over the website owner – who just so happens to be the same owner of the hosting companies – selling the counterfeiting material. When the website owner, Steven Chen, received the demands to take down the website, he refused to take action. That’s what prompted the lawsuit against the companies and the website owner.

On the surface, the case seems to have been a big victory against people who sell infringing material – something that many would celebrate over. However, the case has sparked interesting debate, particularly on Slashdot, over whether or not this has a chilling effect on free speech as well because of the precedent set.

On the international stage, contributing to infringement has been one of the weapons the copyright industry has been using with sometimes surprising success. OiNK, a while back, had legal troubles when their domain name registrar was threatened with legal action if they didn’t discontinued support for the domain name. The Registrar folded and users quickly found their website seemingly offline (although connecting directly to the IP address would reveal that the site was still operational. This caused the website to be forced to move to a different domain. More recently, the “ISP of the ISP” was pressured into blocking ThePirateBay. That was a case where the owners remarked how the copyright industry was going after people who contribute to who contribute to who contribute to who contribute to copyright infringement – a case that brought ThePirateBay down for a mere couple of hours.

Let’s say this latest case does cause a chilling effect in US web hosting companies. That chilling effect that websites are taken down on a mere allegation of copyright infringement or trademark infringement or being threatened with legal action citing this particular case. All it’s really going to do is cause many website owners to simply pack up shop and take their business off American shores – whether they have legitimate reasons or not. This will be at the detriment to American businesses because many will fear that their website will be here today, gone tomorrow. Clearly, then, it would be a court decision that is bad for business.

In this case, it seems a little less likely that such a precedent has been set that the safe harbour provisions have effectively been rendered moot. This is because in this case, the owner of the website was also the owner of the hosting company. Why this is important is because the web hosting owner had full knowledge of the activities of that particular website. In most other cases, the web hosting company doesn’t know what is going on in every given website – only that they receive money at regular intervals in time.

So, it’s really a murky ruling over whether or not free speech and the safe harbour provision has been harmed or not. What it probably will depend on is what future court cases would bring as a result of this ruling.

Have a tip? Want to contact the author? You can do so by sending a PM via the forums or via e-mail at drew@zeropaid.com.

Full post as published by ZeroPaid on September 02, 2009 (boomark / email).