Perfect 10, Inc. v. Visa International Service Association et al

Filing 45

Attachment 1
MOTION to Dismiss First Amended Complaint filed by Cardservice International, Inc., First Data Corporation, Humboldt Bank, Mastercard International Incorporated. Motion Hearing set for 11/15/2004 09:00 AM. (Attachments: # 1 Appendix A (redline)# 2 Appendix B (MCI Merchant Agreement))(Bridges, Andrew) (Filed on 9/24/2004)

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Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 1 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HOWARD E. KING (State Bar No. 077012) STEPHEN D. ROTHSCHILD (State Bar No. 132514) KING, HOLMES, PATERNO & BERLINER, LLP 1900 Avenue of the Stars, 25th Floor Los Angeles, CA 90067 Telephone: (310) 282-8989 Fax: (310) 282-8903 JEFFREY N. MAUSNER (State Bar No. 122385) JOHN R. YATES (State Bar No. 120344) BERMAN, MAUSNER & RESSER 11601 Wilshire Boulevard, Suite 600 Los Angeles, California 90025-1742 Telephone: (310) 473-3333 Facsimile: (310) 473-8303 E-mail: JeffMausner@bmrlaw.com DANIEL J. COOPER (State Bar No. 198460) General Counsel, Perfect 10, Inc. RANDY LEWIS (State Bar No. 210444) Associate General Counsels, Perfect 10, Inc. Attorneys for Plaintiff PERFECT 10, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ­ SAN FRANCISCO DIVISION ) ) ) Plaintiff, ) ) v. ) ) VISA INTERNATIONAL SERVICE ) ASSOCIATION; FIRST DATA ) CORP, a corporation; CARDSERVICE ) INTERNATIONAL, INC., a ) corporation; MASTERCARD ) INTERNATIONAL ) INCORPORATED, a corporation; ) HUMBOLDT BANK, a national ) banking association; and DOES 1 ) through 100, inclusive, ) ) Defendants. ) _______________________ ) ) ) ) ________________________________) PERFECT 10, INC., a California corporation, Case No.___________________ Case No. C04-00371 JW (PVT) [Assigned for all purposes to Judge James Ware] FIRST AMENDED COMPLAINT FOR: FOR: (1) COPYRIGHT INFRINGEMENT; (2) TRADEMARK INFRINGEMENT; (3) TRADEMARK DISPARAGEMENT; (4) WRONGFUL USE OF A REGISTERED MARK; (5) VIOLATION OF RIGHT OF PUBLICITY; (6) UNFAIR COMPETITION; (7) FALSE AND MISLEADING ADVERTISING (8) LIBEL; (9) INJUNCTIVE RELIEF; and (10) INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE [DEMAND FOR JURY TRIAL] FIRST AMENDED COMPLAINT APPENDIX A Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 2 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff Perfect 10, Inc. ("Perfect 10" or "plaintiff"), for its complaint, based upon federal question and pendent jurisdiction, makes the following allegations against alleges as follows against defendants Visa International Service Association ("Visa"); First Data Corp ("FDC"); Cardservice International, Inc. ("CSI"); MasterCard International ("MasterCard"); Humboldt Bank ("Humboldt"); and Does 1-100 (collectively, the "Defendants"). JURISDICTION, VENUE, and INTRADISTRICT ASSIGNMENT 1. Jurisdiction. This action arises under the Copyright Act of the United States, 17 U.S.C. §§ 501 et seq., and the Lanham Act, 15 U.S.C. §§ 1051, et seq. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331, 1338(a) and (b), and principles of pendent jurisdiction. 2. Venue. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(2), (c), and § 1400(a). 3. Personal jurisdiction. Personal jurisdiction is proper over the Defendants because they either reside in California or the wrongful activity at issue in this case concerns Defendants' operation of commercial businesses through which Defendants' knowingly transact business, share information and files, and enter into contracts with individuals in California, including within the County of San Francisco. Each of the Defendants, therefore, has purposefully availed itself of the privilege of doing business in California, and critical elements of Defendants' wrongdoing occurred in this State. 4. Intradistrict Assignment. A substantial part of the events which give rise to the claims occurred in San Francisco County, California, where defendant Visa is located. NATURE OF THE ACTION 5. The Defendants in this case, who are among America's most prominent financial institutions, are knowingly providing crucial transactional support services for the sale of millions of stolen photos and film clips worth billions of dollars that COMPLAINT 2914.060\43841. FIRST AMENDED 1 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 3 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 belong to Perfect 10 and third-parties, as follows: A. The Stolen Content Websites 6. Hidden in undisclosed locations around the world, thieves from every country are operating websites ("Stolen Content Websites") that routinely offer for sale to the public stolen still and moving images consisting of (i) scans from Perfect 10 Magazine and images from its website perfect10.com, (ii) scans of supermodels from other magazines, and (iii) the most treasured film clips (usually nude scenes of top actresses) ever created by motion picture studios. Webmasters who run Stolen Content Websites also typically engage in consumer fraud or other illegal acts by doing one or more of the following: a) charging the consumer's credit card without authorization, b) falsely stating that memberships are free, c) promising nudes or sexually explicit videos of celebrities that don't exist, d) providing rape, incest, and/or bestiality images or falsely promising such images, e) spamming, and f) tricking the consumer into paying for other memberships without their knowledge. Stolen Content webmasters typically use sham Internet registrations with bogus addresses and contact information so that they are virtually impossible to track down and sue. 7. Stolen Content webmastersWebsites cannot exist without the knowledge and assistance direct participation of the financial institutions whothat process the credit card transactions for such unlawful material and who,that, as a result, effectively act as knowing fences for the sale of billions of dollars worth of stolen property. B. The Business of Defendants Herein 8. Visa and MasterCard are joint ventures, each owned by associations of thousands of banks, including Humboldt, which comprise a vast network which processes hundreds of millions of dollars in payment card transactions every day. The member banks issue MasterCard and Visa payments,cards, and contract with merchants to accept their payment cards and sell sales drafts generated from use of those cards to the members, at a discount. COMPLAINT 2914.060\43841. FIRST AMENDED 2 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 4 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9. Typically, when a merchant accepts a payment card from a customer, the merchant electronically and contemporaneously presents the transaction to an acquiring member bank, such as Humboldt, or to a third-party processor (known in the credit card industry as an "Independent Service Organization" ("ISO")) acting as agent for a member bank, for verification and processing. immediate purchase at a discount from the price being paid by the customer. FDC, including its whollyowned subsidiary, CSI, is one of the largest, if not the largest, such ISO. 10. The merchant has a contract with the acquiring bank or ISO that obligates the bank or ISO to purchase the customer charges from the merchant immediately, provided the charges meet certain standards. Visa and MasterCard are virtually present at the time of each and every transaction on their branded cards. The acquirer (or the ISO through which the acquirer does business) presents the transaction data to MasterCard or Visa. The bank that issued the payment card then notifies MasterCard or Visa whether it authorizes or rejects the transaction. The association relays that information to the acquirer, which forwards the information to the merchant's credit card terminal. If the transaction is accepted, the merchant transmits a request for payment to the acquirer, which relays the request through the association to to MasterCard or Visa for verification of a myriad of characteristics, including, but not limited to, that the credit card is not stolen, over its limit, expired, or otherwise incapable of incurring charges. MasterCard or Visa authorizes or rejects the transaction. However, Visa and MasterCard have chosen to ignore the obvious illegality of each and every Stolen Content Website transaction that they review. 11. If the transaction is authorized, the acquirer purchases it from the issuer. The acquirer purchases the transaction from the merchant, at a discount. The foregoing process occurs electronically, with the result being that a merchant can make a sale using a payment card and simultaneously sell same to his acquiring bank, at a discount, receiving the net proceeds immediately. COMPLAINT 2914.060\43841. FIRST AMENDED 3 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 5 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10.12. Member banks, including Humboldt, often delegate responsibility for processing payment card transactions to third party processors such as FDC and CSI. That delegation of responsibility includes responsibility for policing merchants, supervising merchants to makingmake certain that merchants comply with Visa and MasterCard rules, and terminating illegal businesses from the Visa and MasterCard systems. Unless otherwise apparent from the context, references in this complaint to "FDC" include Humboldt and FDC's wholly owned subsidiary CSI. 11.13. Visa and MasterCard receive a fee for eachevery single transaction on their branded cards. They [PAGE BREAK INSERTED] C. Defendants' Right and Ability to Control the Stolen Content Websites 14. Visa and MasterCard are also responsible for administering the Visa and MasterCard credit card networks. For example, MasterCard and Visa rules prohibit member banks andMasterCard credit card networks, and they impose many requirements as a condition to ISOs and acquiring banks participating in the system. In addition to prohibiting member banks and third-party processors from providing services to merchants engaged in illegal activity. The, the associations' rules require member banks and third party processors, such as including FDC, to investigate and terminatemerchants suspected of engaging in illegal activity and to terminate those merchants that are engaged in illegal activity. The associations dictate "interchange rates," or the fees that acquirer banks must pay issuing banks for each transaction. Visa and MasterCard require member banks to terminate the accounts of merchants whose "chargeback" ratios exceed allowable limits. A "chargeback" occurs when a customer requests reversal of a charge that is fraudulent, unauthorized, or otherwise improper. 12. The associations publish an industry-wide "black list" of terminated merchants to which all members and third party processors have access. The black list is known as the MATCH list or the Combined Terminated Merchant File COMPLAINT 2914.060\43841. FIRST AMENDED 4 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 6 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ("CTMF"). All members of Visa and MasterCard, and all third-party processors, have access to the black list. It is virtually impossible for a black listed merchant to obtain credit card charge processing services from a reputable member bank or third party processor. The black listed merchants that are able to obtain processing services must pay exorbitant rates, often to unreliable processors and/or other thirdparties. 13. Because the webmasters for Stolen Content Websites often engage in a variety of fraudulent sales techniques, their chargeback ratios are often quite high, but in at least some cases, they have not been terminated with chargeback rates far above allowed Mastercard and Visa limits. Yet, defendants continue to provide credit card services to such websites and have not placed such merchants on the black list. 15. Visa and MasterCard rules and regulations require each and every merchant that wishes to secure the benefits of participation in the Visa and MasterCard systems to enter into a formal Merchant Agreement with an acquirer, pursuant to which Merchants are licensed to accept MasterCard and Visa charges and participate in the systems. Visa and MasterCard rules dictate many of the significant terms and conditions of such agreements. 16. Plaintiff is informed and believes and based thereon alleges that Humboldt, FDC and CSI have entered into Merchant Agreements with many owner/operators of Stolen Content Websites. Attached hereto as Exhibit "1" and incorporated herein by reference is a copy of a standard CSI Merchant Agreement. Perfect 10 is informed and believes and based thereon alleges that the provisions of the CSI Merchant Agreement are typical of merchant agreements throughout the Visa and MasterCard systems. 17. Paragraph 1.01 of the CSI Merchant Agreement requires Stolen Content Websites to accept all MasterCard and Visa charge cards presented to them. COMPLAINT 2914.060\43841. FIRST AMENDED 5 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 7 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18. Paragraph 1.02 of the CSI Merchant Agreement requires Stolen Content Websites to display defendants' promotional materials with defendants' proprietary names and symbols, unless they are "expressly exempted" by Visa or MasterCard. (Ex. "1," ¶ 1.02.) 19. Paragraph 3.01, entitled "Compliance with Law," imposes the following restrictions on Stolen Content Websites: Merchant shall comply with all laws, ordinances and regulations applicable to Merchant, Merchant's business and any Card transaction, including without limitation all state and federal consumer credit and consumer protection statutes and regulations. Neither Bank [Humboldt] nor Cardservice International shall have any obligation to notify or advise Merchant of the existence of such laws or changes in such laws. Merchant warrants that it has the right to sell the products it sells and to use the names it uses. (Emphasis added.) 20. Pursuant to Visa and MasterCard rules and regulations, and to the contractual rights they insist upon, defendants direct merchants who accept their credit cards and who operate Internet websites to alter or delete contents of such websites in order to comply with laws and/or Visa and MasterCard rules, regulations 14. When MasterCard or Visa learnand policies. When MasterCard or Visa learns of a merchant engaged in illegal, fraudulent, or otherwise improper business practices, they are supposed totheir own regulations require them to cause member banks to investigate and, depending on the nature of the misconduct, terminate the merchants from the Visa and MasterCard systems. The rules of both associations strictly prohibit members from servicing illegal businesses. 21. Defendants assert the right, which they frequently exercise, to suspend merchants from the Visa and MasterCard systems, or to exclude them altogether. For example, pursuant to paragraph 3.04(b) of the CSI Merchant Agreement, COMPLAINT 2914.060\43841. FIRST AMENDED 6 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 8 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants have the right to terminate Stolen Content Websites "immediately" if the merchant "violates any term, condition, covenant or warranty of this Agreement." 22. Plaintiff is informed and believes and based thereon alleges that the grounds for suspending and/or entirely excluding merchants from the system often are that Defendants believe that the merchants have engaged in illegal transactions and/or sell illegal products or services. If Defendants exclude a merchant from the system, all members of the Visa and MasterCard systems, and all ISOs, are prohibited from providing charge card processing services to that merchant, directly or indirectly through third party aggregators. 23. Paragraph 7.01 of the CSI Merchant Agreement requires merchants to use defendants' preapproved forms when accepting payment by credit card. 24. Defendants dictate what products and services a merchant sells. Merchants cannot sell different products without submitting a formal request to defendants and receiving Defendants' express pre-approval. 25. In addition to the foregoing, Defendants dictate the amount of credit card sales Stolen Content Websites may make each month. Since Defendants know that virtually all of the Stolen Content Websites' business is done through charge card payments, Defendants know that each time they increase the volume limits of a Stolen Content Website, they are also increasing the number of illegal transactions on such sites. 26. Plaintiff is informed and believes and based thereon alleges that, before defendants will allow a merchant to participate in the Visa and MasterCard systems, the Visa and MasterCard rules require the merchant to establish that it is financially responsible and that the owner/operators have acceptable backgrounds and business practices. Among other things, defendants inspect websites and business premises, and obtain and review merchants' bank statements, tax returns, credit reports, and a merchant's other financial information before allowing the merchant into the system. Plaintiff is informed and believes and based thereon alleges that, based on their COMPLAINT 2914.060\43841. FIRST AMENDED 7 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 9 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 reviews of Stolen Content Websites applying for merchant accounts, Defendants know when Stolen Content Websites maintain no physical presence in the United States in order to evade criminal and civil liability for their illegal conduct. 27. When Defendants receive what they deem to be an excessive number of chargebacks on the accounts of Stolen Content Websites, Defendants place even more limitations on the account holders and require even more detailed information about their businesses. 28. Plaintiff is informed and believes and based thereon alleges that Defendants also require Stolen Content Websites to give Defendants permission to use their names in their advertising and promotional activities. 29. Defendants also regularly assert their right to require questionable merchants, such as the Stolen Content Websites, to maintain substantial reserve accounts with Humboldt in order to secure potential losses as a result of the misconduct of such merchants. C.D. Defendants' Knowing Participation in the Stolen Content Websites' Illegal Conduct 15.30. Defendants, jointly with the Stolen Content Websites, and individually,are engaged in (i) the willful and systematic infringement of the intellectual property rights of Perfect 10 and third-party publishers, film owners, and celebrities, and (ii) an ongoing deception of consumers. 16.31. The explosion of pornography on the Internet has been a windfall to defendants.Defendants. Websites that provide pornographic images generate hundreds of millions of transactions, each one resulting in a fee to defendants. Since January of 2003,separate fee to Defendants. Since 2002, Perfect 10 repeatedly has identified specific Stolen Content Websites to each of the defendantsdefendant herein and asked each of the defendants to investigate and cease and desist servicing those illegal businesses. Perfect 10 has given defendantsDefendants such notice orally, in writing, and by e-mail. The notices have included screen shots and other COMPLAINT 2914.060\43841. FIRST AMENDED 8 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 10 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 evidence of the websites' illegal conduct. Defendants, and each of them, have failed and refused to investigate the Stolen Content Websites and to discontinue facilitating and participating in the business of the websites. Copies of many such notices are attached hereto as Exhibit "2" and incorporated herein by reference. 17.32. Defendants knowingly continue to supervise and materially contribute to participate in the Stolen Content Websites' illegal conduct by authorizing their member banks to acquire customers' payment card charges for access to those websites, in violation of MasterCard and Visa Rules; providing confirmations for charges for the Stolen Content Websites, accepting fees for each charge card transaction on the Stolen Content Websites; and failing and refusing to enforce their rules prohibiting member banks and ISOs from servicing businesses engaged in illegal activities ., directly or indirectly, and enforcing other rules to assure that they profit from the Stolen Content Websites. 33. Defendants aid and abet the Stolen Content Websites' illegal transactions by allowing them to process charges anonymously through off-shore locations that have no existence except as conduits for processing charge card transactions. 18.34. While most member banks and third-party processors refuse to acquire for pornographic websites, FDC specializes Humboldt, FDC and CSI have at all times material herein specialized in servicing pornographic websites because bywebsites. By charging them significantly more than conventional merchants pay for the same services, including by levying fees of as much as $100 per chargeback, FDC Humboldt, FDC and CSI significantly increase increases itstheir profit margins. 19.35. Defendants' branded payment cards are overwhelmingly the primary way by which customers pay to view Stolen Content Websites. Acceptance of Mastercard MasterCard and Visa is in fact so expected by consumers as a form of online payment , that permission from MastercardMasterCard and Visa to accept their cards is tantamount to a pre-condition forprecondition for running a successful COMPLAINT 2914.060\43841. FIRST AMENDED 9 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 11 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 online business, and gives such websites a significant competitive advantage. Inability to accept Visa and MasterCard would make it impossible for an online website selling adult images to compete and operate at a profit. If defendantsDefendants enforced their own rules when they received notice of a Stolen Content Website, instead of turning a blind eye to the illegality, the Stolen Content Websites would be eradicated. Perfect 10 is informed and believes, and based thereon alleges, that Defendants do not enforce their own rules against websites that they know are Stolen Content Websites in many cases becausebecause Defendants do not defendants do not want to lose the substantial revenues and profits they receive from the websites. 20.36. More specifically, Defendants are engaged in the following unlawful practices: · Defendants are knowingly and intentionally profiting from and providing critical support for the infringement of Perfect 10's copyrights and rights of publicity (by assignment) by reason of the unauthorized reproduction, display, distribution, and sale of distribution of photographs owned by Perfect 10 on Stolen Content Websites. · Defendants are knowingly and intentionally profiting from and providing critical support to sell millions of stolen images and film clips worth billions of dollars which rightfully belong to third-party publishers and film owners. · Defendants are knowingly and intentionally profiting from and providing critical support for the infringement of the copyrights of Perfect 10 and publicity rights of Perfect 10 and others by the unauthorized reproduction, creation of derivative works from, display, advertisement and sale of illegally altered photographs of celebrities and models, which falsely purport to show such celebrities performing sexual acts and in various nude poses. COMPLAINT 2914.060\43841. FIRST AMENDED 10 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 12 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 · Defendants are knowingly and intentionally profiting from and providing critical support for Stolen Content Websites which also compete unfairly by engaging in the following acts: a) making false claims about their content, such as offering images of "Christina Aguilera Masturbating!""Sandra Bullock Fucking!" [celebmovie.com, Exhibit 1] "Britney Spears Sucks Cock! we have proof on video," [Hollywoodextreme.com, Exhibit 1], "Raunchy Stolen Fuck Pics: See The Hottest Female Tennis Player Get Both Holes Penetrated At Once!!!" [with references and pictures of Anna Kournikova] [celebrityorgy.com, Exhibit 1], "J-Lo fucking like a slut," "Lopez takes it big up her big beautiful ass!" [Babylon-x.com website, Exhibit 1]; b) falsely claiming that they are "free," c) grossly misstating the number of images on their sites, claiming for example in one case that they have 90,000 images when they have less than 3,000, d) using multiple "fronts" leading to the same content, e) requiring consumers to affirmatively uncheck a small box, lest they are unwittingly billed for memberships they did not want in the first place, and f) "spamming consumers. 21. With defendants'37. With Defendants' support, the Stolen Content Websites have become so brazen that they actually flaunt their illegality. One such website, touting an illicit video of Paris Hilton, proclaims, "Load it now before the lawyers take it down!" D.E. The Harm that Defendants' Participation in the Businesses of the Stolen Content Websites Has Caused to Perfect 10 22.38. Based on the foregoing, Defendants are aiding and abetting unfair competition against Perfect 10 and materially contributing to the infringement of Perfect 10's intellectual property rights, by providing critical support for and participating in the sale of vast quantities of content misappropriated from Perfect 10 and third parties to this action, thereby diverting consumers from Perfect 10's COMPLAINT 2914.060\43841. FIRST AMENDED 11 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 13 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 products and services to Stolen Content Websites. Despite notice from Perfect 10 of the ongoing violation of its rights on Stolen Content Websites, including infringements specifically alleged in this Complaint, and other fraudulent acts perpetrated by such websites, Defendants have continued wrongfully to purchase the specific credit card sales drafts generated by the illegal sales, at a discount, thereby providing the only profitable means by which a Stolen Content Website can consummate a sale. Nearly all Stolen Content Website sales are credit card transactions. process transactions for such websites. 23. The Defendants' conduct constitutes a willful infringement of Perfect 10's copyrights, trademarks and publicity rights; willful violations of the Lanham Act; and unfair competition under the common law and California statutes. 24.39. Perfect 10 has been forced to spend over $8 million in attorneys fees over the last two and a half years attempting to stop the widespread theft on the Internet of both Perfect 10 images and third-party intellectual property, which. That theft has made it impossible for Perfect 10 to make money from day one, and which has alsooperate at a profit. contributed substantially to the losses of Playboy and the bankruptcy of Penthouse. Such widespread thievery is also dramatically hurting the motion picture studios, as the most valuable portions of their films, the nude clips, are being unlawfully distributed by Stolen Content Websites for tens of millions of dollars in profits. 25. Despite considerable legal success against Stolen Content Websites, Perfect 10 has concluded that the only way to stop the proliferation of such websites is to go to the top, namely the payment card associations and the primary third-party processor, each of which is knowingly and effectively acting as fences for the sale of billions of dollars of stolen content. 26.40. Defendants have failed and refused to apply other rules and regulations to Stolen Content Websites, thereby continuing to profit from each illegal transaction in which they participate. For example, Defendants have allowed certain COMPLAINT 2914.060\43841. FIRST AMENDED 12 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 14 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Stolen Content Websites to incur extraordinarily high chargeback rates because of the high volume from theirillegal conduct, and the resulting high fees accruing to Defendants. 27. At the same time, defendantsDefendants have imposed arbitrarily low chargeback limits on legitimate web content providers, including Perfect 10, because such providers, lacking the increased revenues that result from the Stolen Content Websites' unfair and illegal conduct, are far less profitable for defendants than theto Defendants than the Stolen Content Websites. 28. Aiding and abetting the Stolen Content Websites' unfair competition with plaintiff, in or about Spring 2001, defendants arbitrarily terminated plaintiff's merchant account with FDC, allegedly for high chargeback rates, after levying fines on plaintiff of $100 per chargeback, and also kept plaintiff's money. In fact, Defendants knew that plaintiff had been a victim of hackers who were subsequently investigated by the Secret Service. Nevertheless, and in spite of the fact that plaintiff subsequently ran a chargeback ratio of around ½ of 1% from that point forward, well within Mastercard and Visa limits, Defendants nevertheless maintained plaintiff on the industry wide "black list". Plaintiff has not been able to process Visa cards directly as a result and has incurred significantly higher costs by its inability to have its own merchant account. THE PARTIES Plaintiff Perfect 10 29.41. Plaintiff is, and at all times mentioned herein was, a California corporation having its principal place of business in Beverly Hills, California. Plaintiff owns and operates the website located at perfect10.com and publishes Perfect 10 Magazine. The Defendants 30.42. Perfect 10 is informed and believes, and on that basis alleges, that defendant Visa is and at all times material herein has been a joint venture association with offices at 123 Mission Street, 20th Floor, San Francisco, CA 94105 and COMPLAINT 2914.060\43841. FIRST AMENDED 13 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 15 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 conducts substantial business in California, including within the County of San Francisco. Plaintiff alleges that Visa is also an association of members, primarily banks, that issue payment cards, acquire merchants who accept payment cards, or both. 31.43. Perfect 10 is informed and believes, and on that basis alleges, that defendant MasterCard is and at all times material herein has been a joint venture association with offices at 2000 Purchase Street, Purchase, NY 10577, and conducts substantial business in California, including within the County of San Francisco. Plaintiff alleges that MasterCard is an association of members, primarily banks, that issue payment cards, acquire merchants who accepts payment cards, or both. 32.44. Perfect 10 is informed and believes, and on that basis alleges, that defendant FDC is a corporation with offices at 6200 South Quebec Street, Greenwood Village, Colorado 80111, and conducts substantial business in California, including within the County of San Francisco. Plaintiff alleges on information and belief that FDC is an Independent Service Organization authorized to act by and subject to MasterCard and Visa Rules, engaged in the business of processing payment card transactions and data for Stolen Content Websites. Plaintiff is further informed and believes that FDC is the managing agent of MasterCard, Visa, and a number of their members banks. 33.45. Perfect 10 is informed and believes, and on that basis alleges, that defendant CSI is and at all times material herein has been a wholly owned subsidiary of FDC, located in Moorpark, California, and CSI conducts business within the County of San Francisco. 34.46. Perfect 10 is informed and believes and based thereon alleges that Humboldt is and at all times material herein has been a national banking association organized and existing under the laws of the United States with its principal place of business in Eureka, California. COMPLAINT 2914.060\43841. FIRST AMENDED 14 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 16 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 35.47. Perfect 10 is informed and believes, and based thereon alleges that, at all times material herein, CSI was the alter ego of FDC, and that there exists and has existed at all times material herein a unity of interest and ownership between them, such that any separateness between them has ceased to exist, and that CSI is a mere shell, instrumentality and conduit through which FDC has at all times material herein carried out its business, exercising complete control and dominance over CSI such that any individuality or separateness of CSI from FDC has ceased to exist. 36.48. Adherence to the fiction of the separate existence of CSI as an entity distinct from FDC would permit an abuse of the corporate privilege and would sanction fraud and promote injustice. 37.49. Does 1 through 100, inclusive, are sued herein under fictitious names. Their true names and capacities are unknown to plaintiff. When plaintiff ascertains the Doe defendants' true names and capacities, plaintiff will amend this complaint by inserting their true names and capacities herein. Plaintiff is informed and believes and based thereon alleges that each defendant named herein as a Doe acted with defendants and is responsible for the damages to plaintiff herein alleged. Each reference in this complaint to defendants, or to any of them, also refers to all defendants sued under fictitious names. 38.50. Plaintiff is informed and believes and based thereon alleges that at all times material herein each of the defendants was the agent and employee of the other defendants, and in doing the things hereinafter alleged, was acting within the course and scope of such agency and employment. ALLEGATIONS COMMON TO ALL CLAIMS The Business of Perfect 10 A. Perfect 10's Business 39.51. Perfect 10 is the publisher of the well-known adult entertainment magazine PERFECT 10. PERFECT 10 Magazine has a circulation of over 65,000 copies per issue. Perfect 10 also owns the Internet website of the same name. The Perfect 10 website receives approximately 100,000 unique visitors per month. COMPLAINT 2914.060\43841. FIRST AMENDED 15 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 17 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 40.52. Perfect 10's business consists of the design, layout, filming, production, marketing, and promotion of adult entertainment products, including photographs, magazines, video productions, and other arts. Some of these copyrighted works appear within PERFECT 10 magazine and Perfect 10's website. 41.53. Perfect 10 has invested, and continues to invest, substantial sums of money, as well as time, effort, and creative talent, to produce its copyrighted works. In order to produce such works, Perfect 10 must make numerous payments including model fees, photographer fees, location costs, styling costs, make up costs, printing costs, film and processing costs, travel costs, as well as public relations, legal, and advertising costs. Perfect 10 is compensated for its creative efforts and monetary investments largely from subscription fees to its website, sales of and subscriptions to its magazine, and advertising revenue. 42.54. Perfect 10 is the owner of the valuable and well-known Perfect 10 family of trademarks. These marks are used by Perfect 10 in connection with the sale of its products, including PERFECT 10 magazine. Perfect 10 has spent millions of dollars advertising and promoting the PERFECT 10 mark and Perfect 10 products and services and has sold millions of dollars of products and services under the PERFECT 10 mark. Perfect 10 has built up and now owns valuable goodwill symbolized by the PERFECT 10 trademark. 43.55. Goods and services bearing the Perfect 10 trademarks have been featured on many television and radio shows (including the Tonight Show, Howard Stern Show, The Sopranos, Dawson's Creek, Battledome, Fox News, Hard Copy, Entertainment Tonight, Extra, The Dating Game, Temptation Island, Monday Night Football, Hanity and Combs, The O'Reilly Factor, The View, and Jenny Jones), in movies (American Pie, Hollow Man, and The Way of the Gun), as well as in many newspapers. 44.56. Perfect 10 regularly employs models and hires photographers in connection with the creation of its photographic works. As a regular part of Perfect COMPLAINT 2914.060\43841. FIRST AMENDED 16 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 18 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10's business, it secures assignments from its models of their rights of publicity in connection with these photographic works. Moreover, as a regular part of its business, Perfect 10 hires photographers who perform work for hire. 45.57. The Perfect 10 website is a subscription site. Consumers are given access to content on the website in exchange for the payment of a membership fee. The Business of Defendants B. Defendants' Business 46.58. Upon information and belief, Perfect 10 alleges that Defendants operate their businesses in the following manner: MasterCard and Visa are structured as open, joint venture associations with members (primarily banks) that issue payment cards, acquire merchants who accept payments, or both. Visa members have the right to issue Visa cards and to acquire Visa transactions from merchants that accept Visa cards. In exchange, they must follow Visa's by-laws and operation regulations. The same is true of MasterCard. 47.59. As an ISO, FDC provides critical processing formaterially contributes to transactions involving hundreds if not thousands of websites, including Stolen Content Websites on behalf, by processing individual MasterCard and Visa charges on behalf of MasterCard, Visa, and a number of their member banks. When a merchant accepts a credit card from a customer for the provision of goods or services, such as including stolen content, the customer executes a sales draft which the merchant electronically presents the card transaction data to an acquirer such as FDC. FDC then presents the transaction data to the association (e.g.submits the transaction to Visa or MasterCard, and Visa MasterCard or Visa), which in turn contacts the issuer of the card to check the cardholder's credit line. The issuer then indicates to the association that it authorizes or denies the transaction; the association relays the message to FDC, who then relays the message to the credit card terminal at the merchant's point of sale. 48. If the transaction is authorized, the merchant will thereafter submit a request for payment to FDC, which relays the request, via MasterCard or Visa, to the issuer of COMPLAINT 2914.060\43841. FIRST AMENDED 17 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 19 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the card. The issuer of the card then pays FDC. FDC in turn then pays the merchant, but retains a percentage of the transaction as a fee for its services. FDC then proceeds to remit a portion of its fee to the issuing bank.or MasterCard verify the validity of the customer's card and available credit. Visa or MasterCard then authorizes or denies the transaction, on a transaction by transaction basis. 60. If Visa or MasterCard authorize a transaction, the merchant immediately transmits the sales draft to FDC, which immediately purchases the draft at a discount. 49.61. The websites for which FDC and other acquirer banks process transactions, are required by MasterCard and Visa to adhere to certain "Terms and Conditions" established by MasterCard and Visa which do not allow ostensibly prohibit illegal content or illegal conduct. 50.62. FDC exercises substantial supervision and control over the Stolen Content Websites for which they process it processes transactions. In fact, such control is required by MasterCard and Visa. require such supervision and control. MasterCard and Visa rules prohibit the processing of transactions that violate federal, state, and local laws. SeeExamples of such rules are attached hereto as Exhibit 2. "3" and incorporated herein by reference. On information and belief, FDC regularly reviews websites for which it processes, ostensibly to assure that they comply with Visa and MasterCard regulations. Plaintiff is informed and believes and based thereon alleges that Visa and MasterCard have rules requiring members and processors to exercise similar close supervision of all merchants. 51.63. Despite supposedly conducting such reviews,which clearly would enable FDC to be in a position where they could police the unlawful conduct, attached hereto as Exhibit 3 are illustrative webpages from websites that FDC, MasterCard, and VisaDefendants continue to support and profit from websites which show obviously clearly infringing content and/or openly disclaim the rights to their content. All of these are websites about whichAs more fully set forth in COMPLAINT 2914.060\43841. FIRST AMENDED 18 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 20 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 paragraph 29, above, Perfect 10 has provided Defendants with notice of unlawful activity. many Stolen Content Websites.. C. Defendants' Wrongful Conduct 52.64. Perfect 10 alleges upon information and belief that each of the Defendants, individually and in concert with others, is providing critical support to Stolen Content Websites engaged in the infringement of the copyrights, trademarks, and publicity rights of Perfect 10 as well as the publicity rights of numerous thirdparty film owners, publishers, models, and celebrities., Plaintiff further alleges uponas follows:. 1. Specific Wrongful Conduct By Defendant FDC 65. Stolen Content Websites for which FDC processes transactions display images that violate Perfect 10's copyrights, trademarks, and assigned rights of publicity, and similar intellectual property rights of third parties. Exhibit "4," hereto is a list of some of the Stolen Content Websites. When a credit card holder uses his or her card to buy a membership to a Stolen Content Website, which purchase is facilitated by FDC, the credit card holder can view, download, and copy these infringing images. 66. Plaintiff alleges upon information and belief that virtually all celebrity content invoking the names and/or images of bona fide celebrities on the Stolen Content Websites which Defendants support is misappropriated, including, more specifically, as follows: 53.67. All or virtually all use of the names and images of bona fide celebrities on the Stolen Content Websites is unauthorized, infringing the rights of publicity of the celebrities, whose names and images are invoked. 54.68. Most of the infringements of Perfect 10 copyrights and rights of publicity occur on the celebrity websites. 55.69. Each of the Defendants is liable for conduct of the other Defendants and the Stolen Content Websites as follows: COMPLAINT 2914.060\43841. FIRST AMENDED 19 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 21 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a. Liability of Defendant FDC: FDC is contributorily liable for the wrongful conduct of the Stolen Content Websites, because it induces, causes or materially contributes to the infringing conduct, with knowledge of the infringing activity. FDC is also vicariously liable for the infringing conduct because it has the right, duty and ability to supervise the activities of the Stolen Content Websites and a direct financial interest in the infringing activity. Plaintiff is informed and believes, and on that basis alleges, that FDC has conspired with MasterCard and Visa and the operators of the Stolen Content Websites for which FDC processes transactions to continue to process payment card transactions and data for the Stolen Content Websites as alleged in this complaint, in order to continue to receive the substantial revenues that the websites' illegal and anti-competitive business practices produce. b. Liability of Defendants MasterCard and Visa: By knowingly allowing and facilitating FDC and others to provide critical credit card processing for stolen content in violation of association rules and regulations, and by transmitting transaction data to facilitate payment to the Stolen Content Websites, MasterCard and Visa are contributorily liable for the dispersion of the illegal materials on Stolen Content Websites, as they induce, cause or materially contribute to the infringing conduct, with knowledge of the infringing activity. MasterCard and Visa are also vicariously liable for the infringing conduct because they have the right and ability to supervise the activities of these parties and a direct financial interest in the infringing activity. Plaintiff is informed and believes, and on that basis alleges, that MasterCard and Visa have conspired with FDC, other acquirer banks, and the operators of the Stolen Content Websites for which acquirer banks processes transactions to engage in the wrongful conduct of such Stolen Content Websites as alleged in this complaint. 1. Specific Wrongful Conduct By Defendant FDC 56. Stolen Content Websites for which FDC processes transactions display images that violate Perfect 10's copyrights, trademarks, and assigned rights of COMPLAINT 2914.060\43841. FIRST AMENDED 20 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 22 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 publicity. See, e.g., Exhibit 4, which is a list of some of the Stolen Content Websites. Once the user buys a membership to a Stolen Content Website, which purchase is facilitated by FDC, the user may view, download, and copy these infringing images. Copies of infringing images that appear on the websites listed in this Exhibit and other websites are too numerous to attach as exhibits, but may be examined or photocopied at the offices of Plaintiff's attorneys. 57.70. Plaintiff alleges upon information and belief that, in addition to the websites identified in the foregoing Exhibit,Exhibit "4", many other websites for which FDC processes transactions infringe Plaintiff's copyrights, trademarks, and rights of publicity., with Defendants' knowing participation. 58.71. Stolen Content Websites for which FDC processes transactions contain content that infringes in other ways the rights of Perfect 10 and third parties to this action, including by the unauthorized display of images of celebrities. Such conduct constitutes unfair competition against Perfect 10. The websites listed on Exhibit 4 attached hereto are illustrative, and upon information and belief, many of those are processed through FDC. The user may view, download, and copy these infringing images. Copies of infringing images that appear on the websites listed on this Exhibit are too numerous to attach as exhibits, but may be examined or photocopied at the offices of Plaintiff's attorneys. 59.72. Plaintiff alleges upon information and belief that, in addition to the websites identified on Exhibit 4,"4," other websites for which FDC processes transactions violate third party rights of publicity, and thereby compete unfairly with Perfect 10. 60.73. Defendants are profiting from and providing critical support for Stolen Content Websites which, aside from stealing massive quantities of celebrity images, commit various forms of unfair competition. Defendants are providing critical support to websites which: COMPLAINT 2914.060\43841. FIRST AMENDED 21 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 23 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a. deceiveDeceive consumers by making false claims about their content. Justcontent such by way of example, Exhibit 1 contains false claims such as "Christina Aguilera Masturbating." Masturbating," "Sandra Bullock Fucking," "Britney Spears Sucks Cock ­ we have proof on video," "Raunchy Stolen Fuck Pics ­ See The Hottest Female Tennis Player Get Both Holes Penetrated At Once!", "J-Lo fucking like a slut," "Lopez takes it up her big beautiful ass!" b. c. b. falsely claim that they are "free." grossly Grossly misstate the number of images they contain. For example, in one case, a website claimed that it had 90,000 images when it had less than 3,000. d. c. e. d. have Have multiple "fronts" leading to the same content. provide Provide memberships to consumers who don't want them, for example, by requiring consumers to affirmatively uncheck a small box, lest they are unwittingly billed for memberships they did not want in the first place. f. e. send Send large amounts of spam. (See, e.g., Exhibit 1). 61.74. Plaintiff alleges upon information and belief that FDC is well aware of the wrongful conduct alleged above.has knowledge of the Stolen Websites' illegal transactions before, when and after they occur. Among other things, Plaintiff and others have notified Defendants of this wrongful conduct but Defendants have continued to provide critical support for, and benefit from, such conduct. COMPLAINT 2914.060\43841. FIRST AMENDED 22 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 24 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 62.75. Starting in January of 2003, Perfect 10 wrote to Martin Elliot of Visa, Noah Hanft of MasterCard, Adam Herbert of FDC, and a variety of attorneys for those organizations putting them on notice of more than 240 specifically identified Celebrity Porn Websites with obvious stolen content that they were supporting. In its January 8, 2003 letter [Exhibit 5], Perfect 10 noted that, "Most celebrity websites induce consumers to join the site based on fraudulent representations regarding the content on the site. Promotions on the home pages of such websites, in search engine results, and on banners, falsely promise, for example, such offensive content as the following: "Britney and Christina, their first time oral sex" (from the TrueCelebs.com website [Exhibit 1]); "Alicia Silverstone pussy video shot" (from the celebwood.com website [Exhibit 1]); "Barbara Streisand Porno!" (from the celebmovie.com website [Exhibit 1]); "Elle McPherson and babysitter filmed fucking and masturbating"(from the Call-girls.net website [Exhibit 1]); "See the hottest female tennis player get both holes penetrated at once!" (from the Celebrityorgy.com website [Exhibit 1]). No such content exists." 63.76. Perfect 10 also noted in its January 8, 2003 letter that many of the celebrity porn sites with obviously stolen content had obviously phony Internet registrations and in many cases defrauded consumers by having different homepages and titles leading to the same content. Exhibit "4" includes a copy of that letter. 64.77. Declarations from celebrities, stating that they have not authorized the use of their name, likeness, or identity on pornographic websites and that they do not want their images and names so used, have also been sent to Defendants. Such declarations, from celebrities such as Britney Spears, Christina Aguilera, Anna Kournikova, Yasmine Bleeth, and others, many of which have been sent to Defendants, are attached hereto as Exhibit 6."5". 65.78. MasterCard and Visa also received a letter from attorneys representing Britney Spears, on March 5, 2003, complaining about paysites notifying them of Stolen Content Websites which defame their client which and are supported by COMPLAINT 2914.060\43841. FIRST AMENDED 23 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 25 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MasterCard and Visa, such as call-girls.net, Babylon-x.com, and scoopy.net, and other websites like truecelebs.com, secretceleb.com, rogerceleb.com, which defame their client by working with sites that promise nude images of Britney Spears and which also contain obviously misappropriated content. A copy of that letter is attached as Exhibit 7. Nevertheless, those sites are continuing to be supported by defendants in this action. Visa. A copy of that letter is attached hereto as Exhibit "6" and incorporated herein by reference. 66.79. Even without notice from Perfect 10 and attorneys for Britney Spears, defendants and attorneys for other celebrities, Defendants knew or should have known about the unlawful activity on the Stolen Content Websites they supported for a number of reasons: (i) many of the websites contained the word "illegal," "celeb," "scan," or "fake" in their URL, suggesting that the website had unlawful material or had unlawfully scanned its images; (ii) many of the websites have disclaimers indicating that they did not own the rights to their content; (iii) most of the websites have obviously unauthorized material on their homepages, such as promises of "beaver shots" of various celebrities, "Britney and Christina ­ their first time oral sex," "Elle McPherson and babysitter filmed fucking and masturbating," and various other similarly outrageous offerings; and sex;" and (iv) many of the websites had obviously phony domain name registrations such as BELIZE CITY, BZ BZ BZ; Box 821 The Valley AI; or BUDA, 1112-H HU. 67.80. Plaintiff alleges upon information and belief that the conduct on the Stolen Content Websites for which FDC sells access is calculated to mislead consumers in the following ways: a. Consumers are likely to be misled to believe that Perfect 10 and others, including celebrities, endorse or authorize the use of their names, likenesses or content on the Stolen Content Websites. COMPLAINT 2914.060\43841. FIRST AMENDED 24 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 26 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 COMPLAINT b. Stolen Content Websites routinely falsely claim to have images of popular celebrities in nude poses or performing sexual acts when in fact the websites do not contain such content. c. Some consumers are likely to believe that "fake" or counterfeit images of popular celebrities on Content Websites are true images of those celebrities. d. Many Stolen Content Websites are designed to appear as multiple websites with separate content, when in fact the webpages are all part of a single website, or contain the same content, fraudulently inducing consumers to purchase multiple memberships rather than a single membership. 68.81. Perfect 10 has never authorized Defendants, norDefendants or the Stolen Content Websites for which Defendants and other acquirer banks process transactions, to use Perfect 10's copyrighted photographs or trademarks, or to invoke its rights of publicity. Perfect 10 further alleges upon information and belief that no celebrity (known outside the "porn" industry) has authorized Defendants, nor Defendants or the Stolen Content Websites for which Defendants processes transactions, to use his or her photograph or name or to invoke his or her right of publicity. Upon information and belief, Defendants know or should know that such use of celebrity images and identities is not authorized. 69.82. Plaintiff alleges upon information and belief that Defendants have contributory, vicarious and/or aider and abettor liability for the infringements of Perfect 10's copyrights and other wrongful conduct on the Stolen Content Websites for which Defendants processes transactions. 2. Specific Wrongful Conduct By Defendants MasterCard and Visa 70. The Stolen Content Websites which receive critical support from FDC and other acquirer banks, and which display images that violate Perfect 10's copyrights, 25 2914.060\43841. FIRST AMENDED Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 27 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 trademarks, and assigned rights of publicity, are in turn regulated by MasterCard and Visa, as more fully set forth above. 71.83. Plaintiff is informed and believes that and based thereon alleges that MasterCard and Visa regulations require the associations to review the content of websites that accept MasterCard and Visa credit cards as a form of payment. Despite the existence of such regulations, both MasterCard and Visa have, despite extensive notice from Perfect 10 regarding the unlawful activities in which the Stolen Content Websites have been engaged, repeatedly failed to enforce these regulations, and as a result, have permitted this unlawful activity to continue unabated.Plaintiff is also informed and believes that Visa "sponsors" merchants, reviews and approves their websites, and requires a $750 fee to do that. Without Visa sponsorship, merchants cannot process VISA cards. Upon information and belief, Perfect 10 further alleges that MasterCard and Visa have allowed some of the largest and most successful Stolen Content Webmasters to run chargeback rates far in excess of those allowed by their rules and regulations, such as, for example, 6% and higher, when the purported established Visa/MasterCard limit is not more than 1% 72.84. Simultaneously, while turning a blind eye to what is occurring on Stolen Content Websites accepting MasterCard and Visa as forms of payments, Visa and FDC have ironically--and unfairly--made it impossible for Perfect 10 to accept Visa as a form of payment on a new website, by arbitrarily terminating Perfect 10's merchant account in 2001 and wrongfully placing Perfect 10 and its president on the black list. FIRST CLAIM FOR RELIEF (Copyright Infringement, Vicarious Liability, and Contributory Infringement Against All Defendants -- 17 U.S.C. §§ 501 et seq.) 73.85. Perfect 10 realleges and incorporates herein by reference each and every allegation of paragraphs 1 through 7284 above as though fully set forth at length. COMPLAINT 2914.060\43841. FIRST AMENDED 26 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 28 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 74.86. At all times relevant hereto, Perfect 10 has been the owner of all right, title, and interest to each of the copyrights in suit, or has been assigned the copyrights and all claims for infringement of those copyrights. Perfect 10 (or its predecessor in interest) has registered the copyrights for its magazines, calendars, website, and photographs, each of which contain individually copyrighted works that Defendants have unlawfully reproduced, copied, prepared derivative works from, distributed, and publicly displayed. Perfect 10's United States copyright registrations are as follows: Copyright Registration No. Title of Work TX 4-556-514 Perfect 10 Magazine (Vol. 1; Number 1) TX 4-556-511 Perfect 10 Magazine (Vol. 1; Number 2) TX 4-556-482 Perfect 10 Magazine (Vol. 1; Number 3) TX 4-556-510 Perfect 10 Magazine (Vol. 1; Number 4) TX 4-556-475 Perfect 10 Magazine (Vol. 1; Number 5) TX 4-556-541 Perfect 10 Magazine (Vol. 1; Number 6) TX 4-812-575 Perfect 10 Magazine (Vol. 2; Number 1) TX 4-813-355 Perfect 10 Magazine (Vol. 2; Number 2) [PAGE BREAK] COMPLAINT 2914.060\43841. FIRST AMENDED 27 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 29 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Copyright Registration No. Title of Work TX 4-812-793 Perfect 10 Magazine (Vol. 2; Number 3) TX 4-813-026 Perfect 10 Magazine (Vol. 2; Number 4) TX 4-812-972 Perfect 10 Magazine (Vol. 2; Number 5) TX 4-813-344 Perfect 10 Magazine (Vol. 2; Number 6) TX 4-813-338 Perfect 10 Magazine (Vol. 3; Number 1) TX 4-813-390 Perfect 10 Magazine (Vol. 3; Number 2) TX 5-172-229 Perfect 10 Magazine (Vol. 3; Number 3) TX 5-201-630 Perfect 10 Magazine (Vol. 3; Number 4) TX 5-217-598 Perfect 10 Magazine (Vol. 3; Number 5) TX 5-328-427 Perfect 10 Magazine (Vol. 3; Number 6) TX 5-328-528 Perfect 10 Magazine (Vol. 4; Number 1) TX 5-328-636 Perfect 10 Magazine (Vol. 4; Number 2) TX 5-488-941 Perfect 10 Magazine (Vol. 4; Number 3) TX 5-488-942 Perfect 10 Magazine (Vol. 4; Number 4) TX 5-451-806 Perfect 10 Magazine (Vol. 4; Number 5) TX 5-452-020 Perfect 10 Magazine (Vol. 4; Number 6) TX 5-452-132 Perfect 10 Magazine (Vol. 5; Number 1) TX 5-452-254 Perfect 10 Magazine (Vol. 5; Number 2) TX 5-452-489 Perfect 10 Magazine (Vol. 5; Number 3) TX 5-802-012 Perfect 10 Magazine (Vol. 5; Number 4) Pending Perfect 10 Magazine (Vol. 5; Number 5) Pending Perfect 10 Magazine (Vol. 5; Number 6) PA 776-173 Perfect 10 Model of the Year Video (G-Rated) PA 955-019 Perfect 10 Model of the Year Video (R-Rated) VA 987-612 Perfect 10 2000 Calendar COMPLAINT 2914.060\43841. FIRST AMENDED 28 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 30 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Copyright Registration No. Title of Work VA 1-026-167 Perfect 10 2001 Calendar VA 996-673 Perfect 10 Website (Perfect10.com) VA 1-085-670 Perfect 10 Website (Perfect10.com) VA 1-177-241 Perfect 10 Website (Perfect10.com) VA 1-201-270 Adele Stephens, Asia Carrera, and Nikki Nova Photos Published in 1996 VA 1-201-269 Jenna Jameson Photos Published in 1994 VA 1-201-268 Adele Stephens and Veronika Zemanova Photos Published in 1998 VA 1-202-770 Veronika Zemanova Poolside Photo Published in 2000 VA 1-202-771 Veronika Zemanova Poolside Photos Published in 1999 VA 1-208-295 Amy Weber Photos 1998 VA 1-208-275 Amy Weber Photos 1998 Volume 2 VA 1-208-244 Amy Weber Photos 1999 VA 1-221-373 Amy Weber Photos 1997 Pending Amy Weber Photos 1998 Volume 3 Pending Perfect 10 Behind the Scenes, Volume 1 Pending Perfect 10 Behind the Scenes, Volume 2 Date of Recordation June 12, 2003 Volume 3498 Page Description 888 Certificate of Recordation of Agreement for Assignment of Rights to Perfect 10, Inc. for the following Copyright Registrations. COMPLAINT 2914.060\43841. FIRST AMENDED 29 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 31 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Copyright Registration No. VAU 514-094 Photo Number on Continuation Sheet 2111B, 2134A, 2134B, 2150, 2151B, 2160, 2168, 2177 1874, 1880, 1883, 1884A, 1884B, 1889A, 1889B, 1890, 1891, 1892, 1894B, 1899, 1984A 1906, 1907A, 1907B, 1941, 1942, 1943, 1945, 1954 Title of Work March 2001 JSH Photo Registration March 1999 JSH Photo Registration VAU 353-469 VAU 353-504 August 1999 JSH Photo Registration VAU 514- 122 D24, 2214, 2223, 2240, 2242, September 2001 JSH Photo 2264A, 2282, 2288, Registration 1980, 2004, 2010, 2028, 2031A, 2031B, 2032A, 2032B, 2037 2053, 2054, 2058, 2079, 2086, 2087, 2093A, 2093B, 2102, 2105, 2119, 2412, 2435, 2439, 2451A, 2451B, 2452, D35, D36, 2311, 2345, 2348, 2366 1867, 1873 1834 February 3, 2000 JSH Photo Registration September 2000 JSH Photo Registration July 2002 JSH Photo Registration June 2002 JSH Photo Registration February 1999 JSH Photo Registration February 1999 J. Stephen Hicks Photo Registration Assignment of Copyright from Roman Salicki Assignment of Rights from J. Stephen Hicks Photography, Inc. VAU 353-511 VAU 323-589 VAU 537-932 VAU 537-946 VAU 353-439 VAU 353-448 COMPLAINT 2914.060\43841. FIRST AMENDED 30 Case 5:04-cv-00371-JW Document 45-2 Filed 09/24/2004 Page 32 of 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 75.87. Attached hereto as Exhibit 8"7" are copies of Perfect 10's copyright registrations. 76.88. Perfect 10's copyrighted photographs are contained in PERFECT 10 magazine and Perfect 10 calendars, which will be made available to Defendants' attorneys at the offices of Perfect 10's attorneys, and in Perfect 10's website, which can be accessed at perfect10.com. 77.89. Each of Perfect 10's copyrighted works consists of material wholly original with Perfect 10, and each is copyrightable subject matter under the laws of the United States. 78.90. Plaintiff is informed and believes, and on that basis alleges, that Defendants have knowingly induced, caused, encouraged, and assisted others to infringe, and/or materially contributed to the infringement by others of Perfect 10's copyrights, including by the reproduction, alteration, public display and distribution of the copyrighted works on the Stolen Content Websites, as set forth above. 79.91. Plaintiff alleges upon information and belief that Defendants knew, based on explicit notice and on the open and obvious infringing nature of the content, that photographs on the Stolen Content Websites were infringing and had reason to know that other photographs on the websites were infringing. Indeed, some of these photogr

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