Keck v. Alibaba.com, Inc.

Filing 300

ORDER DENYING 292 ALIBABA DEFENDANTS' MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS. Signed by Judge Beth Labson Freeman on 2/21/2019. (blflc3S, COURT STAFF) (Filed on 2/21/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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MICHEL KECK,
Plaintiff,

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v.

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ALIBABA.COM HONG KONG LTD., et
al.,

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Defendants.

United States District Court
Northern District of California

Case No. 17-cv-05672-BLF
ORDER DENYING ALIBABA
DEFENDANTS’ MOTION FOR
PARTIAL JUDGMENT ON THE
PLEADINGS
[Re: ECF 292]

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Plaintiff Michel Keck brings this copyright and trademark infringement action against

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Alibaba.com Hong Kong Ltd. (“Alibaba HK”), Taobao China Holding Ltd. (“TCHL”), Zhejiang

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Taobao Network Co., Ltd. (“Zhejiang Taobao”) (collectively, the “Alibaba Defendants”) and

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numerous Chinese merchants. See generally First Amended Complaint (“FAC”), ECF 286.

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Before the Court is Alibaba Defendants’ Motion for Partial Judgment on the Pleadings

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(“Motion”). Motion, ECF 292. Specifically, Defendants1 move to dismiss Count III of the FAC

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for failure to sufficiently allege the requisite elements of a vicarious copyright infringement claim.

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See Motion at 1. The Court previously ruled that Defendants’ Motion would be determined

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without oral argument. See ECF 299. For the reasons set forth below, the Court hereby DENIES

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Defendants’ Motion for Partial Judgment on the Pleadings.

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I.

BACKGROUND
Plaintiff is a professional artist who resides in Indiana and sells her artwork from her own

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website and through authorized dealers. FAC ¶¶ 1, 180. She alleges that her artwork was

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reproduced and sold on websites operated by Alibaba Defendants—e.g., Alibaba.com,

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In this Order “Defendants” refers to the Alibaba Defendants.

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AliExpress.com, Taobao Marketplace, Tmall, and 1688.com—by Chinese merchants without her

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authorization. See, e.g., id. ¶¶ 149–156, 190–201. Plaintiff alleges that she sent numerous notices

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requesting that the infringing products be taken down from the virtual online stores. See, e.g.,

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id. ¶¶ 264–74, 278–282. Thereafter, on October 2, 2017, Plaintiff filed this lawsuit against

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Alibaba Defendants and numerous Chinese merchants (“Defendant Stores”).
Plaintiff’s original complaint included Defendants Alibaba.com, Inc., Alibaba Group

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(U.S.), Inc., Alibaba Group Holding, Ltd. (“AGHL”), and Alipay US, Inc. On February 7, 2018,

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Keck dismissed Defendant Alipay US, Inc. without prejudice. ECF 165. On August 30, 2018, the

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Court dismissed Defendant AGHL for lack of personal jurisdiction without leave to amend and
dismissed Plaintiff’s claim for vicarious copyright infringement against Defendants Alibaba.com,

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United States District Court
Northern District of California

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Inc. and Alibaba Group (U.S.), Inc. with leave to amend, among other rulings. See Order Granting

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in Part and Denying in Part Alibaba Defendants’ Motion to Dismiss at 25, ECF 277.
Plaintiff subsequently filed her FAC amending, inter alia, her vicarious copyright

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infringement claim. The FAC asserts the following five claims:

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(1) Direct copyright infringement (against Defendant Stores);

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(2) Contributory copyright infringement (against Alibaba Defendants);

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(3) Vicarious copyright infringement (against Alibaba Defendants);

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(4) Contributory trademark infringement (against Alibaba Defendants); and

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(5) Contributory trademark infringement and false designation of origin under 15 U.S.C.
§ 1125(a) (against Alibaba Defendants).

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FAC ¶¶ 373–401. The second and third claims are class claims. The instant Motion for Partial

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Judgment on the Pleadings as to Count III followed. The Court’s prior order at ECF 277 did not

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address vicarious copyright infringement as to Defendants Alibaba HK, TCHL, or Zhejiang

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Taobao (the “Alibaba Defendants” in Plaintiff’s FAC, who bring the instant Motion).

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Additional background2 not relevant to the instant Motion is not restated here.

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For additional background, see the Court’s prior orders at ECF 269 and ECF 277.
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II.

LEGAL STANDARD

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Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed—but

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early enough not to delay trial—a party may move for judgment on the pleadings.” A Rule 12(c)

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motion is “functionally identical” to a Rule 12(b)(6) motion, and the same legal standard applies

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to both. Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir.

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2011). Thus, when considering a Rule 12(c) motion, a district court “must accept the facts as pled

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by the nonmovant.” Id. at 1053. The district court then must apply the Iqbal standard to

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determine “whether the complaint’s factual allegations, together with all reasonable inferences,

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state a plausible claim for relief.” Cafasso, 637 F.3d at 1054 & n.4 (citing Ashcroft v. Iqbal, 556

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U.S. 662 (2009)).

United States District Court
Northern District of California

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A district court generally may not consider materials outside the pleadings in deciding a

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motion under either Rule 12(b)(6) or Rule 12(c), and if such materials are presented to the court

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and not excluded, the motion must be treated as a motion for summary judgment under Rule 56.

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See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the

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pleadings are presented to and not excluded by the court, the motion must be treated as one for

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summary judgment under Rule 56.”). A district court may, however, consider the following

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materials without converting a Rule 12(c) motion to a Rule 56 motion: “(1) exhibits to the

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nonmoving party’s pleading, (2) documents that are referred to in the non-moving party’s

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pleading, or (3) facts that are included in materials that can be judicially noticed.” Yang v. Dar Al-

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Handash Consultants, 250 F. App’x 771, 772 (9th Cir. 2007).

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III.

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DISCUSSION
Defendants argue that Plaintiff’s vicarious copyright infringement claim (Count III of the

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FAC) should be dismissed for failure to sufficiently allege one or both necessary elements of such

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a claim. See Motion at 1–3. Plaintiff counters that “Defendants cannot advance a serious

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argument that, under existing precedent, Keck failed to allege facts supporting the elements of

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vicarious [copyright] infringement.” Opp’n at 2, ECF 296.

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Vicarious copyright liability is an “outgrowth” of respondeat superior. See A&M Records,
Inc. v. Napster Inc., 239 F.3d 1004, 1022 (9th Cir. 2001) (quoting and citing Fonovisa, Inc. v.
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Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir. 1996)). “[T]o succeed in imposing vicarious

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liability, a plaintiff must establish that [1] the defendant exercises the requisite control over the

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direct infringer and that [2] the defendant derives a direct financial benefit from the direct

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infringement.” Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007) (citing

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Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005)). Here, for the

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reasons discussed below, the Court finds that Plaintiff’s FAC contains sufficient factual

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allegations to support a vicarious copyright infringement claim against Defendants. Each element

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is discussed in turn, followed by a short conclusion.

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A.

Requisite Control

“A vicarious infringer ‘exercises control over a direct infringer when he has both a legal

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United States District Court
Northern District of California

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right to stop or limit the directly infringing conduct, as well as the practical ability to do

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so.’” Williams v. Gaye, 895 F.3d 1106, 1132 (9th Cir. 2018) (quoting Amazon.com, 508 F.3d at

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1173).

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First, Defendants argue that Keck does not plausibly allege that Defendants had the right to

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stop or limit the infringing conduct by the Chinese merchants who use Defendants’ websites

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because the merchants are “independent actors whose product listings are not [] materially shaped

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by the Alibaba Defendants.” See Motion at 12. Defendants acknowledge that they have the

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capacity to “remove infringing listings and penalize the sellers,” see Motion at 11, but contend that

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this “prong of vicarious liability requires more than simply the capacity of an online service

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provider to remove infringing material from the system,” see Motion at 10. Defendants cite

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Amazon.com, 508 F.3d at 1172–75 for this proposition. See Motion at 10.

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In Amazon.com, the Ninth Circuit evaluated plaintiff Perfect 10’s contention that Google

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was vicariously liable for third-party websites’ reproduction, display, and distribution of

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unauthorized copies of Perfect 10’s images on the internet. See Amazon.com, 508 F.3d at 1173.

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In reversing the district court’s grant of a preliminary injunction, the Ninth Circuit held that

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Perfect 10 did not demonstrate a likelihood of success in establishing that Google had the right

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and ability to stop or limit the infringing activities of the third-party websites. See id. at 1173. In

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Amazon.com, some third-party websites participated in Google’s AdSense program, which
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matches online content with ads relevant to that content. See id. at 1156, 1166. The Ninth Circuit

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noted that although Google had “the right to monitor and terminate partnerships with [third-party

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websites participating in AdSense] that violate others’ copyrights,” Google “[could] not stop any

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of the third-party websites from [directly infringing] Perfect 10’s images because that infringing

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conduct takes place on the third-party websites.” Id. at 1173–74.

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The Ninth Circuit then contrasted Google’s capabilities to those of the swap meet operators
in Fonovisa, 76 F.3d at 262–63. In Fonovisa, the Ninth Circuit found that a swap meet operator’s

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“broad contract with its vendors” was sufficient to satisfy the control requirement because it “had

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the right to terminate vendors for any reason whatsoever and through that right had the ability to

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control the activities of vendors on the premises.” Id. at 263. Unlike Fonovisa, Google did not

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United States District Court
Northern District of California

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have “contracts with third-party websites that empower Google to stop or limit them from

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reproducing, displaying, and distributing infringing copies of Perfect 10’s images on the

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Internet.” Amazon.com, 508 F.3d at 1173.

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In addition, the Ninth Circuit contrasted Google with Napster in A&M Records, 239 F.3d

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at 1011. “Because Napster had a closed system requiring user registration, and could terminate its

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users’ accounts and block their access to the Napster system, Napster had the right and ability to

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prevent its users from engaging in the infringing activity of uploading file names and downloading

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Napster users’ music files through the Napster system. By contrast, Google cannot stop any of the

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third-party websites from reproducing, displaying, and distributing unauthorized copies of Perfect

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10’s images because that infringing conduct takes place on the third-party websites.” Amazon.com,

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508 F.3d at 1174 (internal quotations and citations omitted).

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Here, although a close call, the Defendants are more similarly situated to the swap meet

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operator and Napster than to Google. Crucially, Plaintiff alleges that Defendants’ websites are

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online marketplaces that constitute “a large ecosystem for online and mobile commerce” over

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which Defendants “exercise high levels of control.” See FAC ¶¶ 11, 133, 151, 253. Plaintiff

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further alleges that Defendants are “involved in the day-to-day operation, control, marketing, and

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design of [the marketplaces].” Id. ¶ 6; see also id. ¶¶ 253, 346–49. For example, Plaintiff

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specifically alleges that “the Alibaba Defendants provide marketing services to merchants who
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operate on Taobao, Alibaba.com and AliExpress, provide guidance for the layout of the

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merchants’ virtual stores, and facilitate transactions between merchants and buyers.” Id. at ¶ 346.

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Thus, unlike in Amazon.com, the alleged direct infringement here takes place not “on the internet”

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writ large but instead on Defendants’ websites/marketplaces. Moreover, Plaintiff alleges that

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Defendants have the right and ability to terminate the membership of merchants who repeatedly

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infringe, the right to remove, modify, or reject unlawful content on the websites/marketplaces, and

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the discretionary right to suspend access to the websites/marketplaces. See FAC ¶¶ 248–251. In

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other words, where Google had the right to terminate the AdSense partnership—which would not

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have stopped direct infringement by third parties—here the Defendants could have ended the
alleged direct infringement on their own websites/marketplaces by terminating or suspending the

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United States District Court
Northern District of California

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merchants’ memberships. See Amazon.com, 508 F.3d at 1174; see also Routt v. Amazon.com, Inc.,

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584 Fed. Appx. 713, 714–15 (9th Cir. 2014) (“A defendant has control over a third party’s

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infringing conduct when the defendant can directly put an end to that conduct.”).

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Second, Defendants argue that Plaintiff does not sufficiently allege that Defendants have

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“the practical ability to stop or limit the [alleged] infringement.” See Motion at 13. Defendants

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acknowledge that Plaintiff alleges that Defendants have deployed technology to identify and take

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down “millions of postings that infringed third parties’ intellectual property rights,” but contend

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that these measures “do not reflect an ability to prevent sellers from uploading infringing listings

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in the first place.” See id. at 13 (emphasis in original). However, as Plaintiff points out, see

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Opp’n at 9, a “practical ability” to stop or limit infringement does not require antecedent

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prevention. Instead, the question is whether Defendants have “the practical ability to police the

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infringing activities of third-part[ies].” See Amazon.com, 508 F.3d at 1174 (emphasis added).

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Indeed, “[t]o escape imposition of vicarious liability, the reserved right to police must be exercised

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to its fullest extent. Turning a blind eye to detectable acts of infringement for the sake of profit

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gives rise to liability.” See A&M Records, 239 F.3d at 1023.

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Here, Plaintiff has adequately alleged that Defendants failed to police their

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websites/marketplaces to the fullest extent, thus permitting detectable acts of infringement to

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occur. For example, Plaintiff alleges that Defendants have technology to proactively identify
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infringing material, see, e.g., FAC ¶¶ 246, 252, and that Plaintiff has repeatedly notified

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Defendants of infringing material, see, e.g., id. ¶¶ 264–73, but that Defendants nonetheless failed

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to remove the infringing material, see, e.g., id. ¶¶ 221, 256, 274–86, 332. As another example,

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Plaintiff alleges that so-called “repeat offenders”—merchants identified as having previously

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infringed—were permitted to continue to use Defendants’ websites/marketplaces despite

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Defendants’ knowledge of the merchants’ infringing activity. See id. ¶¶ 337–341. Plaintiff also

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alleges that Defendants have failed to maintain adequate records of infringing activity, see id.

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¶ 342, which the Court may reasonably infer hinders Defendants’ ability to police their system.

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Taken as a whole, the Court finds sufficient allegations of Defendants’ practical ability to stop or

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limit infringement and failure to police their websites/marketplaces “to [the] fullest extent.” See

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United States District Court
Northern District of California

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A&M Records, 239 F.3d at 1023.

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In sum, Plaintiff sufficiently alleges “a legal right to stop or limit the directly infringing
conduct, as well as the practical ability to do so.” Williams, 895 F.3d at 1132.

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B.

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The Court next turns to the second element of vicarious copyright infringement, whether

Direct Financial Benefit

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“the defendant derives a direct financial benefit from the direct infringement.” Amazon.com, Inc.,

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508 F.3d at 1173. “Financial benefit exists where the availability of infringing material acts as a

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draw for customers.” Ellison v. Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004) (internal

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quotation and citations omitted). “[T]he size of the ‘draw’ relative to a defendant’s overall

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business is immaterial. Indeed, [t]he essential aspect of the ‘direct financial benefit’ inquiry is

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whether there is a causal relationship between the infringing activity and any financial benefit a

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defendant reaps, regardless of how substantial the benefit is in proportion to a defendant’s overall

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profits.” Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657, 673 (9th Cir.), cert. denied, 138 S. Ct.

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504, (2017) (internal quotation and citation omitted). “There is no requirement that the draw be

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substantial.” Ellison, 357 F.3d at 1079.

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Defendants argue that “Plaintiff’s allegations do not establish a direct financial benefit

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from the alleged direct infringement in the manner [] require[d].” See Motion at 16. At the

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pleading stage, the Court disagrees. The factual matter in the FAC, accepted as true, see Iqbal,
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556 U.S. at 678, supports the inference that the allegedly infringing material draws customers to

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Defendants’ websites/marketplaces resulting in benefits to Defendants they would not otherwise

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receive. For example, Plaintiff alleges that Defendants receive commissions from the sale of

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unauthorized copies of Keck’s artwork and that the unauthorized display, reproduction and sale of

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copyrighted works owned by Keck and others draws visitors to Defendants’ platforms. See, e.g.,

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FAC ¶¶ 257–59. As another example, Plaintiff alleges that Defendants have knowledge that

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goods are being sold on their platforms in violation of third parties’ copyright and trademark

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rights, that Defendants have developed the reputation as marketplaces for such “[k]nock-off

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goods,” and that Defendants monetize increased traffic due to those goods. See, e.g., FAC
¶¶ 161–63. These allegations adequately support Plaintiff’s assertion of a causal link between the

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United States District Court
Northern District of California

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merchants’ allegedly infringing activities and financial benefit to Defendants.

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Defendants cite Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004), for the proposition

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that no causal relationship exists here. See Motion at 15–16. In Ellison, the question before the

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court was “whether there [was] a triable issue of a material fact regarding whether AOL received a

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direct financial benefit from the copyright infringement.” 357 F.3d at 1079. The court concluded

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that plaintiff had not offered enough evidence for a reasonable juror to find a direct financial

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benefit. Id. Here, at the pleading stage, the Court is not asked whether Plaintiff has sufficient

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evidence to create a triable issue of material fact. Instead, the question is whether Plaintiff

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plausibly alleged a direct financial benefit to Defendants due to the alleged infringing activity,

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which Plaintiff has.

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C.

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As stated above, the Court finds that Plaintiff has sufficiently alleged vicarious copyright

Conclusion

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infringement. For this claim, full application of the law to the facts would require a developed

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record. The Court has reviewed Defendants’ arguments in full and finds certain arguments

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compelling but better suited for summary judgment or trial on a developed record.

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//

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//

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//
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IV.

ORDER
For the foregoing reasons, Defendants’ Motion for Partial Judgment on the Pleadings at

ECF 292 is DENIED.

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IT IS SO ORDERED.
Dated: February 21, 2019
______________________________________
BETH LABSON FREEMAN
United States District Judge

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United States District Court
Northern District of California

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