Malibu Media LLC v. Doe

Filing 48

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 6/9/2014: For the reasons stated in this decision, the Court grants plaintiff's motion to dismiss defendant's counterclaim [dkt. no. 30] and grants in part plainti ff's motion to strike certain affirmative defenses [dkt. no. 32]. Specifically, the Court strikes affirmative defenses 1, 2, 5, 8, 17, and 19 but declines to strike defenses 3 and 4. The case is set for a telephone status hearing on June 19, 2 014 at 9:00 a.m., for the purpose of setting a schedule for discovery. Plaintiff's counsel is to get defendant's counsel on the telephone and then call chambers (312-435-5618). Counsel are directed to confer in advance of the hearing to attempt to agree on a schedule to propose to the Court. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

MALIBU MEDIA, LLC,
Plaintiff,
vs.
JOHN DOE, subscriber assigned IP
address 24.14.139.173,
Defendant.

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No. 13 C 3648

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Plaintiff Malibu Media LLC has filed a copyright infringement suit against
defendant John Doe,1 who is identified only by his use of the IP address 24.14.139.173.
Doe has asserted nineteen affirmative defenses and a counterclaim for declaratory
relief. Malibu Media has moved to dismiss the counterclaim and to strike eight of the
affirmative defenses. For the reasons stated below, the Court dismisses Doe's
counterclaim and strikes all but two of the disputed defenses.
Background
The Court takes the following facts from Malibu's complaint, indicating which
facts are and are not disputed. Malibu is a California-based company that creates and
distributes adult films. Doe contends that the company also creates and distributes
child pornography as that term is defined in certain federal statutes, or at least that it

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Doe's gender is unknown to the Court. The Court will refer to Doe as "he," as the
parties have in their briefs.

fails to comply with certain federal statutory requirements geared toward preventing the
production and distribution of child pornography.
BitTorrent is an online venue for peer-to-peer sharing of large amounts of data,
including digital video files. According to Malibu, "[e]ach bit of a BitTorrent file is
assigned a unique cryptographic hash value" which "acts as that bit’s unique digital
fingerprint." Compl. ¶ 14. Doe disagrees, stating that "[i]t is possible (although rare) for
two unrelated pieces to have an identical cryptographic hash value, as a matter of pure
coincidence." Answer ¶ 15.
Malibu says that at a date not identified in the complaint, its retained investigator,
IPP Limited, established a TCP/IP connection with Doe and downloaded one or more
bits of various digital media files from him. All of the bits, Malibu alleges, belong to
copyrighted films that it owns. Malibu alleges that IPP was able to confirm that it had
downloaded Malibu's copyrighted content from Doe. Malibu further alleges that "[a]t no
time did IPP Limited upload Plaintiff's copyrighted content to any other BitTorrent user."
Compl. ¶ 20.
Malibu has sued Doe for direct copyright infringement. It requests statutory
damages of $150,000 per infringed work pursuant to 17 U.S.C. § 504(a) and (c). Malibu
also alleges that Doe is distributing its copyrighted films via BitTorrent. Malibu bases
this allegation on the fact that Doe pays the bill for Internet service associated with an IP
address that is being used to distribute the movies.
As indicated earlier, Doe's answer to Malibu's complaint includes nineteen
affirmative defenses, and he has also asserted a counterclaim for declaratory relief. In
his counterclaim, Doe seeks a determination that his affirmative defenses are

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meritorious and that he is not liable to Malibu for copyright infringement. He does not
seek damages. Malibu has moved to dismiss the counterclaim pursuant to Federal
Rule of Civil Procedure 12(b)(6) and to strike eight of Doe's affirmative defenses
pursuant to Rule 12(f), specifically, defenses 1, 2, 3, 4, 5, 8, 17, and 19.
Discussion
In considering Malibu's motion to dismiss Doe's counterclaim, the court "accept[s]
all well pleaded allegations in the counterclaim as true and draw[s] all reasonable
inferences in favor of the counterclaim plaintiff." Cozzi Iron & Metal, Inc. v. U.S. Office
Equip., Inc., 250 F.3d 570, 574 (7th Cir. 2001). "If the allegations in a complaint do not
'state a claim to relief that is plausible on its face,' the claim cannot survive a motion to
dismiss." Carmody v. Bd. of Trs. of Univ. of Ill., 747 F.3d 470, 480 (7th Cir. 2014)
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
A court may strike an affirmative defense if it is legally insufficient on its face.
See Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). The
standard for deciding a motion to strike an affirmative defense is effectively the same as
the standard for a motion to dismiss a complaint for failure to state a claim. See, e.g.,
Renalds v. S.R.G. Restaurant Grp., Chicago, LLC, 119 F. Supp. 2d 800, 802-03 (N.D.
Ill. 2000). Doe therefore must make factual allegations sufficient to raise the asserted
defenses above the “speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). The Court accepts the allegations in the affirmative defenses as true and
considers them in the light most favorable to Doe. Id. at 572.
The Court addresses Doe's counterclaim first and then addresses each of the
disputed affirmative defenses.

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A.

Counterclaim.
Doe's counterclaim seeks no affirmative relief other than a determination that his

affirmative defenses are meritorious and that he is not liable to Malibu for copyright
infringement. As such, it is not appropriately a counterclaim. See Rayman v. Peoples
Sav. Corp., 735 F. Supp. 842, 852 (N.D. Ill. 1990) (citing Tenneco Inc. v. Saxony Bar &
Tube, Inc., 776 F.2d 1375, 1379 (7th Cir. 1985), and Green Bay Packaging, Inc. v.
Hoganson & Assocs., Inc., 362 F. Supp. 78 (N.D. Ill. 1973), for the proposition that what
is actually a defense to a suit does not become an independent claim based on its
relabeling). The Court therefore dismisses Doe's counterclaim.
B.

Affirmative defenses.2
1.

Copyright misuse. The doctrine of copyright misuse 'prevents copyright

holders from leveraging their limited monopoly to allow them control of areas outside the
monopoly." Assessment Tech. of WI, LLC v. WIREdata, Inc., 350 F.3d 640, 647 (7th
Cir. 2003) (quoting A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1026–27 (9th
Cir. 2001)). This is not what Doe alleges in support of his first affirmative defense.
First, he contends that "Malibu has made a business model out of pornographic
copyright infringement litigation . . . [and] has been systematically suing John Doe
defendants for infringement, and then seeking settlements, on a scale seldom seen in
the history of federal litigation." Countercl. ¶ 26. Second, Doe maintains that IPP
Limited has itself seeded Malibu's content onto BitTorrent and has thus enabled and
encouraged the very copyright infringement of which it complains. Id. ¶¶ 18-19.

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Doe incorporates the allegations of his counterclaim into his defenses, so the Court's
citations in this section of its decision will be to the counterclaim.
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The Court has a hard time seeing how the former allegation involves "misuse" of
Malibu's copyrights. It is certainly true that Malibu has filed a very large number of
infringement suits in this district and in others. But that is what the holders of intellectual
property rights do when they are faced with mass infringement. Courts in this district
and elsewhere frequently get, for example, lawsuits by trademark owners against
multiple websites that sell counterfeited products bearing the trademark owners' marks.
By way of example, a review of the index of this district's filings reflects that Coach, Inc.
which produces handbags, accessories, footwear, clothing, etc. bearing the company's
trademarks, has filed 57 lawsuits in this district alone within the past four years, many of
them naming dozens and indeed hundreds of entities as defendants. And a search of
this district's index for suits naming "The Partnerships and Unincorporated Associations
Identified on Schedule A," a term commonly used by trademark holders to sue multiple
websites selling counterfeit products, reveals over 75 such lawsuits in the past year
alone by various trademark holders. As best as the Court can determine, not one of
these has led to criticism of the intellectual property right holder for misusing its
trademark, let alone to dismissal of a case for that reason. Presumably the reason is
that although cases involving the doctrine of copyright misuse refer to suing on a
copyright "hoping to force a settlement or even achieve an outright victory over an
opponent that may lack the resources or the legal sophistication to resist effectively,"
Assessment Techs. of WI, 350 F.3d at 647, the predicate for a misuse defense is an
attempt to use the copyright monopoly to control something the monopoly does not
protect. That element is missing from Doe's affirmative defense. The Court is hardpressed to see why Malibu Media's large-volume litigation should be treated differently

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from that of Coach or other intellectual property rights holders simply because Malibu's
intellectual property rights involve pornographic films. (The question of the claimed
illegality of Malibu's films and its effect on copyright protection is addressed in a
separate defense.)
Doe's allegation that Malibu is itself "seeding" its copyrighted content onto
BitTorrent sites and in effect encouraging its distribution there might give rise to a
separate affirmative defense, a topic the Court addresses below, but it does not give
rise to a defense of copyright misuse given the way the Seventh Circuit has defined that
term.
For these reasons, the Court strikes Doe's first affirmative defense.
2.

Estoppel. The Court likewise strikes Doe's second affirmative defense, in

which he alleges estoppel based on his contention that Malibu or its agents have
seeded Malibu's own content onto BitTorrent sites, where it is readily available for
downloading. "For estoppel to apply in a copyright action, the copyright owner must be
aware of the infringing conduct and yet act in a way that induces the infringer
reasonably to rely upon such action to his detriment." Chi–Boy Music v. Charlie Club,
Inc., 930 F.2d 1224, 1228 (7th Cir. 1991). Doe does not allege that Malibu did anything
that misled him to believe that the conduct constituting the alleged infringement was
legal or condoned by Malibu. Doe does not contend that he was aware of the alleged
seeding by an agent of Malibu. Countercl. ¶ 18 ("Doe is not clear on the specifics of
Guardaley’s wrongdoing or what the court specifically found, but is aware that there are
documents, in German, relating to this issue."). And there is no basis to believe that the
mere availability of Malibu's content on BitTorrent would have given Doe the impression

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that the content was unprotected by copyright law or that its downloading and
redistribution was legal.
3.

Unclean hands. "The point [of the unclean hands doctrine] is . . . that a

court will not adjudicate a case if a judgment for the plaintiff would encourage or reward
criminal or other unlawful activity." Schlueter v. Latek, 683 F.3d 350, 355 (7th Cir.
2012). Doe alleges that Malibu has violated federal statutory and regulatory
recordkeeping requirements whose purpose is to enforce legal prohibitions against
production of child pornography.
Specifically, Doe cites 18 U.S.C. § 2257, which requires anyone who produces
(among other things) films of a person engaged in "sexually explicit conduct" to "create
and maintain individually identifiable records pertaining to every performer portrayed in
such a visual depiction." Id. § 2257(a). The statute also requires the person or entity
that produces the film to do the following "with respect to every performer portrayed in a
visual depiction of actual sexually explicit conduct":
(1) ascertain, by examination of an identification document containing
such information, the performer’s name and date of birth, and require the
performer to provide such other indicia of his or her identity as may be
prescribed by regulations;
(2) ascertain any name, other than the performer’s present and correct
name, ever used by the performer including maiden name, alias,
nickname, stage, or professional name; and
(3) record in the records required by subsection (a) the information
required by paragraphs (1) and (2) of this subsection and such other
identifying information as may be prescribed by regulation.
Id. § 2257(b).
Doe contends that Malibu keeps incomplete, deficient, or fabricated records of
the performers in its works. He suggests that at least some of the performers in
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Malibu's works are underage and that the copyrighted content at issue in the case
constitutes child pornography as federal law defines that term. Doe also alleges that
Malibu does not place at the start and end of its films section 2257 compliance notices
that are required by regulation. Doe contends that "[i]f any of the sexually explicit films
featuring young-looking girls at issue here . . . were feloniously produced in violation of
the strict record-keeping requirements of 18 U.S.C. § 2257. . . then the Court should not
enforce copyright monopolies for such films." Def.'s Resp. at 6-7.
The Seventh Circuit has indicated—though it has not squarely held—that "the
prevailing view is that even illegality is not a bar to copyrightability." Flava Works, Inc. v.
Gunter, 689 F.3d 754, 755 (7th Cir. 2012). In that case, however, the court was
discussing obscene works, not child pornography. The primary case the court cited for
the point, Jartech, Inc. v. Clancy, 666 F.3d 403 (9th Cir. 1982), noted that "[p]ragmatism
. . . compels a rejection of an obscenity defense." Id. at 406. The court noted that
under Supreme Court precedent, "obscenity is a community standard which may vary"
and that "[a]cceptance of an obscenity defense would fragment copyright enforcement,
protecting registered materials in a certain community, while, in effect, authorizing
pirating in another locale." Id.
That consideration does not apply to child pornography, the production and
distribution of which is prohibited by federal law—a single, national standard. Section
2257, which is part of federal child pornography prohibition's enforcement mechanism,
is likewise a nationally-applicable requirement. Thus the practical consideration noted
in Jartech does not apply; there is no risk of fragmented or differential enforcement.
The Court understands the considerations that counsel against imposing a non-

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statutory, equitable barrier to copyright enforcement. See generally Mitchell Bros. Film
Grp. v. Cinema Adult Theater, 604 F.2d 852, 861-63 (5th Cir. 1979). That said, the
Court is not prepared to say that federal copyright law would permit one who has
produced child pornography—which cannot be legally produced or distributed anywhere
in the United States—or who has failed to comply with federally-mandated requirements
aimed to deter production of child pornography to enforce a copyright relating to such
material. The Court therefore declines to strike Doe's third unclean hands defense and
leaves for another day the question of whether it is a legally viable defense.
The Court notes that assuming the defense is legally viable, it will require Doe to
establish that Malibu has violated the law with respect to one or more of the particular
films that are the subject of its copyright infringement claims. "[U]nclean hands doctrine
closes the door of a court of equity to one tainted with inequitableness or bad faith
relative to the matter in which he seeks relief . . . ." ABF Freight Sys., Inc. v. NLRB, 510
U.S. 317, 329-330 (1994) (internal quotations omitted) (emphasis added); see also,
e.g., JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 585 (6th Cir. 2007)
(allegations of misconduct that do not concern the cause of action before the court do
not give rise to unclean hands defense).
4.

Implied license. Doe contends that an agent of Malibu, either IPP or an

entity called Guardaley, "seeded" Malibu's content onto BitTorrent and thereby invited
others to download it. He alleges that this amounted to an implied license, precluding a
claim of infringement. Malibu denies that any such seeding occurred, but the factual
accuracy of Doe's allegation cannot be resolved on a motion to strike.

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A non-exclusive license may be implied by the conduct of the copyright holder.
See, e.g., I.A.E., Inc. v. Shaver, 74 F.3d 768, 776 n.9 (7th Cir. 1996). Malibu says that
Doe cannot meet the requirements for establishing an implied license. It relies upon,
among other cases, Kennedy v. Nat'l Juvenile Det. Ass'n, 187 F.3d 690 (7th Cir. 1999,
in which the Seventh Circuit stated that "[a] n implied license has been granted when (1)
the licensee requests the creation of a work; (2) the licensor creates the work and
delivers it to the licensee who asked for it; and (3) the licensor intends that the licensee
copy and distribute the work." Id. at 694. Because there is no allegation that Doe
requested creation of the work and thus no meeting of the minds, Malibu argues, the
requirements for an implied license are not met. See Pl.'s Mot. to Strike at 7.
It does not appear to the Court that the three-part test referenced in Kennedy and
I.A.E., Inc. describes the only way to establish an implied license. In Baisden v. I'm
Ready Prod., Inc., 693 F.3d 491 (5th Cir. 2012), for example, the Fifth Circuit indicated
that all that is needed to show an implied license is that the "totality of the parties'
conduct indicate[d] an intent to grant such permission." Id. at 501 (internal quotation
marks omitted). In addition, the Seventh Circuit stated in I.A.E., Inc. that relevant intent
"is not the parties' subjective intent but their outward manifestation of it." 74 F.3d at
777.
At this stage of the proceedings, the Court is unprepared to rule out the
possibility that Doe can establish an implied license defense based on "seeding" by
Malibu onto BitTorrent of the particular films upon which its claim against Doe is based..
5.

Single satisfaction rule. The copyright statute permits a copyright holder

to elect an award of statutory damages instead of actual damages and profits. 17

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U.S.C. § 504(c). There is nothing in the statute or any case of which the Court is aware
that would limit Malibu from recovering multiple statutory damage awards from multiple
infringers of the same copyrighted work. Though recoveries from others might
conceivably be a factor to consider in determining the amount of a statutory damages
award, that is not a basis to dismiss Malibu's claim against Doe.
8.

Failure to mitigate damages. Doe concedes that Malibu's election of

statutory damages eliminates failure to mitigate as a viable defense. The Court
therefore strikes Doe's eighth affirmative defense.
17.

Insufficient legal process. Doe has abandoned his defense of insufficient

legal process by failing to respond to this aspect of Malibu's motion to strike.
19.

Failure to join an indispensable party. Doe has conceded Malibu's

contention that it is not required to join joint tortfeasors in a single case.
Conclusion
For the reasons stated above, the Court grants plaintiff's motion to dismiss
defendant's counterclaim [dkt. no. 30] and grants in part plaintiff's motion to strike
certain affirmative defenses [dkt. no. 32]. Specifically, the Court strikes affirmative
defenses 1, 2, 5, 8, 17, and 19 but declines to strike defenses 3 and 4. The case is set
for a telephone status hearing on June 19, 2014 at 9:00 a.m., for the purpose of setting
a schedule for discovery. Plaintiff's counsel is to get defendant's counsel on the
telephone and then call chambers (312-435-5618). Counsel are directed to confer in
advance of the hearing to attempt to agree on a schedule to propose to the Court.

________________________________
MATTHEW F. KENNELLY
United States District Judge

Date: June 9, 2014
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