Columbia Pictures Indus., Inc. v. Fung
By Sam Callahan – Edited by Jennifer Wong

Columbia Pictures Indus., Inc. v. Fung, No. CV-06-05578SVW(JCx) (C.D. Cal. Filed Sept. 26, 2006)
Proposed Settlement (hosted by Wired)

Gary Fung, operator of the popular file-sharing website isoHunt.com, has agreed to pay $110 million in damages and will permanently shut down his site in order to settle a copyright infringement lawsuit brought by six major film studios. Stipulation and Proposed Settlement, Columbia Pictures Indus., Inc. v. Fung, No. 2:06-cv-05578SVW(JCx) (C.D. Cal Oct. 17, 2013). The settlement comes after more than seven years of litigation with the Motion Picture Association of America (“MPAA”), which represents the studios—Columbia Pictures, Twentieth Century Fox, and Disney among others.

Claiming more than 44 million users and indexing over 13 million active BitTorrent files, isoHunt was the fourth most popular website of its kind. Other file-sharing sites operated by Fung, including the popular TorrentBox.com, will also shut down as a result of the settlement.

Prior to the recent settlement, two federal courts had ruled against Fung in the lawsuit, first brought in 2006. The United States District Court for the Central District of California found Fung liable for copyright infringement in 2009, and the United States Court of Appeals for the Ninth Circuit affirmed the relevant parts of that holding in March. Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020 (9th Cir. 2013).

The settlement was announced in an official statement from the MPAA. Wired and CNET also report on the recent settlement. A Washington Post blog comments favorably on the outcome, while Techdirt criticizes the settlement’s “bogus” damages value. Patently-O discusses the Ninth Circuit decision preceding the settlement.

The Ninth Circuit unanimously ruled that Fung had induced his isoHunt users to share copyrighted material in order to bolster the site’s traffic and increase advertising revenue. Columbia Pictures, 710 F.3d at 1042. In finding inducement, the court relied on the landmark copyright case Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), in which Justice Souter first applied the “rule on inducement” to peer-to-peer file-sharing networks. Id. at 936. The Grokster court held “that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” Id. at 919.

According to the Ninth Circuit, Fung’s inducement consisted of “red flag knowledge” of his site’s copyright infringement, making him ineligible for protection under the Digital Millennium Copyright Act’s (“DMCA”) “safe harbor” provision. Columbia Pictures, 710 F.3d at 1065. Under some circumstances, that provision protects service providers from liability for copyright infringement violations committed by their users. 17 U.S.C.A. § 512.

The inducement rule has been copyright holders’ key legal weapon in fighting websites like isoHunt. But its use is not without controversy. In an interview with Bloomberg Businessweek shortly after the Grokster ruling, Harvard Law Professor Lawrence Lessig said that the rule “increased the legal uncertainty around innovation substantially and created great opportunities to defeat legitimate competition.”

The $110 million damages imposed on isoHunt are significant but not astronomical in the context of file-sharing settlements. Peer-to-peer networks Grokster, BearShare, and Napster each paid over $25 million to settle claims against them. In 2011, the creator of file-sharing program LimeWire agreed to pay $105 million to settle a similar suit brought by thirteen large record companies, represented by the Recording Industry Association of America.