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To read comments to this article, go here
How Many Words is Fair Use? Maybe More Than You and AP Thought: Let's Look at a Righthaven Case
Wednesday, September 22 2010 @ 02:23 PM EDT

There is an interesting ruling [PDF] in a Righthaven copyright infringement case, one of its tidal wave of copyright infringement cases against bloggers in Nevada, Righthaven v. Klerks et al. TechDirt highlights that the ruling indicates that the judge is willing to listen to the defendants' argument that there was an implied license. It's also a case asserting fair use. Anyone blogging would do well to read it, so I have it as text for you.

A reader had copied and pasted an entire article from a Righthaven client, The Las Vegas Review Journal, to a comment on the blog. The blogger was located in Illinois, not Nevada, which meant that to contest, he'd have to hire a Nevada lawyer to represent him in this case. Righthaven sent the notice of the litigation to the wrong address initially, and so the defendant didn't know it was happening until there was already a clerk's default against him. What should he do? Nothing? Call Righthaven and work out payments? Or hire a lawyer and try to get the default set aside? What would you do?

I've collected all the important documents in the case so far, so you can see exactly what this defendant did. So far, he did a number of things right.

You may find this ruling educational, because it was a ruling on a motion to set aside the default, and the judge explains when a court is allowed to set aside a default or a default judgment, and then he goes down the list of the four factors courts consider when looking at a fair use defense, and all four tilted, with this judge, in favor of letting the defendant assert the defense. So she set the default aside, and the fight is on. It will now cost Righthaven real money to pursue the litigation, which I gather from what I've read is exactly what they'd prefer not to have to do, since I gather from what I've read that their business model appears to be to pressure out-of-state defendants to just settle rather than fight, kind of like the RIAA's strategy.

If the RIAA interests you, here's an article by Tony Mauro on Law.com about a file-sharing case that it looks like the US Supreme Court may rule on, thanks to a petition [PDF] filed by K.D. Camara in Harper v. Maverick Recording Company. The Court has just asked the RIAA to weigh in, BLT reports:

After Kiwi Camara of Camara & Sibley in Houston filed the petition in May, Maverick in August waived its right to respond, which often occurs in Court practice. But on Sept. 15, according to the Court's online docket, the Court requested a response from Maverick.

The Court's unusual action is a sign of the Court's interest in the case.

Camara's petition, BLT says, "asserts that the downloaders should be viewed as 'innocent infringers' subject to smaller fines than record companies sought." It's another KaZaa case, but it's the first music downloading copyright case to reach the US Supreme Court. So you might want to keep an eye on it.

Because this Righthaven defendant decided to fight, we get to see what works and what doesn't. Several things stand out to me:

1) Hire a lawyer as soon as you know you are being sued, even if it's after there is a default. And note that there is a difference between a clerk's default and a judge's issued default judgment. In this case, the defendant acted so promptly, he had his motion filed right after the clerk's default but before a default judgment issued. The judge found that indicative of his interest in using the court system fairly. So don't assume it's too late. Even a default judgment can be set aside for good cause.

2) It's skating on thin ice to republish an entire article without permission. Even here, the judge said it is possible for such a thing to be fair use in a noncommercial environment, but personally, I'd rather not take that chance. So if you are not the owner of the blog, don't post questionable materials, because while you are the right party to be sued, entities like Righthaven may sue the blog owner too, because of what you did. So, think. Having said that, this judge didn't rule out the possibility that it could be fair use to have posted an entire article in a noncommercial setting, given that the article was predominantly informational, not as creative a work as a novel. I know I've seen articles by AP that were one paragraph of nothing but a string of facts. You can't copyright facts. So where is the line? This case will address that question.

3) This was an interesting case too because I think it marks the turning point for Righthaven. It has been aggressively suing bloggers, even when they are not the ones posting the allegedly infringing works. Klerks's motion puts it like this:

Mr. Klerks has a meritorious defense. Righthaven is a “copyright troll” -- an entity formed for the sole purpose of acquiring copyrights of allegedly infringed articles published in the Las Vegas Review-Journal and then suing, without prior notice, any web site operator whose site contains any portion of the article, regardless of whether the web site operator itself published the material. Since March 2010, Righthaven has filed approximately 100 such lawsuits in the District of Nevada. If the case cannot be settled, Mr. Klerks intends to assert several meritorious defenses, including fair use, de minimis copying, and implied license.
Now, some have wondered why Righthaven chooses to sue bloggers, who don't usually have large buckets of money, and for things they didn't do without any notice first. I've seen some write that the motive is to imitate the RIAA and try to bully settlements from bewildered little people who don't have lawyers on staff and might just pay up something to make it all go away.

The facts of this case seem to me to lead to exactly that thought. For example, Righthaven claimed to the court that it had served the defendant. The judge believed the defendant, who said it had not, in that they served the wrong address. And when the defendant realized there was litigation against him when a reporter called him, his newly hired lawyer immediately approached Righthaven to ask that they agree to set aside the default, and Righthaven refused. Then when the defendant asked why not, there was no answer. That's just hardball, considering the facts as presented by the judge, and it did not go well for Righthaven as a result. It doesn't smell like good faith, does it? Note this snip from the defendants' reply memo in support of its motion to set aside the default:

As usual with Righthaven and its counsel, what should be a simple issue -- even a matter of courtesy among counsel -- now becomes the subject of a 23-page opposition. Instead of agreeing to vacate entry of default (and even acknowledging the possibility that Righthaven’s process server did not properly serve Defendant Jan Klerks), Righthaven insists on spending thousands of dollars in legal fees and wasting the Court’s time arguing about whether Mr. Klerks should have the right to defend himself on the merits, despite the fact that Righthaven has failed to identify any possible prejudice that it would suffer as the result of vacating default.

Do you know how many cases Righthaven has in this same US District Court in Nevada? 132. Yes. 132 cases are listed on PACER. Do you think the judges there are starting to catch on? This judge certainly noticed. She writes:

Plaintiff does not argue that it will be prejudiced if the suit goes forward. In light of this and the fact that Plaintiff has aggressively pursued over 100 similar suits alleging copyright infringement, allowing one more to proceed should not prejudice Plaintiff.
Federal judges don't get the job because they are stupid. Righthaven is using copyright law "aggressively", as this judge put it. You and I might choose a different adverb.

4) The implied license defense impressed this judge, who references in the footnote a scholarly work, Using the Implied License to Inject Common Sense into Digital Copyright, by John S. Sieman:

1 As the internet has developed into more of an opt-out system, the argument has been made that only the act of sharing information from websites that actively choose to be removed from participating in the system is generally recognized as unacceptable, despite the Copyright Act being an opt-in system. John S. Sieman, Comment, Using the Implied License to Inject Common Sense into Digital Copyright, 85 N.C. L. Rev. 885, 887-93 (2007).
Sieman is an attorney at the IP law firm Finnegan, by the way. Not all lawyers are bottom-feeding, low life sharks who think only about money. Here's where you can get his article, but just the table of contents is interesting. Here's the first sentence:
Existing copyright law is not well-suited to handle the transmission of copyrighted works over the Internet.
Amen. As the article points out, it's an opt-out system. Copyright is the opposite. So that's why there are issues, and that's why all the indignation about sharing misses an important element. Lexis has the article too, as does the British Library Direct, a service where you can search for free and then pay for what you want. Lexis shows a more significant snip from the introduction of the article, one that implicates policy questions as to the use of copyright as a method of censorship:
In January 2007, CBS News chief foreign correspondent Lara Logan sent out an e-mail asking for help. She objected to the fact that a story developing two blocks from her office in Baghdad was being "ignored" by the CBS Evening News, which normally aired her reports. Less than two miles away from the seat of Iraq's government, in Baghdad's "Green Zone," footage showed what appeared to be several Iraqi army soldiers fallen in combat, and the bodies of several Iraqi civilians showing clear signs of torture. Buildings smoldered and crumbled nearby. The CBS Evening News didn't run the story, even though it found time in January for stories on the Super Bowl, soccer, lottery winners, horse racing, and reality television shows. The footage appeared on YouTube, a subsidiary of Google, however, and has been viewed more than 25,000 times.

Many Internet users sought out another Logan scoop on YouTube, where Logan's report about children starving nearly to death in an Iraqi orphanage, and her interview with CNN about attempts by the U.S. government to suppress the story, were viewed more than 10,000 times. About a year after that story aired, Logan told The Daily Show that the American public was grossly uninformed on the wars in Iraq and Afghanistan, and that the soldiers fighting them felt forgotten. She noted that the media never shows footage of dead soldiers to the American public, so that "nobody really understands" the wars except those ...

I think you can see how a judge might take that seriously.

You know how I always tell you that there is a time lag but judges do grasp new technology over time, and then the tide starts to turn and things become more balanced? This is Exhibit A.

Common sense does argue that if you don't want your work copied, don't put it on the Internet without clear restrictions in the first place. Don't let Google include it, and don't tell people to share it with their friends. Put it on the iPad, or whatever, behind a paywall if you wish to, instead, but if you throw it to the winds, the winds may carry it where you didn't intend.

There's a culture on the Internet, and when you arrive in a new culture, it's you that needs to fit in, not the culture that preexisted. And the culture of the Internet is sharing. Stop and think about what the Internet is: lots of computers linking together to share information. That's its design and its purpose. No one invented it so you could sell stuff. That is your desired use of it, but it's not the purpose of the invention. So, go away and don't share a thing if you don't want to, but if you are on the Internet, there is a presumption that you do intend to share with others what you put out there. Companies do need to think about this and make their wishes a lot clearer, or this implied license defense might just keep showing up and winning. This judge found it the most persuasive defense the defendant raised.

So those are the most important issues I see in this ruling. AP has issued statements about how many words you can quote "legally", and that is nonsense, according to this ruling, as you will see. Ever since AP started claiming that X number of words is all that is allowed, I stopped linking to them on Groklaw, because I know from experience that I can send a lot of readers to a site, and after they said that, I didn't want to help them at all, not until they change their policy. Maybe after reading this ruling, they just might do exactly that. And because I don't want to be bothered with litigious entities. I've had more than my share of that to last a lifetime.

There is no X number of words that the law sets as necessarily all right to copy or not all right, as you will see in the judge's ruling. It's case by case, so fair use is situational. All four elements will be analyzed if you go to court as a defendant. So when AP said what it did, my reaction was that they were overreaching, and since they have lawyers who know what fair use is supposed to be, it bothered me enough to decide not to ever link to them again.

If you blog, take a look at the ruling. Keep in mind that while it's clear how this judge feels, not all judges agree with each other, so yours in a different state might have a different analysis. If you are in different country, it doesn't apply at all, of course, since fair use is a US concept. And law, as Eben Moglen once said, is squishy. What happens in one court might not happen in another.

Also context matters, the specific facts of the case. This ruling came about like this: Righthaven had sent the summons to the wrong address, and so the defendant defaulted, not even aware that it was happening. But when reading about it on the Internet, the defendant realized what had happened, hired a lawyer and got it set aside. So now it will go to court, and the defendant will have an opportunity to demonstrate that the use was fair.

There is no guarantee that the defenses this defendant chose will be successful in the end, but he did win the right to so argue, and that despite language like this in Righthaven's opposition to the motion:

Mr. Klerks' Motion to Set Aside Default (the "Motion”) should be denied because Mr. Klerks fails to provide a single meritorious defense to the copyright infringement claim set forth in Righthaven's Complaint, and because the entry of default was the result Mr. Klerks' unexcused failure to timely appear in this lawsuit. Mr. Klerks asserts a de minimis defense despite the fact that his infringing act constitutes a verbatim copy of a Righthaven-owned literary work in its entirety. Additionally, Mr. Klerks' infringement is not protected by fair use because: Mr. Klerks' wholesale reproduction contains no transformative value whatsoever, the infringing act was performed as a means of advancing the commercial elements of Mr. Klerks' website, and the infringement impaired the literary work's present and future value by superseding the work's original purpose. In fact, the defenses proffered by Mr. Klerks are so erroneous that it is reasonable to question whether said defenses were asserted in good faith. Furthermore, the lone excuse offered by Mr. Klerks in an effort to justify his failure to timely respond to the Complaint is squarely undermined by the sworn statements already on file with the Court. Finally, as Mr. Klerks has neither demonstrated a meritorious defense to the copyright claim nor sufficiently excused his failure to timely respond to Righthaven's allegations, the Court need not evaluate the possibility of prejudice resulting from the Court's ruling on Mr. Klerks' Motion.
Copyright has gotten so out of balance, folks like this don't even try to sound pleasant, let alone act pleasantly. And the judge didn't accept its assertions. But so far, the issue was only if the defendant could get the default set aside, and it was in this context that the judge considered his various defenses. At this stage, they only need to be plausible enough to go forward. That's a lower bar than to prevail in the end of a copyright infringement case. But because the defendants didn't just roll over and let his pocket get picked by a default, the rest of us can benefit from watching his experience and from reading this judge explain fair use. If there is a meritorious fair use defense, then the plaintiff has a higher burden, in that it has to show actual damage in the market.

I have been expecting the courts to push back in time against copyright aggression. They started to with the RIAA, so those guys decided to get legislation and ISPs to go their way instead. The courts were no longer working out the way they'd hoped. There is a tacking process that I've seen in courts over and over. When one side gets overbearing, there is often a pushback, not in Congress so much, but in the courts. Federal judges have an independence that politicians don't. And I view this as an example of courts waking up and smelling the coffee, and not liking the smell much at all.

As a side point, this particular case was originally assigned to the same judge who handled SCO v. AutoZone, Judge Robert C. Jones, but he reassigned it to another judge.

I decided to get more of the documents in the case than just the order, so you can follow the story more closely. The law has subtleties to it, and you don't want to overdo it when trying to decide what a case might mean. Plus this one is just getting started. But some of you might have just rolled over if this happened to you, and you may find it helpful to see how important it is to hire a lawyer immediately if you wish to have your interests properly represented before a judge. Courts also have a culture, and you are wise to try to fit in to that culture and act the way judges think is appropriate and indicative of good faith.

Update: Here's Mr. Klerk's LinkedIn profile. It's more than likely that his gravitas also helped:

Jan graduated from the Erasmus University of Rotterdam where he got a degree in spatial economics and urban sociology. For his final thesis he did research on high-rise living in Rotterdam.

Before moving to Chicago, Jan was self employed and commissioned to act as executive director of the Dutch Council on Tall Buildings, one of active local sister organizations of the Council on Tall Buildings and Urban Habitat. In this position, he was responsible for organizing conferences, publishing newsletters, conducting study projects, supporting high-rise related activities and maintaining the professional network in the Netherlands.

Next to that he chaired the Rotterdam Skyscraper Foundation, through which local publications and activities for the general public are organized. As such he initiated the first Rotterdam Skyscraper Festival in 2007.

Next to that Jan, owns and administrates skyscrapercity.com, the world's largest Web site on skyscrapers and urban related topics. Regularly, Klerks gives lectures or writes articles for a professional, educational or a general audience or conducts high-rise related studies for third parties.

That's the website in question. He's a high-rise expert, now with the nonprofit Council on Tall Buildings and Urban Habitat.

Here are all the important documents filed, followed by the order, as text:

*****************************************

2:10-cv-00741-GMN-LRL Righthaven LLC v. Klerks et al
Gloria M. Navarro, presiding
Lawrence R. Leavitt, referral
Date filed: 05/19/2010
Date of last filing: 09/17/2010

Filed & Entered: - 05/20/2010
Assign Judges in Civil Case
Docket Text: Case assigned to Judge Robert C. Jones and Magistrate Judge Lawrence R. Leavitt. (EDS)

1 - Filed & Entered: 05/20/2010
Complaint
Docket Text: COMPLAINT against Jan Klerks, Stichting Wolkenkrabbers (Filing fee $ 350 receipt number 0978-1616877), filed by Righthaven LLC. Certificate of Interested Parties due by 5/30/2010. Proof of service due by 9/17/2010. (Attachments: # (1) Exhibit, # (2) Civil Cover Sheet, # (3) Summons)(Coons, John)

2 - Filed & Entered: 05/20/2010
Notice re AO 85 Consent to Proceed Before a Magistrate Docket Text: NOTICE PURSUANT TO LOCAL RULE IB 2-2: In accordance with 28 USC § 636(c) and FRCP 73, the parties in this action are provided with a link to the "AO 85 Notice of Availability, Consent, and Order of Reference - Exercise of Jurisdiction by a U.S. Magistrate Judge" form on the Court's website - www.nvd.uscourts.gov. Consent forms should NOT be electronically filed. Upon consent of all parties, counsel are advised to manually file the form with the Clerk's Office. (no image attached) (EDS)

3 - Filed & Entered: 05/20/2010
AO 121 Copyright Form
Docket Text: AO 121 - REPORT on the filing or determination of an action or appeal regarding a copyright. Mailed to the Register of Copyrights, Copyright Office. (Attachments: # (1) Complaint) (EDS)

4 - Filed & Entered: 05/20/2010
Summons Issued
Docket Text: Summons Issued as to Jan Klerks. (EDS)

5 - Filed & Entered: 05/26/2010
Certificate of Interested Parties
Docket Text: CERTIFICATE of Interested Parties filed by Righthaven LLC Identifying Corporate Parent Net Sortie Systems, LLC, Corporate Parent SI Content Monitor LLC for Righthaven LLC. (Coons, John)

6 - Filed & Entered: 05/27/2010
Reassign Judge Minute Order
Docket Text: MINUTE ORDER IN CHAMBERS of the Honorable Chief Judge Roger L. Hunt, on 5/27/2010. IT IS ORDERED that this case is reassigned to the Honorable U.S. District Court Judge Gloria M. Navarro for all further proceedings. The Honorable U.S. District Court Judge Robert C. Jones is no longer assigned to this case. All further documents must bear the correct case number 2:10-cv-00741-GMN-LRL. (no image attached) (Copies have been distributed pursuant to the NEF - AF)

7 Filed & Entered: 06/17/2010
Summons Returned Executed
Docket Text: SUMMONS Returned Executed by Righthaven LLC re [1] Complaint, [4] Summons Issued. Jan Klerks served on 6/14/2010, answer due 7/5/2010. (Coons, John)

8 - Filed & Entered: 07/08/2010
Terminated: 07/09/2010
Motion for Entry of Clerks Default
Docket Text: MOTION for Entry of Clerks Default by Plaintiff Righthaven LLC. Motion ripe 7/8/2010. (Coons, John)

9 - Filed & Entered: 07/09/2010
Clerk's Entry of Default
Docket Text: Clerk's ENTRY OF DEFAULT as to Jan Klerks re [8] MOTION for Entry of Clerks Default. (EDS) Set Aside per [14] Order. (ASB)

10 - Filed & Entered: 08/17/2010
Terminated: 09/17/2010
Motion to Set Aside
Docket Text: MOTION to Set Aside Default by Defendants Jan Klerks, Stichting Wolkenkrabbers. Responses due by 9/3/2010. (Attachments: # (1) Declaration Jan Klerks in Support of Motion to Set Aside Default, # (2) Declaration Michael J. McCue in Support of Motion to Set Aside Default)(Williams, Nikkya)

11 - Filed & Entered: 09/03/2010
Response to Motion
Docket Text: RESPONSE to [10] MOTION to Set Aside Default, filed by Plaintiff Righthaven LLC. Replies due by 9/13/2010. (Coons, John)

12 - Filed & Entered: 09/03/2010
Declaration
Docket Text: DECLARATION of Joseph C. Chu re [11] Response to Motion ; by Plaintiff Righthaven LLC. (Attachments: # (1) Exhibit)(Coons, John)

13 - Filed & Entered: 09/13/2010
Reply to Response to Motion
Docket Text: REPLY to Response to [10] MOTION to Set Aside Default ; filed by Defendant Jan Klerks. Defendant Jan Klerks' Reply in Support of His Motion to Set Aside Default (McCue, Michael)

14 - Filed & Entered: 09/17/2010
Order on Motion to Set Aside
Docket Text: ORDER Granting [10] Motion to Set Aside Default. Signed by Judge Gloria M. Navarro on 9/17/10. (Copies have been distributed pursuant to the NEF - ASB)

**************************************
**************************************

UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

_________________________

RIGHTHAVEN LLC, a Nevada limited-
liability company,

Plaintiff,

vs.

JAN KLERKS, an individual; and
STICHTING WOLKENKRABBERS, an
individual,

Defendants.

___________________________

Case No.: 2:10-cv-00741-GMN-LRL

ORDER

__________________________

INTRODUCTION

Before the Court is Defendant's Motion to Set Aside Default (ECF No. 10), Plaintiff's timely Response (ECF No. 11) and Defendant's Reply (ECF No. 13).

The Court has considered the pleadings and arguments offered by the parties. IT IS HEREBY ORDERED that Defendants' Motion to Set Aside Default (ECF No. 10) is GRANTED.

BACKGROUND

Plaintiff, Righthaven LLC, filed this lawsuit on May 19, 2010 against Defendants, Jan Klerks and Stichting Wolkenkrabbers, alleging copyright infringement. (ECF No. 1).

Righthaven filed an Affidavit of Service attesting that Mr. Klerks was personally served with the Summons, Complaint, and exhibits on June 14, 2010 at 3360 South State Street, Chicago, Illinois, 60616. (ECF No. 7). Plaintiff filed a Motion for Entry of Clerk's Default (ECF No. 8) on July 7, 2010, and Default (ECF No. 9) was entered on July 9, 2010. However, before a Default Judgment was entered, Defendants filed this Motion to

Set Aside Default (ECF No. 10) on August 17, 2010. Plaintiff filed a timely Response on September 3, 2010 (ECF No. 11), and Defendants replied on September 13, 2010 (ECF No. 13). In his motion, Mr. Klerks denies that he ever received these court papers and contends that his office actually is located at [redacted], not 3360 South State Street. (Klerks Decl. ¶ 3). Defendant also claims that he did not learn of the lawsuit until a Las Vegas Sun reporter called him. (Id. at ¶¶ 4-5). Defendant obtained a copy of the Complaint through the internet and alleges that he still has not ever been personally served in this case. (Id. at ¶ 5).

DISCUSSION

Federal Rule of Civil Procedure 55(c) provides that "[t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b)."

"The 'good cause' standard that governs vacating an entry of default under Rule 55(c) is the same standard that governs vacating a default judgment under Rule 60(b)." Franchise Holding II, LLC. v. Huntington Restaurants Group, Inc., 375 F.3d 922, 925 (9th Cir. 2004). As a practical matter, however, courts have broader discretion in evaluating relief from an entry of default. See Brady v. United States, 211 F.3d 499, 504 (9th Cir. 2000) ("[A] district court's discretion is 'especially broad' when . . . it is entry of default that is being set aside, rather than a default judgment."). The standard is applied generously and more liberally where only a default has been entered with no accompanying default judgment. See Cracco v. Vitran Exp., Inc., 559 F.3d 625, 630-31 (7th Cir. 2009); In re OCA, Inc., 551 F.3d 359, 370 (5th Cir. 2008).

The Ninth Circuit has held that there are three factors to be considered when weighing whether or not there is good cause: (1) whether the defendant's culpable conduct led to the default; (2) whether the defendant has a meritorious defense; or (3) whether reopening the default judgment would prejudice the plaintiff. Franchise Holding

2

II, 375 F.3d at 925. "Where timely relief is sought from a default . . . and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the [default] so that cases may be decided on their merits." Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1996).

A. Defendant's Culpable Conduct

A defendant's conduct is culpable "where there is no explanation of the default inconsistent with a devious, deliberate, willful, or bad faith failure to respond." Employee Painters' Trust v. Ethan Enterprises, Inc., 480 F.3d 993, 1000 (9th Cir. 2007) (quoting TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 698 (9th Cir. 2001)). As this court has noted in another case:

Under this prong, where a defendant has received actual or constructive notice that suit has been filed and has intentionally failed to answer, a court may find that there has been culpable conduct leading to the default. See [Knoebber, 244 F.3d] at 697. In this context, "intentional" means that the defendant acted willfully, deliberately, or in bad faith. Id. Where a defendant negligently failed to answer, but then offers a "good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decision making, or otherwise manipulate the legal process," a court will find that the defendant has not acted intentionally. Id. Culpable conduct involves "not simply nonappearance following receipt of notice of the action, but rather conduct which hindered judicial proceedings." Id. at 698.
Ernestberg v. Mortgage Investors Group, No. 2:08-cv-01304-RCJ-RJJ, 2009 WL 160241, at *2 (D. Nev. Jan. 22, 2009).

Defendant claims that he was never properly served with a summons and complaint and that his office is located at a different address. Further, once Defendant learned that Righthaven was claiming that service had been effected, he promptly retained counsel and filed the instant motion. This evidence does not demonstrate

3

culpability on Defendant's part. The fact that he sought counsel shortly after he received constructive notice from the news reporter that Righthaven was claiming to have effected service, and then also promptly filed this motion before a default judgment was requested, shows that Defendant was trying to cooperate with judicial proceedings in good faith, not hinder them. Therefore, this factor weighs in favor of setting aside the clerk's default.

B. Meritorious Defense

As to the second factor--whether Defendant has a meritorious defense, a party needs to "demonstrate facts or law showing the trial court that a sufficient defense is assertable." Knoebber, 244 F.3d at 699. "[T]he burden on a party seeking to vacate a default judgment is not extraordinarily heavy." Id. at 700.

i. Fair Use

Fair use of a copyrighted work is a valid defense to an allegation of infringement of copyright under the Copyright Act. 17 U.S.C. § 107. The Copyright Act directs a court to analyze four factors when the defendant asserts the affirmative defense of fair use:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001); Field v. Google Inc., 412 F. Supp. 2d 1106, 1117-18 (D. Nev. 2006). All factors are to be explored and weighed together in light of the purposes of copyright when evaluating fair use. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 114 S. Ct. 1164, 1171

4

(1994). Noncommercial, nonprofit activity is presumptively fair. See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 448, 104 S.Ct. 774, 792 (1984). This is because a use that has no demonstrable effect upon the potential market for, or the value of, the copyrighted work need not be prohibited in order to protect the author's incentive to create. Id. at 450. If the intended use is for a noncommercial purpose, the likelihood of harm must be demonstrated. Sony, 464 U.S. at 451, 104 S.Ct. at 793.

The first factor relates to the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes. Defendant argues that the allegedly infringing article was posted by a third-party to an informational, non-commercial website maintained by Defendant and that this website is dedicated to sharing information about skyscrapers and urban development among enthusiasts around the world. As it can be properly asserted and reasonably argued in this case that the article was posted by a reader of the Defendant's site for the non-commercial purpose of sharing information and not for the purpose of making a profit for the reader or the site, the first factor is sufficiently satisfied and weighs in favor of setting aside the default.

The second factor considers the nature of the copyrighted work. Defendant argues that the copyrighted work was largely informational, meaning that it is more likely to fall within the realm of fair use. See Los Angeles News Serv. v. Reuters Television Int'l Ltd., 149 F.3d 987, 994 (9th Cir. 1998); Hustler Magazine Inc. v. Moral Majority Inc., 796 F.2d 1148, 1153-54 (9th Cir. 1986) ("The scope of fair use is greater when 'informational' as opposed to more 'creative' works are involved."); see also Harper & Row Publishers, Inc. v. National Enterprises, 471 U.S. 539, 563, 105 S. Ct. 2218, 2232 (1985) ("The law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy."). Plaintiff argues that, even though the subject of the work

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is based largely on fact, creativity was needed to structure the contents of the article.

Acknowledging that a news article may require some degree of creativity in order to appeal to its reader, the court nevertheless does agree with the Defendant that the article is primarily informational and, therefore, finds that this second factor also weighs in favor of the Defendant.

Defendant does not deny that the third factor, which examines the amount and substantiality of the portion used in relation to the copyrighted work as a whole, is a factor weighing against him, as the entire allegedly infringing article was posted on his website's forum.

Finally, in regard to the fourth factor--the effect of the use upon the potential market for or value of the copyrighted work, Defendant argues that posting the allegedly infringing article did not have any impact on the market for the original work because the same article was viewable to the public for free on the Las Vegas Review-Journal's website and is still available to anyone for free through a Google search for the article.

However, Plaintiff argues that it is entitled to a presumption of market harm because of the commercial elements surrounding the infringing activities, such as its own advertisement rates and the number of advertisers listed on the infringing website.

Plaintiff also argues that the infringement is non-transformative because it is merely a copied-and-pasted reprint of the work in its entirety. This factual contradiction does not equate to an unmeritorious defense, but, rather, weighs in favor of the Defendant, as it raises issues that would need to be resolved later in the litigation, were the court to grant the motion to set aside default.

Despite these factual contradictions raised by Plaintiff, when one considers the facts provided to the court and weighs all of the above factors, Defendant has asserted a sufficiently meritorious affirmative defense of fair use. It is important to note that the

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standard imposed under this factor test is whether or not the defense is reasonably assertable, not whether Defendant will actually succeed on this particular defense.

ii. Implied License

Perhaps Defendant's most meritorious defense is his other affirmative defense, implied license. "An implied license can be found where the copyright holder engages in conduct from which the other party may properly infer that the owner consents to his use." Field, 412 F. Supp. 2d at 1116 (internal quotation marks omitted). Defendant argues that the original copyright holder offered the article to the world for free, encouraged people to save and share the article with others without restrictions, and permitted users to "right-click" and copy the article from its website.

Plaintiff argues that it gave no such license to the Defendant, or anyone else. Plaintiff instead claims that allowing users to hyperlink to its page is demonstratively different than allowing users to copy the entire article. Plaintiff argues that allowing a user to copy an entire article and post it to the user's website is similar to allowing a user to copy a library book and distribute the copies; a practice that it notes is illegal under current copyright laws. Even though Plaintiff is correct in regard to the redistribution of complete hard copies derived from a copyrighted library book in physical form, Defendant has still made a plausible argument based on the recent cases addressing the copying of works taken from the internet. The Defendant has reasonably asserted that the Plaintiff's conduct may have constituted an implied license and that the Defendant may have properly inferred that the owner consented to the use, especially in light of the established and accepted custom of users freely and openly sharing certain information

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posted on the internet.1 Thus, Defendant has asserted a sufficiently plausible affirmative defense to warrant setting aside the default. Defendant also claims a third meritorious defense but as he has already met his burden, it is not necessary for the court to address it at this time.

C. Prejudice to Plaintiff

The third factor, prejudice to Plaintiff, turns on "whether plaintiff's ability to pursue his claim will be hindered." Id. at 701 (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). Plaintiff does not argue that it will be prejudiced if the suit goes forward. In light of this and the fact that Plaintiff has aggressively pursued over 100 similar suits alleging copyright infringement, allowing one more to proceed should not prejudice Plaintiff.

CONCLUSION

Defendant has satisfied the Ninth Circuit's three-factor test to set aside default.

Therefore, this Court HEREBY ORDERS THAT Defendant's Motion to Set Aside Default is GRANTED.

DATED this 17th day of September, 2010.

[signature]
Gloria M. Navarro
United States District Judge

__________________________

1 As the internet has developed into more of an opt-out system, the argument has been made that only the act of sharing information from websites that actively choose to be removed from participating in the system is generally recognized as unacceptable, despite the Copyright Act being an opt-in system. John S. Sieman, Comment, Using the Implied License to Inject Common Sense into Digital Copyright, 85 N.C. L. Rev. 885, 887-93 (2007).

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