Viral DRM LLC v. Margarita

Background

Viral DRM LLC brought copyright infringement and related claims against Shubstor Margarita. It alleged that Margarita downloaded and copied Viral DRM’s copyrighted materials from YouTube and re-uploaded infringing versions to his YouTube channel, When God is Angry. Margarita did not respond to the complaint. The clerk entered his default, and Viral DRM moved for default judgment.

At the hearing, the court questioned whether Viral DRM had standing—the legal authority to bring the claims. The court directed Viral DRM to provide its license agreements and later ordered it to explain why it had standing. The court noted that Viral DRM submitted the same response in several related cases without citations to the record or tailoring the response to the facts of this case.

The copyright registrations for the works at issue identified Michael Brandon Clement as the copyright owner. Clement declared that he was a principal and owner of Viral DRM. Viral DRM later submitted an agreement between itself and Clement. The agreement gave Viral DRM exclusive agency rights to manage and administer the works, search for infringements, register copyrights, authorize attorneys to negotiate settlements, send takedown notices, and file claims. The agreement also stated that the content creator retained the copyright and ownership rights.

Copyright-Infringement and Watermark Claims

The court held that Viral DRM had not shown standing under 17 U.S.C. § 501(b), which permits the legal or beneficial owner of an exclusive copyright right to sue for infringement. Under Ninth Circuit precedent, an assignment or exclusive license can transfer a copyright right sufficient for standing, but a nonexclusive license cannot. The court concluded that Viral DRM’s agreement gave it rights to enforce the videographers’ copyrights but did not give it the exclusive right to authorize third parties to reproduce, distribute, or display the copyrighted videos.

The court also held that Viral DRM had not shown standing for its claims under 17 U.S.C. §§ 1201 and 1202 concerning removal or falsification of copyright-management information, including Live Storms Media’s watermark. The agreements in the record did not mention Live Storms Media, and Viral DRM did not provide evidence of an agreement giving it authority to sue concerning that company’s watermarks. The court stated that the relationships among Live Storms Media, Viral DRM, the videographers, and the works were unclear.

The court therefore denied Viral DRM’s motion for default judgment on the §§ 501(b), 1201, and 1202 claims and dismissed those claims without leave to amend for lack of standing. The court also denied Viral DRM leave to amend those claims after considering its previous opportunities to clarify the claims and supporting evidence.

False Digital Millennium Copyright Act Counter-Notice Claim

The court found that Viral DRM had standing to pursue its claim under 17 U.S.C. § 512(f), which allows damages for material misrepresentations in copyright counter-notices by a copyright owner or authorized licensee. Viral DRM provided licensing agreements with Arnold, Timmer, Jayjack, and Clement; evidence that Clement submitted the takedown notices for Viral DRM; and copies of the counter-notices.

The court granted default judgment on this claim. It found that the complaint adequately alleged the claim, Viral DRM presented reliable supporting evidence, Margarita was properly served but never appeared, and the factors used to evaluate default judgment favored entering judgment.

Viral DRM sought $10,000 but did not justify that amount. The court found no evidence that Viral DRM suffered actual harm because of Margarita’s counter-notices. The employee time described in Clement’s declaration concerned preparing and submitting the takedown notices, rather than responding to the counter-notices. The court therefore awarded nominal damages of $1 for each of four false counter-notices, for a total of $4, plus post-judgment interest at the federal rate. The opinion states that Viral DRM waived any claim for pre-judgment interest, attorney’s fees, and costs, although it suggested it might later seek to amend the judgment regarding pre-judgment interest.

Disposition

Judge Jacqueline Scott Corley granted default judgment on Viral DRM’s § 512(f) claim and awarded $4 in nominal damages plus post-judgment interest. She denied the motion for default judgment on the §§ 501(b), 1201, and 1202 claims, dismissed those claims without leave to amend for lack of standing, and denied leave to amend those claims. A separate judgment was to follow.