Comeback Media, Inc. v. Particle Media, Inc., et al.

Background

Comeback Media, Inc., doing business as Next Impulse Sports, publishes articles on its websites and earns advertising revenue through arrangements with news applications and websites. The opinion identifies Particle Media, Inc. as “NewsBreak,” and Digital Next, Inc. as “Total Impulse.” Comeback alleged that Total Impulse copied its articles, pictures, videos, and trademark and published them on NewsBreak, taking traffic and revenue that otherwise would have gone to Comeback.

Comeback alleged that NewsBreak gave Total Impulse verified-publisher status, directed users to Total Impulse’s copies instead of Comeback’s articles, and failed to restore referrals to Comeback after suspending Total Impulse’s account. Comeback asserted five claims against NewsBreak: trademark infringement, vicarious copyright infringement, contributory copyright infringement, unfair competition under California law, and common-law misappropriation. NewsBreak moved to dismiss all five claims under Federal Rule of Civil Procedure 12(b)(6), which requires dismissal when a complaint does not adequately state a legally actionable claim.

Contributory copyright infringement

The court granted the motion on the contributory-copyright claim. Such a claim requires allegations that the defendant knew about specific infringement and materially contributed to or induced it. The court held that Comeback could rely on either actual knowledge or facts showing that NewsBreak had reason to know, but Comeback still had to allege knowledge of specific infringers or instances of infringement.

The court found that Comeback did not allege that NewsBreak had actual knowledge or received a notice of the infringement. The alleged presence of copied material on NewsBreak, even if the copying was obvious, was not enough by itself to show the required specific knowledge. The court also found that Comeback had not adequately pleaded material contribution or inducement. Although Comeback alleged problems with NewsBreak’s verification practices, it also alleged that NewsBreak suspended Total Impulse after discovering its misconduct.

Vicarious copyright infringement

The court denied the motion on the vicarious-copyright claim. A plaintiff must allege that the defendant had the right and ability to supervise the infringement and received a direct financial benefit from it. The court found that NewsBreak’s terms of service allowed it to decide whether publishers’ content would be hosted and to remove content, and that Comeback’s allegation that NewsBreak suspended Total Impulse’s account supported the claim that NewsBreak exercised content control.

The court also found a plausible connection between the alleged infringement and NewsBreak’s financial benefit. Comeback alleged that NewsBreak received traffic and advertising revenue from articles on its platform and that Total Impulse’s copying led to a collapse in traffic to Comeback’s articles. The court therefore allowed the vicarious-copyright claim to proceed.

Direct trademark infringement

The court dismissed Comeback’s direct-trademark-infringement claim. Direct infringement requires the defendant itself to use the mark in a way likely to cause consumer confusion. The court held that Comeback’s allegations showed Total Impulse, not NewsBreak, was using the mark. Hosting or displaying Total Impulse’s material and directing users to it could, at most, facilitate Total Impulse’s use; those allegations did not establish that NewsBreak directly used the mark.

State-law claims and copyright-law preemption

The court held that the Copyright Act preempted, meaning displaced, Comeback’s state-law unfair-competition and misappropriation claims. A state-law claim is not preempted only when it protects rights qualitatively different from copyright rights and contains an additional element that changes the nature of the claim.

The court concluded that Comeback’s unfair-competition claim was based on allegations that NewsBreak’s verification process allowed bad actors to obtain verified status and monetize stolen content. The court viewed those allegations as involving encouragement or inducement of copyright infringement. It likewise concluded that the misappropriation claim was based on copying and distributing Comeback’s articles and interfering with Comeback’s ownership rights, which were not qualitatively different from rights protected by copyright.

Disposition

The court granted in part and denied in part NewsBreak’s motion to dismiss. It granted the motion as to contributory copyright infringement, denied it as to vicarious copyright infringement, and dismissed the direct-trademark-infringement, unfair-competition, and misappropriation claims against NewsBreak. Because this was Comeback’s first opportunity to respond to a motion to dismiss, the court granted Comeback leave to amend. The opinion does not state that any dismissal was with or without prejudice.