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TransUnion, Nicklin, and Preserving the Right to Embed

Twitter website on desktop

Recent decisions in the Southern District of New York have rejected the Ninth Circuit’s “server rule,” which authorizes web content “embedding” an image projected from another website. These decisions have created legal uncertainty regarding a widespread Internet practice. The Supreme Court’s recent holding in TransUnion v. Ramirez that a plaintiff must show concrete harm in order to have standing to sue could lessen the damaging impact of these courts’ rejection of the “server rule.” 

In 2007, the Ninth Circuit held in Perfect 10 v. that a website publisher did not infringe copyright’s display right when it embedded, without authorization, an image hosted on another website. The court reasoned that as a technical matter, an embedded image was transmitted to the user’s computer from the server on which the second website was stored, not the first website. Because the second website’s server actually displayed the image, the first website’s publisher did not infringe the display right by linking to the second website. Under this “server rule,” what mattered was the server from which the image was transmitted to the user, not the website which directed the user to that server. 

The Ninth Circuit’s server rule was embraced by other courts and widely accepted by website publishers and users. Reflecting the Internet’s interconnected nature, the server rule permitted embedding without the fear of copyright infringement liability, which contributed to the dramatic growth of social media.

However, judges in the Southern District of New York have recently begun to question the server rule. At the end of July, Judge Rakoff flatly rejected the server rule as being “contrary to the text and legislative history of the Copyright Act.” In Nicklin v. Sinclair, photographer Paul Nicklin posted a video of emaciated polar bears wandering the Canadian Arctic to his social media accounts. After the video went viral, Sinclair Broadcast Group published an article about the video on its website that embedded the video using the social media platform’s application programming interface embed tool. When Nicklin sued for infringement, Sinclair moved to dismiss, contending that under the server rule, it had not infringed Nicklin’s display right. Judge Rakoff rejected Sinclair’s invocation of the server rule, stating that “the Ninth Circuit’s approach, under which no display is possible unless the alleged infringer has also stored a copy of the work on the infringer’s computer, makes the display right merely a subset of the reproduction right.”

Judge Rakoff also dismissed the suggestion by proponents of the server rule that “a contrary rule would impose far-reaching and ruinous liability, supposedly grinding the internet to a halt.” Judge Rakoff responded that “these speculations seem farfetched, but are, in any case, just speculations.” 

Contrary to Judge Rakoff’s assertion, elimination of the server rule would have an enormously disruptive impact on the Internet. For more than a decade, authors and publishers alike have understood that embedding content created by others did not require a license. If the courts displace the server rule, authors and publishers would not know whether they could embed content hosted on other websites without seeking permission. Nicklin included a caption to his video which explicitly stated that those seeking to license or use the video in a commercial player should contact his manager, but most content online is not so labeled. Could the author of a blog reasonably assume that the absence of a notice on an image posted on another website implied that the copyright owner granted an implied license to embed? Would the publisher of an online magazine have to seek permission for the thousands of embedded images included in the content it published over the past decade, or remove all those links? In addition to crippling the sharing of content on the Internet, elimination of the server rule would provide a fertile new field for copyright trolls. 

The Second Circuit may eventually reverse Nicklin or a similar case rejecting the server rule. In the meantime, the Supreme Court’s decision this June in TransUnion v. Ramirez may provide some relief from Nicklin’s adverse impact within the Second Circuit. TransUnion involved a class action alleging violations of the Fair Credit Reporting Act (“FCRA”). While some of the plaintiffs could show they were harmed by a credit recording agency’s violation of the FCRA, other plaintiffs could not. The Court found that only plaintiffs concretely harmed by a defendant’s statutory violation had standing under Article III of the Constitution to seek the actual and statutory damages available under FCRA. The Court found that this standard could also be met by a showing of a material risk of future harm that was sufficiently imminent and substantial.

Under TransUnion, a rightsholder would have to show that she was concretely harmed by the unauthorized embedding of her content, or that there was a material risk that she would be concretely harmed. In the vast majority of cases where the rightsholder posted her work on a social media platform, the rightsholder would have difficulty showing economic harm in the form of lost revenue. If anyone can access the work directly for free, the rightsholder would likely not succeed in proving her economic harm arising from people accessing the work indirectly by its being embedded in another work. Presumably, a hypothetical license fee that the embedder, along with the rest of the world, did not pay, would not constitute concrete harm. 

To be sure, courts likely would find concrete non-economic harm if the embedder failed to give attribution to the rightsholder and passed the work off as his own. Similarly, they might find concrete economic harm if a commercial entity embedded a work in a manner that truly decreased its economic value. Nonetheless, TransUnion’s concrete harm requirement should provide a useful weapon to defendants, particularly against copyright trolls attempting to trap users who embed content posted on social media platforms. The concrete harm requirement, combined with fair use and implied license, should enable embedding to continue within the Second Circuit until that court adopts the server rule.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.