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VHT, Inc. v. Zillow Group, Inc.

United States District Court, W.D. Washington, Seattle

January 24, 2017

VHT, INC., a Delaware Corporation, Plaintiff,
v.
ZILLOW GROUP, INC., a Washington corporation; and ZILLOW, INC., a Washington corporation, Defendants.

          DAVIS WRIGHT TREMAINE LLP Jonathan M. Lloyd, James L. Howard, Max B. Hensley, Attorneys for VHT, Inc.

          SUSMAN GODFREY LLP Edgar G. Sargent, Genevieve Vose Wallace, Jordan Connors, Jenna Farleigh Attorneys for Zillow Group, Inc. and Zillow, Inc.

          PRETRIAL ORDER

          JAMES L. ROBART United States District Judge

         I. JURISDICTION

         Jurisdiction is vested in this Court by virtue of 28 U.S.C. § 1331, because this case raises federal questions, including under the Copyright Act, 17 U.S.C. § 101 et seq.

         II. CLAIMS FOR RELIEF

         A. Plaintiff's Claims

         The plaintiff will pursue at trial the following claims:[1]

         Plaintiff claims that Defendants infringed its exclusive rights as copyright owners of 27, 358 photographs by reproducing, distributing, and displaying those photographs on the Digs home improvement platform on Zillow's website, www.zillow.com (the "Digs Site"). VHT also maintains that Zillow created unauthorized derivative works of each of those photographs. VHT also asserts claims against Zillow for secondary liability with regard to user posting of images to the Digs Site by reason of Zillow's material contribution to that infringement and its inducement of users to infringe. Zillow is also liable for vicarious liability as it has the right and ability to control those user posts and has a direct financial benefit from use and/or display of the VHT Photographs on the Digs Site.

         VHT holds copyright registrations for 27, 358 images infringed directly or secondarily by Zillow on the Digs Site, creating & prima facie presumption of ownership and validity as to each of them. Each of the photographs is an original work of authorship and copyrightable subject matter, owned by VHT pursuant to work-for-hire agreements and/or assigned by each photographer who created the photographs to VHT for all purposes. The effective date of registration for each photograph at issue in this case is the date of filing of the applications, regardless of whether registration was granted by the Office or is granted by the Court. VHT also asks the Court, as a matter of law, to grant protection for an additional 4, 759 photographs for which the Copyright Office has refused to grant registration.

         VHT seeks actual damages and/or infringing profits to the extent non-duplicative or, at its election at any time prior to final judgment, statutory damages for willful copyright infringement by Zillow. Actual damages will be determined by the amount that a reasonable willing buyer and a willing seller in all the attendant circumstances would have negotiated as of the time of the infringement for licenses to use the images on the Digs Site. VHT is entitled to a statutory damages award for each photograph effectively registered prior to Zillow's infringement and that it can prove has independent economic value, to be determined by the jury within the statutory ranges which vary with the level of Zillow's culpability. VHT maintains that Zillow's conduct was willful.

         B. Defendants' Defenses

         The Defendants will pursue the following defenses:

         1. License

         Zillow holds an implied or express license authorizing the uses of VHT photographs that VHT challenges in this case. The photographs at issue in this case were created by VHT at the request of its customers and clients. When VHT delivered the photographs to its customers and clients, VHT intended that those customers and clients would distribute and copy the photographs. VHT also understood and intended that those customers and clients would submit the photographs to websites, including Zillow, which would themselves copy and display the photographs.

         Evidence supporting the existence and scope of Zillow's license includes: (1) custom and practice in the real estate industry; (2) the course of dealing between relevant parties, including VHT, VHT's clients, Zillow, and other websites; (3) the terms of VHT's written license agreements with many of its clients, including provisions granting those clients rights to use VHT's photographs in marketing efforts and rights to post the photographs to an unrestricted number of websites; (4) the terms of VHT's "Terms of Use, " contained on its website, which Zillow contends does not constitute an enforceable agreement with any customer or client but which nevertheless demonstrate VHT's intent to license its customers and clients with rights to copy and distribute the images on any unrestricted number of marketing platforms, including websites; (5) the terms of the implied license between VHT and any customer or client with whom it does not have a written license agreement, which include, at the very least, the permission to use VHT photographs on an unrestricted number of websites for unrestricted purposes.

         2. Fair Use

         Zillow will show that any copying of VHT images in connection with the operation of the Digs site was fair use. All such copying undertaken by Zillow is performed solely to facilitate operation of the website, primarily for the purpose of improving the display characteristics of the image in various contexts (e.g. display on different devices, or display in different sections of the Zillow website, including Digs). Because this copying is an inevitable and necessary part of operating the Zillow website, because it is overwhelmingly authorized, and because it had no effect on any market for those images, this copying constitutes protected fair use. Zillow asserts that fair use is a complete defense to VHT's allegations of infringement based on the copying of VHT images in order to make them available on Digs. Zillow will not contend that fair use is a defense to allegations of copyright infringement based on the display, as opposed to copying, of images.

3. Unclean Hands Doctrine/Defective Registration

'Zillow contends that VHT is barred from recovering because of unclean hands/defcetive registration with respect to its representations to the Copyright Office that-resulted in the registration

         III. ADMITTED FACTS

         The Parties

         1. VHT is a Delaware corporation with its principal place of business in Rosemont, Illinois.

         2. VHT's primary business involves the creation and curation of photographs of residential real properties listed for sale, and the licensing of those photographs to real estate brokers and agents.

         3. Zillow, Inc. ("Zillow") is a Washington corporation with its principal place of business in Seattle, Washington.

         4. Zillow Group, Inc. ("Zillow Group") is a Washington corporation with its principal place of business in Seattle, Washington. Zillow Group was formed following the announcement of the planned merger of Zillow, Inc. and Trulia, Inc.

         5. Zillow is a wholly owned subsidiary of Zillow Group.

         6. Zillow was founded in 2005 and launched the Zillow.com website in 2006.

         VHT's Photographs

         7. VHT has a network of professional real estate photographers (the "VHT Photographer Network'').

         8. When a broker or agent requests that VHT obtain and license photos of a residential real estate property, VHT dispatches one of the photographers in the VHT Photographer Network (the "dispatched photographer") to shoot photographs of that property.

         9. The United States Copyright Office has issued copyright registrations to VHT for 27, 358 of the photographs that are the subject of this action ("VHT Photographs").

         Zillow's ...


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