VHT, Inc. v. Zillow Group, Inc. addresses the question whether compliance with the registration requirement under Section 411(a) of the Copyright Act can be excused. 69 F. 4th 983 (9th Cir. 2023). The case is the second time the Ninth Circuit considers copyright claims concerning the online display of photos by Zillow Group, Inc. and Zillow Inc. (collectively, "Zillow"), an online real estate marketplace. In VHT Inc. v. Zillow Group Inc. ("Zillow I"), the Ninth Circuit addressed infringement claims related to tens of thousands of real estate property photos displayed by Zillow on its website. 918 F.3d 723, 732, 734 (9th Cir. 2019).
In Zillow I, the Ninth Circuit remanded for consideration of
statutory damages and a determination "whether VHT's photos used on Digs
are part of a 'compilation' or if they are individual photos," id. at
748.
VHT is the largest professional real estate photography studio in the country, and thousands of the copyrighted photos on Zillow's site come from VHT. Id. at 730. VHT's clients, including real estate brokerages and listing services, hire VHT to photograph properties for marketing purposes. Id. The photos are retouched and edited by the company, saved in VHT's electronic photo database, and delivered to the clients per their license agreement. Id. Zillow used VHT's photos in two ways: on its real estate "Listing Platform," which is the primary display of properties, and on a section of the website called "Digs," which "features photos of artfully-designed rooms in some of those properties and is geared toward home improvement and remodeling." Id.
Following summary judgment rulings, a jury trial and various post-trial motions, Zillow I affirmed the district court in large part. Specifically, the Ninth Circuit agreed with the district court that Zillow was not liable for direct, secondary or contributory infringement. See id. at 750. However, the court determined that Zillow's addition of searchable functionality on the Digs home design webpages was not fair use. See id. at 743-44.
In this second appeal, Zillow argues that the district court erred in excusing VHT's compliance with the registration requirement under Section 411(a).
Affirmed — VHT complied with then-existing precedent from the Ninth Circuit and now, at this late stage in the proceedings, the statute of limitations has already expired. Imposing a new registration timeline after years of discovery, reliance on circuit precedent, a jury trial, a bench trial and two appeals would be a judicial travesty and waste of resources.
* * *
The Copyright Act provides that no infringement action "shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title." 17 U.S.C. § 411(a). More than a decade ago, the Supreme Court made clear that registration is non-jurisdictional. See Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 169, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010). The Court noted that "Section 411(a) imposes a precondition to filing a claim that is not clearly labeled jurisdictional, is not located in a jurisdiction-granting provision, and admits of congressionally authorized exceptions." Id. at 166, 130 S.Ct. 1237 (citing §§ 411(a)-(c)). "Section 411(a) thus imposes a type of precondition to suit that supports nonjurisdictional treatment under [the Court's] precedents." Id. The key question, then, is what constitutes registration.
In Fourth Estate, the Supreme Court granted certiorari to resolve a circuit split on the correct interpretation of 17 U.S.C. § 411(a). A unanimous Court held that "'registration ... has been made' within the meaning of 17 U.S.C. § 411(a) not when an application for registration is filed, but when the [Copyright] Register has registered a copyright after examining a properly filed application." 139 S. Ct. at 892 (alteration in original). Although Fourth Estate overruled Ninth Circuit law in Cosmetic Ideas, the Court did not address or implicate the Court's earlier holding in Reed Elsevier that registration under Section 411(a) is a non-jurisdictional requirement. See Reed Elsevier, 559 U.S. at 169, 130 S.Ct. 1237. The Supreme Court explained that "registration is akin to an administrative exhaustion requirement that the owner must satisfy before suing to enforce ownership rights." Fourth Estate, 139 S. Ct. at 887. It reasoned that "Congress has maintained registration as prerequisite to suit, and rejected proposals that would have eliminated registration." Id. at 891.
Fourth Estate was decided 11 days before the Ninth Circuit issued its opinion in Zillow I. Before our opinion was filed, neither party argued the impact of Fourth Estate through a Rule 28(j) letter or otherwise, nor did Zillow file a petition for rehearing afterward. Instead, after remand, Zillow for the first time argued that VHT failed to satisfy Section 411(a)'s requirement to obtain issued copyright registrations before filing suit, and its claims must be dismissed. The district court concluded that "because § 411(a) is a pre-filing requirement, the fact that this case made it to trial implies a decision that VHT either complied with § 411(a) or was excused from compliance." Alternatively, the district court held that it "would excuse the [exhaustion] requirement in this narrow instance." The district court noted that "dismissal would result in a massive waste of judicial resources" given the advanced stage of the proceedings. We agree that dismissal was not required.
Our review of the district court's excusal of exhaustion is de novo, because the exhaustion requirement is "predominantly a question of law." Hoeft v. Tucson Unified Sch. Dist., 967 F.2d 1298, 1302-03 (9th Cir. 1992). We benchmark whether to excuse compliance with non-jurisdictional exhaustion requirements, thus avoiding dismissal, based on three considerations, namely whether: (1) the claim is "wholly collateral" to the substantive claim of entitlement; (2) there is a "colorable showing of irreparable harm;" and (3) "exhaustion would be futile." Glob. Rescue Jets, LLC v. Kaiser Found. Health Plan, Inc., 30 F.4th 905, 919 (9th Cir. 2022).
The district court did not err in excusing VHT's failure to exhaust under Section 411(a). To begin, copyright registration is wholly collateral to whether Zillow infringed on VHT's copyright. Copyright protection runs from the work's creation, not from registration. See Eldred v. Ashcroft, 537 U.S. 186, 194-95, 123 S.Ct. 769, 154 L.Ed.2d 683 (2003). VHT gained an exclusive right in its photos upon creation—a right "apart from registration" with the Copyright Office. Fourth Estate, 139 S. Ct. at 887. While "registration is akin to an administrative exhaustion requirement," id., the requirement exists to encourage registration because Congress values "a robust federal register of existing copyrights," Cosmetic Ideas, 606 F.3d at 619 (citing H.R. Rep. No. 94-1476 at 158), abrogated on other grounds by Fourth Estate, 139 S. Ct. at 886. Here, the registration requirement is collateral to the merits determination about whether Zillow infringed the copyright. See McBride Cotton & Cattle Corp. v. Veneman, 290 F.3d 973, 980 (9th Cir. 2002) (holding that a claim is collateral "if it is not bound up with the merits so closely that the court's decision would constitute interference with the agency process" (cleaned up)).
No party disputes that dismissing VHT's claim after the statute of limitations has already expired would cause irreparable harm. Such irreparable harm is unique to this case because VHT complied with then-existing precedent from our court and now, at this late stage in the proceedings, the statute of limitations has already expired. To impose a new registration timeline after years of discovery, reliance on circuit precedent, a jury trial, a bench trial and two appeals would be a judicial travesty and waste of resources.
Finally, and importantly, excusal would not undermine the purpose of administrative exhaustion. Exhaustion is generally required to prevent "premature interference with agency processes," to allow the agency to "function efficiently and so that it may ... correct its own errors," to provide courts "the benefit[s] of [the agency's] experience and expertise," and "to compile a record" for judicial review. Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975). Excusal here would not prematurely interfere with the agency process, nor would it deprive the Copyright Office of providing its experience and expertise. The Third Amended Complaint, filed October 24, 2016, pled that the Copyright Office had by then issued the registrations. Alternatively, the Copyright Office had the opportunity to enter an appearance in the case on the issue of registrability but did not do so. See 17 U.S.C. § 411(a). The Supreme Court's concern that "an infringement suit could be filed and resolved before the Register acted on an application" is surely not present in this case. See Fourth Estate, 139 S. Ct. at 889. After the Copyright Office granted VHT's eleventh registration in May 2016, the infringement suit did not go to trial until January 2017, eight months later. By the time the district court excused the exhaustion requirement in its May 2020 decision, it had been over six years since the Copyright Office registered VHT's copyright. Therefore, VHT's failure to obtain a registration before initiating suit did not undermine the administrative process.
The district court properly excused VHT's compliance with the registration requirement under Section 411(a).
THIS CASEBOOK contains a selection of U. S. Court of Appeals decisions that analyze, interpret and apply provisions of the Copyright Act. Volume 1 of the casebook covers the District of Columbia Circuit and the First through the Fifth Circuit Court of Appeals. Volume 2 of the casebook covers the Sixth through the Eleventh Circuit Court of Appeals.