Adware on Pirated Movie Sites Raises Legal Questions

Washington-based adware vendor Zango has been in the spotlight in recent days for cooperating with web sites that serve pirated movies and TV shows online. There have been calls to sue Zango — but such a step could open a can of worms.

The whole story all started with a post on the FaceTime Security Labs Blog last week about Movietvonline.com, which forces Windows-using visitors to install Zango’s adware application in order to access a catalog of bootlegged video streams and downloads. FaceTime followed up with reports about several other sites doing the same thing; install Zango, get access to Hollywood blockbusters and TV show episodes.

Security researcher Ben Edelman told Computerworld earlier this week that he believes Zango is violating the DMCA by cooperating with sites like Movietvonline.com and that Hollywood would win a court case against Zango. “I think this would be a pretty good one to pursue, because Zango is profiting directly from the infringement,” he added. While the idea of Hollywood suing an adware company sounds enticing, is the case really that clear-cut? And what kind of implications could a successful Hollywood lawsuit have for other advertisers in the online video space?

In the Computerworld article, Edelman argued that Zango wasn’t protected by the DMCA’s safe harbor provisions because it makes money from affiliate deals with sites like Movietvonline.com. He quoted from the DMCA safe harbor statute that a company cannot “receive a financial benefit directly attributable to the infringing activity” if it wants to be protected by the DMCA.

But not everyone thinks that means Hollywood would have a case against Zango. Electronic Frontier Foundation Senior Staff Attorney Fred von Lohmann points out that the actual text of the safe harbor provision only invokes the financial benefit in a case where the service provider “has the right and ability to control such activity.”

Said von Lohmann: “Affiliate relationships are not, by themselves, going to disqualify a service provider from the DMCA safe harbors. Disqualification requires both financial benefit and the right and ability to control the infringement,” adding that he had no idea whether Zango had that level of control in this case.

To be honest, we don’t know either, but it doesn’t look like it. Movietvonline.com is hosted on a server in Panama, and the domain is registered through an anonymous domain registrar based in China. Some of the other Zango affiliates mentioned on the FaceTime blog are hosted in the U.S., with at least one of the site registrations pointing to a registrant based in Sacramento. There doesn’t seem to be any clear pattern that would lead us to assume all of the sites are owned by one single entity, much less by Zango.

So why does this matter? Major advertisers like Wal-Mart have been criticized for buying ad space on torrent and other online video sites that offer access to unlicensed content. Rights holders have shied away from suing any of these advertisers so far, but there’s a first for everything — and an adware vendor, which inspires little sympathy, makes for a really bad precedent. Next up could be affiliate advertisers on torrent sites, and then it’s only a question of time until someone sues Starbucks for running ads that happen to be placed right next to user-uploaded Daily Show clips on your favorite online video site.

More NTV coverage on DMCA issues from this morning: Judge: Fair Use Important Before Takedown

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