Small Justice LLC et al. v. Xcentric Ventures LLC [1]

This case arose from the judicial transfer of the copyright in a report [2] entitled "Complaint Review: Richard A. Goren" ("the Report") that was posted on consumer reporting website Ripoff Report on January 31, 2012. The copyright transfer was ordered by a justice of the Massachusetts Superior Court in Goren v. Doe [3].

On July 16, 2013, Goren and Small Justice LLC, a separate entity alleged to have an interest in the copyright of the Report, filed a complaint [4] in the U.S. District Court for the District of Massachusetts against Xcentric Ventures, the owner and operator of Ripoff Report [5], for copyright infringement. The complaint claimed that after the state court transferred copyright ownership to Goren on May 8, 2013, he served Xcentric Ventures on May 14, 2013, with a demand that the defendant cease infringing on his copyright and remove the Report. The complaint alleged that Goren made the same demand on June 25, 2013, and that on June 27, 2013, Ripoff Report -- which has a strict no-removal policy -- notified Goren of its refusal to remove the Report.

The complaint stated that per a preliminary injunction issued by the state court, Google acquiesced to Goren's request to remove the URLs containing the content specified in the injunction, which appeared in response to searches for "Richard Goren attorney" and "Richard Goren fraud." The plaintiffs alleged that after the removal, however, the Report was re-indexed with different dates from the original and appeared again on a Google search. They alleged that these acts of infringement were willful and intentional and that, unless enjoined, the conduct would continue to cause both plaintiffs "great and irreparable injury that [could not] fully be compensated or measured in money." The plaintiffs sought injunctive relief, statutory and actual damages, and attorney's fees, as well as a jury trial.

Plaintiffs filed a First Amended Complaint [6] on  September 2, 2013, adding "Christian DuPont dba Arabianights-Boston Massachusetts" - alleged to be the creator of the original Ripoff Report entry at issue - as a plaintiff. The new complaint also added three new claims against Xcentric: libel, tortious interference, and unfair and deceptive acts under Massachusetts General Laws chapter 93A. The last claim involved allegations that Xcentric operated a scheme where they refused to remove damaging content while offering those affected an opportunity to pay for "arbitration services" to restore their reputations.

Xcentric moved to dismiss [7] the First Amended Complaint on  September 16, 2013, arguing among other things that: (1) the new claims were barred by Section 230 of the Communications Decency Act because they were based on content created by a third party; and (2) Goren lacked any ownership of the copyrights because  Xcentric owned those copyrights itself under the original author's earlier agreement to the Ripoff Report terms of service, and/or because the state court judge's purported transfer of copyrights to Goren was invalid under the Copyright Act as an involuntary transfer.

The plaintiffs opposed [8] the motion to dismiss, arguing that Section 230 did not apply to Xcentric's content because Xcentric claimed to own the content at issue and affirmatively promoted it.  It further argued that Xcentric's arbitration scheme for damaging content was separately actionable as an unfair trade practice. With respect to copyright standing, the plaintiffs claimed that the alleged transfer of rights to Xcentric was invalid as a matter of contract, and that the transfer of rights by the state court judge was the result of the original author's voluntary decision not to defend against the state court action.  The plaintiffs further sought partial judgment on the pleadings that Xcentric was not protected by Section 230 and could not prove that it had received a transfer of the copyrights at issue.

On March 24, 2014, the district court ruled on the pending motions [9], as follows: (1) granting the motion to dismiss (and denying plaintiffs' motion) as to the libel, tortious interference, and Chapter 93A claims to the extent they were based on publication of third-party content, finding that these claims were barred by Section 230 regardless of whether Xcentric owned or promoted the content; (2) denying the motion to dismiss as to the Chapter 93A claim to the extent that it was premised on the offering of arbitration services; and (3) denying both Xcentric's motion to dismiss and plaintiffs' motion for judgment on the pleadings as to the copyright issues, finding that the state of copyright ownership could not be determined on the current state of the record. The court did not reach the question of the validity of the state court's purported transfer of the copyright to Goren.