An advertising network has been found not guilty of copyright infringement for serving ads to a site offering links to unauthorized copies of ebooks. The case, brought by Elsevier and 'For Dummies' publisher Wiley & Sons, sought to find the Chitika ad network liable for contributory infringement, even though it produced no evidence of direct infringement, or that the network had knowledge of the e-book site's allegedly infringing behavior.

During January 2011, book publishers Elsevier and John Wiley & Sons filed a complaint in the Massachusetts District Court against the Chitika and Clicksor advertising networks and domain registrar Enom’s Whois Privacy Protection Service.

All of these companies were named in the lawsuit because of their connections to Pharmatext.org, a site that offered links to pirated e-books. The plaintiffs asked the court to find the operator of Pharmatext guilty of direct copyright infringement and the ad networks guilty of contributory copyright infringement for serving ads to Pharmatext, an arrangement which generated just $510.93 between August 2008 and December 2010.

Since the defendants weren’t initially present to mount a defense, the court issued a preliminary injunction which ordered Whois Privacy Protection Service to reveal the previously hidden identity of the Pharmatext owner (revealed as Kapil Dev Saggi of India), and site’s domain registrar to disable the website. The advertising networks, Clicksor and Chitika, were ordered to stop doing business with Pharmatext.

On June 3rd, 2011, in their defense Chitika argued that the plaintiffs had failed to present a viable claim for direct infringement against Pharmatext. Not only is Saggi in India (offenses need to be carried out in the US), but the location of the cyberlocker services where the allegedly infringing material was hosted was never revealed. Without a valid claim for direct infringement, Chitika argued, a claim for contributory infringement could not go ahead.

Nevertheless, even if direct infringement could be proven, Chitika argued that as a mere provider of a technology that allows a website operator to embed adverts in his site, the company “has no mechanism by which it can determine whether a publisher’s site contains allegedly infringing materials.”

The ad network added that London-based Elsevier and New Jersey-based John Wiley & Sons had not produced any evidence which showed that Chitika had knowledge of any infringing activity, or that it knowingly caused or substantially contributed to any infringing activity. The court has just delivered its verdict and essentially agreed with Chitika.

“Plaintiffs do not allege facts showing that Chitika was familiar with the content of the Pharmatext website, or knew (or had reason to know) that such content was infringing,” wrote United States District Judge Richard G. Stearns in his ruling.

“Thus, plaintiffs fail to support with plausible facts their conclusory allegations that Chitika ‘must have had knowledge’ of the alleged infringement of plaintiffs’ books,” and that “Chitika “plac[ed] ads on the Pharmatext site because [it] believe[d] that Pharmatext users – in other words, people seeking to obtain pirated copies of copyrighted books – are a target audience for particular advertisers.”

But while Chitika came out of this battle on top, law professor Eric Goldman says that if the plaintiffs had approached this particular infringement issue in a different way – by sending an early complaint to Chitika about Pharmatext’s infringing activities before going ahead with a lawsuit – the outcome could have tipped in the plaintiffs’ favor.

“I would expect this opinion to look very different if Elsevier sent a cutoff notice and Chitika didn’t promptly drop Pharmatext,” Goldman writes.

But the points of interest don’t stop there, particularly in respect of the advertising-blocking sanctions of the pending SOPA legislation. As previously noted, Chitika made hardly anything from its business with Pharmatext. In the face of a shutdown request from the book publishers, would it really have carried on doing business with the linking site? Goldman thinks not.

“Assuming Chitika does 50/50 splits with its publishers, Chitika will not expend an ounce of effort to preserve its $17/month revenue stream from Saggi. Thus, Elsevier’s cutoff notice would be dispositive–even if Chitika could win a ruling like this (which would be more uncertain after Chitika gets a cutoff notice), it’s not worth the fight,” Goldman continues.

“So after Elsevier’s cutoff notice to Chitika, Chitika instantly tosses Pharmatext overboard like a piece of garbage, due process be damned. SOPA isn’t required to get that result.”

As previously reported, online piracy of its products has recently become a focus issue for Wiley. In late October the publisher filed a lawsuit to obtain the identities of 27 individuals it accuses of illegally sharing its “For Dummies” books on Demonoid, a request that has now been granted by the court.

On November 23rd it filed another lawsuit, this time against 46 John Does. It is not yet clear if Wiley intends to take cases to court or obtain settlement from its targets.