An appeals court has overturned a lower court’s ruling that Zillow Group willfully infringed on photos belonging to photography firm VHT and sent the case back to a lower court.

The 9th U.S. Circuit Court of Appeals has overturned a lower court’s ruling that real estate giant Zillow Group willfully infringed on thousands of photos belonging to real estate photography firm VHT and sent the case back to a lower court to determine whether the photos were individual photos or a compilation.

In February 2017, a jury from the U.S. District Court in the Western District of Washington in Seattle ordered Zillow Group to pay $8.24 million in statutory damages for infringing VHT’s copyright on images displayed on its now-defunct home improvement site Zillow Digs.

Months later, in July, Judge James Robart overruled the jury’s verdict regarding the vast majority of the images and cut VHT’s damages award down to $4.05 million, though Robart agreed with the jury that the company willfully infringed thousands of VHT’s photos, possibly for its own financial benefit. Both Zillow and VHT appealed the decision and the appeals court ruled Friday.

Though the appeals court largely affirmed the lower court’s ruling in issuing its opinion, that opinion undoes the $4.05 million award to VHT because it vacated the jury’s finding on willfulness, which had previously been the basis for awarding VHT $1,500 for each of 2,700 photos the court determined Zillow directly infringed.

In the opinion, Judge M. Margaret McKeown, writing for the three-judge panel, said willfulness on Zillow’s part was not supported by “substantial evidence,” including the feed agreements Zillow has with its listing feed providers: real estate agents, brokerages, and multiple listing services, among others.

“Zillow’s agreements with its feed providers grant it an express license to use, copy, distribute, publicly display, and create derivative works for each photo, and the agreements include unambiguous representations by the feed providers that they have the authority to assign such rights,” McKeown wrote.

“Zillow’s belief that feed providers had properly licensed its uses and that its system effectively respected those rights was reasonable. And, as the district court observed, ‘[t]he record suggests no reason to conclude that Zillow maintained that position in bad faith, and Zillow’s non-infringement contention proved accurate as to most of the images at issue in this lawsuit.'”

The appeals court did not buy VHT’s argument that Zillow should have known its feed provider license agreements were invalid, particularly since VHT did not, as Zillow requested, provide Zillow with the executed contracts VHT had with the agents and brokers that provided the images to Zillow and instead provided a blank form contract.

“Access to a blank form contract (that the district court earlier found ambiguous as a matter of law) is not enough. We conclude that substantial evidence does not show Zillow was ‘reckless or willfully blind’ as to its infringement. We reverse the district court and vacate the jury’s finding of willful infringement,” McKeown wrote.

On the other hand, the appeals court did not buy that Zillow’s direct infringement of 3,921 of VHT’s photos — including the aforementioned 2,700 photos — that Zillow’s moderators selected and tagged to make them searchable on Digs was fair use under copyright law. The court found, like the district court, that Zillow’s use of the photos was not “transformative” enough to constitute fair use.

“That Digs makes these images searchable does not fundamentally change their original purpose when produced by VHT: to artfully depict rooms and properties. Additionally, Digs displays the entire VHT image, not merely a thumbnail. [T]he new image does not serve a ‘different function’ than the old one,” McKeown wrote.

The appeals court remanded back to the district court the issue of whether the thousands of VHT photos used on Digs constitute a compilation or individual photos. If they are ruled a compilation, VHT would receive a single award of statutory damages for Zillow’s use of the photos, but if they aren’t a compilation, VHT could seek damages for each photo Zillow used, according to the ruling.

In an emailed statement, a Zillow Group spokesperson told Inman, “We are pleased with the results of this appeal. We take copyright protection and enforcement seriously and will continue to respect copyright permissions across our platforms.”

In an email to Inman, VHT CEO Brian Balduf said, “We’re working through the options. It’s obviously an important issue to us and all photographers, so we will keep up our efforts.”

Like the district court, the appeals court found that VHT did not provide enough evidence to show that Zillow exercised control over photos that appeared specifically on its listing site post-sale, other than through the general operation of its website, and therefore did not directly infringe VHT’s copyrights in those photos.

The agents, brokers, and MLSs that feed Zillow the photos decide whether Zillow has the right to only use the photos while the property is being actively marketed for sale (a designation Zillow terms “deciduous”) or whether Zillow has the right to use the photos in perpetuity (which Zillow calls “evergreen”), according to the ruling.

“The content of the Listing Platform is populated with data submitted by third-party sources that attested to the permissible use of that data, and Zillow’s system for managing photos on the Listing Platform was constructed in a copyright-protective way,” McKeown wrote.

“The feed providers themselves select and upload every photo, along with the evergreen or deciduous designations, that wind up on the Listing Platform. As a result, the photos on the Listing Platform were not ‘selected’ by Zillow.”

“Zillow required feed providers to certify the extent of their rights to use each photo. Consistent with these designations, Zillow’s system classified each photo as deciduous or evergreen and programmed its automated systems to treat each photo consistently with that scope of use certified to by the third party,” she added.

Moreover, in a case where multiple copies of the same photo are uploaded to the website, Zillow’s system automatically gives preference to photos with evergreen rights, she noted.

“These rules, along with other features of the system, facilitate keeping the photos with evergreen rights on the website and removing the photos with deciduous rights once a property has sold. Thus, Zillow actively designed its system to avoid and eliminate copyright infringement,” McKeown wrote.

In a separate case, real estate photographer George Gutenberg filed a copyright lawsuit against Zillow on Sept. 17, 2018, but voluntarily dismissed that suit without prejudice — meaning he can refile at will — on October 3, 2018.

Email Andrea V. Brambila.

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