This just in -- The Fourth Circuit Court of Appeals has affirmed in the Costar v. Loopnet case that ISPs and other providers are not liable for direct infringement when their servers passively copy works that have been uploaded, downloaded, or hosted by users if they didn't have knowledge that the works were infringing. Their rationale: copyright infringement requires as active "volitional" act; setting up automatic servers to upload/download/host content is purely passive and does not include any active participation by the hosting company.

This essentially reaffirms the ruling in RTC v. Netcom from 1995 but was a lingering question after the DMCA safe harbors were passed in 1998, especially given copyright law's purported "strict liability" standard. Moreover, the Court found that even the act of Loopnet employees viewing the photogaphs was not violitional enough to be direct infringement. A very good ruling given the realities of computers and networks.

Full Disclosure: My good friend Kurt Opsahl argued the winning side for Loopnet. Way to go Kurt!