                           PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


ALS SCAN, INCORPORATED,                
                Plaintiff-Appellant,
                 v.
                                                 No. 00-1351
REMARQ COMMUNITIES,
INCORPORATED,
              Defendant-Appellee.
                                       
           Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
             J. Frederick Motz, Chief District Judge.
                        (CA-99-2594-JFM)

                      Argued: November 1, 2000

                      Decided: February 6, 2001

 Before WIDENER, WILKINS, and NIEMEYER, Circuit Judges.



Affirmed in part, reversed in part, and remanded by published opin-
ion. Judge Niemeyer wrote the opinion, in which Judge Widener and
Judge Wilkins joined.


                             COUNSEL

ARGUED: Harry Brett Siegel, LAW OFFICE OF JOEL MARC
ABRAMSON, Columbia, Maryland, for Appellant. Robert R. Vieth,
COOLEY GODWARD, L.L.P., Reston, Virginia, for Appellee. ON
BRIEF: Robert T. Cahill, COOLEY GODWARD, L.L.P., Reston,
Virginia, for Appellee.
2           ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
                              OPINION

NIEMEYER, Circuit Judge:

   We are presented with an issue of first impression — whether an
Internet service provider enjoys a safe harbor from copyright infringe-
ment liability as provided by Title II of the Digital Millennium Copy-
right Act ("DMCA") when it is put on notice of infringement activity
on its system by an imperfect notice. Because we conclude that the
service provider was provided with a notice of infringing activity that
substantially complied with the Act, it may not rely on a claim of
defective notice to maintain the immunity defense provided by the
safe harbor. Accordingly, we reverse the ruling of the district court
that found the notice fatally defective, and affirm its remaining rul-
ings.

                                   I

   ALS Scan, Inc., a Maryland corporation, is engaged in the business
of creating and marketing "adult" photographs. It displays these pic-
tures on the Internet to paying subscribers and also sells them through
the media of CD ROMs and videotapes. ALS Scan is holder of the
copyrights for all of these photographs.

   RemarQ Communities, Inc., a Delaware corporation, is an online
Internet service provider that provides access to its subscribing mem-
bers. It has approximately 24,000 subscribers to its newsgroup base
and provides access to over 30,000 newsgroups which cover thou-
sands of subjects. These newsgroups, organized by topic, enable sub-
scribers to participate in discussions on virtually any topic, such as
fine arts, politics, religion, social issues, sports, and entertainment.
For example, RemarQ provides access to a newsgroup entitled "Balti-
more Orioles," in which users share observations or materials about
the Orioles. It claims that users post over one million articles a day
in these newsgroups, which RemarQ removes after about 8-10 days
to accommodate its limited server capacity. In providing access to
newsgroups, RemarQ does not monitor, regulate, or censor the con-
tent of articles posted in the newsgroup by subscribing members. It
does, however, have the ability to filter information contained in the
            ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.               3
newsgroups and to screen its members from logging onto certain
newsgroups, such as those containing pornographic material.

   Two of the newsgroups to which RemarQ provides its subscribers
access contain ALS Scan’s name in the titles. These newsgroups —
"alt.als" and "alt.binaries.pictures.erotica.als" — contain hundreds of
postings that infringe ALS Scan’s copyrights. These postings are
placed in these newsgroups by RemarQ’s subscribers.

   Upon discovering that RemarQ databases contained material that
infringed ALS Scan’s copyrights, ALS Scan sent a letter, dated
August 2, 1999, to RemarQ, stating:

    Both       of     these      newsgroups      ["alt.als"    and
    "alt.binaries.pictures.erotica.als"] were created for the sole
    purpose of violating our Federally filed Copyrights and
    Tradename. These newsgroups contain virtually all Feder-
    ally Copyrighted images. . . . Your servers provide access
    to these illegally posted images and enable the illegal trans-
    mission of these images across state lines.

       This is a cease and desist letter. You are hereby ordered
    to cease carrying these newsgroups within twenty-four (24)
    hours upon receipt of this correspondence . . . .

      America Online, Erol’s, Mindspring, and others have all
    complied with our cease and desist order and no longer
    carry these newsgroups.

                            *     *      *

       Our ALS Scan models can be identified at
    http://www.alsscan.com/modlinf2.html[.] Our copyright
    information can be reviewed at http://www.alsscan.com/
    copyrite.html[.]

RemarQ responded by refusing to comply with ALS Scan’s demand
but advising ALS Scan that RemarQ would eliminate individual
infringing items from these newsgroups if ALS Scan identified them
4           ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
"with sufficient specificity." ALS Scan answered that RemarQ had
included over 10,000 copyrighted images belonging to ALS Scan in
its newsgroups over the period of several months and that

    [t]hese newsgroups have apparently been created by individ-
    uals for the express sole purpose of illegally posting, trans-
    ferring and disseminating photographs that have been
    copyrighted by my client through both its websites and its
    CD-ROMs. The newsgroups, on their face from reviewing
    messages posted thereon, serve no other purpose.

   When correspondence between the parties progressed no further to
resolution of the dispute, ALS Scan commenced this action, alleging
violations of the Copyright Act and Title II of the DMCA, as well as
unfair competition. In its complaint, ALS Scan alleged that RemarQ
possessed actual knowledge that the newsgroups contained infringing
material but had "steadfastly refused to remove or block access to the
material." ALS Scan also alleged that RemarQ was put on notice by
ALS Scan of the infringing material contained in its database. In addi-
tion to injunctive relief, ALS Scan demanded actual and statutory
damages, as well as attorneys fees. It attached to its complaint affida-
vits establishing the essential elements of its claims.

    In response, RemarQ filed a motion to dismiss the complaint or, in
the alternative, for summary judgment, and also attached affidavits,
stating that RemarQ was prepared to remove articles posted in its
newsgroups if the allegedly infringing articles were specifically iden-
tified. It contended that because it is a provider of access to news-
groups, ALS Scan’s failure to comply with the DMCA notice require-
ments provided it with a defense to ALS Scan’s copyright infringe-
ment claim.

   The district court ruled on RemarQ’s motion, stating, "[RemarQ’s]
motion to dismiss or for summary judgment is treated as one to dis-
miss and, as such, is granted." In making this ruling, the district court
held: (1) that RemarQ could not be held liable for direct copyright
infringement merely because it provided access to a newsgroup con-
taining infringing material; and (2) that RemarQ could not be held lia-
ble for contributory infringement because ALS Scan failed to comply
             ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.                  5
with the notice requirements set forth in the DMCA, 17 U.S.C.
§ 512(c)(3)(A). This appeal followed.

                                    II

   ALS Scan contends first that the district court erred in dismissing
its direct copyright infringement claim. It contends that it stated a
cause of action for copyright infringement when it alleged (1) the
"ownership of valid copyrights," and (2) RemarQ’s violation of its
copyrights "by allowing its members access to newsgroups containing
infringing material."1 See generally Keeler Brass Co. v. Continental
Brass Co., 862 F.2d 1063, 1065 (4th Cir. 1988) (describing the
requirements of a direct infringement claim). In rejecting ALS Scan’s
direct infringement claim, the district court relied on the decision in
Religious Technology Center v. Netcom On-Line Communication Ser-
vices, Inc., 907 F. Supp. 1361, 1368-73 (N.D. Cal. 1995), which con-
cluded that when an Internet provider serves, without human
intervention, as a passive conduit for copyrighted material, it is not
liable as a direct infringer. The Netcom court reasoned that "it does
not make sense to adopt a rule that could lead to liability of countless
parties whose role in the infringement is nothing more than setting up
and operating a system that is necessary for the functioning of the
Internet." Id. at 1372. That court observed that it would not be work-
able to hold "the entire Internet liable for activities that cannot reason-
ably be deterred." Id.; see also Marobie-FL, Inc. v. National Ass’n of
Fire Equip. Distribs., 983 F. Supp. 1167, 1176-79 (N.D. Ill. 1997)
(agreeing with Netcom’s reasoning). ALS Scan argues, however, that
the better reasoned position, contrary to that held in Netcom, is pres-
ented in Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552, 1555-
59 (M.D. Fla. 1993), which held a computer bulletin board service
provider liable for the copyright infringement when it failed to pre-
vent the placement of plaintiff’s copyrighted photographs in its sys-
  1
    It would appear that ALS Scan’s allegations amount more to a claim
of contributory infringement in which a defendant, "with knowledge of
the infringing activity, induces, causes or materially contributes to the
infringing conduct of another," Gershwin Publ’g Corp. v. Columbia Art-
ists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971), than to a claim of
direct infringement.
6           ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
tem, despite any proof that the provider had any knowledge of the
infringing activities.

   Although we find the Netcom court reasoning more persuasive, the
ultimate conclusion on this point is controlled by Congress’ codifica-
tion of the Netcom principles in Title II of the DMCA. As the House
Report for that Act states,

       The bill distinguishes between direct infringement and
    secondary liability, treating each separately. This structure
    is consistent with evolving case law, and appropriate in light
    of the different legal bases for and policies behind the differ-
    ent forms of liability.

       As to direct infringement, liability is ruled out for passive,
    automatic acts engaged in through a technological process
    initiated by another. Thus the bill essentially codifies the
    result in the leading and most thoughtful judicial decision to
    date: Religious Technology Center v. Netcom On-Line Com-
    munications Services, Inc., 907 F. Supp. 1361 (N.D. Cal.
    1995). In doing so, it overrules these aspects of Playboy
    Enterprises, Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla.
    1993), insofar as that case suggests that such acts by service
    providers could constitute direct infringement, and provides
    certainty that Netcom and its progeny, so far only a few dis-
    trict court cases, will be the law of the land.

H.R. Rep. No. 105-551(I), at 11 (1998). Accordingly, we address only
ALS Scan’s claims brought under the DMCA itself.

                                   III

   For its principal argument, ALS Scan contends that it substantially
complied with the notification requirements of the DMCA and
thereby denied RemarQ the "safe harbor" from copyright infringe-
ment liability granted by that Act. See 17 U.S.C. § 512(c)(3)(A) (set-
ting forth notification requirements). It asserts that because its
notification was sufficient to put RemarQ on notice of its infringe-
ment activities, RemarQ lost its service-provider immunity from
             ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.                 7
infringement liability. It argues that the district court’s application of
the DMCA was overly strict and that Congress did not intend to per-
mit Internet providers to avoid copyright infringement liability
"merely because a cease and desist notice failed to technically comply
with the DMCA."

   RemarQ argues in response that it did not have "knowledge of the
infringing activity as a matter of law," stating that the DMCA protects
it from liability because "ALS Scan failed to identify the infringing
works in compliance with the Act, and RemarQ falls within the ‘safe
harbor’ provisions of the Act." It notes that ALS Scan never provided
RemarQ or the district court with the identity of the pictures forming
the basis of its copyright infringement claim.

   These contentions of the parties present the issue of whether ALS
Scan complied with the notification requirements of the DMCA so as
to deny RemarQ the safe-harbor defense to copyright infringement
liability afforded by that Act.

   Title II of the DMCA, designated the "Online Copyright Infringe-
ment Limitation Act," DMCA, § 201, Pub. L. 105-304, 112 Stat. 2877
(1998) (codified at 17 U.S.C. § 101 note), defines limitations of liabil-
ity for copyright infringement to which Internet service providers
might otherwise be exposed. The Act defines a service provider
broadly to include any provider of "online services or network access,
or the operator of facilities therefor," including any entity providing
"digital online communications, between or among points specified
by user, of material of the user’s choosing, without modification to
the content of the material as sent or received." 17 U.S.C. § 512(k).
Neither party to this case suggests that RemarQ is not an Internet ser-
vice provider for purposes of the Act.

   The liability-limiting provision applicable here, 17 U.S.C. § 512(c),
gives Internet service providers a safe harbor from liability for "in-
fringement of copyright by reason of the storage at the direction of
a user of material that resides on a system or network controlled or
operated by or for the service provider" as long as the service pro-
vider can show that: (1) it has neither actual knowledge that its system
contains infringing materials nor an awareness of facts or circum-
stances from which infringement is apparent, or it has expeditiously
8                 ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
removed or disabled access to infringing material upon obtaining
actual knowledge of infringement; (2) it receives no financial benefit
directly attributable to infringing activity; and (3) it responded expe-
ditiously to remove or disable access to material claimed to be
infringing after receiving from the copyright holder a notification
conforming with requirements of § 512(c)(3). Id. § 512(c)(1).2 Thus,
to qualify for this safe harbor protection, the Internet service provider
must demonstrate that it has met all three of the safe harbor require-
ments, and a showing under the first prong — the lack of actual or
constructive knowledge — is prior to and separate from the showings
that must be made under the second and third prongs.
    2
     Section 512(c)(1) provides in full:
        (c)   Information residing on systems or networks at direction of
              users.—
        (1)   In general.—A service provider shall not be liable for mon-
              etary relief, or, except as provided in subsection (j), for
              injunctive or other equitable relief, for infringement of
              copyright by reason of the storage at the direction of a user
              of material that resides on a system or network controlled
              or operated by or for the service provider, if the service
              provider—
                 (A)(i) does not have actual knowledge that the material
              or an activity using the material on the system or network
              is infringing;
                 (ii) in the absence of such actual knowledge, is not aware
              of facts or circumstances from which infringing activity is
              apparent; or
                (iii) upon obtaining such knowledge or awareness, acts
              expeditiously to remove, or disable access to, the material;
                 (B) does not receive a financial benefit directly attribut-
              able to the infringing activity, in a case in which the service
              provider has the right and ability to control such activity;
              and
                (C) upon notification of claimed infringement as
              described in paragraph (3), responds expeditiously to
              remove, or disable access to, the material that is claimed to
              be infringing or to be the subject of infringing activity.
               ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.                9
   In this case, the district court evaluated the adequacy given to
RemarQ under the third prong only. Despite the fact the district court
stated it was treating RemarQ’s motion as a motion to dismiss, rather
than as a motion for summary judgment, the court’s memorandum
opinion fails to mention the allegation made in ALS Scan’s complaint
that RemarQ had actual knowledge of the infringing nature of the two
subject newsgroups even before being contacted by ALS Scan, an
allegation denied by RemarQ. Clearly, had the court truly been evalu-
ating ALS Scan’s complaint under a 12(b)(6) standard of review, it
would necessarily have had to accept ALS Scan’s allegation as
proven for purposes of testing the adequacy of the complaint, see
Eastern Shore Markets, Inc. v. J.D. Assoc. Ltd. P’ship, 213 F.3d 175,
180 (4th Cir. 2000), and consequently been required to rule in favor
of ALS Scan under the first prong.

   Even if we were to treat the district court’s order as disposing of
a motion for summary judgment, and not a motion to dismiss, the
court still could not, as a matter of law, have resolved the conflicting
affidavits about actual knowledge. Resolving whether the court actu-
ally treated the motion as one to dismiss or for summary judgment is
not necessary, however, because we conclude that ALS Scan substan-
tially complied with the third prong, thereby denying RemarQ its safe
harbor defense.

   In evaluating the third prong, requiring RemarQ to remove materi-
als following "notification," the district court concluded that ALS
Scan’s notice was defective in failing to comply strictly with two of
the six requirements of a notification — (1) that ALS Scan’s notice
include "a list of [infringing] works" contained on the RemarQ site
and (2) that the notice identify the infringing works in sufficient detail
to enable RemarQ to locate and disable them. 17 U.S.C.
§ 512(c)(3)(A)(ii), (iii).3
  3
   Section 512(c)(3)(A)(ii), (iii) provides:
      (3)   Elements of notification.—
         (A) To be effective under this subsection, a notification of
      claimed infringement must be a written communication provided
      to the designated agent of a service provider that includes sub-
      stantially the following:
10          ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
   In support of the district court’s conclusion, RemarQ points to the
fact that ALS Scan never provided it with a "representative list" of the
infringing photographs, as required by § 512(c)(3)(A)(ii), nor did it
identify those photographs with sufficient detail to enable RemarQ to
locate and disable them, as required by § 512(c)(3)(A)(iii). RemarQ
buttresses its contention with the observation that not all materials at
the offending sites contained material to which ALS Scan held the
copyrights. RemarQ’s affidavit states in this regard:

     Some, but not all, of the pictures users have posted on these
     sites appear to be ALS Scan pictures. It also appears that
     users have posted other non-ALS Scan’s erotic images on
     these newsgroups. The articles in these newsgroups also
     contain text messages, many of which discuss the adult
     images posted on the newsgroups.

   ALS Scan responds that the two sites in question — "alt.als" and
"alt.binaries.pictures.erotica.als" — were created solely for the pur-
pose of publishing and exchanging ALS Scan’s copyrighted images.
It points out that the address of the newsgroup is defined by ALS
Scan’s name. As one of its affidavits states:

     [RemarQ’s] subscribers going onto the two offending news-
     groups for the purpose of violating [ALS Scan’s] copy-
     rights, are actually aware of the copyrighted status of [ALS
     Scan’s] material because (1) each newsgroup has "als" as
     part of its title, and (2) each photograph belonging to [ALS

                              *     *      *
           (ii) Identification of the copyrighted work claimed to have
        been infringed, or, if multiple copyrighted works at a single
        online site are covered by a single notification, a representa-
        tive list of such works at that site.
           (iii) Identification of the material that is claimed to be
        infringing or to be the subject of infringing activity and that
        is to be removed or access to which is to be disabled, and
        information reasonably sufficient to permit the service pro-
        vider to locate the material.
            ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.              11
    Scan] has [ALS Scan’s] name and/or the copyright symbol
    next to it.

       Each of these two newsgroups was created by unknown
    persons for the illegal purpose of trading the copyrighted
    pictures of [ALS Scan] to one another without the need for
    paying to either (1) become members of [ALS Scan’s] web
    site(s) or (2) purchasing the CD-ROMs produced by [ALS
    Scan].

ALS Scan presses the contention that these two sites serve no other
purpose than to distribute ALS Scan’s copyrighted materials and
therefore, by directing RemarQ to these sites, it has directed RemarQ
to a representative list of infringing materials.

   The DMCA was enacted both to preserve copyright enforcement
on the Internet and to provide immunity to service providers from
copyright infringement liability for "passive," "automatic" actions in
which a service provider’s system engages through a technological
process initiated by another without the knowledge of the service pro-
vider. H.R. Conf. Rep. No. 105-796, at 72 (1998), reprinted in 1998
U.S.C.C.A.N. 649; H.R. Rep. No. 105-551(I), at 11 (1998). This
immunity, however, is not presumptive, but granted only to "inno-
cent" service providers who can prove they do not have actual or con-
structive knowledge of the infringement, as defined under any of the
three prongs of 17 U.S.C. § 512(c)(1). The DMCA’s protection of an
innocent service provider disappears at the moment the service pro-
vider loses its innocence, i.e., at the moment it becomes aware that
a third party is using its system to infringe. At that point, the Act
shifts responsibility to the service provider to disable the infringing
matter, "preserv[ing] the strong incentives for service providers and
copyright owners to cooperate to detect and deal with copyright
infringements that take place in the digital networked environment."
H.R. Conf. Rep. No. 105-796, at 72 (1998), reprinted in 1998
U.S.C.C.A.N. 649. In the spirit of achieving a balance between the
responsibilities of the service provider and the copyright owner, the
DMCA requires that a copyright owner put the service provider on
notice in a detailed manner but allows notice by means that comport
with the prescribed format only "substantially," rather than perfectly.
The Act states: "To be effective under this subsection, a notification
12          ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.
of claimed infringement must be a written communication provided
to the designated agent of a service provider that includes substan-
tially the following . . . ." 17 U.S.C. § 512(c)(3)(A) (emphasis added).
In addition to substantial compliance, the notification requirements
are relaxed to the extent that, with respect to multiple works, not all
must be identified — only a "representative" list. See id.
§ 512(c)(3)(A)(ii). And with respect to location information, the
copyright holder must provide information that is "reasonably suffi-
cient" to permit the service provider to "locate" this material. Id.
§ 512(c)(3)(A)(iii) (emphasis added). This subsection specifying the
requirements of a notification does not seek to burden copyright hold-
ers with the responsibility of identifying every infringing work — or
even most of them — when multiple copyrights are involved. Instead,
the requirements are written so as to reduce the burden of holders of
multiple copyrights who face extensive infringement of their works.
Thus, when a letter provides notice equivalent to a list of representa-
tive works that can be easily identified by the service provider, the
notice substantially complies with the notification requirements.

   In this case, ALS Scan provided RemarQ with information that (1)
identified two sites created for the sole purpose of publishing ALS
Scan’s copyrighted works, (2) asserted that virtually all the images at
the two sites were its copyrighted material, and (3) referred RemarQ
to two web addresses where RemarQ could find pictures of ALS
Scan’s models and obtain ALS Scan’s copyright information. In addi-
tion, it noted that material at the site could be identified as ALS
Scan’s material because the material included ALS Scan’s "name
and/or copyright symbol next to it." We believe that with this infor-
mation, ALS Scan substantially complied with the notification
requirement of providing a representative list of infringing material as
well as information reasonably sufficient to enable RemarQ to locate
the infringing material. To the extent that ALS Scan’s claims about
infringing materials prove to be false, RemarQ has remedies for any
injury it suffers as a result of removing or disabling noninfringing
material. See 17 U.S.C. § 512(f), (g).

   Accordingly, we reverse the district court’s ruling granting sum-
mary judgment in favor of RemarQ on the basis of ALS Scan’s non-
compliance with the notification provisions of 17 U.S.C.
§ 512(c)(3)(A)(ii) and (iii). Because our ruling only removes the safe
            ALS SCAN, INC. v. REMARQ COMMUNITIES, INC.               13
harbor defense, we remand for further proceedings on ALS Scan’s
copyright infringement claims and any other affirmative defenses that
RemarQ may have.

                                  IV

   ALS Scan also appeals the district court’s decision not to enter
summary judgment on its behalf with respect to its infringement
claim. Because there is a dispute as to several material facts, however,
we affirm the district court’s ruling on ALS Scan’s motion for sum-
mary judgment. If ALS Scan is able to prove that in fact the offending
newsgroups’ "sole purpose" is infringement of ALS Scan’s copy-
rights, it may be entitled to a remedy. However, because it is con-
tested both that such is, in fact, the "sole" purpose of the newsgroups,
and that "virtually all" the images posted in the newsgroups are
infringing, we are unable to come to any legal conclusions. Final dis-
position must await further development of the record and further pro-
ceedings.

                                   V

   Accordingly, for the reasons given, we reverse the district court’s
decision to grant summary judgment in favor of RemarQ, affirm the
district court’s decision not to grant summary judgment in favor of
ALS Scan, and remand this case for further proceedings consistent
with this opinion.

                                  AFFIRMED IN PART, REVERSED
                                      IN PART, AND REMANDED
