CoStar arises from a rather bizarre fact pattern (which is not clear from the opinion). CoStar provides sales and leasing support for commercial real estate, most particularly including copyrighted photographs of available properties (and presumably of teaser properties not actually on the market… but that's for another time). Loopnet is a subscription service that enables lessors to advertise their properties on a website. Loopnet does allow its subscribers to post photographs, but does a very quick "sanity check" of submitted photos before they are posted to the site. At least according to the various decisions, this appears to consist of checking that the photographs are of commercial real estate, non-pornographic, and do not bear obvious indications of copyright.
The problem with this case is that it actually answers almost nothing. CoStar pressed a theory of direct infringement, which did not persuade the court.
Because LoopNet, as an Internet service provider, is simply the owner and manager of a system used by others who are violating CoStar's copyrights and is not an actual duplicator itself, it is not directly liable for copyright infringement.
Slip op. at 3 (emphasis in original). This is not a terribly surprising result. CoStar should have been pressing contributory and vicarious liability. At least, in the abstract it should have been. The Fourth Circuit's law is not terribly clear, but it appears from a quick review that in that circuit a direct infringer must be joined to have a viable contributory or vicarious infringement claim. In this context, that means one or more persons who actually used Loopnet to post photographs that infringe CoStar's copyrights. In turn, that probably means a Doe complaintwhich is not a winning technique in the District of Maryland, where the case was heard below.
What this means in the long run is that the rhetoric in the Fourth Circuit's opinion will be quoted out of context in cases turning on contributory or vicarious infringement, or in attempts to intimidate persons making what are essentially contributory or vicarious infringement claims. Interestingly, the Fourth Circuit cites the Ninth Circuit's opinion in Ellison only for the proposition that the DMCA did not "rewrite copyright law for the on-line world." Of course, Ellison is a contributory/vicarious infringement matter. The parties appear to have obstinately refused to address any theory of liability other than direct; the court obliged their apparent myopia with an opinion that only Mr Magoo could love.