Cammarata claims in his original suit filed two years ago that streaming video site RedTube has unlawfully offered free movies as loss leaders in an attempt to crush the competition. The suit seeks $10 million in actual damages and $30 million in treble damages.
The decision, handed down yesterday 3-0, represents a big defeat for Cammarata, the former Teen Revenue owner, whose lawyer, Jay Spillane, argued that the law, known as strategic lawsuit against public participation, or SLAPP, didn't apply in the case in relation to unfair competition.
The lower court already granted a SLAPP motion as to Cammarata's charges of below-cost competition and unlawful loss leaders.
"We reject Cammarata’s argument that his causes of action arise from [RedTube's] predatory pricing, not its speech, because here the product being priced is speech, not dog food," the panel wrote. "All of Cammarata’s causes of action arise from [RedTube's] conduct of placing speech on the Internet where it can be viewed for free by the public. This is the 'predatory pricing' that Cammarata complains of."
In his suit, Cammarata has been seeking to have RedTube shut down, among other forms of relief, because he alleges RedTube subscribed to his website, downloaded its content and then uploaded the content to RedTube.
But the appeals panel dashed that hope, ruling that the lower court erred in the SLAPP denial in relation to unfair competition because "Cammarata could not make a minimal showing that he suffered losses which would entitle him to restitution he lacked standing to pursue injunctive relief."
The court also said Cammarata failed to establish a probability of success on the merits of his causes of action against RedTube for below-cost sales.
"It is not reasonably probable that Cammarata can prove that [RedTube] undertook the tube-based business model for the purpose of injuring Cammarata or any of [RedTube's] other competitors or destroying its competition," the appeals panel wrote.
"If [RedTube]’s business model sounds familiar it’s because it’s the business model typical of broadcast radio and television stations in the U.S. not to mention thousands of local newspapers and, more recently, tens of thousands of Internet websites including Youtube, CNN and Yahoo."
The appeals court said that the evidence showed that RedTube obtains most of its videos free of charge from advertisers who pay the Hong Kong-based company to display their videos containing their ads.
Advertisers represented as defendants in the suit include Bangbros.com, Fling.com, Utherverse, FriendFinder Networks, Mansef Productions, Brazzers Technology, LALIB Limitada and Stallion.com.
"Fundamentally, there is no difference between RedTube and a radio station in the early 1900s that broadcasted records it obtained for free from a music store and, in return, told its listeners where the records could be purchased," the panel said.
The panel noted that if RedTube’s purpose in adopting the tube-based business model was to destroy competition it has failed.
"The unchallenged declaration of one of [RedTube's] attorneys states that in the interest of representing his client he visited 101 tube-based adult entertainment sites between May 14-16, 2009, and was able to access adult videos free of charge on every one of them," the panel said.
"This declaration shows that the business of providing adult entertainment over the Internet is alive and well and has not been adversely affected by [RedTube]," the panel said. "If Cammarata’s subscription-based website lost revenue after RedTube and other tube-based websites came on the scene it was because the tube-based business model is more efficient, not because of alleged predatory pricing by [RedTube]."
With the appeals court ruling, the case has been remanded to the lower court to grant the SLAPP as to unfair competition.
Attorney Larry Walters, who represented Fling.com, Bangbros.com, and Videosz.com, who were advertisers on RedTube.com, said the appellate decision is "realistically, the end of the road for Cammarata."
"He can seek rehearing, which is almost always denied. Or he can try to appeal to the California Supreme Court, which is a long shot," Walters told XBIZ. "The bottom line is that the whole legal theory underlying Cammarata's claim was ill-conceived.
"There is nothing illegal about offering free videos on a website, which is supported by advertising instead of subscription fees. If that were unlawful, broadcast television and newspapers would likewise be prohibited.
"We were particularly pleased with the findings, in the decision, regarding the protected nature of user-uploaded video, which has substantial legal implications for future cases."