Judge Gregory dissented, stating that LoopNet had engaged in active, volitional conduct because of its screening process.

The district court held that LoopNet was not liable for direct copyright infringement based on Religious Technology Center v. Netcom.

The Netcom case held that direct copyright infringement implied some element of volition or causation, which was lacking in automatic and passive ISPs.

CoStar Group argued that since the United States Congress considered the Religious Technology Center v. Netcom case and codified its principles in enacting the Digital Millennium Copyright Act ("DMCA"), the DMCA should supplant and preempt the Religious Technology Center v. Netcom case as the only exemption from liability for direct copyright infringement for ISPs.

The court reasoned that similar to a copying machine, an ISP who owned an electronic facility that responded automatically to users' input was not a direct infringer.

The court first reasoned that the DMCA specifically provided that despite a failure to meet the safe-harbor conditions of § 512, an ISP was still entitled to all other arguments under the law.

Third, the court reasoned that legislative history suggested that Congress intended the DMCA's safe harbor for ISPs to be a floor, not a ceiling, of protection.