Yesterday, the Ninth Circuit held that video sharing site Veoh is immune from copyright liability under the DMCA in what will likely become a seminal ruling for copyright and the internet.

Plaintiff Universal Music Group had asked the Circuit Court to reverse the lower court’s holding that Veoh qualified for the DMCA safe harbor on several grounds:

  • “[T]he alleged infringing activities do not fall within the plain meaning of ‘infringement of copyright by reason of the storage [of material] at the direction of a user'”
  • “Veoh had actual knowledge of infringement, or was ‘aware of facts or circumstances from which infringing activity [wa]s apparent'”
  • “Veoh ‘receive[d] a financial benefit directly attributable to . . . infringing activity’ that it had the right and ability to control.”

The Circuit Court rejected all of these arguments. The full opinion is available here. Some preliminary thoughts follow.

Infringement by Reason of Storage

The court’s conclusion that Veoh’s operations fall within the scope of § 512(c) is not a surprise. It interpreted the statute’s “by reason of” language broadly — protecting service providers from any infringing activity that occurs on their site stemming from a user’s upload.

But while this interpretation may be reasonable in light of how the internet has developed, it is no doubt an expansion on the original intent of the language. The court says “if Congress wanted to confine § 512(c) exclusively to web hosts rather than reach a wider range of service providers, we very much doubt it would have done so with the oblique ‘by reason of storage’ language.” But of course, this reasoning begs the question. When Congress passed the DMCA, “user-generated content” had yet to even enter the lexicon — Congress couldn’t have factored a type of service provider that didn’t exist yet into the law.

I’ve talked previously about how sites like Veoh, YouTube, and other Web 2.0/UGC sites are arguably beyond the scope of protection of 512(c). The provision was drafted at a time when storing content at the direction of a user was primarily a collateral or passive function of service providers. For UGC sites, this “storage” is the sine qua non of their business model.

I’m certainly not saying such sites should be strictly liable for infringement by their users, or even required to monitor or prescreen uploads. But I also don’t think the only thing they need do to qualify for the DMCA safe harbor is respond to takedown notices. Unauthorized content unquestionably subsidizes many UGC sites — it’s perfectly reasonable that such sites subsidize copyright enforcement. As unavoidable as the expansion of the scope of this safe harbor might be, it may be the case that the language may need to be revisited at some point down the road.

Actual and Apparent Knowledge

The court’s holding that “general knowledge that [a service provider’s] services could be used to post infringing material” is insufficient to eliminate DMCA safe harbor protection is consistent with what other courts have held.1

The court does, however, engage in a bit of curious reasoning to come to this conclusion. It notes:

Further, Congress’ express intention that the DMCA “facilitate making available quickly and conveniently via the Internet . . . movies, music, software, and literary works” — precisely the service Veoh provides — makes us skeptical that UMG’s narrow interpretation of § 512(c) is plausible. S. Rep. No. 105-190, at 8.

This is curious because the quote used by the 9th Circuit used is not referring to the purpose behind the DMCA safe harbors, it is referring to the purpose behind the anti-circumvention and copyright management information provisions of the DMCA.2

By conflating the purpose of stronger digital protections for copyright owners with the purpose for limiting the liability of service providers, it essentially creates a logical absurdity within the Copyright Act: promoting the progress of the arts and sciences through exclusive rights is accomplished when ignoring those exclusive rights is made easier.

The Ninth Circuit leaves us still with little meaningful distinction between actual knowledge and apparent — so-called “red flag” — knowledge. It says “that the burden” for bringing red flags to service provider’s attention “remains with the copyright holder rather than the service provider.” The summary conclusion is that “Veoh’s general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag.”

But it does mention one way a service provider can have apparent knowledge, at least in theory. The Ninth Circuit notes that if “notification had come from a third party, such as a Veoh user, rather than from a copyright holder, it might meet the red flag test because it specified particular infringing material.”

Right and Ability to Control

The clear discussion of the interplay between safe harbor and common law vicarious liability is to be commended. As court explains, the two are independent: Congress intended the safe harbor to protect against vicarious liability if the statute’s conditions are met, even though the requirement that a service provider doesn’t have the “right and ability to control” infringing activity seems synonymous with the common law articulation of vicarious liability. Yet some courts still get tripped up by this concept.

However, I am a bit troubled by court’s interpretation of “right and ability to control” as being dependent on scope of service:

Where, as here, it is a practical impossibility for Veoh to ensure that no infringing material is ever uploaded to its site, or to remove unauthorized material that has not yet been identified to Veoh as infringing, we do not believe that Veoh can properly be said to possess the “needed powers . . . or needed resources” to be “competen[t] in” exercising the sort of “restraining domination” that § 512(c)(1)(B) requires for denying safe harbor eligibility.

You hear this often from DMCA maximalists: it’s just too hard to control infringement on the internet. But this seems similar to a “too big to fail” argument — eventually, a service provider becomes “too big to be liable for infringement.”

Viewed this way, the interpretation doesn’t seem to comport with real world views on liability. Imagine a factory owner who says he dumps a lot of stuff into the river, and it’s not possible as a practical matter to ensure that none of that stuff is toxic. Or imagine a government that says it arrests a lot of people, and it doesn’t have the needed resources to exercise the type of restraining domination to ensure that none of them were wrongfully arrested.

Yes, there are differences between offline services and online services. But I don’t know if that should mean a complete departure from liability principles — especially since sites like Veoh and YouTube did not sprout online, organically and fully-formed. The fact remains that sites like these were purposely designed to provide content acquired through user uploads, just as services like Hulu and Netflix were purposely designed to provide content acquired through licensing.

As I said earlier, I’m not suggesting in the least that sites like Veoh should be responsible for every upload. Just that “the right and ability to control” shouldn’t necessarily hinge on popularity.

Finally, it is good to see the Ninth Circuit reaffirm the fact that “willful blindness” can constitute knowledge under this section:

Accordingly, we hold that the ‘right and ability to control’ under § 512(c) requires control over specific infringing activity the provider knows about. A service provider’s general right and ability to remove materials from its services is, alone, insufficient. Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.

What’s Next?

The Ninth Circuit affirmed summary judgment on the DMCA safe harbor and dismissal of the claims against the Investor defendants, who had been sued along with Veoh. It remanded to the lower court only for determination of whether Veoh can collect certain costs, excluding attorney’s fees, under FRCP 68.

That means the lawsuit is essentially over, barring an appeal by UMG to the Supreme Court.

The Second Circuit, of course, is currently considering similar issues in Viacom’s lawsuit against YouTube. It isn’t bound to follow the ruling here, but it will most likely have a look at the opinion. That opinion, of course, is still months away.

Footnotes

  1. See, for example, A & M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001); Viacom v. YouTube, 718 F.Supp.2d 514, 523 (SDNY 2010); Corbis Corp. v. Amazon, 351 F.Supp.2d 1090, 1109 (WD Wash 2004). []
  2. The HRCC has a copy of S. Rep. No. 105-190 available on its site. The relevant portion in full reads:

    Due to the ease with which digital works can be copied and distributed worldwide virtually instantaneously, copyright owners will hesitate to make their works readily available on the Internet without reasonable assurance that they will be protected against massive piracy. Legislation implementing the treaties provides this protection and creates the legal platform for launching the global digital on-line marketplace for copyrighted works. It will facilitate making available quickly and conveniently via the Internet the movies, music, software, and literary works that are the fruit of American creative genius. It will also encourage the continued growth of the existing off-line global marketplace for copyrighted works in digital format by setting strong international copyright standards.

    At the same time, without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet. In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand. []

21 Comments

  1. “The Ninth Circuit notes that if “notification had come from a third party, such as a Veoh user, rather than from a copyright holder, it might meet the red flag test because it specified particular infringing material.””

    How would a Veoh user who is NOT a copyright holder know if the material is, in fact, infringing?
    For example, a Veoh user could file a complaint about 1940s Superman cartoons on Veoh uploaded by one of the clients.
    After all, Superman is owned by DC Comics, which is owned by Time-Warner.
    Therefore, the material posted by anyone except Time-Warner MUST be infringing, right?
    Wrong!
    The 1940s cartoons are Public Domain due to failure to renew copyright when it came due in the late 1960s!
    So, your non-copyright-holder Veoh user has INCORRECTLY “identified” a copyright violation!

    Is that what you want?

    The potential for abuse (inadvertent or not) by non-copyright holders is too great for such a concept to be allowed.

    • I agree. That is just such a ridiculous statement, that i don’t know where to begin…

      The law needs to be rewritten. It’s outdated and not relevant to todays’ reality. To continue to make judgements using said law -will just hasten content creators drive off the edge of the cliff..

    • Agreed – to say nothing of fair use considerations or if the work was copyrighted but under a creative-commons license. The potential for abuse would indeed be too great to allow enforcement by third parties who don’t hold the actual copyright. (Which incidentally is another reason why we need to return to a registration-based copyright system in order to help stem false claims of copyright.)

  2. “[T]he interpretation doesn’t seem to comport with real world views on liability. Imagine a factory owner who says he dumps a lot of stuff into the river, and it’s not possible as a practical matter to ensure that none of that stuff is toxic.”

    Naturally, the factory owner should still face liability in that instance. But that is not what you are arguing for in your analogy here. What you are essentially arguing for is to hold the Army Corp of Engineers liable for the toxic dumping by the factory by virtue of the fact that they built the river. You would force them to constantly monitor the river to make sure that third-party factories don’t dump pollutants into it, and then hold the Army Corp of Engineers strictly liable when the third-party factory does so. This makes no sense. Its far better to hold the factory (i.e., the person who uploaded the infringing material) liable, rather than the party which built the receptacle where the toxic material happened to get dumped into.

    Yes, the Army Corp of Engineers may have built the river with a general knowledge that other people might pollute it with toxins – but its the height of insanity to hold the Engineers responsible for the actions of third parties in this instance.

    That is the far more appropriate analogy which comports perfectly well with standard tort principles.

    • “Yes, the Army Corp of Engineers may have built the river with a general knowledge that other people might pollute it with toxins – but its the height of insanity to hold the Engineers responsible for the actions of third parties in this instance”

      Right.. but what if (in your example) the ACoE took out advertisements stating you can dump toxic waste into their newly built river? …That they incidently named “Toxic Dump River” ?

      • “Right.. but what if (in your example) the ACoE took out advertisements stating you can dump toxic waste into their newly built river? …That they incidently named “Toxic Dump River” ?”

        Sorry, son, but that should read…”Right.. but what if (in your example) the ACoE took out advertisements stating you can use the river for legitimate transport purposes, and someone used it for smuggling stolen goods?”
        Would the ACoE be responsible for that?
        Would the ACoE be required to search every vessel coming down the river to make sure they weren’t carrying stolen goods?

        • *rolls eyes*

          The Pirate Bay is a legitamate company facilitating legal commerce then… in your imaginary world…

          • “The Pirate Bay is a legitamate (sic) company facilitating legal commerce then… in your imaginary world…”

            No, son, in the real world.

            The Pirate Bay is like the river.
            It’s a conduit.

            There’s lots of shareware and Public Domain material on it.
            The fact that some outsiders (not the owners of Pirate Bay itself) post copyrighted material doesn’t make the owners of Pirate Bay criminals.

            If someone uses your car without permission to pull a bank job, are you responsible?

            Doesn’t Pirate Bay take down material when it’s reported by the copyright owners?
            If so, they’re doing their legal duty.
            However, if they don’t take down stuff after receiving proper notice, THEN, you’ve got grounds to kick ass…

            But it’s the copyright owners’ property.
            It’s up to them to keep an eye out for it.

          • The fact that some outsiders (not the owners of Pirate Bay itself) post copyrighted material doesn’t make the owners of Pirate Bay criminals.

            Except that the owners of Pirate Bay were convicted and sentenced to jail for copyright infringement.

            If someone uses your car without permission to pull a bank job, are you responsible?
            In some cases, yes. See, for example, Richardson v. Carnegie Library Restaurant:

            An emerging group of jurisdictions, on the other hand, has rejected the contention that an intervening criminal act automatically breaks the chain of causation as a matter of law, concluding instead that a reasonable person could foresee a theft of an automobile left unattended with the keys in the ignition and reasonably could foresee the increased risk to the public should the theft occur.[List of cases] In addition, a few courts, including some of those that earlier denied liability, have indicated a willingness to impose liability upon the owner under “special circumstances.”[List of cases] Courts looking at special circumstances seek to determine whether an owner’s conduct enhanced the probability that his car would be stolen and thus increased the hazard to third persons.

            Doesn’t Pirate Bay take down material when it’s reported by the copyright owners?

            No, it doesn’t.

  3. [“[I]t’s perfectly reasonable that such [user generated content] sites subsidize copyright enforcement.”

    How so? What enforcement mechanism would be subsidized exactly? And by what method? A general tax on on such sites so that revenues could be be given to IP plaintiffs’ lawyers such as yourself perhaps?…Another private entity which feels it can enforce laws outside of the parameters of government-run institutions?

    Are you confident that the concept of a USG site could be clearly defined? What about a personal blog of a private individual which runs a software platform that allows people in the comment section to upload media into the section in order to help enhance the comments they wish to make. Does that suddenly become a USG site which should be taxed at the behest of another private industry?

    It all seems very problematic to me.

    • Don’t forget that text itself can be copyrighted, how am I suppose to know the comment I am replying to isn’t copyright infringement? Surely any Web 2.0 site would be subject to this content tax, but probably any website and Internet user using similar justifications..

      If you are going to tax everyone on the Internet to pay for the losses resulting from filesharing, filesharing on the Internet could easily become legal. Something similar happened in Canada as I understand it.

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  5. I think the fundamental problem not that the copyright lobbyists/political forces want technology companies and the government to play them welfare ca$$h. But that they want this money without giving anything back. They still want the same copyright regime and refuse to budge on things like expanding fair use. Basically they want their cake and to eat it too and it’s just not going to work.

    • ^What are you even talking about?
      Are you having a different discussion?

      M wrote: “But that they want this money without giving anything back”

      Huh? nobody is asking for money… content creators are asking for their products not to be stolen.
      As for giving back… how much money has The Pirate Bay, LimeWire, ect., ect.. invested in creation? ZERO. They are just parasites.
      It’s your God given right to give away stuff you create, and no one will stop you. You can’t, however, give away MY stuff.
      If nobody wants the stuff i’m asking a price for, then i won’t sell anything.. but at the same time, you don’t have a right to just Take!

      We just want equal protection under the law. No other buisness would tolerate the wholesale raping that has been happening over the last decade to content creators.

      • “We just want equal protection under the law. No other buisness (sic) would tolerate the wholesale raping that has been happening over the last decade to content creators.”

        If you don’t want something to happen, YOU monitor where your work appears, then report when it does!
        Why are you insisting someone else (whom you’re not paying) do it for you, and for FREE?

        • Erm… for the same reason we’d expect used car lots to check the paperwork on the vehicles they buy, as opposed to paying hard cash for everything Fast Eddie Johnson brings in at three o’clock in the morning?

          • Paperwork for cars can be verified from state databases.
            How does a storage site verify your copyrights?
            Where’s your paperwork?
            Most people (and many corporations) don’t even register with the Library of Congress!
            (And, without a registered copyright, you can’t sue for damages.)
            So there’s no way to even verify the existence of the copyright.

            Pre-1976, the ONLY way to have copyright was to do the paperwork and send two copies to the Library of Congress.
            Without that simple procedure, you didn’t have a copyright.
            (You’d be amazed how many publishers, especially periodicals, didn’t bother, figuring no one would care about their material years down the road…)
            Restore that requirement, and you’d have a valid point.

        • “If you don’t want something to happen, YOU monitor where your work appears, then report when it does!
          Why are you insisting someone else (whom you’re not paying) do it for you, and for FREE?”

          i pay taxes.
          Just like when you call the cops when someone is breaking into your home, or when organized crime is robbing your delivery trucks, or a shoplifter steals from a store… Are the law enforcement services rendered to you dependent on you paying them? Can i get a reciept? …

          The money, if they clamp down on piracy, would be a net gain anyhow. The last estimate for loss due to IP theft (for all US industries) was somewhere around (over) 250-billion dollars a year… even if it had 1/250th of the desired effect it would pay for itself for the next 10years EVERY year (considering a low 20% tax rate on earned income), in 10 years time [at that obsurdley low success/tax rate…] 100 years of enforcement would be paid for…

          • The money, if they clamp down on piracy, would be a net gain anyhow.

            There’s very few studies that are taken seriously that agree with your conclusion. Sure, at the most, an additional $90 million is gained, but the budget of the MPAA is a lot larger than that, and you’ve destroyed a lot more platforms for expression than caused industry numbers to grow.

            The last estimate for loss due to IP theft (for all US industries) was somewhere around (over) 250-billion dollars a year

            [citation required]

            100 years of enforcement would be paid for…

            Nope. The CBO has already calculated that the next year of SOPA would be $10 million. And seeing as how Philippe Dauman already makes $80 million a year as Viacom CEO, it’s highly doubtful that piracy is truly causing a downfall of his business. Further, the “core copyright” industries have been doing a lot better than the economy overall. Or have you not read the newest report by Siwek showing exactly the same information that I’m describing to you?

          • Are you aware that stores often have to actually have to pay for cops to press charges on shoplifters? Or you know cops that hang out outside of malls (it happens in some places)? The malls pays the police department for this service. It’s rarely free.

            Cops are very expensive. And on demand they cost money. It’s a market like anything else.

            And even still, big establishments pay significant property taxes to the police department on top of the service fees. Most of the revenue for cops come from property taxes. Can you show me where is the property tax on IP (it is “property”, according to many proponents, after all)?

            Despite this they are never, in any way under any obligation to protect you or anyone (especially your business interests!!), ever. Remember that: there is no law that says a police department must take on a case – they do so on their discretion only. Only that they can (if they feel like it). I assure you, they’ll always have something better to do than go after 14-year olds over the Internet for “independent” artist scrubs who don’t contribute anything to their tax revenues or service revenues.

  6. Cyberlocker’s business model depends on the “look the other way” approach. Despite clear language in their “Terms of Service” every cyberlocker site is dependent on UGC to survive and thrive. Cyberlockers could easily follow Youtube and institute a content management system whereby rightsholders could control their content by allowing it to be monetized, block it (territory by territory) or remove it. The technology exists for these sites to vet the uploaded content, yet they choose not to. Why? There’s no incentive to do so. Given the current interpretation of “safe harbor” it’s basically open season on content theft and they reap the rewards.

    If Congress wanted to take effective action against piracy one major step in the right direction would be to revise the “safe harbor” language to exert leverage over these cyberlocker sites to alter their current business model.

    Youtube’s system, though imperfect, works. Google still gets to earn loads of cash off UGC but at least rightsholders control how, and when, their work is used and earns money in the process.

    Technology gave rise to rampant piracy for theft. It’s time for technology to mitigate its impact on content creators.

  7. “Except that the owners of Pirate Bay were convicted and sentenced to jail for copyright infringement.”

    Actually it was “accessory to breaching copyright laws”, not the actual infringements.
    And, it was under Swedish/European copyright law which is different than the US’s in a number of ways.
    They would not be convicted under US copyright laws.
    In addition, under Swedish law, the verdict is not lawful until all appeals have been exhausted.
    There is currently an appeal for a retrial due to judicial bias.
    And, despite the ruling (which was reduced on appeal), Pirate Bay continued operations for another three years before shutting down due to internal dissention.

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