Second Circuit Reinstates Viacom v. YouTube, Addressing Contours of DMCA Safe Harbor

Practical Law Legal Update 7-518-8588 (Approx. 7 pages)

Second Circuit Reinstates Viacom v. YouTube, Addressing Contours of DMCA Safe Harbor

by PLC Intellectual Property & Technology

Key Litigated Issue

In Viacom International Inc. v. YouTube, the key issues before the US Court of Appeals for the Second Circuit involved the scope and requirements of the Digital Millennium Copyright Act (DMCA) safe harbor for storing materials at the direction of a user. In particular, the court addressed, among other things:

The type of knowledge of infringing activity that disqualifies an online service provider from safe harbor protection, specifically, whether the knowledge (either actual or red flag) must be of specific infringing activity or whether a general awareness of infringing activity is sufficient.
The meaning of actual and red flag knowledge.
The application of the common law willful blindness doctrine to the DMCA.
What constitutes a provider's "right and ability to control" infringing activity, specifically, whether it includes a specific knowledge component.
The scope of activities that occur by reason of storage at the direction of a user and, specifically, whether licensing of clips to third parties falls within this scope.
Whether the safe harbor protects against all affirmative claims for monetary relief.

Background

The Second Circuit heard this case on appeal from a decision of the US District Court for the Southern District of New York. Viacom and various other copyright owners had sued YouTube, the popular website for user-uploaded videos, for direct and secondary copyright infringement based on the public performance, display and reproduction of thousands of their copyrighted audiovisual works between 2005 and 2008. YouTube argued that it was protected by the DMCA's safe harbor provision which shields online service providers from infringement liability for user-uploaded content if certain criteria are met.

The requirements of the DMCA safe harbor for materials stored at the direction of a user include:

Threshold eligibility requirements. These include that:
- the service provider must adopt and reasonably implement a repeat infringer policy that provides for the termination in appropriate circumstances of subscribers and account holders (17 U.S.C. § 512(i)(1)(A));
- the service provider must accommodate standard technical measures that are used by copyright owners to identify or protect copyrighted works (17 U.S.C. § 512(i)(1)(B), (i)(2)); and
- the infringements must occur by reason of storage of the copyrighted material "at the direction of a user" (17 U.S.C. § 512(c)(1)).
Knowledge requirements. Safe harbor protection applies only where the online service provider:
- does not have actual knowledge that the material or an activity using the material on the system or network is infringing;
- in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent (so-called "red flag" knowledge); or
- on obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material.
(17 U.S.C. § 512(c)(1)(A).)
Control and benefit requirements. A service provider must not receive a financial benefit directly attributable to the infringing activity in a case where the provider has the "right and ability to control" the infringing activity (17 U.S.C. § 512(c)(1)(B)).

The District Court granted summary judgment to YouTube on June 23, 2010, finding that it was entitled to DMCA safe harbor protection primarily because it had insufficient knowledge of the particular infringements at issue. In interpreting the DMCA safe harbor provision, the District Court held that both actual and red flag knowledge refer to knowledge of specific and identifiable infringements, and not merely general awareness of infringing activity.

The District Court also held that:

Item-specific knowledge of infringing activity is required for finding that a service provider has the "right and ability to control" the infringing activity under Section 512(c)(1)(B).
Replication, transmittal, and display of videos on YouTube constituted infringing activity "by reason of the storage at the direction of a user" within the meaning of Section 512(c)(1).

Outcome

Knowledge of Infringing Activity

The Second Circuit agreed with the district court's ultimate interpretation of the knowledge requirements of Section 512(c)(1)(A) of the DMCA, holding that actual and red flag knowledge refer to knowledge or awareness of facts that indicate specific and identifiable instances of infringement. Mere general awareness of infringing activity is not sufficient.

In its analysis, the court distinguished between actual knowledge under Section 512(c)(1)(A) and red flag (facts or circumstances from which infringing activity is apparent) knowledge under Section 512(c)(1)(A), finding that:

The actual knowledge provision turns on whether the provider actually or "subjectively" knew of specific infringement.
The red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement "objectively" obvious to a reasonable person.

The court noted that the red flag provision, because it incorporates an objective standard, is not swallowed by the actual knowledge provision. The court indicated that both provisions work independently, and both apply only to specific instances of infringement.

Reversal of Summary Judgment

While the Second Circuit agreed with the District Court's interpretation of the knowledge requirements of Section 512(c)(1)(A), it disagreed with the District Court's grant of summary judgment to YouTube. In reversing the summary judgment order, the Second Circuit found that a triable issue of fact existed because a reasonable jury could conclude that YouTube had actual knowledge or red flag awareness of specific instances of infringement. As evidence, the court cited:

Survey results on the percentage of content on YouTube that was infringing, although the court indicated that the surveys alone do not create a triable issue of fact.
Internal YouTube e-mails and other communications that referred to particular infringing clips.

Application of the Common Law Willful Blindness Doctrine

Characterizing it as issue of first impression, the Second Circuit found that the common law willful blindness doctrine (which is not mentioned in the DMCA) may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA.

The court noted that an online service provider does not have a duty to affirmatively monitor or otherwise seek out infringing activity based on a general awareness that it may be occurring. However, citing its decision in the trademark context in Tiffany v. eBay, the court noted that a service provider may not shield itself from learning of infringements by "looking the other way" (600 F.3d 93, 109 (2d Cir. 2010)).

The Second Circuit remanded this issue to the District Court to determine whether YouTube made a "deliberate effort to avoid guilty knowledge."

Right and Ability to Control the Infringing Activity

A service provider is also ineligible for DMCA safe harbor protection under Section 512(c) if it both:

Receives a financial benefit directly attributable to the infringing activity.
Has the "right and ability to control" the infringing activity.

(17 U.S.C. § 512(c)(1)(B).)

The District Court held that a service provider must know of the particular case of infringement before it can control it. The Second Circuit noted that the Ninth Circuit, in its recent decision in UMG Recordings v. Shelter Capital Partners, agreed with the District Court's analysis (Nos. 09-55902, 09-56777, 10-55732 (9th Cir. December 20, 2011)).

The Second Circuit rejected the constructions of both the District Court and Ninth Circuit, finding that importing a specific knowledge requirement into the control provision renders the control provision duplicative of the knowledge provision. The court also rejected the plaintiffs' contention that the control provision codifies the common law doctrine of vicarious liability.

The Second Circuit held that, while the control provision does not include a specific knowledge requirement, it does require "something more" than the ability to remove or block access to materials posted on a service provider's website. The court did not specifically indicate what constitutes "something more," but suggested that it involves a service provider "exerting substantial influence on the activities of users," without necessarily, or even frequently, acquiring knowledge of specific infringing activity. The court remanded the issue to the District Court for further proceedings to determine both the standard and whether YouTube satisfied it.

Stored at a User's Direction

The Section 512(c) safe harbor only applies to activities that fall within the scope of storage of material at the direction of a user.

The District Court found that the four challenged software functions of YouTube constituted storage at a user's direction within the meaning of the safe harbor, namely:

The conversion of videos into a standard display format.
Video playback.
Related videos feature.
Third-party syndication, by which YouTube transcoded certain videos into a mobile format and licensed them to Verizon Wireless and others.

The Second Circuit affirmed the District Court findings on all of the software functions except third-party syndication. The Second Circuit remanded to the District Court for further fact-finding on whether any of the clips at issue in the suit were syndicated to a third party. The Second Circuit suggested, but did not decide, that syndication, which involves manual selection of material for licensing to a third party, is not storage occurring at the direction of a user within the meaning of Section 512(c)(1).

Application to all Affirmative Claims

The Second Circuit confirmed that the DMCA safe harbor, if applicable, protects a defendant from all affirmative claims for monetary relief, including claims for:

Direct infringement.
Vicarious liability.
Contributory liability.

Update: On March 18, 2014, the parties jointly announced they had reached a settlement in the Viacom vs. YouTube copyright litigation.

Practical Implications

The Second Circuit's decision provides content owners and online service providers with additional certainty on the scope of the DMCA safe harbor in some areas while at the same time raising new questions in others, leaving significant aspects unsettled.

Notably, the decision confirms that DMCA safe harbor disqualifying knowledge is actual knowledge or awareness of facts and circumstances (red flag knowledge) that indicate specific and identifiable infringements and not merely general awareness of infringing activity.

However, the decision raises questions regarding:

The full meaning of the court's subjective-objective distinction between actual and red flag knowledge.
The specific facts that show disqualifying knowledge.
The application of the willful blindness doctrine to the knowledge requirement.
The meaning of "right and ability to control."
Whether licensing content to third parties constitutes storage at the direction of a user.

Content owners and online service providers should continue to monitor this case as proceedings resume in the District Court.

Second Circuit Reinstates Viacom v. YouTube, Addressing Contours of DMCA Safe Harbor | Practical Law