Recent Second Circuit Decision in the Ongoing Viacom/YouTube Battle

by Mike Mintz on May 10, 2012 · 0 comments

in Intellectual Property,martindale.com

Big names in the entertainment industry such as Viacom, Paramount, other film studios and television networks, music publishers and sports leagues sued YouTube and Google in the Southern District of New York several years ago in a lawsuit entitled Viacom International, Inc. LLC, et al. v. YouTube Inc. LLC, et al., Docket Nos. 10–3270–cv, 10–3342–cv over what the plaintiffs claim was copyright infringement.  The case arose out of video clips users displayed on YouTube which were sourced from the plaintiffs’ own videos. The Second Circuit consolidated the cases and recently issued a decision clarifying the “safe harbor” provisions of the Digital Millennium Copyright Act (DMCA) and when online service providers are liable for copyright infringement that occurs “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c).  The plaintiffs sued YouTube for the display and reproduction of clips that appeared on YouTube from 2005 to 2008.

Under the DMCA there are a series of four safe harbors allowing internet service providers to limit their liability for claims of copyright infringement. The four “safe harbors” are: (1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (5) information location tools. 17 USC Sections 512 (a) – (d).

To qualify for protection under the safe harbor rules a party must meet certain criteria. Obviously, it must be a service provider defined as “a provider of online services or network access, or the operator of facilities therefor.” 17 USC § 512 (k) (1) (B).  A qualified service provider has to meet certain conditions of eligibility including adoption and reasonable implementation of a repeat infringer policy that provides for termination of subscribers and account holders of the service provider’s system or network.  Also, the service provider has to accommodate “standard technical measures” that are “used by copyright owners to identify or protect copyrighted works”. See § 512 (i) (1) (A) & (B). After meeting these criteria, a service provider has to satisfy one of the safe harbor provisions.  The one at issue in the instant case was the third one, i.e., infringement claims arising from the storage, at the direction of a user, of material that resides on a system or network controlled or operated by or for the service provider.  This safe harbor applies only if:

(1)   The provider does not have actual knowledge that the material or activity using the material on the system or network is infringing a copyright;

(2)   In the absence of such actual knowledge, the provider is unaware of facts or circumstances that would make the infringement apparent;

(3)   Upon obtaining such knowledge, the provider acts in an expeditious manner to remove or disable access to the material in question;

(4)   The provider does not receive financial benefit directly attributable to the infringing activity in situations where the service provider has the right and ability to control such activity;

(5)   If and when the provider receives notification of a claimed infringement, it responds expeditiously to remove or disable access to the offending material.

See § 512 (c) (1).  There is also a notification system provided for in the statute.  The notice provisions will trigger an obligation to remove the offending material expeditiously.

Facts

Although most of us are familiar with how to post videos on YouTube, a short description of the process involved will be helpful to an understanding of the opinion.  A user has to register with YouTube and create an account.  Under YouTube’s Terms of Use, the user cannot submit material unless he owns the rights, or has permission from the rightful owner, to post the material and to grant YouTube a licensing right to the material.  Users select videos to upload from their personal computer, smart phone, etc. and then instruct YouTube to upload the video by clicking on a button.  During the uploading process, YouTube makes one or more copies of the video in its original format, and it also makes copies in “Flash” format.  The video is accessed by streaming the video to the user’s computer in response to a “play” request.  YouTube also displays clips that are related to the requested clip.

Procedural Background

Viacom et al. sued YouTube for alleged copyright infringement based on the display and public performance of their videos on YouTube’s website.  The parties subsequently cross-moved for partial summary judgment, basing their motions on the DMCA’s safe harbor provisions.  The district court denied plaintiffs’ motions and found that the defendants were protected by the safe harbor provisions.  The district court identified the central issue as whether the statutory phrase “actual knowledge that the material or an activity using the material or the system or network is infringing” and “facts or circumstances from which infringing activity is apparent” in § 512 (c) (1) (A) mean a general awareness that infringements are occurring or whether it means constructive knowledge of a specific and identifiable infringement of individual items.

The district court concluded that the statute required knowledge of a specific and identifiable infringement of particular items.  According to the district court, mere general knowledge of such activity is not enough.

Legal Analysis

The central question on appeal is whether the safe harbor provision in question require “actual knowledge” of facts and circumstances indicating specific and identifiable infringements.  After the Second Circuit quoted the language of the relevant safe harbor provision, it substantially affirmed the district court’s holding.  It noted that the statute requires knowledge of specific infringing activity.  Also, if the provider acts expeditiously to remove or disable access to the material, it is still protected by the safe harbor provision.  The expeditious removal of the offending material of course presupposes that the provider had specific knowledge of the infringing material.

While the Second Circuit affirmed the district court’s interpretation of the safe harbor provision, it also found that the lower court’s granting of summary judgment was premature.  Plaintiffs argue that there are questions of fact regarding YouTube’s actual knowledge of specific instances of infringement.   The Second Circuit agreed with plaintiffs and reasoned that a jury could find that, based on YouTube’s internal communications, YouTube was actually aware of specific instances of infringing material popping up on YouTube.

The Second Circuit also addressed the issue of whether YouTube was willfully blind to specific infringing activity.  A person is “willfully blind” or engages in “conscious avoidance” amounting to knowledge where the person “was aware of a high probability of the fact in dispute and consciously avoided confirming that fact.” United States v. Aina -Marshall, 336 F.3d 167, 170 (2d Cir.2003) (quoting United States v. Rodriguez, 983 F.2d 455, 458 (2d Cir.1993)). In a  trademark infringement case, the court reasoned that “[a] service provider is not permitted willful blindness. When it has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.” Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93,109 (2d Cir.2010).

Although the DMCA does not mention “willful blindness”, a statute only abrogates a common law principle if the statute directly addresses the question covered by the common law.  The relevant DMCA provision, § 512(m), provides that safe harbor protection shall not be conditioned on “a service provider monitoring its service or affirmatively seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure complying with the provisions of subsection (i).” 17 U.S.C. § 512(m)(1). In other words, safe harbor protection cannot be conditioned on a provider affirmatively monitoring its service for infringing material. § 512(m) is incompatible with a broad common law duty to monitor or seek out infringing activity based on general awareness that infringement may be occurring. Since section 512 (m) does not address directly the willful blindness doctrine, § 512(m) limits—but does not abrogate—the doctrine of willful blindness. The Second Circuit concluded that the willful blindness doctrine may be applied to prove actual knowledge of specific instances of infringement under the DMCA. The district court did not address the issue of willful blindness in its opinion and it remains a fact question as to whether it existed in this action.  The Second Circuit remanded this issue to the lower court for further fact-finding.

Next, the appellate court addressed the issue of whether YouTube received a financial benefit directly attributable to the financial activity where the provider has the right and ability to control such infringing activity, pursuant to the statute at section 512 (c) (1) (B).  The district court erred when it concluded that the control provision requires item-specific knowledge of such activity.  The lower court should not have included a specific knowledge requirement into the control and benefit provision.  The Second Circuit remanded the issue of controlf for further fact-finding.

Next the court addressed the issue of whether YouTube fell under the safe harbor provision “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider”, 17 USC § 512 (c) (1).  The appellate court agreed with the district court’s holding that three of the challenged software functions, i.e. (1) the conversion of videos into standard display format; (2) the playback of videos on “watch” pages and (3) the “related videos” function fell within the aforementioned safe harbor provision.  There was a fourth software function pertaining to third-party syndication of videos uploaded to YouTube which the appellate court remanded to the lower court for further fact-finding consistent with the appellate court’s opinion.

This long-standing lawsuit, which involves some of the biggest names in entertainment and media, is not even close to being resolved.  Since posting online videos remains such a popular pastime for the general public, the case bears close watching.

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