YouTube’s Safe Harbor Status Requires More Fact-Finding, Rules Second Circuit

The Second Circuit issued its opinion in Viacom v. YouTube last week.  This case is similar to UMG v. Shelter Capital Partners, LLC in that it addresses issues arising out of applying the Digital Millennium Copyright Act (DMCA) safe harbor provisions to a service provider that permits users to upload videos to its website and view video clips uploaded by others without charge.  See my post Veoh’s Services Protected by DMCA Safe Harbor, Rules Ninth Circuit for details on UMG v. Shelter Capital.  The Second Circuit agreed with some, but not all, of the Ninth Circuit’s DMCA safe harbor analysis.

The plaintiffs in Viacom v. YouTube appealed the district court’s ruling granting YouTube’s motion for summary judgment on the grounds that YouTube was protected by the DMCA §512(c) safe harbor and denying plaintiffs’ cross motions for partial summary judgment.  This case is actually comprised of related actions in which the plaintiffs, including Viacom, film studios, television networks, music producers, sports leagues and class action plaintiffs, are copyright holders who sued YouTube for copyright infringement based on the public performance, display, and reproduction of video clips that appeared on the YouTube website between 2005 and 2008.  The specific video clips at issue are 63,497 clips identified by Viacom and 13,500 clips identified by the class action plaintiffs.  The Second Circuit refers to the clips at issue as “clips-in-suit.”

Section 512(c)(1)(A) actual and “red flag” knowledge.  “The first and most important question on appeal is whether the DMCA safe harbor at issue requires “actual knowledge” or “awareness” of facts or circumstances indicating “specific and identifiable infringements.”  (Opinion pdf page 15). 

A service provider is protected by the 17 U.S.C. §512(c) safe harbor only if the service provider:

(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material.

§512(c)(1)(A).

The Second Circuit upheld the district court’s ruling that the phrases “actual knowledge that the material is infringing” and “facts or circumstances from which infringing activity is apparent” refer to “knowledge of specific and identifiable infringements.”  (Opinion pdf page 15).  This result is compelled by the language of the statute.  Knowledge or awareness of infringing activity by itself does not preclude safe harbor protection.  The service provider with knowledge of infringing activity is still protected if it “acts expeditiously to remove, or disable access to, the material.”  The expeditious removal obligation can be fulfilled only when the service provider knows the exact items to remove. 

The plaintiffs argued that the “facts or circumstances” language in §512(c)(1)(A)(ii), the “red flag” knowledge provision, “demonstrates that Congress did not intend to limit the red flag provision to a particular type of knowledge.”  (Opinion pdf page 16).  The plaintiffs argued that requiring awareness of specific infringements for both §512(c)(1)(A)(i) and §512(c)(1)(A)(ii) makes §512(c)(1)(A)(ii) unnecessary.  The Second Circuit ruled that the phrase “actual knowledge” in §512(c)(1)(A)(i) denotes a subjective belief, whereas the phrase “facts and circumstances” in §512(c)(1)(A)(ii) denotes an objective reasonableness standard.  “Both provisions do independent work, and both apply only to specific instances of infringement.”  (Opinion pdf page 18).

The district court’s grant of summary judgment.  The Second Circuit thought the district court’s grant of summary judgment to You Tube on the record presented was premature and remanded that portion of the case.  The Second Circuit determined from its review of the record that, on the basis of internal YouTube communications, “a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent.”  (Opinion pdf page 22).  It was unclear to the Second Circuit whether the activity discussed in the internal YouTube communications referred to any of the clips-in-suit.  It therefore remanded so that the district court could answer that question.

Was YouTube willfully blind?  The Second Circuit stated that the issue of applying the common law doctrine of willful blindness in the DMCA context was an issue of first impression, meaning that the question had not been previously addressed by the court. 

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 the fact.

(Opinion pdf page 23).

Section 512(m) of the DMCA prohibits conditioning safe harbor protection on affirmative monitoring by a service provider.  Section 512(m) does not directly address the doctrine of willful blindness, and for that reason limits the application of the doctrine, but does not do away with it.  The Second Circuit held that “the willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA.”  (Opinion pdf page 24).  The Second Circuit remanded this issue to the district court, as the district court ruled that safe harbor protection does not require affirmative monitoring, but did not specifically discuss willful blindness or its application to the DMCA safe harbors. 

Control and benefit under §512(c)(1)(B).  Under this section, a service provider cannot qualify for safe harbor protection if it “receive[s] a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.”  The district court imported a specific knowledge requirement into this section, ruling that the activity had to be known to the service provider before it could be controlled by the service provider.  The Second Circuit ruled that the district court erred.

The Second Circuit rejected the district court’s interpretation that that right and ability to control requires specific knowledge because that interpretation would make §512(c)(1)(B) duplicative of §512(c)(1)(A).  Section 512(c)(1)(A) excludes from safe harbor protection service providers with specific knowledge of infringing material and who fail to expeditiously remove the material.  The Second Circuit also rejected the argument that §512(c)(1)(B) is a codification of the common law doctrine of vicarious liability.  The safe harbor provisions assume that service providers have the ability to control, so that the vicarious liability interpretation would exclude all service providers from safe harbor protection.

The Second Circuit concluded that “the right and ability to control infringing activity under §512(c)(1)(B) requires something more than the ability to remove or block access to materials posted on a service provider’s website.”  (Opinion pdf page 28).  However, the court did not decide what that something more is and remanded to the district court “to consider in the first instance whether the plaintiffs have adduced sufficient evidence to allow a reasonable jury to conclude that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity.”  (Opinion pdf pages 28-29).

Section 512(c)(1) “by reason of storage.”  The §512(c) safe harbor applies only to service providers “for infringement of copyright 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.”  YouTube takes four actions for the videos that are uploaded to its system by users:  converting (transcoding) the videos into a standard display format, playing back (streaming) the videos to other users, running an algorithm to match videos to related videos, and syndicating videos uploaded by users to third parties. 

The district court ruled that all of these functions occur “by reason of” user storage and are protected by the safe harbor.  The Second Circuit agreed regarding the first three, but remanded for more fact finding on the third party syndication of videos uploaded by users.  Syndicating to third parties is licensing videos to third parties to make the videos available on other devices, such as mobile devices. 

The Second Circuit agreed with the Ninth Circuit in the Veoh case that “§512(c) is clearly meant to cover more than mere electronic storage lockers.”  The Second Circuit indicated that the safe harbor extends to software functions that facilitate access to the user-stored material.  The software functions of transcoding, streaming and matching related videos are all automated functions that occur without the active involvement of YouTube employees.  Excluding these functions from protection would render the §512(c) safe harbor meaningless. 

Regarding the third party syndication issue, the Second Circuit stated that “plaintiffs argue – with some force – that business transactions do not occur at the ‘direction of a user’ within the meaning of §512(c)(1) when they involve the manual selection of copyrighted material for licensing to a third party.”  (Opinion pdf page 31).  The Second Circuit remanded to the district court to determine whether any of the clips-in-suit were syndicated to a third party.

The class plaintiffs argued that YouTube failed to comply with the repeat infringer requirements of §512(i)(1)(A) because it restricted access to tools identifying infringing material to designated “partners.”  The Second Circuit ruled that YouTube is only required to institute “standard technical measures” and since the class plaintiffs did not argue that YouTube failed to meet standard technical measures, rejected that challenge.

The plaintiffs also argued that the district court erred under Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. in denying the plaintiffs summary judgment on their direct infringement, vicarious liability and contributory liability claims.  The Second Circuit indicated that since the district court found that YouTube was protected by the DMCA safe harbor provisions, that it was correct in ruling that YouTube was therefore protected from all affirmative claims for monetary relief.  Because further fact-finding is required to determine whether YouTube is entitled to safe harbor protection, the Second Circuit vacated the order denying plaintiffs’ summary judgment motions and remanded without discussing the merits of those infringement claims.

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