By: James Kachmar
In late December, the Ninth Circuit revisited the “safe harbor” provisions of the Digital Millennium Copyright Act (“DMCA”) in the case UMG Recordings, Inc. v. Veoh Networks, Inc., 101 U.S.P.Q.2D (BNA) 1001. Veoh is a web service that allows users to view videos uploaded by other users. Veoh was sued for copyright infringement by UMG, one of the world’s largest music and music publishing companies.
Veoh’s service not only “stores” videos, but subjects them to an automated process that breaks the video into smaller 250KB “chunks” and “transcodes” the video into Flash 7 format to make the videos more easily accessible to other users. The videos may then be viewed either through “streaming” or downloading the video. Veoh uses several technologies to automatically prevent copyright infringement in its system, including employing various filters and terminating users who upload infringing materials. Despite Veoh’s efforts, however, its users were able to download numerous unauthorized videos containing songs for which UMG owned the copyright. Veoh was notified of the alleged infringements not by UMG, however, but rather, by the Recording Industry Association of America. Once it received the notices from the RIAA, Veoh immediately removed the infringing material.
In September 2007, UMG sued Veoh for copyright infringement claiming it did not do enough to prevent the infringement of its copyright materials. UMG moved for partial summary judgment claiming that Veoh was not entitled to protection under the DMCA’s “safe harbor” provision but the District Court denied this motion. Veoh then moved for summary judgment on the basis that it satisfied the remaining requirements of the safe harbor provisions and the lower court granted its motion. UMG appealed to the Ninth Circuit and argued that Veoh had not met its burden of showing that it qualified for immunity under the safe harbor provisions.
The Ninth Circuit began by looking at the history that prompted congress to enact the DMCA. The Ninth Circuit recognized “although congress was aware that the services provided by companies like Veoh are capable of being misused to facilitate copyright infringement, it was loathed to permit the specter of liability to chill innovation that could also serve substantially socially beneficial functions.” To that extent, congress created four safe harbors to preclude a service provider from being held for monetary liability for copyright infringement.
In general, to avail itself of a safe harbor protection, a service provider must show: (1) it did not have actual knowledge of the infringing material on its system; (2) if it did not have actual knowledge, it was also unaware of facts or circumstances from which the infringing activity to would be apparent; or (3) that upon obtaining such knowledge or awareness it acts expeditiously to remove or disable the materials. A service provider must also show that it does not receive a financial benefit directly attributable to the infringing activity and that upon notification, it expeditiously removed the offending material.
UMG argued that Veoh did not engage merely in “storage” to avail itself of the safe harbor provision. The Ninth Circuit began by determining whether the automatic functions performed by Veoh in processing a video uploaded to its site fell within the DMCA’s meaning of “by reason of the storage at the direction of a user.” UMG argued that the automatic process employed by Veoh to make the video accessible took the case outside the safe harbor provisions since Veoh was not merely “storing” the material at the user’s direction. The Ninth Circuit rejected this argument finding that UMG’s reading of the statute was too narrow. The Court looked at the legislative intent to find that the safe harbor provisions were drafted to “encompass the access-facilitating processes that automatically occur when a user uploads a video to Veoh.” The Ninth Circuit reasoned that UMG was arguing that the safe harbor provision should only be limited to web hosts, but that had congress wanted such a limitation, it could have drafted the DMA to be restricted as such.
UMG also argued that Veoh had actual knowledge of the infringing activity or was aware of facts and circumstances by which it should have known. The Ninth Circuit likewise rejected this argument. First, it found that it was undisputed that UMG never notified Veoh of specific material that it claimed to be infringing. UMG argued instead that because Veoh was aware that there was other infringing material on its website that it should have been aware that UMG’s copyright material would likewise be present. The Ninth Circuit rejected this claim, however, finding that there were many music videos that could legally be on the website. Further, if the mere presence of some infringing material on a website was sufficient to put a service provider on notice that other material might be infringing, it would render the safe harbor provisions “a dead letter.” Instead, the Ninth Circuit found that the DMCA requires “specific knowledge of particular infringing activity” given that this fosters congress’s intent to encourage cooperation between copyright holders and service providers in dealing with infringement on the internet. This is also consistent with congress’s decision to enact a notice and take down protocol encouraging copyright holders to identify specific infringing material to service providers. The Ninth Circuit refused UMG’s request to “alter” this statutory language and found that Veoh had taken sufficient actions to prevent infringing material from appearing on its website.
Finally, UMG argued that Veoh was not entitled to judgment because it did receive a financial benefit directly attributable to the infringing activity. Specifically, UMG argued that Veoh had the right and ability to control infringing activity and thus could not take advantage of the safe harbor protection. The Ninth Circuit rejected this argument finding that Veoh only had the necessary right and ability to control infringing activity once it had been notified of such activity. The Ninth Circuit found that merely knowing that a website can host infringing material did not satisfy the specific knowledge requirement to impose liability. Thus, the Ninth Circuit held that “the ‘right and ability to control’ under section 512(c) [of the DMCA] requires control over specific infringing activity the provider knows about” and “a service provider’s general right and ability to remove materials from its services is alone insufficient.”
The Ninth Circuit’s decision in UMG Recordings provides further clarification about the safe harbor provisions of the DMCA. Service providers are encouraged to be proactive in identifying and removing infringing material upon receipt of notice that such materials exist. Such policies can help shield a service provider from liability under the DMCA’s safe harbor provisions.
James Kachmar is a shareholder in Weintraub Genshlea Chediak Tobin & Tobin’s litigation section. He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes. For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.