Viacom v. YouTube: Can A Web Host Welcome and Profit From Infringing Activity and Then Claim Not to Know About It?

Is Judge Stanton’s decision in Viacom v. YouTube vulnerable on appeal? You bet. Before I explain why some background.

The Action and Motions

In 2007 Viacom sued YouTube for copyright infringement alleging that YouTube posted on its site tens of thousands of Viacom’s videos without permission. Viacom argued in its summary judgment motion:

YouTube’s founders single-mindedly focused on geometrically increasing the number of YouTube users to maximize its commercial value. They recognized they could achieve that goal only if they cast a blind eye to and did not block the huge number of unauthorized copyrighted works posted on the site. The founders’ deliberate decision to build a business based on piracy enabled them to sell their start-up business to Google after 16 months for $1.8 billion.

YouTube cross-moved seeking to dismiss the action. YouTube sought refuge under what’s called the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”). Those provisions shield online service providers like YouTube from monetary liability if they lack the knowledge required by § 512(c)(1)(A)(i) and (ii) that infringement is occurring on their site.

The Two Knowledge Standards

Section 512 (c) provides for safe harbor immunity if the service provider lacks “actual knowledge that the material or an activity using the material on the system is infringing” or “in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent.” These two standards are referred to as actual and red flag knowledge.

Under § 512(c)(1)(A)(iii) of the DMCA, actual knowledge of infringing “material” or awareness of facts or circumstances from which infringing activity is apparent invokes the service provider’s duty to “act expeditiously to remove” the infringing material.

The District Court Requires Specificity

In deciding the motions, the district court stated the “critical question” was whether actual and red flag knowledge are triggered by “a general awareness that there are infringements” “or rather mean[s] actual or constructive knowledge of specific and identifiable infringements of individual items.” The district court, relying solely on legislative history, opted for specificity, holding that actual and red flag knowledge arise only if YouTube knew of “specific and identifiable infringements of particular individual items. Mere knowledge of the prevalence of such activity is not enough.”

Accordingly, the district court held that YouTube qualified for safe harbor protection and dismissed the action.

I suggest the district court got it wrong. The court’s narrow construction of the knowledge standard ignored the language of § 512 (c)(1), made the red flag standard superfluous and is not supported by the section’s legislative history. Let me explain.

The Knowledge Standards Do Not Require Specificity

Section 512 (c)(1) on its face does not require specific knowledge of infringing clips. Although particularized knowledge of infringing clips would surely satisfy this standard, it is broader and is triggered when the service provider knows that “material” or “activity” on the site is infringing. Red flag knowledge exists where the service provider becomes “aware of facts or circumstances from which infringing activity is apparent.” The “facts or circumstances” are not limited to specific clips.

Specificity is elsewhere in the DMCA. For instance, § 512 (c)(3) of the DMCA conditions the effectiveness of a takedown notice on an “identification of the copyright work claimed to have been infringed.” But Congress did not similarly condition the loss of safe harbor protection in § 512 (c)(1) on a service provider’s knowledge that specific works were being infringed. Thus it appears that Judge Stanton replaced “infringing” “activity” in § 512(c)(1)(A) with “specific clips.”

The District Court Made the Red Flag Standard Superfluous

Further, the district court, by holding that knowledge of specific infringing clips satisfies the actual and red flag standards, effectively jettisoned the red flag standard. When Congress enacted the two standards of knowledge it must have intended they be different. Why else have two? Further, the legislative history and the face of § 512 (c)(1) indicate that the red flag standard requires something less than actual knowledge of infringement. But Viacom holds both standards require the same specificity. Therefore, if a service provider has red flag knowledge, it also must have actual knowledge. As a result, the red flag standard that had been a separate basis for imposing infringing knowledge on a service provider was read out of the DMCA.

The Legislative History Does Not Require Specificity

In addition, the legislative history the court relied on does not require that a service provider know of specific infringements of particular works. The House and Senate reports indicate that actual knowledge is satisfied by knowledge of “infringement” without further limitation. The legislative history illustrates red flag knowledge by referring to “pirate sites.” The congressional reports state that red flag knowledge arises where the service provider links to such sites “where sound recordings, software, movies or books were available for unauthorized downloading. Thus it appears that Congress intended that knowledge that a site contains a collection of unauthorized works is enough to raise a red flag. Knowledge of specific identifiable infringements of individual items on such a site is not required.

Welcoming Infringing Activity and Then Claiming Not to Know About It

The only factual finding Judge Stanton made, without expressly so stating, was that YouTube’s level of knowledge of the infringing conduct on its site never reached the specificity the court required. But the court  acknowledged a jury could find that YouTube was “not only generally aware of, but welcomed copyright-infringing material being placed on their website,” which “enhanced defendants’ income.”

If a host welcomes and profits from an infringer’s activity can the host claim it was unaware of facts or circumstances from which that infringing activity is apparent? We will see how the Second Circuit decides that issue.

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5 Responses to “Viacom v. YouTube: Can A Web Host Welcome and Profit From Infringing Activity and Then Claim Not to Know About It?”

  1. Tom Sydnor says:

    I agree with your analyses, and those are but a few of the Opinion’s reversible errors. Here is a link to my paper summarizing what seemed, to me, to be its two most glaring flaws:

    http://www.pff.org/issues-pubs/pops/2010/pop17.14-Grokster_Redux.pdf

    In short, this was a really disappointing ruling in a case that seemed well-litigated by both sides. Judge Stanton’s Opinion just was not very thoughtful or substantive. Whatever happens during the inevitable appeal, I doubt that it will be, “sustained, for the reasons set forth by the district court….”

    –Tom Sydnor

  2. Tom, I share your disappointment. The case wide implications for the copyright industry. Judge Stanton knew the losing party would appeal but that was no reason to shorten the analysis.

  3. Franco says:

    I have been following this case off and on and I am not as verse about the law’s specifics, etc. However, I’m curious to know whats the point of appealing when the founders of Youtube will more than likely retain ALL of the ill-gotten income? What does appealing do for all the other legit companies who lost the race to the top as a result of Youtube illegal activities? What I am getting at is that, appeal all you want the “damage” has been done and nothing will stop the train from its ill-gotten momentum. Also, I find it quite hypocritical for some companies to welcome infringement on Youtube, as long as they can claim the advertising dollars, while on other smaller sites they seek to take down such activities. Such activities will only encourage others to keep pirating movies and music, knowing firmly that in order to get rich and stay rich like the Youtube guys you have to break the law at every turn. Thank you.

  4. Franco thanks for your comments. If Viacom is able to overturn the dismissal of its case and succeeds in establishing that YouTube is liable for infringement, Viacom will then move into the damages phase of the case. At that point Viacom will ask for either an award of what are called statutory damages or seek actual damages for whatever lost license fees YouTube should have paid for its use of Viacom’s videos plus the profits YouTube made that are attributable to its unauthorized use of Viacom’s videos.

    In either case (whether Viacom elects statutory or actual damages) it will seek, as part of those damages, a return of YouTube’s “ill-gotten” monies.

    If Viacom successfully reaches the damages phase and chooses to receive statutory damages (which may be as much as $150,000 for each of its infringed works), the court has the discretion to set those damages in an amount that will not only compensate Viacom for its losses but will also act as a deterrent to others who may wish to similarly infringe.

    You are correct that it is hard for Viacom or any copyright holder these days to “stop the train.” But, if Viacom is successful, it will at least attempt to recover the damage the train has caused. We will all be watching.

  5. [...] But as the Outline indicates, a series of cases under the DMCA has nearly extinguished red-flag knowledge. UMG v. Veoh held that generalized knowledge of infringement, without more, is not enough for red-flag knowledge. The Ninth Circuit in Perfect 10 v. CCBill went further and held that defendant lacked red-flag knowledge even though its clients’ websites had alluring, come hither names such as “illegal.net” or “stolencelebritypictures.net.” Then Viacom v. YouTubesimply read red-flag knowledge out of the DMCA, stating that the ISP needed to have the same knowledge of specific infringing activity on its site for both red-flag and actual knowledge. See my earlier post here. [...]

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