Happy Easter from the AmeriKat I: Appeals Court rules in Viacom v YouTube

The AmeriKat ready to get this
Easter show started...
The AmeriKat relocated from the leafy legal maze of Holborn to the less leafy, but no less legal, maze of Liverpool Street two months ago.  Now having her fuzzy paws firmly under her desk and no longer getting lost as she emerges from Liverpool Street Station or from the elevator onto her floor, her new challenge has been juggling an ever exploding number of tasks, meetings, calls, dinners and trips.  Being a very busy kitten for the past few weeks, she in fact forgot that one of her favorite holidays was coming up this weekend - Easter.  It was only when she was gently reminded not to persist in scheduling meetings on Friday or Monday, that the chocolate egg finally dropped.  Now with the Easter weekend  now in her midst and sadly, given her lack of planning, no Easter eggs to dye or Easter basket bounty to gorge upon, she has found some breathing space to return with some brightly colored eggs of  US IP news of the past few weeks.  

Second Circuit Appeals finally rules on Viacom v YouTube

Last week, after five years coursing through the veins of the US judicial system, the Viacom v YouTube case is finally subject to an appellate court ruling courtesy of the Second Circuit Court of Appeals clarifying the scope of the safe harbor provisions in the Digital Millennium Copyright Act (DMCA) (see previous IPKat/AmeriKat reports here).  Viacom  appealed Judge Stanton's 23 June 2010 decision granting summary judgment in favor of YouTube which held that YouTube was, when faced with direct and contributory copyright infringement claims in respect of unauthorized Viacom copyright content uploaded on YouTube, entitled to benefit from the safe harbor protection under section 512 of the DMCA.

The safe harbor provisions provide that where a service provider can comply with certain threshold requirements and does not have actual knowledge or awareness ("red flag" test) of the infringing activity on its platform then it can enjoy safe harbor protection when faced with copyright infringement claims.  To benefit from the protection a party must be a service provider, must adopt and reasonably implement a "repeat infringer" policy that provides for the termination of subscribers and account holders in appropriate circumstances, and must accommodate "standard technical measures" used by copyright owners to identify or protect their copyright works.  Once past these thresholds, a service provider must, in the case at issue under section 512(c)  which deals with infringement "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", show that  they do not have actual knowledge or constructive knowledge ("the red flag" test) of infringing activity and if they do, act expeditiously to remove the material.  To benefit from the safe harbor provisions, the service provider must also not receive a financial benefit directly attributable to the infringing activity, in a case where the service provider has "the right and ability to control such activity" (Section 512(c)(1)(B) DMCA).

The main thrust of Judge Stanton's District Court ruling was that YouTube had insufficient notice of particular, specific infringements.  That is to say under the statutory tests of "actual knowledge" or "aware[ness] of facts or circumstances" the knowledge that would disqualify an online service provider from safe harbor protection would have to be "knowledge of specific and identifiable infringements" under section 512(c)(1)(A).  Without item-specific knowledge of infringing activity, a service provider could not be found to have "the right and ability to control" infringing activity under section 512(c)(1)(B).  Further, the District Court held that the replication, transmittal and display of videos on YouTube was done "by reason of the storage at the direction of a user" under section 512(c)(1).  The net effect was that YouTube benefited from the safe harbor provisions.

The Court of Appeals held that the District Court was right in finding that the section 512 safe harbor provisions requires knowledge or awareness of specific infringing activity. In support of this finding, the Appeals Court said that they were particularly persuaded by statutory construction of section 512(c) and in particular section 512(c)(1)(A) which demonstrates that knowledge or awareness alone did not disqualify the service provider for the safe harbor but only does so if it does not  "[act] expeditiously to remove, or disable access to, the material".  The nature of the removal obligation therefore recognizes that expeditious removal is only possible if the service provider knows which specific items it should remove.  The court, recognizing how this may impact on "red-flag" knowledge stated that the difference between "actual" and "red flag" knowledge is "not between specific and generalized knowledge, but instead between a subjective and objective standard".  Providing clarity on the knowledge standards, and finding support in a recent Ninth Circuit panel ruling in UMG Recordings Inc v Shelter Capital Partners (2011) the court explained that:
"The actual knowledge standard asks whether the service provider actually or "subjectively" knew of the specific infringement, while 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 red flag provision, because it incorporates an objective standard, is not swallowed up by the actual knowledge provision under our construction of the § 512(c) safe harbor.  Both provisions do independent work, and both apply only to specific instances of infringement."
However, the Court of Appeals vacated the order granting summary judgement because they held that, a  reasonable jury could find that YouTube did have actual knowledge or awareness of specific infringing activity on its website.  In support of this ruling, the Appeals Court cited various evidence from Viacom that arguably showed that YouTube had reason to know that a fair percentage of the content uploaded on the site contained unauthorized copyright material.  The Court further remanded back to the District Court the task of determining whether any of this evidence may show that YouTube had knowledge of or awareness of infringements which corresponded with the YouTube clips subject to the present action - all of which could be quite the evidential task.  The Court also remanded the question of willful blindness back to the District Court and indirectly demanded an explicit fact-finding exercise to be undertaken under their recent decision in the Tiffany v eBay (2010) case.

"Statutory interpretation that render
language superfluous are disfavored"
 - i.e. the "Do not duplicate" rule
of statutory interpretation 
Judge José Cabranes writing for the Appeals Court further held that under section 512(c)(1)(B) the "right and ability to control" provision did not require "item-specific" knowledge and thus reversed the finding of the District Court in so far as it rested on an erroneous interpretation of this provision .  The Court rejected this "item-specific" construction - a construction affirmed by the UMG Recordings case.  The difficulty, the Court held, was that this construction imports a specific knowledge requirement into section 512(c)(1)(B) and therefore duplicates section 512(c)(1)(A).
"Any service provider that has item-specific knowledge of infringing activity and therefore obtains financial benefit would already be excluded from the safe harbor under section 512(c)(1)(A) for having specific knowledge of infringing material and failing to effect expeditious removal.  No additional service provider would be excluded by section 512(c)(1)(B) that was not already excluded by section 512(c)(1)(A)."
The Court also affirmed the District Court's holding that three of the challenged YouTube software functions - transcoding, playback and the "related videos" function -  fell within the safe harbor provisions for infringement that occurs "by reason of" user storage.  However, the Court remanded the fourth software function - third-party syndication - back to District Court for further fact-finding.  In 2007, YouTube transcoded a select number of videos into a format compatible for mobile devices and "syndicated" or licensed the videos to Verizon Wireless and other companies.  Viacom argued that such business transactions do not occur "at the direction of a user" under section 512(c)(1) as these videos were manually chosen for licensing to a third party by YouTube.  None of the videos in dispute were included in the 2,000 or so videos provided to Verizon Wireless, but to "avoid rendering an advisory opinion on the outer boundaries of the storage provision" the Court remanded the question of whether any of the clips-in-suit were in fact syndicated to any other third party.  

Circuit Judge Jose A. Cabranes
So for those of you readers who have lost score, the net effect of this judgment is that the following issues are heading back to the District Court to allow the parties to brief on the following issues, with  a view of permitting renewed motions for summary judgment as soon as possible:

(A) Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);
(B) Whether, on the current record, YouTube willfully blinded itself to specific infringements;
(C) Whether YouTube had the “right and ability to control” infringing activity within the meaning of § 512(c)(1)(B); and
(D) Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred “by reason of the storage at the direction of the user” within the meaning of § 512(c)(1), so that YouTube may claim the protection of the § 512(c) safe harbor.  
The Court of Appeals ruling is obviously good news for Viacom, but the AmeriKat would cautiously not  characterize it as a "win" for Viacom (despite some media outlets calling it a "bummer" for Google and the user-generated content community - Ars Technica article here, Financial Times here and Wall Street Journal here ).  This is because although some clarifications have been made as to the statutory legal provisions, the devil is in the detail and those details lie into a further factual exercise to be undertaken on remand.  Hopefully, for us anxious legal observers and the parties, this exercise will occur as soon as possible.  
Happy Easter from the AmeriKat I: Appeals Court rules in Viacom v YouTube Happy Easter from the AmeriKat I: Appeals Court rules in Viacom v YouTube Reviewed by Annsley Merelle Ward on Sunday, April 08, 2012 Rating: 5

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