The Seven Year Itch: Viacom v YouTube settles, lawyers despair

Seven years seems to be the optimum time it takes before content owners and service providers get tired of IP litigation and settle.   And, boy, is 2014 the year they are settling.   In January, it was a seven-year long trade mark battle between L’Oréal v eBay before the UK courts (and the CJEU) that bit the dust. Today, also after seven years of intense litigation, the behemoth case of Viacom v YouTube has ended, making the parties rejoice (we hope) while their lawyers look on despondently, remembering the good times.

Readers will recall, courtesy of the AmeriKat’s reports, that in March 2007 Viacom commenced copyright infringement proceedings against YouTube in a New York federal court after Viacom and its affiliates, including Paramount Pictures, discovered that its copyright-protected content (episodes, movies and substantial segments thereof) were uploaded onto YouTube without Viacom’s permission by YouTube users. Viacom was not holding any punches either, claiming approximately $1 billion in damages for the infringement. 

Viacom’s dealings with YouTube were different from that of other media corporations, namely NBC and CBS, who chose to take a more "collaborative" approach. NBC had dealt with infringing works on YouTube on a case-by-case basis. CBS seemingly heeded the old commercial lawyer adage "Make deals, not war", in taking a more permissive approach with YouTube. CBS seeing that the future was now ["And not seven years down the line", chides Merpel] established its own YouTube channel; entering into a deal with YouTube to receive a share of the advertising revenue, CBS has not seemingly turned back.

At the time, law professors including Tim Wu at Columbia University and John G Palfrey Jr at Harvard Law did not rate Viacom’s chances of success. The Digital Millennium Copyright Act’s (DMCA’s) Safe Harbor provisions would, inevitably, help save the day for YouTube. Sure enough, a summary judgment decision of Judge Stanton in 2010 and an appellate court ruling from the Second Circuit Court of Appeals in 2012 would prove this prophecy right.

During the summary judgment hearing, Viacom argued that YouTube knew and had knowing intent that it was inducing or encouraging the uploading of infringing content onto its website, the so called "Grokster intent". The Supreme Court in Grokster provided three factors for that could be used to determine whether a company should be held liable for the inducement or facilitation of copyright infringement by virtue of its business model: (i) whether the defendant communicated to users that their service could be used for infringing purposes; (ii) the absence of absence of filtering technology; and (iii) their advertising-revenue model. Viacom argued that all these factors were present by virtue of YouTube’s "patently illegal objective" to actively encourage the growth of the site as, according to the documents produced during the litigation, "as aggressively as we can through whatever tactics, however evil" (see para 85 of the Statement of Undisputed Facts), their refusal until May 2008 to implement filtering tools and the fact that YouTube’s business model was based on advertising revenue. Viacom was also at pains to repeatedly emphasize YouTube’s intent that the site be used for infringing purposes as well as turning a blind eye to the videos containing infringing content being uploaded y its users.

This emphasis on intent was for good reason. The robust safe harbour provisions set out in Section 512, limit a service provides direct, vicarious and contributor infringement liability for four acts – transmitting, caching, storing and linking to infringing copyright-protected content. The scope of the safe harbour applicable in this case was that relating to the storing provisions (Section 512(c)(1)). For YouTube to benefit form the safe harbour provisions it had to satisfy three main threshold requirements. First, that it did not have actual knowledge or awareness of the infringement ("the red flag test"). Secondly, that it did not receive a financial benefit directly attributable to the infringing activity. Thirdly, that upon notification it acted expeditiously to remove any infringing content. As a prerequisite to this protection, YouTube also had to ensure that they adopted and implemented a "notice and take down" policy and did not interfere with standard technical measures which are used by copyright owners to identify and protect their works.

Judge Stanton’s summary judgment ruling held that YouTube had insufficient notice of particular, specific infringements for them to have "actual knowledge" or "aware[ness] of factors or circumstances" which would disqualify them for the safe harbour protection. 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.

On appeal, the Court agreed with Judge Stanton’s interpretation of the knowledge requirement stating that under Section 512(c)(1)(A) knowledge alone will not disqualify a service provider from the safe harbour protection. What will disqualify a service provider is if they have the knowledge or awareness but does not act expeditiously to remove or disable access to the material. Removing access to the material, of course, requires specific knowledge of the infringing material. To that the court said (and cool compress to the ready):

"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."

Nevertheless, the appellate court vacated the order granting summary judgment because it held that a reasonable jury could find that YouTube did have acknowledge knowledge or awareness of specific infringing activity on the website. The killer for YouTube on this point was that there was quite a bit of evidence adduced that arguably showed that YouTube had reason to know that a fair percentage of the content uploaded on the site was infringing. This and other issues, including whether the evidence showed that YouTube wilfully blinded itself to specific infringements, were remanded to the District Court.
In light of the today’s announced settlement, we will never have the District Court’s answers on these issues. 

Over the past seven years the commercial opportunities of YouTube for content owners has been too much of a siren call. And, like many service providers in the intervening years, YouTube has significantly developed its content filters and notice and take down procedures to weed out infringing material. The Wild West that was the YouTube platform may have been considered by content owners in the mid-noughties is now the manicured suburban lawn of Silicon Valley. That, and Viacom may have seen the writing on the wall that despite best efforts and potentially killer evidence, the US courts, as with some European national courts and the CJEU, will always be reluctant in finding service providers like YouTube or Google liable for copyright or trade mark infringement. In any event, Google will likely be content in not having to hand over Viacom’s original £1 billion asking price.

In their joint statement, Google and Viacom declare that

"This settlement reflects the growing collaborative dialogue between our two companies on important opportunities, and we look forward to working more closely together"

And with that the once warring parties go riding off into the social-media sunset…

Adds Merpel: there just had to be a settlement since neither party could risk losing. Google won't have wanted a loss or even only a partial win because then they would have in public a record of the measures they would need to take to avoid a finding of infringement -- and at this point the sound of flood gates opening would be plainly audible.  Viacom wouldnt want a public loss as then they wouldn't have the leverage to negotiate a likely good monitoring/filtering program with YouTube which is what they were on their way to doing in the the few months after they issued but never got anywhere.

L'Oréal v eBay - news of settlement here
All IPKat Viacom v YouTube posts here
The AmeriKat’s appellate court ruling post here
Judge Stanton’s ruling here
Appellate court ruling here
More news here, here and here
The Seven Year Itch: Viacom v YouTube settles, lawyers despair The Seven Year Itch:  Viacom v YouTube settles, lawyers despair Reviewed by Merpel on Wednesday, March 19, 2014 Rating: 5

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