Also, UMG’s Home-Run Stroke Still Need Work


Last year* there were two much-anticipated, important decisions about the scope of the major DMCA safe-harbor defenses: the Ninth Circuit in UMG Recordings v. Shelter Capital (better known as the “Veoh case”), which was issued first, and then the Second Circuit in Viacom v. YouTube. They mostly agreed with each other, but diverged on a major point and on a minor point.** I blogged at length about both of them: Veoh here, here and here; and YouTube here and here.

* If by “last year” you mean “2012 plus the tail end of 2011.”

** A quick recap of the the basic mechanics of the two major DMCA safe-harbors are set out here. Remember: there are four requirements that you have to meet in order to take advantage of the safe harbors, simplified somewhat: (1) you implement a reasonable repeat-infringer policy; (2) you are genuinely unaware that content in question is infringing, whether through actual knowledge or indirect “red flag” knowledge”; (3) you don’t both benefit financially and directly from the infringement and have the right and ability to control the infringing activity; and (4) you expeditiously remove content when you receive a proper takedown notice. Lots more detail at two of my old #onlinemusicseries blogs: here and here.

The Major Point: How Much Control Is Too Much?


One question both courts had to confront was WHAT you needed to be able to control in order to have the “ability to control” infringing activity. On one extreme, you have the ability to stop any uploading of content to your servers, regardless of whether the content was infringing or not. If that were the standard, then almost any hosting service would have the “ability to control” infringing activity on their systems because it could simply shut down all uploading or remove all content.* Both the Ninth Circuit and Second Circuit rejected that approach.

* Or, what the heck, just go out of business. Which a lot of people would like to see them do.

On the other extreme, one could limit the requisite control to the ability to block specific infringing acts, which implies an ability to detect infringing activity. The Ninth Circuit essentially adopted this approach in Veoh. The problem with this approach is that it collapsed the benefit+control requirement into the knowledge requirement, since both could be defeated by pretty much the exact amount of knowledge. In order to stop X act of infringement, you had to have knowledge of X act, but if you had that knowledge, you’d either (1) be in trouble with the knowledge requirement, or (2) have acted on the knowledge and be OK. Either way, the “ability to control” prong gets pretty much read out of the statute.

The Second Circuit, seeing this problem, rejected this approach and picked a middle-ground approach, but it didn’t really have a middle-ground test handy. Instead, it held you have the “ability to control” if you have “substantial influence on the activities of its users.” But it didn’t do much to explain what that means (leaving the poor district court to figure it out).

116017204_3a475bc6a1This photograph was taken by this guy. Under Creative Commons license.

The Minor Point: How Much Knowledge Is Too Much?


In old Veoh, the Ninth Circuit ticked through a list of instances where Veoh might have received some hint of infringing activity and explained why it didn’t constitute a red-flag*. The Ninth Circuit also explained that, just because the content you host is, as a general matter, copyrighted, you have sufficient knowledge of infringing activity. The Second Circuit agreed with that and went on to clearly explain the difference between “actual” and “red-flag” knowledge.** but then threw a curve ball. It added that “willful ignorance” could also defeat the knowledge prong. It was unclear whether “willful ignorance” was a species of red-flag knowledge or a third type of knowledge.

* For example, information provided by the copyright owner are not red flags because they are forced to use the notice-and-takedown procedure. There were also instances where third parties had pointed to specific instances of possible infringement, but the Ninth Circuit dismissed those because it reasonably required UMG to prove that Veoh didn’t check those out.

** The Ninth Circuit didn’t because, even though UMG’s main argument was that the district court applied the wrong standards for the two types of knowledge, it didn’t actually suggest what those standards should be. Instead, it wasted several pages wishing CCBill and the statutory language said something other than they did. Either it needed a scholarly exegesis of the standards, or it needed to spend its resources on an issue it could win.

Don’t Split Up the Party!


When YouTube issued, commentators wondered at these two splits between the two most influential circuits on copyright matters. Are the DMCA safe harbors slightly different in those two Circuits? How would other Circuits respond? Would the Supreme Court eventually take up the matter to resolve the splits?

The Ninth Circuit resolved the problem when UMG asked it to reconsider its Veoh decision in light of YouTube, and the court obliged. It withdrew its decision, received some additional briefing, thought about it (for a long time), then issued a superseding opinion that addresses YouTube. I’ve compared the new opinion with the old one to see how the Ninth Circuit altered its opinion in light of YouTube.

The Minor Point: Because it didn’t really distinguish between the two types of knowledge in its original opinion, the Ninth Circuit now makes a point of adopting the Second Circuit’s common-sensical distinction: “actual” knowledge is subjective, “red-flag” knowledge is objective. There. Under this new standard, UMG still loses, for exactly the same reasons it lost before. Bottom line: the holding is unchanged, only the rule is sharpened somewhat.*

* Did UMG argue anything new here? Read its supplemental brief here. Mostly, it (1) argued against the Second Circuit’s interpretation but said it survived under it anyway, and (2) wished fervently that § 512(m)—the provision absolving service providers from having to investigate or monitor their systems—didn’t exist. I can’t say I blame them. If you hate the DMCA safe harbors, then you really hate § 512(m).

The Second Circuit’s Curve: The Ninth Circuit also addresses the Second Circuit’s concept of “willful ignorance,” without actually helping us understand where it fits in the overall scheme. “Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.” But whatever Veoh did, it wasn’t burying its head in the sand.*

* I’m starting to think that “willful ignorance” works like this: if you are found to have deliberately turned away from actual knowledge or a “red flag,” or deliberately set things up so that such knowledge would never come to you, you will be credited with such knowledge. In the red-flag context, this isn’t terribly important (by itself), but in the context of actual knowledge, it could strip you of some of your immunity.

The Major Point: The Ninth Circuit accepts the Second Circuit’s criticism that its interpretation of the “ability to control” prong conflates that prong with the knowledge requirement. And so, it strips out the entire portion of its old opinion in which it previously held that “ability to control” requires the ability to stop specific instances of infringement.

After an unenlightening discussion about the dictionary definitions of “ability” and “control,” the Ninth Circuit purports to adopt the Second Circuit’s unhelpful test: to “exert[] substantial influence on the activities of others”—”something more” than just the general ability to stop uploads or remove material. It could be “high levels of control over user activities” (citing the Cybernet opinion, which I discuss here) or “purposeful conduct” (citing Grokster*).

* Since Grokster was about inducement, does this mean that inducement automatically disqualifies one for DMCA safe-harbor protection? Funny you should ask, because a week later, the Ninth Circuit will address that exact question in the Fung case. Spoiler: the Ninth Circuit wasn’t quite ready to go quite so far.

The Ninth Circuit went on to hold that, where an online system has infringing material on its system, has the ability to remove the material, has the ability to filter for such material, and could have searched more diligently for such material, that doesn’t add up to “ability to control infringing activity.”* One comes away with the strong sense that when the Ninth Circuit says “something more” is needed, it really means, something A LOT more is needed.

* Tantalizingly, to support this holding, the Ninth Circuit cited to what I take to be the only decision to follow YouTube on this point, from a case in the SDNY called Obodai v. Demand Media. In that case, the court granted summary judgment to the publisher of Cracked magazine against a charge that it infringed the plaintiff’s copyright when a Cracked user allegedly uploaded the plaintiff’s humor piece to Cracked’s website. Unfortunately, Obodai actually sheds no light on this issue. The plaintiff’s argument regarding the financial benefit+ability to control prong apparently focused entirely on the “financial benefit” element. Thus, when the court held, “No evidence supports the conclusion that the defendant exerted such close control over content posted to [the website],” it literally meant “no evidence.”

On an abstract level, that doesn’t tell us much where the line is drawn. On a practical level, it tells us a lot, since that describes almost all user-provided websites, like YouTube and Wikipedia. Thus, in the Ninth Circuit, at least, the law is settled as to a wide swath of the consumer-oriented internet. If you can channel Veoh’s business practices*, you should be fine (at least in the Ninth Circuit).

* Which should be easier to do, since Veoh is, in fact, dead. (It’s easier to channel dead people, right?) It went under because it couldn’t afford to pay the legal fees to defend itself from UMG’s lawsuit, even though it eventually won. This explains UMG’s swing-for-the-fences strategy: having exhausted its quarry, it set its sights on the extinction of the entire species.

Next time, I’ll examine the other big DMCA opinion to come out of the Ninth Circuit recently.

Thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.