Viacom International Inc v YouTube Inc (2nd Cir 2012), 5 April 2012
Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps106, first published online: July 4, 2012
The Court of Appeals for the Second Circuit has clarified the scope of the ‘safe harbor’ provision in the Digital Millennium Copyright Act (DMCA) in respect of website operators that permits users to post materials on their website.
Legal context and facts
The district court denied the plaintiff's motions and granted summary judgment to the defendant, finding that YouTube qualified for Digital Millennium Copyright Act (DMCA) safe harbour protection with respect to all claims of direct and secondary copyright infringement. Although noting that the DMCA safe harbour provision protected the defendant's action, the court held that, based on the plaintiffs' summary judgment submissions, a jury could find that the defendants were not only generally aware of, but welcomed, copyright-infringing material being placed on their website.
However, the district court also noted that the defendants had properly designated an agent pursuant to section 512(c)(2), and when they received specific notice that a particular item infringed a copyright, they swiftly removed it. It also held that held that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, described knowledge of specific and identifiable infringements of particular individual items. In addition, the district court rejected the plaintiff's argument that, first, the replication, transmittal and display of YouTube videos were functions that fell outside the protection section 512(c)(1) afforded for ‘infringement of copyright by reason of … storage at the direction of the user’; and, second, YouTube was ineligible for safe harbour protection under the control provision, holding that the ‘right and ability to control’ infringing activity under section 512(c)(1)(B) required ‘item-specific’ knowledge thereof, because the provider must know of the particular case before he can control it.
Actual or constructive knowledge
In the view of the Second Circuit, the first and most important question was whether the DMCA safe harbour under section 512(c)(1)(A) at issue required ‘actual knowledge’ or ‘awareness’ of facts or circumstances indicating ‘specific and identifiable infringements’. Under section 512(c)(1)(A), safe harbour protection is available only if the service provider
(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing; (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material …The Second Circuit agreed with the conclusion of the district court that the statutory phrases ‘actual knowledge that the material … is infringing’ and ‘facts or circumstances from which infringing activity is apparent’ referred to ‘knowledge of specific and identifiable infringements’, noting that it was the text of the statute that compelled its conclusion. It was persuaded that the basic operation of section 512(c) required knowledge or awareness of specific infringing activity. In other words, the nature of the removal obligation contemplates knowledge or awareness of specific infringing material, because expeditious removal was possible only if the service provider knew with particularity which items to remove.
After examining the few decisions of the Federal Circuits, including the decision of UMG Recordings Inc v Shelter Capital Partners LLC, 667 F 3d 1022 (9th Cir 2011), the Second Circuit was of the view that the difference between actual and red flag knowledge was not between specific and generalized knowledge, but instead between a subjective and an objective standard. In other words, the actual knowledge provision turned on whether the provider actually or ‘subjectively’ knew of specific infringement, while the red flag provision turned on whether the provider was subjectively aware of facts that would have made the specific infringement ‘objectively’ obvious to a reasonable person. It continued that the red flag provision, because it incorporated an objective standard, was not absorbed within the actual knowledge provision under its construction of the section 512(c) safe harbour. The Second Circuit accepted that both provisions did independent work, and both applied only to specific instances of infringement. Therefore, based on the text of section 512(c)(1)(A), as well as the limited case law on point, it affirmed the district court's holding that actual knowledge or awareness of facts or circumstances that indicated specific and identifiable instances of infringement would disqualify a service provider from the safe harbour provision.
Application to the facts
Specific knowledge or awareness
Having so construed section 512(c)(1)(A), the Second Circuit next considered whether the district court had erred in granting summary judgment to YouTube on the record presented. The plaintiffs argued that, even under the district court's construction of the safe harbour, the record raised material issues of fact regarding YouTube's actual knowledge or ‘red flag’ awareness of specific instances of infringement, for example, the percentage of infringing content on the YouTube website. The Second Circuit responded that such estimates were insufficient, standing alone, to create a triable issue of fact as to whether YouTube actually knew, or was aware of facts or circumstances that would indicate the existence of particular instances of infringement. The plaintiff also relied upon internal YouTube communications that referred to particular clips or groups of clips. After reviewing the record, the Second Circuit was persuaded that the plaintiffs might have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement. In its view, based on the facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent. As a result, the Second Circuit held that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature.
The plaintiffs also argued that the district court erred in granting summary judgment to the defendants despite evidence that YouTube was ‘wilfully blind’ to specific infringing activity. The Second Circuit, therefore, had to consider the application of the common law wilful blindness doctrine in the DMCA context. It noted that the DMCA did not mention wilful blindness and that, as a general matter, it would interpret a statute to abrogate a common law principle only if the statute speaks directly to the question addressed by the common law. The Second Circuit claimed that a person is ‘wilfully blind’ or engages in ‘conscious avoidance’ amounting to knowledge where the person was aware of a high probability of the fact in dispute and consciously avoided confirming that fact. The relevant DMCA provision is section 512(m) which provides that safe harbour protection shall not be conditioned on ‘a service provider monitoring its service or affirmatively seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure complying with the provisions of subsection (i).’
The Second Circuit held that this meant that DMCA safe harbour protection could not be conditioned on affirmative monitoring by a service provider. As a result, section 512(m) was incompatible with a broad common law duty to monitor or otherwise seek out infringing activity based on general awareness that infringement may be occurring. The Second Circuit therefore held that the wilful blindness doctrine might be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA. Since the district court only cited section 512(m) for the proposition that safe harbour protection did not require affirmative monitoring, and did not expressly address the principle of wilful blindness or its relationship to the DMCA safe harbours, it concluded that the question of whether the defendant had made a ‘deliberate effort to avoid guilty knowledge’ remained a factual question for the district court to consider on remand.
Control and benefit
The section safe harbour also provides that an eligible service provider must ‘not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity’: section 512(c)(1)(B). The Second Circuit rejected, as fatally flawed, the parties' competing constructions of the ‘right and ability to control’ infringing activity in favour of a fact-based inquiry to be conducted in the first instance by the district court. The defendant's argument, which the district court accepted, was that the provider must know of the particular case before he can control it. This approach was adopted by the Ninth Circuit in Shelter Capital. Rejecting this approach, the Second Circuit explained that such a construction, which imported a specific knowledge requirement into section 512(c)(1)(B), would render the control provision duplicative of section 512(c)(1)(A): any service provider that had item-specific knowledge of infringing activity and thereby obtained financial benefit would already be excluded from the safe harbour under section 512(c)(1)(A) for having specific knowledge of infringing material and failing to effect its expeditious removal. In the Second Circuit's view, this would also mean that 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 plaintiff, however, argued that the control provision codified the common law doctrine of vicarious copyright liability. The Second Circuit clarified that, to adopt that principle in the DMCA context would render the statute internally inconsistent. Section 512(c) presumed that service providers had the ability to ‘block … access’ to infringing material; further, a service provider who had knowledge or awareness of infringing material or who received a takedown notice from a copyright holder was required to ‘remove, or disable access to, the material’ in order to claim the benefit of the safe harbour; and, third, in taking such action, the service provider would—in the plaintiff's analysis—be admitting the ‘right and ability to control’ the infringing material. As a result, the prerequisite to safe harbour protection under sections 512(c)(1)(A)(iii) and (C) would simultaneously be a disqualifier under section 512(c)(1)(B).
In rejecting the reasoning of the Ninth Circuit in Shelter Capital, the Second Circuit held that the ‘right and ability to control’ infringing activity under section 512(c)(1)(B) ‘requires something more than the ability to remove or block access to materials posted on a service provider's website’. The Second Circuit, therefore, ruled that in light of its holding that that section did not include a specific knowledge requirement, it was prudent to remand to the district court to consider in the first instance whether the plaintiffs had adduced sufficient evidence to allow a reasonable jury to conclude that YouTube had (i) the right and ability to control the infringing activity and (ii) received a financial benefit directly attributable to that activity.
By reason of storage
The section 512(c) safe harbour is only available when the infringement occurs ‘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’. The district court held that YouTube's software functions fell within the safe harbour for infringements that occurred ‘by reason of’ user storage, noting that a contrary holding would confine the word ‘storage’ too narrowly to meet the statute's purpose. The Second Circuit claimed that service providers seeking safe harbour under section 512(c) were not limited to merely storing material: the structure of the statute distinguishes between so-called ‘conduit only’ functions under section 512(a) and the functions addressed by section 512(c) and the other subsections. In the absence of a parallel limitation on the ability of a service provider to modify user-submitted material, section 512(c) was clearly meant to cover more than mere electronic storage lockers.
The Second Circuit opined that Shelter Capital makes clear that the section 512(c) safe harbour extended to software functions performed ‘for the purpose of facilitating access to user-stored material’. The two software functions at issue here, transcoding (converting videos into a standard playable format) and playback (delivering videos to a user's browser cache in response to a request), were expressly considered in Shelter Capital, which held that liability arising from these functions occurred ‘by reason of the storage at the direction of a user’. The Second Circuit noted that the district court correctly found that to exclude these automated functions from the safe harbour would eviscerate the protection afforded to service providers by section 512(c). It held that the related videos function (the process by which a YouTube computer algorithm identified and displayed ‘thumbnails’ of clips that were ‘related’ to the video selected by the user) was also protected by the section 512(c) safe harbour. However, it noted that the final software function at issue—third-party syndication—was the closest case. This occurred where YouTube, in 2007, transcoded a select number of videos into a format compatible with mobile devices and ‘syndicated’ or licensed the videos to Verizon Wireless and other companies. The Second Circuit, in order to avoid rendering an advisory opinion on the outer boundaries of the storage provision, remanded to the district court for fact-finding on the question of whether any of the clips-in-suit were in fact syndicated to any other third party.
This decision provides important guidance for service providers: first, it is now settled law that the service provider must have knowledge of specific and identifiable infringements. General awareness by the service provider that infringements take place will not be sufficient. Secondly, where the service provider becomes subjectively aware of facts that would have made the specific infringement ‘objectively’ obvious to a reasonable person, he would be held to have specific knowledge. In addition, the Second Circuit has made it clear that adducing evidence of wilful blindness can show specific knowledge. This occurs where a person is aware of a high probability of the fact in dispute and consciously avoided confirming that fact. In respect of the right and ability to control the infringing activity, the Second Circuit, rejecting the Ninth Circuit requirement of evidence of item-specific knowledge, clarified that the law requires something more than the ability to remove or block access to materials posted on a service provider's website. Service providers have been given the green light on the activities they can engage in, for example, transcoding, playback and posting links, without falling outside the safe harbour provision. It is still an open question whether syndicating videos fall within the section 512(c) safe harbour. This also means that service providers will now spend significant amounts of monies to close those loopholes that would prevent them from getting section 512(c) safe harbour protection. This is perhaps due to the unwieldy nature of that provision, which means that if a service provider does not satisfy every element, protection is lost completely.