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UMG Recordings, Inc v. Veoh Networks, Inc. et al

By Barry Werbin

On March 14, the 9th Circuit came down with a lengthy superseding opinion in UMG Recordings, Inc v. Veoh Networks, Inc. et al [prior withdrawn opinion is at 667 F.3d 1022 (9th Cir. 2011)], holding that Veoh, the video sharing site and service, is entitled to a defense under the DMCA's "safe harbor" in 17 U.S.C. § 512(c), which limits a service provider's liability for "infringement of copyright 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."

In affirming a Cal. District Court's grant of summary judgment in favor of Veoh, the Court agreed with the Second Circuit's opinion in Viacom Int'l v. YouTube, Inc., 676 F.3d 19, 31 (2d Cir. 2012), in rejecting UMG's arguments that that the DMCA safe harbor did not apply because: "(1) the alleged infringing activities did not fall within the plain meaning of 'infringement of copyright by reason of the storage [of material]at the direction of a user;' (2) genuine issues of fact remained about whether Veoh had actual knowledge of infringement, or was 'aware of facts or circumstances from which infringing activity [wa]s apparent;' and(3) Veoh 'receive[d] a financial benefit directly attributable to . . . infringing activity' that it had the right and ability to control." [from Court's Summary]

In particular, the court rejected UMG's arguments that Section 512(c) of the DMCA only applied to web hosting services as opposed to a much broader class of "service providers," such as Veoh, and that the statute limited the safe harbor only to "storage" but not "facilitation of access." As the Court stated: "To carry out their function of making websites available to Internet users, web hosting services thus routinely copy content and transmit it to Internet users....We cannot see how these access-facilitating processes are meaningfully distinguishable from Veoh's for § 512(c)(1)purposes." (at p. 25)

With respect to "actual knowledge" and "red flag" awareness, the Court held that the district court was correct in finding that UMG "failed to rebut Veoh's showing 'that when it did acquire knowledge of allegedly infringing material - whether from DMCA notices, informal notices, or other means - it expeditiously removed such material.'" (at p. 28) "We therefore hold that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one's services could be used to share infringing material, is insufficient to meet the actual knowledge requirement under §512(c)(1)(A)(i)." (at p. 33)

With respect to "red flag" knowledge --whether a provider is "aware of facts or circumstances from which infringing activity is apparent" -- the Court held that "Veoh's general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag." (at p. 34) Consistent with the Second Circuit's opinion in Viacom v. YouTube, the Court observed that while a service provider can't "bury its head in the sand to avoid obtaining such specific knowledge," after "viewing the evidence in the light most favorable to UMG as we must here, however, we agree with the district court there is no evidence that Veoh acted in such a manner. Rather, the evidence demonstrates that Veoh promptly removed infringing material when it became aware of specific instances of infringement. Although the parties agree, in retrospect, that at times there was infringing material available on Veoh's services, the DMCA recognizes that service providers who do not locate and remove infringing materials they do not specifically know of should not suffer the loss of safe harbor protection." (at p. 34)

The Court also affirmed the District Court's finding that "Veoh did not have the necessary right and ability to control infringing activity and thus remained eligible for safe harbor protection." (at p. 40) In part, the Court rejected UMG's view that "control" under Section 512(c) should be equated with common law vicarious liability (which was applied in Napster), an interpretation also rejected by the Second Circuit in Viacom. The Ninth Circuit held:

"We agree with the Second Circuit and hold that, in order to have the 'right and ability to control,' the service provider must 'exert[] substantial influence on the activities of users." Id. 'Substantial influence' may include, as the Second Circuit suggested, high levels of control over activities of users... Or it may include purposeful conduct, as in Grokster. In this case, Veoh's interactions with and conduct toward its users did not rise to such a level."

There's a lot more discussion and interesting reading about additional facts relating to "knowledge," such as emails sent to Michael Eisner, one of Veoh's investors, by Disney's CEO citing specific infringing content. But the Court viewed this as a "deficient" DMCA notice coming from a copyright owner, and that the cited content was thereafter promptly removed anyway.

A copy of the decision is available at: umg_veoh_Decision.pdf

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