Opinion by 2nd Circuit raises deeper liability issues

Viacom and YouTube each spun last week’s 2nd Circuit Court of Appeals opinion as a victory in their protracted copyright battle. But could old media have gained the upper hand in the war?

The case is about the interpretation of the Digital Millennium Copyright Act’s “safe harbor” provision, which shields sites from liability for content that users post if the sites meet certain criteria, including promptly removing pirated material when they receive a notice from a content owner.

The provision has been a legal lifeline for a whole host of user-generated sites and social-media services and is perhaps among the major reasons they have proliferated and thrived.

Yet Hollywood studios, record labels and others in the content business have complained that the whole notion of “safe harbor” has devolved into merely the “notice and takedown” aspect of the law, leaving them with the whack-a-mole burden of identifying their property posted on the Internet.

That’s why the 2nd Circuit opinion is important: It suggests that the Internet may — emphasis on may — bear more responsibility for pirated content on user-generated sites.

Hillel Parness, partner at Robins, Kaplan, Miller and Ciresi, noted a number of areas that favor Viacom’s side, raising questions of whether YouTube ignored the piracy right in front of them and whether its ability to control infringement somehow made it liable.

The ruling, Parness said, “reanimated the case. Assuming (YouTube) doesn’t settle, the district court has specific marching orders.”

When U.S. District Judge Louis Stanton ruled definitively in YouTube’s favor in 2010, studios and guilds were irate. Viacom sued YouTube in 2007 over tens of thousands of clips encompassing everything from “South Park” to “The Daily Show With Jon Stewart,” and although YouTube claimed that it took down all of them upon getting a notice, Viacom said that it still had liability. The conglom cited a host of reasons, including that YouTube was aware that its site was a hot spot for pirated material and even built up its business based on such alluring Hollywood content.

Stanton seemed to believe that the whole “notice and takedown” system was working just fine and even wrote that for YouTube to have liability, “mere knowledge” that YouTube or any other site hosted a flurry of infringing activities was “not enough.”

The 2nd Circuit agreed with Stanton that liability required “knowledge or awareness of specific infringing activity” — an affirmation that certainly pleased YouTube. But the appellate judges said that a “reasonable juror could conclude” that YouTube had knowledge of specific instances of infringement “or was at least aware of facts or circumstances” from which it was apparent. The upshot is that merely responding to takedown notices may not be enough to earn the safe harbor.

The 2nd Circuit cited the most explosive evidence in the case: emails and memos between YouTube’s founders in which they discuss whether to remove infringing clips or wait until they get a takedown notice. Jawed Karim wrote in 2006 that clips of shows like “MTV Cribs” and “Daily Show” were on the site and said that “although YouTube is not legally required to monitor content … and complies with DMCA takedown requests, we would benefit from preemptively removing content that is blatantly illegal and likely to attract criticism.” What must be determined, the 2nd Circuit said, is whether the clips cited in the emails are the ones in Viacom’s suit.

Russell Frackman, a partner at Mitchell, Silberberg & Knupp who is best known for winning the Napster case, said that the appellate court “made clear this is not simply a ‘notice and takedown’ statute. The court also cites a legal principle not contained in the DMCA: the common law doctrine of “willful blindness.” Sites are not required to monitor what is posted — in fact, Silicon Valley has long argued that it would be next to impossible to police the Internet. But the 2nd Circuit made clear that sites can’t bury their head in the sand, either, saying that “willful blindness” may be applied “in appropriate circumstances” to demonstrate knowledge of specific instances of infringement. They left it up to the district court to decide whether YouTube deliberately went out of its way to avoid guilty knowledge.

User-generated content sites “are going to have to change,” said Frackman, who filed a friend of the court brief on behalf of BMI, ASCAP and other parties. “The concept of plausible deniability, where you set up a system so you can plausibly deny knowledge, disappears.”

In 2008, YouTube did put in place filtering technology to help root out pirated content, but a “key impact is going to be a message sent on the standards of behavior for other upstarts,” said Eleanor Lackman of Cowan, DeBaets, Abrahams and Sheppard.

“At least this does send a warning shot out there to anyone who thinks that all you need to do is ‘notice and takedown,’?” she said.

Silicon Valley has argued, loudly and clearly, against efforts to tinker with safe harbor, the third rail of the Internet.

After the whole SOPA debate, it’s ever more unlikely that lawmakers will want to broach the idea, but as the 2nd Circuit reminded, there is still much more left to court interpretation.

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