<i>Veoh</i> Ruling: Protecting Service Providers or Is It a Trap Door?

The recent ruling in Io Group Inc. v. Veoh Networks Inc., C06-03926 HRL (N.D.Calif. 2008), has been widely heralded as a win for online service providers in the legal maelstrom surrounding social media. Veoh is an Internet TV platform similar to YouTube that hosts user uploaded content. When clips from adult movies owned by Io Group appeared on Veoh's network, Io brought a copyright infringement suit, rather than issuing Digital Millennium Copyright Act (DMCA) notices to Veoh requesting that its content be removed. Io lost its case.

Use DMCA Notice

For content owners, the Veoh ruling reaffirms the importance of utilizing the DMCA take-down provisions, which require sending a take-down demand notice first, rather than running straight to a judge with a copyright infringement complaint.

Veoh was able to claim the protection of the DMCA safe harbor because, by failing to send Veoh notice of the alleged infringement, Io could not prove that Veoh knew, or should have known, about infringing activity on its site. Had Io issued a DMCA notice, Veoh would have been under a duty to remove, or disable access to, the offending material.

The biggest win for technologists under this case is the broadening of what is protected under the DMCA Sec. 512(c) safe harbor. When content was uploaded to Veoh's servers, automatic processes would convert video clips into Flash format and extract screen captures to help organize and index Veoh's content bank. United States magistrate Howard R. Lloyd held for the Northern District of California that these activities fell within the safe harbor insofar as they facilitated user access to content.

The Veoh decision also affords service providers a degree of flexibility in how they deal with allegedly infringing intellectual property found on their sites or services.

Veoh had implemented a system of digital fingerprinting that tracked files identical to those previously determined to be infringing and blocked them from reappearing on their servers. The court determined the diligence afforded by this mechanism to be reasonable, noting that the DMCA termination policy requirement does not require service providers to police their users for evidence of repeat infringement.

Just as important as what the court did address in this case is what the court chose not to address. Because the court found that Veoh did not have a right or ability to control infringing activity, it did not need to address whether Veoh obtained a direct financial benefit from infringement. As many online video and social media sites are monetized by advertising revenue, an analysis of the nexus between infringement and financial benefit in this case would have been very instructive, especially considering Veoh's use of featured content provided by sponsors such as CBS and Turner.

Affirmative Duty and the DMCA

One potentially troubling aspect of this ruling is the language used by the court in explaining its conclusions. In an otherwise sensible analysis of why Veoh did not have the right or ability to control what content its users chose to upload to its site, the court may have created the basis for an affirmative duty for service providers to police infringing content. Such an affirmative duty is specifically disallowed by the plain language of the DMCA.

The DMCA explicitly states that it should not be construed to condition the applicability of the safe harbors on a service provider actively monitoring what users put on its service or otherwise policing infringing activity. Rather, the incentives were balanced so that as long as service providers made it easy for content owners to police infringing activity on their own, the service providers would not be expected to take affirmative action to seek out, monitor or otherwise police infringing activity.

Accordingly, the quid pro quo was that service providers received a limitation on their liability in exchange for taking on a duty to act affirmatively when they learned that their services were being used to violate the rights of others. In explaining its decision, the Veoh court stressed that “perhaps most importantly, there is no indication that Veoh has failed to police its system to the fullest extent permitted by its architecture.”

While on the whole the opinion is thorough and well reasoned, this analysis not only directly contradicts the plain language of the DMCA, but might also be read to place an unintended burden on service providers to police to the fullest extent their architecture makes possible. If this inconsistency is not addressed moving forward, service providers could be held to a more rigorous standard of behavior under this decision than the plain language of the statute requires.

The recent ruling in Io Group Inc. v. Veoh Networks Inc., C06-03926 HRL (N.D.Calif. 2008), has been widely heralded as a win for online service providers in the legal maelstrom surrounding social media. Veoh is an Internet TV platform similar to YouTube that hosts user uploaded content. When clips from adult movies owned by Io Group appeared on Veoh's network, Io brought a copyright infringement suit, rather than issuing Digital Millennium Copyright Act (DMCA) notices to Veoh requesting that its content be removed. Io lost its case.

Use DMCA Notice

For content owners, the Veoh ruling reaffirms the importance of utilizing the DMCA take-down provisions, which require sending a take-down demand notice first, rather than running straight to a judge with a copyright infringement complaint.

Veoh was able to claim the protection of the DMCA safe harbor because, by failing to send Veoh notice of the alleged infringement, Io could not prove that Veoh knew, or should have known, about infringing activity on its site. Had Io issued a DMCA notice, Veoh would have been under a duty to remove, or disable access to, the offending material.

The biggest win for technologists under this case is the broadening of what is protected under the DMCA Sec. 512(c) safe harbor. When content was uploaded to Veoh's servers, automatic processes would convert video clips into Flash format and extract screen captures to help organize and index Veoh's content bank. United States magistrate Howard R. Lloyd held for the Northern District of California that these activities fell within the safe harbor insofar as they facilitated user access to content.

The Veoh decision also affords service providers a degree of flexibility in how they deal with allegedly infringing intellectual property found on their sites or services.

Veoh had implemented a system of digital fingerprinting that tracked files identical to those previously determined to be infringing and blocked them from reappearing on their servers. The court determined the diligence afforded by this mechanism to be reasonable, noting that the DMCA termination policy requirement does not require service providers to police their users for evidence of repeat infringement.

Just as important as what the court did address in this case is what the court chose not to address. Because the court found that Veoh did not have a right or ability to control infringing activity, it did not need to address whether Veoh obtained a direct financial benefit from infringement. As many online video and social media sites are monetized by advertising revenue, an analysis of the nexus between infringement and financial benefit in this case would have been very instructive, especially considering Veoh's use of featured content provided by sponsors such as CBS and Turner.

Affirmative Duty and the DMCA

One potentially troubling aspect of this ruling is the language used by the court in explaining its conclusions. In an otherwise sensible analysis of why Veoh did not have the right or ability to control what content its users chose to upload to its site, the court may have created the basis for an affirmative duty for service providers to police infringing content. Such an affirmative duty is specifically disallowed by the plain language of the DMCA.

The DMCA explicitly states that it should not be construed to condition the applicability of the safe harbors on a service provider actively monitoring what users put on its service or otherwise policing infringing activity. Rather, the incentives were balanced so that as long as service providers made it easy for content owners to police infringing activity on their own, the service providers would not be expected to take affirmative action to seek out, monitor or otherwise police infringing activity.

Accordingly, the quid pro quo was that service providers received a limitation on their liability in exchange for taking on a duty to act affirmatively when they learned that their services were being used to violate the rights of others. In explaining its decision, the Veoh court stressed that “perhaps most importantly, there is no indication that Veoh has failed to police its system to the fullest extent permitted by its architecture.”

While on the whole the opinion is thorough and well reasoned, this analysis not only directly contradicts the plain language of the DMCA, but might also be read to place an unintended burden on service providers to police to the fullest extent their architecture makes possible. If this inconsistency is not addressed moving forward, service providers could be held to a more rigorous standard of behavior under this decision than the plain language of the statute requires.