Viacom Appeal May Decide Future of the Web

By Amanda Bronstad
January 26, 2011

A long-simmering copyright dispute between Hollywood and the Web has hit the U.S. Court of Appeals for the Second Circuit ' and the outcome could set a national precedent regarding the scope of potential liability for nearly every business on the Internet that posts infringing content.

Viacom Inc. seeks to overturn a devastating loss it suffered in June, when U.S. District Judge Louis Stanton found that, under the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”), YouTube bore no liability for thousands of videos posted by third parties on its site in alleged infringement of Viacom's copyrights. [See, "Section 512 of the DMCA" below for relevant language of the Copyright Act]

Support for Both Sides

An appellate ruling for Viacom could wipe out many of today's most popular Web sites, particularly those featuring user-generated content, says Michael Barclay, a fellow at the Electronic Frontier Foundation (“EFF”; www.eff.org), which plans to
file an amicus brief supporting YouTube. While most of those sites post user-generated material, users often post copyrighted content, including photographs and videos.

“The question is: 'Should those Web sites be allowed to exist?' If you think they all should be shut down, you'd be on Viacom's side in this case,” he says.

Daniel Mandil, general counsel of the Motion Picture Association of America (“MPAA”), which filed an amicus brief in support of Viacom in December, stated in a press release that: “The decision of the lower court, if not overturned, will allow businesses to profit by inviting massive amounts of online copyright theft and avoid liability simply by turning a blind eye to the direct, illegal effects of their business models.” (The full amicus brief can be found at http://bit.ly/hR4lVC.)

Mandil says online businesses need to take responsibility for infringing content on their sites: “What matters here is that both parties ' content owners and service providers ' have a real serious legal responsibility to attend to online copyright infringement. It's a principle that needs to be defended and needs to be upheld by the appellate court.”

Google spokesman Aaron Zamost issued the following statement: “We regret that Viacom continues to drag out this case. The court here, like every other court to have considered the issue, correctly ruled that the law protects online services like YouTube, which remove content when notified by the copyright holder that it is unauthorized. We will strongly defend the court's decision on appeal.”

The case has attracted amicus groups on both sides looking to set straight the legal rules for Web sites displaying copyrighted content, particularly those provided by users. Specifically, both sides want guidance on what constitutes safe harbor under the DMCA, which exempts online service providers from liability.

In YouTube's camp are social media sites, such as Facebook, as well as tech industry groups and First Amendment advocates like the EFF. Viacom has the support of the MPAA and various sports leagues, book publishers and newspapers.

Circuit Split Brewing

The Ninth Circuit issued a ruling favorable to Web sites in a similar court challenge in Perfect 10 Inc. v. CCBill LLC, and is expected to hear arguments in a case brought by UMG Recordings Inc. against the defunct Veoh Networks Inc. (For more on the Perfect 10 case, see, “Net News” in the June 2007 issue of Internet Law & Strategy, http://bit.ly/dIywgs.) “I think there is a circuit split that's brewing on this particular issue,” says Patrick Coyne, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner and chairman of the amicus committee of the American Intellectual Property Law Association. That organization filed an amicus brief on Dec. 3 generally in support of Stanton's ruling.

The case against YouTube originated in 2007 when Viacom, which owns MTV, Comedy Central and Paramount Pictures Corp., alleged that the site was deliberately posting copyrighted material to draw users to its site. Google Inc. acquired YouTube in 2006 for $1.65 billion.

The DMCA, passed in 1998, defines online service providers as providing “storage at the direction of a user.” To qualify for safe harbor, the law says that:

A provider must have had no “actual knowledge” or “awareness of the facts and circumstances” of the infringing activity.
The provider must not have a “financial benefit” directly attributable to the infringing material if it has the “right and ability to control” or supervise such activity.
A provider must take down the infringing content after receiving notice of its existence.

Viacom argued in the lower court that YouTube was no different from the file-sharing site Grokster, which the U.S. Supreme Court found liable for inducing users to post infringing music videos on its site in MGM Studios Inc. v. Grokster Ltd., 545 U.S. 913 (2005).

Viacom sought a partial summary judgment invalidating YouTube's anticipated safe harbor arguments. As to knowledge, Viacom introduced numerous internal e-mails indicating that YouTube's founding officers knew the business relied on “truckloads” of videos belonging to Viacom yet did nothing about it, despite having the tools to prevent their broadcast. In response, YouTube sought summary judgment against Viacom, arguing it was “worlds away” from Grokster because it had taken steps to take down infringing videos. YouTube noted that it does not charge users for viewing videos.

On June 23, Stanton denied Viacom's motion and granted YouTube's.

Viacom, which filed its opening brief before the Second Circuit on Dec. 3, brought in noted appellate and media lawyer Theodore Olson, a partner in the Washington office of Gibson, Dunn & Crutcher, to handle its appeal. Viacom's legal team also includes Paul Smith, a partner at Jenner & Block, and Stuart Baskin, a partner at Shearman & Sterling in New York.

In a separate class action, a group of content providers, including the Football Association Premier League Ltd. and the National Music Publishers' Association, filed an opening brief on Dec. 6 seeking to overturn Stanton's ruling, which applied to their case raising many of the same arguments against YouTube.

YouTube had not yet filed its opening brief at press time. Its lawyers ' Andrew Schapiro, a partner at Mayer Brown, and David Kramer, a partner at Wilson Sonsini Goodrich & Rosati of Palo Alto, CA ' did not return calls for comment.

Knowledge Is Key

One of the key debates is whether YouTube had sufficient knowledge about the infringing videos on its site. In finding that YouTube wasn't liable, Stanton concluded that an online service provider must have specific knowledge about the particular infringing work in order to do something about it. “General knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements,” he wrote.

Stanton relied on a Second Circuit decision issued last year in Tiffany (NJ) Inc. v. eBay, which addressed trademark, not copyright, infringement. Although both sides used the case to support their arguments, Stanton adopted the Second Circuit's finding that a service provider must have more than a general knowledge that counterfeit products were being sold on its site. [Editor's Note: On Nov. 29, 2010, the U.S. Supreme Court, without comment, declined to hear the Tiffany case. See, "Analyzing the U.S. Supreme Court's Decision Not to Review Tiffany v. eBay," in the January 2011 issue of Internet Law & Strategy, http://bit.ly/dKwQfv.]

“That was the problem with the opinion: The court very, very narrowly and incorrectly read the DMCA provisions to say you get the safe harbor unless you have very specific actual knowledge,” says the MPAA's Mandil. “And that's not true. You don't get the safe harbor if you have red flags out there.”

One case Viacom cited in its brief was Fonovisa Inc. v. Cherry Auction Inc., 76 F.3d 259 (9th Cir. 1996). In that case, the Ninth Circuit held that a swap-meet operator was liable for pirated cassette tapes being sold at his event.

“Why should a copyright owner ' be required to search the Internet the entire time when the swap-meet owner, or the operator of a Web site like YouTube, has the tools to look for copyright infringement, has the ability to do it and is the one making profit from it?” Michael Fricklas, general counsel of Viacom, wondered during an interview.

But YouTube has some Ninth Circuit support for its arguments. In court documents, it cited Perfect 10 Inc., in which the Ninth Circuit in 2007 found that a Web hosting company was immune from liability under the DMCA even though it was aware that it was hosting domain names such as illegal.net and stolencelebritypics.com.

Knowledge is only one factor at issue. Viacom, in its opening brief, argued that YouTube made money on the infringing videos. Viacom added that YouTube, which actively displays and advertises its videos on its site, rather than just storing them, is not the type of provider Congress intended the DMCA to protect.

“We're not arguing that YouTube isn't involved in storage. But although your storage activities are protected, it doesn't protect everything else you do,” Fricklas says. “They're broadcasting distribution of public performances that are exclusive to the copyright owner and not covered.”

Stanton found that Viacom's definition of a service provider protected under the DMCA was too narrow. The EFF tends to agree, arguing that Viacom's argument poses a significant threat to most social media and user-generated sites, on account of copyright-protected material posted there. “If they win on that argument, that shuts down all the user-generated content sites, like YouTube or Facebook,” the EFF's Barclay says.

Stanton also appeared swayed by YouTube's success at taking down infringing material, even after Viacom sent 100,000 notices of infringement on a single day. Barclay says other courts have found the takedown-notice provision to be enough for a provider to withstand liability claims: “If you put those to one side ' Napster and Grokster ' every district court that has considered this issue has said that, if you comply with the takedown provisions of the Copyright Act, that Internet Web sites can offer user-generated content.”

But simply taking down infringing videos isn't enough to be protected from liability, according to Mary Rasenberger, counsel to Skadden, Arps, Slate, Meagher & Flom's New York office. Rasenberger planned to file an amicus brief in support of Viacom on behalf of several sports leagues, book publishers and newspapers.

“It's a cat-and-mouse game,” she says. “There's no way to keep up with infringement if it's just notice and takedown. You have to put some onus on the service provider who is making money from your content to take responsibility. And that's what this case is all about.”

“>Section 512 of the DMCA

Digital Millennium Copyright Act

(Section 512 of the Copyright Act)

(c) Information Residing on Systems or Networks At Direction of Users. '

(1) In general. ' A service provider shall not be liable for monetary relief, or ' for injunctive or other equitable relief, 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, if the service provider '

(A) (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;

(B) does 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; and

(C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM affiliate of Internet Law & Strategy. She can be contacted at [email protected].

A long-simmering copyright dispute between Hollywood and the Web has hit the U.S. Court of Appeals for the Second Circuit ' and the outcome could set a national precedent regarding the scope of potential liability for nearly every business on the Internet that posts infringing content.

Viacom Inc. seeks to overturn a devastating loss it suffered in June, when U.S. District Judge Louis Stanton found that, under the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”), YouTube bore no liability for thousands of videos posted by third parties on its site in alleged infringement of Viacom's copyrights. [See, "Section 512 of the DMCA" below for relevant language of the Copyright Act]

Support for Both Sides

An appellate ruling for Viacom could wipe out many of today's most popular Web sites, particularly those featuring user-generated content, says Michael Barclay, a fellow at the Electronic Frontier Foundation (“EFF”; www.eff.org), which plans to
file an amicus brief supporting YouTube. While most of those sites post user-generated material, users often post copyrighted content, including photographs and videos.

“The question is: 'Should those Web sites be allowed to exist?' If you think they all should be shut down, you'd be on Viacom's side in this case,” he says.

Daniel Mandil, general counsel of the Motion Picture Association of America (“MPAA”), which filed an amicus brief in support of Viacom in December, stated in a press release that: “The decision of the lower court, if not overturned, will allow businesses to profit by inviting massive amounts of online copyright theft and avoid liability simply by turning a blind eye to the direct, illegal effects of their business models.” (The full amicus brief can be found at http://bit.ly/hR4lVC.)

Mandil says online businesses need to take responsibility for infringing content on their sites: “What matters here is that both parties ' content owners and service providers ' have a real serious legal responsibility to attend to online copyright infringement. It's a principle that needs to be defended and needs to be upheld by the appellate court.”

Google spokesman Aaron Zamost issued the following statement: “We regret that Viacom continues to drag out this case. The court here, like every other court to have considered the issue, correctly ruled that the law protects online services like YouTube, which remove content when notified by the copyright holder that it is unauthorized. We will strongly defend the court's decision on appeal.”

The case has attracted amicus groups on both sides looking to set straight the legal rules for Web sites displaying copyrighted content, particularly those provided by users. Specifically, both sides want guidance on what constitutes safe harbor under the DMCA, which exempts online service providers from liability.

In YouTube's camp are social media sites, such as Facebook, as well as tech industry groups and First Amendment advocates like the EFF. Viacom has the support of the MPAA and various sports leagues, book publishers and newspapers.

Circuit Split Brewing

The Ninth Circuit issued a ruling favorable to Web sites in a similar court challenge in Perfect 10 Inc. v. CCBill LLC, and is expected to hear arguments in a case brought by UMG Recordings Inc. against the defunct Veoh Networks Inc. (For more on the Perfect 10 case, see, “Net News” in the June 2007 issue of Internet Law & Strategy, http://bit.ly/dIywgs.) “I think there is a circuit split that's brewing on this particular issue,” says Patrick Coyne, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner and chairman of the amicus committee of the American Intellectual Property Law Association. That organization filed an amicus brief on Dec. 3 generally in support of Stanton's ruling.

The case against YouTube originated in 2007 when Viacom, which owns MTV, Comedy Central and Paramount Pictures Corp., alleged that the site was deliberately posting copyrighted material to draw users to its site. Google Inc. acquired YouTube in 2006 for $1.65 billion.

The DMCA, passed in 1998, defines online service providers as providing “storage at the direction of a user.” To qualify for safe harbor, the law says that:

A provider must have had no “actual knowledge” or “awareness of the facts and circumstances” of the infringing activity.
The provider must not have a “financial benefit” directly attributable to the infringing material if it has the “right and ability to control” or supervise such activity.
A provider must take down the infringing content after receiving notice of its existence.

Viacom argued in the lower court that YouTube was no different from the file-sharing site Grokster, which the U.S. Supreme Court found liable for inducing users to post infringing music videos on its site in MGM Studios Inc. v. Grokster Ltd. , 545 U.S. 913 (2005).

Viacom sought a partial summary judgment invalidating YouTube's anticipated safe harbor arguments. As to knowledge, Viacom introduced numerous internal e-mails indicating that YouTube's founding officers knew the business relied on “truckloads” of videos belonging to Viacom yet did nothing about it, despite having the tools to prevent their broadcast. In response, YouTube sought summary judgment against Viacom, arguing it was “worlds away” from Grokster because it had taken steps to take down infringing videos. YouTube noted that it does not charge users for viewing videos.

On June 23, Stanton denied Viacom's motion and granted YouTube's.

Viacom, which filed its opening brief before the Second Circuit on Dec. 3, brought in noted appellate and media lawyer Theodore Olson, a partner in the Washington office of Gibson, Dunn & Crutcher, to handle its appeal. Viacom's legal team also includes Paul Smith, a partner at Jenner & Block, and Stuart Baskin, a partner at Shearman & Sterling in New York.

In a separate class action, a group of content providers, including the Football Association Premier League Ltd. and the National Music Publishers' Association, filed an opening brief on Dec. 6 seeking to overturn Stanton's ruling, which applied to their case raising many of the same arguments against YouTube.

YouTube had not yet filed its opening brief at press time. Its lawyers ' Andrew Schapiro, a partner at Mayer Brown, and David Kramer, a partner at Wilson Sonsini Goodrich & Rosati of Palo Alto, CA ' did not return calls for comment.

Knowledge Is Key

One of the key debates is whether YouTube had sufficient knowledge about the infringing videos on its site. In finding that YouTube wasn't liable, Stanton concluded that an online service provider must have specific knowledge about the particular infringing work in order to do something about it. “General knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements,” he wrote.

Stanton relied on a Second Circuit decision issued last year in Tiffany (NJ) Inc. v. eBay, which addressed trademark, not copyright, infringement. Although both sides used the case to support their arguments, Stanton adopted the Second Circuit's finding that a service provider must have more than a general knowledge that counterfeit products were being sold on its site. [Editor's Note: On Nov. 29, 2010, the U.S. Supreme Court, without comment, declined to hear the Tiffany case. See, "Analyzing the U.S. Supreme Court's Decision Not to Review Tiffany v. eBay," in the January 2011 issue of Internet Law & Strategy, http://bit.ly/dKwQfv.]

“That was the problem with the opinion: The court very, very narrowly and incorrectly read the DMCA provisions to say you get the safe harbor unless you have very specific actual knowledge,” says the MPAA's Mandil. “And that's not true. You don't get the safe harbor if you have red flags out there.”

One case Viacom cited in its brief was Fonovisa Inc. v. Cherry Auction Inc. , 76 F.3d 259 (9th Cir. 1996). In that case, the Ninth Circuit held that a swap-meet operator was liable for pirated cassette tapes being sold at his event.