Second Circuit Revives Copyright Case Against Google, YouTube

Viacom International got a second shot at proving that Google's YouTube massively infringed its copyrights by hosting clips from shows like The Daily Show and Family Guy without its permission. And whether Viacom and its lawyers succeed or not, they've already managed to shape the developing case law over copyrighted content that users illegally upload to the Internet.

In April, the U.S. Court of Appeals for the Second Circuit reversed a 2010 decision by Southern District Judge Louis Stanton granting Google Inc. summary judgment in the $1 billion case. See, Viacom International Inc. v. YouTube Inc., 718 F. Supp. 2d 514 (S.D.N.Y. 2010), http://bit.ly/IKVHSf.

Though the Second Circuit “substantially affirmed” that holding, the appeals court said summary judgment was premature, determining that “a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website.” The Second Circuit said YouTube should not have been shielded from infringement claims under the safe harbor provision of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. '512 (http://1.usa.gov/vvSvKc), for copyrighted content that YouTube agreed to remove. Viacom International Inc. v. YouTube Inc., 10-3270 (2nd Cir. 2012).

Google bought YouTube for $1.65 billion in 2006 convinced the service was shielded by the safe harbor provisions of the DMCA, 17 U.S.C. '512(c), (m) and (n). Under those provisions, a service provider escapes liability for infringing content unless it has “actual knowledge” the material is infringing or where there are “facts and circumstances from which the infringing activity is apparent.” Monetary liability can be avoided if the provider moves quickly to pull down the offending content once it has the requisite knowledge or receives notice from the infringed.

In the lower court opinion, Stanton granted partial summary judgment for YouTube and Google. Stanton said that the phrases in the statute “actual knowledge that the material ' is infringing” and “facts or circumstances from which infringing activity is apparent” refer to “knowledge of specific and identifiable infringements,” that would disqualify YouTube from invoking the safe harbor provision.

At oral argument, the appellate judges were concerned about the obvious and blatant use of copyrighted material, despite the assertion of YouTube attorney Andrew Schapirio of Quinn Emanuel that “[t]here isn't one clip that YouTube knew was infringing that it didn't take down.”

But Paul Smith of Jenner & Block, arguing for Viacom, told the court that YouTube was turning a blind eye to infringing content, saying “[t]hey were fully on notice there (was) tons of material up there on which they were making money.”

Charles Sims of Proskauer Rose, arguing for The Football Association Premier League in a companion suit against YouTube, said YouTube would respond to take-down notices by removing some clips but leaving other versions of the same clips up on its website and litigating others, a strategy that left his client playing a game of “Whack-A-Mole.”

In his opinion, Second Circuit Judges Jose Cabranes noted Viacom evidence of YouTube employee website surveys estimating that 75-80 of all YouTube streams contained copyrighted material.

Cabranes also noted a claim by the plaintiffs that Credit Suisse, which handled the Google purchase of YouTube, estimated that more than 60% of YouTube's content was “premium” copyright content and that a mere 10% of that premium content was authorized.

Together with this evidence, Cabranes cited internal YouTube e-mails and communications as persuading the court the plaintiffs “may have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement.”

'Willfull Blindness'

The Second Circuit remanded the case to determine the extent of YouTube and Google's “knowledge or awareness” of 63,497 video clips that Viacom identified as infringing, as well as 13,500 clips identified by a separate class of copyright holders. And in a first-of-its-kind holding, the appellate panel also held that Viacom and the class could go after Google for being “willfully blind” to specific instances of copyright infringement.

Paul Smith of Jenner & Block, who argued the appeal for Viacom last October, says the court's decision on willful blindness was a crucial victory. If Viacom and lawyers for the The Football Association and the class of copyright holders can establish that YouTube and Google executives ignored the infringement taking place on the site, Smith says, the defense will be liable for all 76,997 clips at issue in the case.

“We're very pleased, because we now have rules for the road for services like YouTube that will be fair and balanced,” Smith says.

Premier League counsel Charles Sims of Proskauer Rose likewise welcomed the decision. “YouTube willfully blinded itself to specific infringement and had ample ability to control infringing activity within the meaning of the copyright law,” he said in a statement.

Willful blindness is a tough standard to apply in cases against websites. In 2010, the Second Circuit rejected a willful blindness challenge against eBay Inc. in a trademark case brought by Tiffany over counterfeit jewelry that was being sold on the auction site. 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/IL44Nr. But Smith says that compared to Tiffany's case, Viacom has much better facts on its side. For example, while YouTube had a community flagging system encouraging users to alert the company to adult content, it did not have a similar system at the time for copyrighted material, he says.

The Second Circuit also held that District Judge Stanton erred in construing the statute so that “item-specific” knowledge of infringing activity is required for a provider to have the “right and ability to control” infringing activity under '512(c)(1)(B).

Holding that the subsection does not include a specific knowledge requirement, Cabranes said it was prudent on remand for the court to consider whether the plaintiffs have enough evidence for a jury to conclude “that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity.”

Safe Harbor Decisions

The decision adds to a limited body of case law interpreting the extent to which Internet sites that allow users to upload content should receive safe harbor protection under the DMCA. In what the Second Circuit deemed the “most important” question in front of it, the two-judge panel held that “actual knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement will disqualify a service provider from the safe harbor.” (The third member of the panel to hear the companies' oral arguments, Judge Roger Miner, died in February.)

The appellate court affirmed part of Judge Stanton's June 2010 decision, establishing a higher standard for proving infringement for Viacom and the other plaintiffs to meet at trial. The Second Circuit's holding on the scope of the safe harbor largely tracks the Ninth Circuit's ruling in December in a similar case in which UMG Recordings accused video hosting company Veoh Networks of copyright infringement. See, UMG Recordings v. Shelter Capital Partners, No. 2:07-cv-05744 (9th Cir. 2011).

But while the Second Circuit in Viacom upheld Stanton's interpretation of the DMCA's safe harbor provisions, the panel concluded that it was “premature” to grant for summary judgment for Google. “Upon a review of the record, we are persuaded that the plaintiffs may have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement,” Cabranes wrote.

Reaction

YouTube released a statement saying the Second Circuit had “upheld the long-standing interpretation of the DMCA and rejected Viacom's reading of the law.”

“All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago
removed from YouTube. Nothing in this decision impacts the way YouTube is operating.”

Viacom released a statement praising the court's “balanced decision” as providing a “thoughtful way to distinguish legitimate service providers from those that built their businesses on infringement. The court delivered a definitive, common sense message to YouTube ' intentionally ignoring theft is not protected by the law. We are confident we will prevail when the merits of the case are heard.”

Richard Peirce of Eckert Seamans Cherin & Mellott, LLC in Philadelphia and a member of the Board of Editors of Entertainment Law & Finance's
sibling newsletter, Internet Law & Strategy, says that “the case highlights that the DMCA immunity is contingent on more than just the notice and take down provisions. Actual knowledge of infringement or awareness of facts that infringing activity is apparent ('red flag') activates a take down action.”

He says that the Second Circuit referenced a third option, willful blindness, “yet was not real specific on how it will work.”

Peirce also feels that “some bad e-mail evidence for YouTube opened the door on the knowledge element.”

Viacom International got a second shot at proving that Google's YouTube massively infringed its copyrights by hosting clips from shows like The Daily Show and Family Guy without its permission. And whether Viacom and its lawyers succeed or not, they've already managed to shape the developing case law over copyrighted content that users illegally upload to the Internet.

In April, the U.S. Court of Appeals for the Second Circuit reversed a 2010 decision by Southern District Judge Louis Stanton granting Google Inc. summary judgment in the $1 billion case. See , Viacom International Inc. v. YouTube Inc. , 718 F. Supp. 2d 514 (S.D.N.Y. 2010), http://bit.ly/IKVHSf .

Though the Second Circuit “substantially affirmed” that holding, the appeals court said summary judgment was premature, determining that “a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website.” The Second Circuit said YouTube should not have been shielded from infringement claims under the safe harbor provision of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. '512 (http://1.usa.gov/vvSvKc), for copyrighted content that YouTube agreed to remove. Viacom International Inc. v. YouTube Inc., 10-3270 (2nd Cir. 2012).

Google bought YouTube for $1.65 billion in 2006 convinced the service was shielded by the safe harbor provisions of the DMCA, 17 U.S.C. '512(c), (m) and (n). Under those provisions, a service provider escapes liability for infringing content unless it has “actual knowledge” the material is infringing or where there are “facts and circumstances from which the infringing activity is apparent.” Monetary liability can be avoided if the provider moves quickly to pull down the offending content once it has the requisite knowledge or receives notice from the infringed.

In the lower court opinion, Stanton granted partial summary judgment for YouTube and Google. Stanton said that the phrases in the statute “actual knowledge that the material ' is infringing” and “facts or circumstances from which infringing activity is apparent” refer to “knowledge of specific and identifiable infringements,” that would disqualify YouTube from invoking the safe harbor provision.

At oral argument, the appellate judges were concerned about the obvious and blatant use of copyrighted material, despite the assertion of YouTube attorney Andrew Schapirio of Quinn Emanuel that “[t]here isn't one clip that YouTube knew was infringing that it didn't take down.”

But Paul Smith of Jenner & Block, arguing for Viacom, told the court that YouTube was turning a blind eye to infringing content, saying “[t]hey were fully on notice there (was) tons of material up there on which they were making money.”

Charles Sims of Proskauer Rose, arguing for The Football Association Premier League in a companion suit against YouTube, said YouTube would respond to take-down notices by removing some clips but leaving other versions of the same clips up on its website and litigating others, a strategy that left his client playing a game of “Whack-A-Mole.”

In his opinion, Second Circuit Judges Jose Cabranes noted Viacom evidence of YouTube employee website surveys estimating that 75-80 of all YouTube streams contained copyrighted material.

Cabranes also noted a claim by the plaintiffs that Credit Suisse, which handled the Google purchase of YouTube, estimated that more than 60% of YouTube's content was “premium” copyright content and that a mere 10% of that premium content was authorized.

Together with this evidence, Cabranes cited internal YouTube e-mails and communications as persuading the court the plaintiffs “may have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement.”

'Willfull Blindness'

The Second Circuit remanded the case to determine the extent of YouTube and Google's “knowledge or awareness” of 63,497 video clips that Viacom identified as infringing, as well as 13,500 clips identified by a separate class of copyright holders. And in a first-of-its-kind holding, the appellate panel also held that Viacom and the class could go after Google for being “willfully blind” to specific instances of copyright infringement.

Paul Smith of Jenner & Block, who argued the appeal for Viacom last October, says the court's decision on willful blindness was a crucial victory. If Viacom and lawyers for the The Football Association and the class of copyright holders can establish that YouTube and Google executives ignored the infringement taking place on the site, Smith says, the defense will be liable for all 76,997 clips at issue in the case.

“We're very pleased, because we now have rules for the road for services like YouTube that will be fair and balanced,” Smith says.

Premier League counsel Charles Sims of Proskauer Rose likewise welcomed the decision. “YouTube willfully blinded itself to specific infringement and had ample ability to control infringing activity within the meaning of the copyright law,” he said in a statement.

Willful blindness is a tough standard to apply in cases against websites. In 2010, the Second Circuit rejected a willful blindness challenge against eBay Inc. in a trademark case brought by Tiffany over counterfeit jewelry that was being sold on the auction site. 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/IL44Nr. But Smith says that compared to Tiffany's case, Viacom has much better facts on its side. For example, while YouTube had a community flagging system encouraging users to alert the company to adult content, it did not have a similar system at the time for copyrighted material, he says.

The Second Circuit also held that District Judge Stanton erred in construing the statute so that “item-specific” knowledge of infringing activity is required for a provider to have the “right and ability to control” infringing activity under '512(c)(1)(B).

Holding that the subsection does not include a specific knowledge requirement, Cabranes said it was prudent on remand for the court to consider whether the plaintiffs have enough evidence for a jury to conclude “that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity.”

Safe Harbor Decisions

The decision adds to a limited body of case law interpreting the extent to which Internet sites that allow users to upload content should receive safe harbor protection under the DMCA. In what the Second Circuit deemed the “most important” question in front of it, the two-judge panel held that “actual knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement will disqualify a service provider from the safe harbor.” (The third member of the panel to hear the companies' oral arguments, Judge Roger Miner, died in February.)

The appellate court affirmed part of Judge Stanton's June 2010 decision, establishing a higher standard for proving infringement for Viacom and the other plaintiffs to meet at trial. The Second Circuit's holding on the scope of the safe harbor largely tracks the Ninth Circuit's ruling in December in a similar case in which UMG Recordings accused video hosting company Veoh Networks of copyright infringement. See, UMG Recordings v. Shelter Capital Partners, No. 2:07-cv-05744 (9th Cir. 2011).

But while the Second Circuit in Viacom upheld Stanton's interpretation of the DMCA's safe harbor provisions, the panel concluded that it was “premature” to grant for summary judgment for Google. “Upon a review of the record, we are persuaded that the plaintiffs may have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement,” Cabranes wrote.

Reaction

YouTube released a statement saying the Second Circuit had “upheld the long-standing interpretation of the DMCA and rejected Viacom's reading of the law.”

“All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago
removed from YouTube. Nothing in this decision impacts the way YouTube is operating.”

Viacom released a statement praising the court's “balanced decision” as providing a “thoughtful way to distinguish legitimate service providers from those that built their businesses on infringement. The court delivered a definitive, common sense message to YouTube ' intentionally ignoring theft is not protected by the law. We are confident we will prevail when the merits of the case are heard.”

Richard Peirce of Eckert Seamans Cherin & Mellott, LLC in Philadelphia and a member of the Board of Editors of Entertainment Law & Finance's
sibling newsletter, Internet Law & Strategy, says that “the case highlights that the DMCA immunity is contingent on more than just the notice and take down provisions. Actual knowledge of infringement or awareness of facts that infringing activity is apparent ('red flag') activates a take down action.”

He says that the Second Circuit referenced a third option, willful blindness, “yet was not real specific on how it will work.”

Peirce also feels that “some bad e-mail evidence for YouTube opened the door on the knowledge element.”