The Ninth Circuit Clarifies Scope of DMCA Safe-Harbor Provision

The Ninth Circuit Court of Appeals has clarified the scope and nature of liability for online service providers when users upload infringing content to services such as media hosting sites.  The Ninth Circuit’s March 14, 2013 decision vacated and replaced the court’s prior decision in UMG Recordings v. Shelter Capital Partners, 667 F.3d 1022 (2012) (“Veoh 1”), which it had withdrawn when the Second Circuit issued its opinion in a case brought by media giant Viacom against YouTube that presented similar issues.  Viacom Int’l v. YouTube, 676 F.3d 19 (2012) (“YouTube”).  The court’s new decision (“Veoh 2”) removes potential inconsistencies with the Second Circuit’s YouTube decision on the availability of the safe harbor under the Digital Millennium Copyright Act (“DMCA”).  The net result is that service providers will likely continue to avail themselves of the safe harbor and that copyright owners will face challenges in finding such sites liable for copyright infringement.   

Under the DMCA, an online service provider, such as a media hosting site, is immune from liability for stored user content, as long as the site follows certain take-down procedures pursuant to notice from copyright owners.  Specifically, under 17 U.S.C. § 512(c)(1)(A) a service provider is not liable for infringement posted on its site if the service provider:

(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.

In recent years the first and second prongs of the DMCA “safe harbor provision,” which are commonly referred to as the “actual knowledge” and “red flags” tests,” have been the focus of considerable litigation as content owners have attempted to staunch the flow of posting of allegedly infringing content on the Internet by pursuing the service providers hosting the content.  Pointing to the widespread publicity regarding the extent of online infringement, content owners have alleged that service providers are not entitled to DMCA safe harbor protection because they knew or should have known that large amounts of infringing content is posted on the sites.

In the Ninth Circuit case, UMG, which owns numerous prominent record labels, brought a lawsuit against the video sharing site Veoh alleging that it was not entitled to DMCA safe harbor protection because Veoh had actual knowledge that its site was hosting infringing materials.  Although UMG was able to point to several internal e-mails allegedly reflecting knowledge by Veoh management regarding the presence of infringing content on the site, UMG did not identify any specific infringing materials of which Veoh was aware that it was hosting.  The lack of specific knowledge, in the Ninth Circuit’s view, was fatal.  The court found that generalized knowledge of infringing materials did not meet the “actual knowledge” test.  As the court stated, “if merely hosting material that falls within a category of content capable of copyright protection, with the general knowledge that one’s services could be used to share unauthorized copies of copyrighted material, was sufficient to impute knowledge to service providers, the § 512(c) safe harbor would be  rendered a dead letter…” Veoh 1 at 1036-37.  In contrast, the court found that “actual knowledge” requires awareness of the specific instances of alleged infringement at issue.  “[M]erely 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).” 

UMG was similarly unsuccessful on the “red flags” test.  The court rejected UMG’s argument that Veoh’s awareness of “facts and circumstances from which infringing activity is apparent” was sufficient to remove it from the DMCA safe harbor.  The court “refus[ed] to impose . . . investigative duties on service providers” from “general knowledge that it hosted copyrightable material and that its services could be used for infringement” If there was no notice regarding specific infringing activity, not even the CEO’s awareness of news articles generally discussing widespread infringing activity on the Veoh site constituted sufficient notice. 

Following the Veoh 1 decision, the Second Circuit in its YouTube reached similar conclusions on the “actual knowledge” and “red flags” tests.  However, the Second Circuit approached the issue from a somewhat different perspective that had not been included in the Ninth Circuit’s decision.  Addressing the issue of whether the type of knowledge needed for the two tests was different, the Second Circuit stated that “the difference between actual and red flag knowledge is . . . not between specific and generalized knowledge, but instead between a subjective and objective standard.  In other words, the actual knowledge provision turns on whether the provider actually or ‘subjectively’ knew of specific infringement, while the red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement “objectively” obvious to a reasonable person.”  Under the Second Circuit’s approach, both the “actual knowledge” and the “red flag” provisions require a showing of specific knowledge of infringement, but the “actual knowledge” provision is triggered if a service provider has knowledge, while the “red flags” knowledge is triggered if infringement would have been “obvious to a reasonable person” whether or not the defendant in question drew that conclusion.

Apparently concerned that the subsequent YouTube decision could create a conflict with its decision, the Ninth Circuit withdrew its opinion in Veoh 1 and has filed a new opinion that contains the substance of the prior opinion, but also adopts the Second Circuit’s reasoning regarding the differences between “actual” and “red flag” knowledge.  Under both the Second and Ninth Circuit’s approaches, knowledge by a service provider that its system is capable of hosting (or indeed may generally host) infringing content is not capable of removing the provider from DMCA safe harbor protection.

Faced with the Veoh and YouTube decisions, content owners face challenges in attempting to remove safe harbor protection for service providers.  Given these challenges, content owners are advised to be proactive in utilizing the DMCA take-down procedures to request removal of infringing content.

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