The YouTube Decision: What it means and what happens next

on April 5, 2012

 Today’s appeals court ruling in YouTube v. Viacom is the biggest copyright decision of the year and already both sides are proclaiming victory.
The case is about much more than the $1 billion that Viacom says it is owed for Jon Stewart and South Park clips that appeared on YouTube years ago.
Here’s a plain English guide to what the decision really means:
Why is this case such a big deal?
Content owners have fumed for years that so-called “safe harbor” laws make it too easy for sites like YouTube to avoid responsibility for copyrighted material uploaded by users. They hoped the appeals court would force those sites to take on a greater role in copyright enforcement. The decision shapes the rules for sites like Grooveshark and MP3 Tunes that offer new ways to store or distribute content.
So what happened today?
The Second Circuit is an influential appeals court. Today, they said a lower court made a mistake when it dismissed the case in YouTube’s favor in 2010. It vacated and remanded the earlier decision — meaning it sent the Viacom case back to the lower court with instructions on how to try again. The ruling also applies to a parallel suit brought by the English Premier League and other content owners.
So who won?
Viacom and content owners say the court’s decision to revive the case proves that YouTube and others should pay for being in cahoots with copyright infringers. Google and its allies say the remand order is a technicality and that the overall decision vindicates the existing safe harbor rules.
That sounds like spin. Who really won?
The truth is somewhere in the middle. The decision means that Google could be on the hook for at least some of the YouTube clips. But it doesn’t dramatically change the existing safe harbor regime.
The appeals court wrote a narrow, specific decision and not a wide and sweeping one. And, critically, the Second Circuit took care to be consistent with a similar recent case (involving Veoh video) from California’s Ninth Circuit. If the New York case had disagreed with its “sister circuit,” the case would have been teed up to go the Supreme Court — and possibly set off big changes in the safe harbor law. Now, the Supreme Court is a longshot.
Does the case change the law at all?
A little bit. The appeals court confirmed the meaning of “red flags.” These are situations when a host loses “safe harbor” immunity because they should have known that someone was putting copyrighted content on their site — even if a content owner can’t prove they had actual knowledge.
The dispute turned on technical language in the safe harbor law over when a host had “actual” knowledge versus “apparent” knowledge.
The legal details are pasted below but, in this case, the court decided that the lower court should have taken a closer look at what seem like damning emails about what the YouTube founders knew.
Content owners may also be encouraged by the court’s guidance on “willful blindness” — situations where a website deliberately looks the other way when the site is used for piracy or counterfeiting.
Well, so what’s so important about the YouTube emails?
Emails between the YouTube founders suggest they knew or should have known about specific clips of copyrighted tv shows and sports games but chose to leave the clips up all the same — if this is the case, they forfeited their safe harbor shield and are liable for damages.
Does this mean Google has to pay the $1 billion?
No, because the appeals court ruling addresses the handful of clips in question, not all 79,000 of them.  As Stanford’s Mark Lemley explains:

The court found evidence that YouTube’s founders might have had knowledge of a few specific instances of infringement, and it remanded to determine whether YouTube could be liable for those specific instances. But even if they are liable, the liability is just for the few mentioned postings, assuming Viacom owns them and they were identified as the works in suit.  Any such liability would likely be measured in the hundreds of thousands of dollars, not the billions Viacom was seeking.

(Lemley has represented Google in the past but his view is consistent with text in the judgment as pasted below).
What happens now?
The case returns to the original court which will have to reconsider it in light of the appeals court’s instructions. Google will then move to have it dismissed all over again. The parties will fight like cats and dogs over the emails and the case will be back in court later this year.
It’s also possible that both sides will declare victory and quietly settle the matter.
I can’t get enough of this stuff. Where can I read more?
You can check out the excerpts below. Or you can read smart sources like Public Knowledge who says Google wins or Eric Goldman who says Viacom wins.
And finally, here’s a loose collection of the legal highlights from the judgment itself:

The difference between actual and red-flag knowledge is thus not between specific and generalized knowledge, but instead between a subjective and an 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. The red flag provision, because it incorporates an objective standard, is not swallowed up by the actual knowledge provision under our construction of the § 512(c) safe harbor. Both provisions do independent work, and both apply only to specific instances of infringement.

The limited body of case law interpreting the knowledge provisions of the § 512(c) safe harbor comports with our view of the specificity requirement. Most recently, a panel of the Ninth Circuit addressed the scope of § 512(c) in UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022 (9th Cir. 2011), a copyright infringement case against Veoh Networks, a video-hosting service similar to YouTube.8 As in this case, various music publishers brought suit against the service provider, claiming direct and secondary copyright infringement based on the presence of unauthorized content on the website, and the website operator sought refuge in the § 512(c) safe harbor. The Court of Appeals affirmed the district court’s determination on summary judgment that the website operator was entitled to safe harbor protection. With respect to the actual knowledge provision, the panel declined to “adopt[ ] a broad conception of the knowledge requirement,” id. at 1038, holding instead that the safe harbor “[r]equir[es] specific knowledge of particular infringing activity,” id. at 1037. The Court of Appeals “reach[ed] the same conclusion” with respect to the red flag provision, noting that “[w]e do not place the burden of determining whether [materials] are actually illegal on a service provider.” Id. at 1038 (alterations in original) (quoting Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1114 (9th Cir. 2007)).
Although Shelter Capital contains the most explicit discussion of the § 512(c) knowledge provisions, other cases are generally in accord. See, e.g., Capitol Records, Inc. v. MP3tunes,

[…]

At least some of the TV shows to which Karim referred are owned by Viacom. A reasonable juror could conclude from the March 2006 report that Karim knew of the presence of Viacom-owned material on YouTube, since he presumably located specific clips of the shows in question before he could announce that YouTube hosted the content “[a]s of today.” A reasonable juror could also conclude that Karim believed the clips he located to be infringing (since he refers to them as “blatantly illegal”), and that YouTube did not remove the content from the website until conducting “a more thorough analysis,” thus exposing the company to liability in the interim.
Furthermore, in a July 4, 2005 e-mail exchange, YouTube founder Chad Hurley sent an e-mail to his co-founders with the subject line “budlight commercials,” and stated, “we need to reject these too.” Steve Chen responded, “can we please leave these in a bit longer? another week or two can’t hurt.” Karim also replied, indicating that he “added back in all 28 bud videos.” Similarly, in an August 9, 2005 e-mail exchange, Hurley urged his colleagues “to start being diligent about rejecting copyrighted / inappropriate content,” noting that “there is a cnn clip of the shuttle clip on the site today, if the boys from Turner would come to the site, they might be pissed?” Again, Chen resisted:
but we should just keep that stuff on the site. i really don’t see what will happen. what? someone from cnn sees it? he happens to be someone with power? he happens to want to take it down right away. he gets in touch with cnn legal. 2 weeks later, we get a cease & desist letter. we take the video down.
And again, Karim agreed, indicating that “the CNN space shuttle clip, I like. we can remove it once we’re bigger and better known, but for now that clip is fine.”
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. The foregoing Premier League e-mails request the identification and removal of “clearly infringing, official broadcast footage.” The March 2006 report indicates Karim’s awareness of specific clips that he perceived to be “blatantly illegal.” Similarly, the Bud Light and space shuttle e-mails refer to particular clips in the context of correspondence about whether to remove infringing material from the website. On these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent. See § 512(c)(1)(A)(i)–(ii). Accordingly, we hold that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature.9
We hasten to note, however, that although the foregoing e-mails were annexed as exhibits to the summary judgment papers, it is unclear whether the clips referenced therein are among the current clips-in-suit. By definition, only the current clips-in-suit are at issue in this litigation.
9 (Footnote: We express no opinion as to whether the evidence discussed above will prove sufficient to withstand a renewed motion for summary judgment by YouTube on remand. In particular, we note that there is at least some evidence that the search requested by Walker in his February 7, 2007 e-mail was never carried out. See Joint App’x III:256. We also note that the class plaintiffs have failed to identify evidence indicating that any infringing content discovered as a result of Walker’s request in fact remained on the YouTube website.)

[…]
On appeal, the parties advocate two competing constructions of the “right and ability to control” infringing activity. 17 U.S.C. § 512(c)(1)(B).  [..]
Accordingly, we conclude that the “right and ability to control” infringing activity under § 512(c)(1)(B) “requires something more than the ability to remove or block access to materials posted on a service provider’s website.”
[…]

CONCLUSION
To summarize, we hold that:

  1. (1)  The District Court correctly held that 17 U.S.C. § 512(c)(1)(A) requires knowledge orawareness of facts or circumstances that indicate specific and identifiable instances ofinfringement;
  2. (2)  However, the June 23, 2010 order granting summary judgment to YouTube isVACATED because a reasonable jury could conclude that YouTube had knowledge or awareness under § 512(c)(1)(A) at least with respect to a handful of specific clips; the cause is REMANDED for the District Court to determine whether YouTube had knowledge or awareness of any specific instances of infringement corresponding to the clips-in-suit;
  3. (3)  The willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under § 512(c)(1)(A); the cause is REMANDED for the District Court to consider the application of the willful blindness doctrine in the first instance;
  4. (4)  The District Court erred by requiring “item-specific” knowledge of infringement in its interpretation of the “right and ability to control” infringing activity under 17 U.S.C. § 512(c)(1)(B), and the judgment is REVERSED insofar as it rests on that erroneous construction of the statute; the cause is REMANDED for further fact-finding by the District Court on the issues of control and financial benefit;
  5. (5)  The District Court correctly held that three of the challenged YouTube software functions—replication, playback, and the related videos feature—occur “by reason of the storage at the direction of a user” within the meaning of 17 U.S.C. § 512(c)(1), and
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the judgment is AFFIRMED insofar as it so held; the cause is REMANDED for further fact-finding regarding a fourth software function, involving the syndication of YouTube videos to third parties.
On remand, the District Court shall allow the parties to brief the following issues, with a view to permitting renewed motions for summary judgment as soon as practicable:

  1. (A)  Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);
  2. (B)  Whether, on the current record, YouTube willfully blinded itself to specific infringements;
  3. (C)  Whether YouTube had the “right and ability to control” infringing activity within the meaning of § 512(c)(1)(B); and
  4. (D)  Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred “by reason of the storage at the direction of the user” within the meaning of § 512(c)(1), so that YouTube may claim the protection of the § 512(c) safe harbor.

We leave to the sound discretion of the District Court the question of whether some additional, guided discovery is appropriate in order to resolve “(C)” (“[w]hether YouTube had ‘the right and ability to control’ infringing activity”), and “(D)” (“[w]hether any clips-in-suit were syndicated to a third party”). As noted above, for purposes of this case, the record with respect to “(A)” (“[w]hether . . . YouTube had knowledge or awareness of any specific infringements”) and “(B)” (“[w]hether . . . YouTube willfully blinded itself to specific infringements”) is now complete.