Intellectual Property Bulletin - Spring 2013: A Victory for the DMCA Storage Safe Harbor; a Pyrrhic Victory for Veoh

The Ninth Circuit ruled recently that the safe harbor provisions of the Digital Millennium Copyright Act (DMCA) shielded a video-sharing website from copyright infringement liability. In UMG Recordings, Inc. v. Veoh Networks, Inc., the court affirmed the decision of the United States District Court for the Central District of California, granting summary judgment for Veoh after concluding that it met the requirements outlined in 17 U.S.C. § 512(c). 2013 U.S. App. LEXIS 5100 (9th Cir. March 14, 2013). The court agreed with the Second Circuit’s opinion in Viacom Int’l v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012), in rejecting Universal Music Group’s (UMG) arguments that the DMCA safe harbor did not apply.

Although Veoh’s video-sharing program on its website had procedures to combat copyright infringement, users were able to download protected material without consent of the copyright holder. The prevalence of this practice prompted UMG to bring direct and secondary copyright infringement claims against Veoh as well as secondary liability claims against three Veoh investors. Veoh succeeded in a similar battle against a publisher of adult films in 2008 in another case . See e.g. Mitchell Zimmerman, Io v. Veoh – DMCA Covers Video Upload Site Charged With Exposing Skin Flicks, Fenwick Copyright Alert (September 2008).

In response to UMG’s allegations, Veoh raised an affirmative defense based on the DMCA’s safe harbor provisions, which protect service providers from liability if, among other things, they: (1) Lack actual or constructive notice of the infringing activity; (2) Act expeditiously to remove infringing material upon learning of its existence; and (3) Do not receive a financial benefit directly attributable to the activity. Reviewing the district court’s grant of summary judgment, the Ninth Circuit rejected UMG’s claim that the safe harbor provision was inapplicable because the alleged infringement was not “by reason of the storage [of material] at the direction of a user,” the threshold requirement for 512(c) protection.

After concluding that the safe harbor provisions pertained to Veoh’s service, the court next examined whether Veoh had knowledge of the alleged infringement that would negate any protections afforded by the DMCA. Although the parties agreed that Veoh acted promptly to remove infringing material listed in takedown notices, UMG alleged that Veoh had knowledge of other infringing videos that it did not remove. The court held, however, that UMG failed to create a genuine issue of material fact that Veoh had either actual or “red flag” notice of the infringement, concluding that hosting of copyrightable material and awareness of the potential for infringement does not constitute knowledge. The court also declined to place the burden on service providers to police their websites for possible infringement, instead requiring copyright holders to perform this task.

This decision ends a long and complicated saga between Veoh and UMG, settling the question of responsibility for policing websites for potential infringement. However, the victory came too late for Veoh, which filed for bankruptcy and was liquidated as a result of its legal battles. Despite Veoh’s demise, the court’s holdings will serve as words of warning to service providers to act scrupulously to comply with safe harbor requirements and to copyright holders to consider these requirements when making infringement claims.