On June 16, 2016, the U.S. Court of Appeals for the Second Circuit issued its long-awaited decision in Capitol Records, LLC v. Vimeo, LLC, No. 14-1048 (2d Cir. 2016). First, the Second Circuit held that the "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA) apply to sound recordings made prior to 1972. The court also concluded that where a service provider's employees saw videos on the service featuring "recognizable" songs and failed to take them down, that neither created "red flag knowledge" of copyright infringement, nor rendered the service "willfully blind" to infringement so as to disqualify it from DMCA safe-harbor protection. The ruling is very significant for online service providers and confirms that the DMCA safe harbors are robust and not easy for copyright owners to undermine.

DMCA Safe Harbor Applies to Pre-1972 Sound Recordings

In the first part of its ruling, the court addressed a longstanding debate over whether the DMCA applies to sound recordings created before 1972. Record labels, including the plaintiffs in the Vimeo case, have argued that because such works are protected only by state—and not federal—copyright laws, the DMCA also does not apply to them. The United States Copyright Office had agreed with that position, and so had the New York Court of Appeals (the highest state court in New York), creating substantial practical problems for many online hosts. But the Second Circuit has now dismantled that interpretation, stating that it "is based in major part on a misreading of the statute." The Vimeo court based its ruling on both the language and purpose of the DMCA, which it said was designed "to strike a compromise under which, in return for the obligation to take down infringing works promptly on receipt of notice of infringement from the owner, Internet service providers would be relieved of liability for user-posted infringements of which they were unaware, as well as of the obligation to scour matter posted on their services to ensure against copyright infringement." To exclude pre-1972 sound recordings from DMCA protection, the court observed, would put online service providers in a position "either to incur heavy costs of monitoring every posting to be sure it did not contain infringing pre-1972 recordings, or [to] incur[] potentially crushing liabilities under state copyright laws"—a choice which "would defeat the very purpose Congress sought to achieve in passing the statute." Because there is now a conflict between the Second Circuit and the New York Court of Appeals on this issue, Supreme Court review is possible.

Evidence That Some Employees See "Recognizable" Videos on the Service Does Not Trigger Red Flag Knowledge

The Second Circuit also held that, under the DMCA, "red flag" knowledge of copyright infringement does not arise simply because some employees have watched "recognizable" videos on the service. In this case, Vimeo employees watched videos featuring songs owned by the record labels, and had "liked" them, posted comments, and added the videos to channels. Reaffirming the standard established in Viacom International, Inc. v. YouTube, Inc., 676 F.3d 19, 26 (2012), the Second Circuit rejected the argument that the employee reviews imbued the service with red flag knowledge (knowledge of facts from which the infringing nature of the videos was apparent) so as to defeat the service's DMCA protection for those videos. In so holding, the court noted the litany of questions a content host cannot answer without specialized knowledge of each use of each copyrighted work, including whether the use was authorized or licensed, and whether the video is a fair use—questions "the service provider is under no legal obligation to have its employees investigate[.]" The court was unmoved by the record labels' argument that this narrow reading of red flag knowledge would read that exception out of the statute. In the Second Circuit's view, the fact that Congress created an exception for "objectively obvious" instances of infringement "does not compel the conclusion that Congress expected this extension to cover a large number of instances."

The Vimeo court also rejected the record labels' argument regarding the DMCA's burden of proof on the question of red flag knowledge. The labels had argued that service providers should be obligated to prove that they lacked such knowledge, rather than forcing copyright holders to prove the presence of such disqualifying knowledge. The court disagreed: "The service provider cannot reasonably be expected to prove broad negatives, providing affidavits of every person who was in its employ during the time the video was on its site, attesting that they did not know of the infringement and did not know of the innumerable facts that might make infringement obvious. And to read the statute as requiring a trial whenever the plaintiff contests the credibility of such attestations would largely destroy the benefit of the safe harbor Congress intended to create."

Willful Blindness Requires Suspicion Regarding Particular Instances of Infringement

Finally, the Second Circuit reaffirmed Viacom's holding that, because willful blindness is a proxy for knowledge, it must relate to specific instances of infringement. The record label plaintiffs had argued that because Vimeo was aware of infringement on its service generally, and because it had a policy of monitoring videos for infringement of visual but not audio content, Vimeo had been willfully blind with respect to infringing music, and thus should be ineligible for the DMCA's protections. The court rejected this argument as well, relying on Section 512(m) of the DMCA which expressly relieves service providers of the burden of monitoring their services for infringement. According to the panel, "[p]rotecting service providers from the expense of monitoring was an important part of the compromise embodied in the safe harbor. . . . If service providers were compelled constantly to take stock of all information their employees may have acquired that might suggest the presence of infringements in user postings, and to undertake monitoring investigations whenever some level of suspicion was surpassed, these obligations would largely undo the value of § 512(m)." The Second Circuit also held that a few sporadic instances where Vimeo employees "inappropriately" encouraged users to post allegedly infringing videos was insufficient to give rise to willful blindness, especially where the videos from those instances did not relate to the videos at issue in the lawsuit.

This ruling is an important win for the DMCA and for the community of online service providers. Wilson Sonsini Goodrich & Rosati submitted an amicus brief in support of Vimeo on behalf of several leading service providers, including Twitter, Pinterest, and Tumblr. The analysis in the firm's amicus brief was echoed in the Second Circuit's discussion of the DMCA's knowledge standards.