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How Red Does The Flag Have To Be For Copyright Owners To Have Recourse Against ISPs?

The Digital Millennium Copyright Act (DMCA) contains “safe harbor” protection for Internet Service Providers (ISPs) from infringement claims asserted by copyright owners. In recent years there has been very high stakes litigation between large companies that own valuable copyrights and that believe ISPs are profiting from infringement of those copyrights, and the ISPs who claim that a narrowing of the statutory safe harbor that protects them would threaten the openness that people cherish about the world wide web.

The federal court of appeals for the Ninth Circuit has now joined the Second Circuit regarding how much knowledge an ISP must have before it reaches the level of “red flag” awareness where the safe harbor protection is lost. Both circuits hold that facts showing generalized knowledge of infringement, or the mere ability to find and terminate infringing users, do not meet that standard. This means that copyright owners must now send Take-Down Notices that are more detailed than has been customary, in order to trigger potential liability of the ISP.

Analyzing The Safe Harbor

The Ninth Circuit ruled again in March of 2013 in favor of Veoh Networks, Inc. (Veoh), the operators of a video-sharing site, by affirming that Veoh qualified for the safe harbor protection from copyright infringement claims asserted by Universal Music Group (UMG). The Ninth Circuit had previously ruled in favor of Veoh in a December 2011 opinion (Veoh 1), but granted a panel rehearing after the Second Circuit’s April 2012 opinion in Viacom Int’l v. YouTube, Inc., which differed in certain respects from the Ninth Circuit’s interpretation of the DMCA safe harbor in Veoh 1. In its superseding opinion, the court adopted the Second Circuit’s interpretation of the distinction between actual knowledge and “red flag” awareness, and changed its analysis of the “right and ability to control” test under the DMCA. The Ninth Circuit and Second Circuit are now aligned toward an evidentiary standard that places a high burden on copyright owners to establish facts that would deprive service providers of safe harbor protection. Both circuits hold that facts showing generalized knowledge of infringement, or the mere ability to find and terminate infringing users do not meet that standard.

Actual Knowledge and “Red Flag” Awareness

The DMCA provides that to be eligible for safe harbor protection, a service provider must “not have actual knowledge that the material or an activity using the material on the system or network is infringing” and must not be “aware of facts or circumstances from which infringing activity is apparent”. Even if a service provider has such knowledge or awareness, it still may be eligible for the safe harbor if it “acts expeditiously to remove, or disable access to, the material.”

Regarding the “actual knowledge” requirement, it is undisputed that until the lawsuit was filed, UMG had not given notice to Veoh of any specific infringing music content. In its March 14 opinion, the Ninth Circuit explained that “[r]equiring specific knowledge of particular infringing activity makes good sense in the context of the DMCA”, and held that “merely 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).

As to the requirement of “awareness of facts or circumstances from which infringing activity is apparent” (termed “red flag” awareness by the Ninth Circuit), the court held, like the Second Circuit, that “general knowledge that hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag.” In its analysis, the court rejected UMG’s argument that general widespread infringing activity could be relevant to the “red flag” test and that the district court improperly conflated the actual knowledge and red flag tests. The Ninth Circuit cited to the Second Circuit’s analysis in Viacom regarding the two tests:

The difference between actual and red flag knowledge is . . . 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 Ninth Circuit acknowledged the Second Circuit’s Viacom qualification: “Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.” However, the Ninth Circuit found that there was no evidence that Veoh engaged in such behavior, noting that Veoh “promptly removed infringing material when it became aware of specific instances of infringement.”

In sum, the Ninth Circuit made clear that there must be proof of the defendant’s knowledge or awareness of specific instances of infringement, rather than a generalized knowledge or awareness that some level of infringing activity is taking place. Applying the heighted “specific infringement” standard, the court found that UMG’s evidence did not create a genuine issue of material fact. Indeed, none of the following was sufficient to satisfy the actual knowledge or awareness prongs: (1) general hosting of copyrightable music and thus general knowledge that Veoh’s services could be used to post infringing material; (2) tagging of videos on Veoh’s service as music videos and search term purchases of the names of UMG artists; (3) prior removal by Veoh of certain unauthorized content identified in DMCA take-down notices; (4) Veoh’s awareness of news reports discussing a general problem with use of Veoh’s website for infringing activity; and (5) emails sent to Veoh by copyright holders which did not comply with the DMCA take-down notification provisions.

Right and Ability to Control

The DMCA provides that to be eligible for safe harbor protection, a service provider must not “receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.”

The Ninth Circuit’s March 14 opinion adopted the Second Circuit’s interpretation of “right and ability to control,” holding as follows:

We agree with the Second Circuit and hold that, in order to have the "right and ability to control," the service provider must "exertSuch circumstances are not equivalent to the activities found to constitute substantial influence in Cybernet and Grokster. Nor has UMG, in its initial or supplemental briefing to this court, pointed to other evidence raising a genuine issue of material fact as to whether Veoh's activities involved "something more than the ability to remove or block access to materials posted on a service provider's website.”

The district court in Perfect 10, Inc. v. Cybernet Ventures, Inc. found control where the service provider had a monitoring program by which user websites received detailed instructions about website layout, appearance, and content, and forbade certain types of content and refused access to users who failed to comply with its instructions. In Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. liability was premised “on purposeful, culpable expression and conduct.”

Here, the Ninth Circuit made clear that for the “right and ability to control” requirement, there must be evidence that a service provider could exert “substantial influence” on users’ activities, which must be “something more” than the general ability to locate infringing material and terminate user access.

YouTube Remand Decision

Accordingly, the Ninth Circuit has clarified the DMCA safe harbor protection for service providers, bringing the standards in harmony with the Second Circuit. Nonetheless, whether application of those standards will be consistent at the district court level is an open question.

On April 18, 2013, the district court in Viacom Int'l, Inc. v. Youtube, Inc. ruled again, this time on remand from the Second Circuit, that YouTube’s video-sharing site was shielded from liability by the DMCA, stating, in pertinent part:

But the governing principle must remain clear: knowledge of the prevalence of infringing activity, and welcoming it, does not itself forfeit the safe harbor. To forfeit that, the provider must influence or participate in the infringement.

Viacom has said it plans to appeal. The outcome of a possible second appeal in Viacom may further clarify the standards and effect the development of the law in the Second and Ninth Circuits. For now, those standards stress the importance for copyright holders to specifically call attention to infringing content on service providers’ sites through effective take-down notices.

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