YouTube Infringement Case Goes Back to Trial Court for ‘Actual Knowledge’ Evaluation

At least one fair-use group, though, saw a victory for its interpretation of the DMCA in the 2nd Circuit ruling. An analyst said the ruling appeared to create a split with the 9th Circuit, which could encourage Supreme Court intervention.

Stanton was “substantially” correct to rule that the DMCA liability phrases “actual knowledge that the material ... is infringing,” and “facts or circumstances from which infringing activity is apparent,” refer to “knowledge of specific and identifiable infringements,” said the unanimous opinion (http://xrl.us/bm2ugk) written by Judge Jose Cabranes. He wrote only for fellow appellate Judge Debra Livingston. The third member of the original panel, Judge Roger Miner, died during the proceedings.

To require “expeditious removal” of infringing material short of “specific knowledge or awareness would be to mandate an amorphous obligation to ’take commercially reasonable steps’ in response to a generalized awareness of infringement,” which doesn’t jibe with the statute, Cabranes said. Disputing Viacom’s characterization of the law’s “red flag” provision, the appellate opinion said the difference between actual knowledge and red-flag knowledge is “between a subjective and an objective standard.” The red-flag standard isn’t “superfluous” under that interpretation: “Both provisions do independent work, and both apply only to specific instances of infringement.” Cabranes acknowledged there was “limited case law” relevant to the actual-versus-red-flag distinction.

Internal YouTube communications that mention the presence of specific copyrighted clips, such as Premiere League soccer videos, and founder Jawed Karim’s suggestion in an internal report that YouTube “preemptively” remove “blatantly illegal” content such as Viacom’s South Park TV show, could cause a “reasonable juror” to decide YouTube had actual knowledge of infringement, Cabranes said. He also pointed to email conversations among Karim and cofounders Chad Hurley and Steve Chen that suggested they knew popular Bud Light commercials were on the site and agreed to leave them up for “a bit longer.” The opinion remanded the factual issue to Stanton of whether YouTube’s knowledge of specific infringements actually pertained to the specific copyrighted clips at issue in the lawsuit.

Plaintiffs’ claim that YouTube was “willfully blind” with respect to copyrighted content on the site will also go back to Stanton for a factual determination, Cabranes ruled. The DMCA absolves YouTube of having to “affirmatively” look for evidence of infringement: It “limits -- but does not abrogate -- the doctrine” of willful blindness, the opinion said, referring to another case where a defendant “consciously avoided confirming” the “high probability of the fact in dispute."

Cabranes acknowledged he’s setting up a split with the 9th Circuit on the question of whether the “right and ability to control” infringing activity requires knowledge of specific infringement. The 9th Circuit interpretation, which agreed with YouTube, would render the second provision of the relevant Section 512(c)(1) “duplicative” of the first, Cabranes said. “Any service provider that has item-specific knowledge of infringing activity and thereby obtains financial benefit would already be excluded from the safe harbor under” the first part of the provision “for having specific knowledge of infringing material and failing to effect expeditious removal.” Viacom’s interpretation doesn’t work either, though, Cabranes said. “Right and ability to control” infringing activity “requires something more than the ability” to block or remove content, he said. “The remaining -- and more difficult -- question is how to define the ’something more’ that is required.” The ruling remands to Stanton the question of whether there’s enough evidence for a jury to find YouTube had the “right and ability to control the infringing activity and received a financial benefit directly attributable to that activity."

Both sides claimed victory from the 2nd Circuit ruling. “We are pleased,” said a Viacom spokesman: “The Court delivered a definitive, common sense message -- intentionally ignoring theft is not protected by the law.” The 2nd Circuit “rejected” Viacom’s view of the DMCA, a Google spokeswoman said. “All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube.”

The 2nd Circuit “shot down the majority” of legal theories advanced by Viacom and the other plaintiffs, and the factual remands don’t imperil the interpretation of the DMCA as not requiring filtering and monitoring, Public Knowledge’s Sherwin Siy wrote in a blog post (http://xrl.us/bm2ukn). “Some rather incriminating emails came to light during the course of the decision,” such as the founders’ discussion of infringing videos, he said. “What actually happened with those videos, though, isn’t clear in many cases (did they eventually get taken down?), and it looks like a lot of the videos discussed in the emails don’t actually belong to the plaintiffs in this case.” The 2nd Circuit’s interpretation of “right and ability to control” suggests that YouTube would have to “exert substantial influence on the activities of users” to be liable, Siy said.

The ruling is “on paper” favorable to Viacom, but “in practice,” the content company has “a ways to go,” Guggenheim analyst Paul Gallant wrote investors. Viacom needs both a trial court and an appellate win, and “there is a chance the Supreme Court would agree to hear the case,” given the apparent split between the 2nd and 9th circuits, Gallant said. “Court timelines are not written in stone, but we suspect it would be at least two more years before we have certainty on whether Viacom has a valid copyright claim against YouTube.” Damages against YouTube would probably be less than the $1 billion Viacom seeks, he said, because “there is uncertainty about the extent to which the harm to Viacom may have been partly or completely offset by the promotional value of the clips to Viacom,” and Google may have evidence that “some in the Viacom camp” wanted to use YouTube for promotional purposes. Only if Viacom wins a substantial damages award could Google be in legal trouble with other large content owners like Time Warner and News Corp., Gallant said.