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IP/Entertainment Case Law Updates

UMG Recordings, Inc., et al. v. Veoh Networks, Inc., et al.

In copyright infringement action by recording companies against web site operator, court grants summary judgment for defendant after previously ruling that defendant’s services fall within the scope of the DMCA safe harbor

Defendant Veoh operates an Internet-based service that allows users to share videos with others. Plaintiff Universal Music Group sued Veoh Networks for direct, contributory and vicarious copyright infringement and for inducement of copyright infringement. In December, 2008, the court held that Veoh’s services fall within the scope of the DMCA 512(c) safe harbor, but rejected Veoh’s request for summary judgment, as it was unclear whether Veoh would be able to meet the statute’s additional eligibility requirements relating to knowledge, financial benefit and control. In this ruling, the court granted summary judgment to Veoh, holding that Veoh satisfied all the elements of the DMCA safe harbor.

Section 512(c) of the Copyright Act provides in part:

“A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider -

(A)(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

(B) does 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; and

(C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.”

17 U.S.C. 512(c).

UMG contended that there are genuine issues of material fact as to (1) whether Veoh expeditiously removed infringing material when it acquired actual knowledge of such material or awareness of facts from which infringing activity was apparent; (2) whether Veoh had the right and ability to control allegedly infringing activity from which it received a direct financial benefit; and (3) whether Veoh adopted and reasonably implemented a policy of terminating repeat infringers.

Regarding whether Veoh had actual knowledge of the infringing activity and removed infringing content, the court held that Veoh showed that “when it did acquire knowledge of allegedly infringing material – whether from DMCA notices, informal notices, or other means – it expeditiously removed such material, and UMG has failed to rebut that showing.” The court relied on the Ninth Circuit’s decision in Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007), in which the court held that the DMCA notification procedures place the burden of policing copyright infringement – identifying the potentially infringing material and adequately documenting infringement – squarely on the owners of the copyright. The court rejected UMG’s argument that Veoh had actual knowledge of infringing material because it “knew that it was hosting an entire category of content – music – that was subject to copyright infringement.” According to the court, if merely hosting user-contributed material capable of copyright protection were enough to impute actual knowledge to a service provider, the 512(c) safe harbor “would be a dead letter because vast portions of content on the internet are eligible for copyright protection.” The court also held that a general awareness of infringement, without more, is not enough to disqualify a service provider from the 512(c) safe harbor. The court held that Veoh did not have actual knowledge of infringement, and when it did acquire such knowledge, it acted expeditiously to remove the infringing content.

Regarding control over the infringing activity, the court held that a greater level of control than the threshold level that is required to qualify for the 512(c) safe harbor is required. As the court noted, the DMCA makes clear that the 512(c) safe harbor applies only to service providers that have substantial control over users’ access to material on their systems. “If that degree of control alone were enough to find that a service provider who enjoys a direct financial benefit were ineligible for the safe harbor, that would create an odd ‘catch-22’ that would substantially limit the applicability of the safe harbor.” The court cited to Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002), in which the court found a service provider to have the requisite control based on “something more” than the degree of control necessary to qualify for the safe harbor, and that none of the factors that constituted “something more” were present in this case.

Finally, the court held that Veoh’s policy for terminating repeat infringers was reasonable, even though Veoh did not automatically terminate accounts of users identified by Veoh’s filtering program. The court held that this technology does not meet the standard of reliability and verifiability required by the Ninth Circuit in order to justify terminating a user’s account.