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IP/Entertainment Case Law Updates

Lenz v. Universal Music Corp

Ninth Circuit affirms lower court ruling holding Universal Music Corp. was required to consider fair use doctrine prior to issuing “takedown notice” of YouTube home video showing baby dancing to Prince song “Let’s Go Crazy”, though genuine dispute exists as to whether Universal’s screening procedures are tantamount to fair use consideration.

YouTube removed the video and notified Lenz of the removal. Lenz attempted to restore the video by sending YouTube a counter-notification. Universal protested the video’s reinstatement without mentioning fair use. Upon Lenz’s second counter-notification, YouTube reinstated the video. Lenz then sued Universal, alleging misrepresentation under 17 U.S.C. § 512(f) of the Digital Millennium Copyright Act, among other claims. A California federal district court denied both parties’ motions for summary judgment on the issue of misrepresentation and certified the rulings for interlocutory appeal to the Ninth Circuit.

First, the Ninth Circuit held that under the DMCA, 17 U.S.C. § 512(c)(3)(A)(v), copyright holders must consider whether potentially infringing material is a fair use under the statute before issuing a takedown notification. Distinguishing the doctrine of fair use from other traditional affirmative defenses, the Ninth Circuit explained that the statute “expressly authorizes fair use” and thus must be considered prior to the sending of a takedown notification.

Second, the Ninth Circuit addressed whether Universal knowingly misrepresented that it had formed a good faith belief the video did not constitute fair use. The Ninth Circuit pointed out that the proper inquiry focused on Universal’s subjective — not objective — intent. Although Lenz presented evidence that Universal did not consider fair use explicitly, Universal nevertheless contended that its procedures were tantamount to consideration of fair use, even if not formally so labeled. The Ninth Circuit concluded that a jury must decide whether Universal’s actions sufficiently formed a subjective good faith belief that the video was not fair use. Although Lenz could proceed to trial on the theory of “actual knowledge,” she could not do the same under a theory of “willful blindness” because she failed to make a threshold showing from which a juror could infer that Universal was aware of a high probability the video constituted fair use.

Finally, the Ninth Circuit rejected Universal’s argument that Lenz was required to demonstrate actual monetary loss in order to proceed. Although common law presumes that a plaintiff alleging a knowingly material misrepresentation must have suffered a monetary loss, Congress expressly provided for the recovery of “any damages” in the statute.

Judge Milan D. Smith concurred in part and dissented in part. In particular, the judge questioned whether § 512(f) directly prohibits a party from misrepresenting that it has formed a good faith belief that a work is subject to the fair use doctrine. The plain text of the statute prohibits misrepresentations that a work is infringing, not misrepresentations about the party’s diligence in forming its belief that the work is infringing, he said. The judge also disagreed that there is any material dispute about whether Universal considered fair use. “Universal’s misrepresentation, if any, was knowing because Universal knew it had not considered fair use, and therefore knew it lacked a basis to conclude that the video was infringing,” he concluded.

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