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IP/Entertainment Case Law Updates

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

In this copyright infringement suit, plaintiffs, record companies and music publishers (collectively “UMG”), moved for partial summary judgment against defendant Veoh Networks, an online service that allows users to share videos with others free of charge. In its motion, UMG claimed that certain activities of Veoh were not entitled to safe harbor protection under section 512(c) of the Digital Millennium Copyright Act (“DMCA”). Section 512(c) protects qualifying online service providers from incurring monetary liability for copyright infringement “by reason of the storage at the direction of a user of material that resides on [the service provider’s] system or network. . . .” UMG argued that the challenged activities fell outside the scope of section 512(c) protection because they neither constituted “storage” nor were triggered “at the direction of a user.”

The court first set forth the exact activities in dispute: (1) Veoh’s automatic “transcoding” that converts an uploaded video into Flash language; (2) Veoh’s automatic break down of a video file into 256-kilobyte “chunks”; (3) Veoh’s system function that allows users to access videos by “streaming”; and (4) Veoh’s system function that enables users to download videos. Aside from the Flash-formatting activity, no court had previously addressed the applicability of these internet functions to section 512(c)’s language “by reason of the storage[.]”

Turning to the DMCA language, the court rejected UMG’s position that the phrase “by reason of the storage” solely protects the act of storing material. The court reasoned that Congress’s inclusion of broad, causal language – “by reason of” – indicated an intent to encompass conduct that occurs “as a result of” or “attributable to” the storage. The court continued its analysis by looking to other clauses of section 512(c) that repeatedly refer to disabling “access” to infringing material or “activity” – an indication, the court explained, that section 512(c) limited liability for online service provider activities beyond mere storage. The court found its reading of “by the reason of the storage” consistent with the policy and purpose of the DMCA to strengthen the “robust development and world-wide expansion of electronic commerce, communications, research, development, and education in the digital age.”

The court noted that a recent California district opinion in a separate case against Veoh reached the same conclusion as to 512(c)’s application to its automatic Flash formatting but declined to discuss the opinion’s reasoning in detail except to note that its holding was consistent with previous case law addressing 512(c). (We summarized Io Group, Inc. v. Veoh Networks, Inc., in September, 2008.)

Finally, in a footnote, the court rejected Veoh’s request that the court grant summary judgment on the issue of safe harbor eligibility in its favor, as it was unclear whether Veoh would be able to meet the statute’s additional eligibility requirements relating to knowledge, financial benefit and control.