Appeals Court Gives Internet Service Providers Big Relief in Copyright Disputes

On Thursday, the 2nd Circuit Court of Appeals issued a long- and eagerly-awaited opinion in a case brought by major record labels against the video-sharing site Vimeo. The decision will be cheered by those in the tech community by providing some immunization from copyright liability.

Capitol Records and others sued the Barry Diller-owned Vimeo in 2009 — a virtual generation ago in the digital world. At the time, Viacom was fighting with YouTube over how to interpret the safe harbor provisions of the Digital Millennium Copyright Act, which allows ISPs to escape copyright claims so long as they remove infringements expeditiously and not have actual knowledge of infringements on their networks. The since-settled YouTube controversy slowed the Vimeo case, which dealt with videos posted of the “lip dub” variety, showing users who choreographed elaborate lip-synching spectacles to popular music. Ultimately, Capitol Records et. al. v. Vimeo figures to be just as important as Viacom v. YouTube.

On summary judgment, U.S. District Judge Ronnie Abrams gave Vimeo a pass on liability on 144 videos while denying a safe harbor defense with respect to 55. One of the things that the judge examined was evidence that some of Vimeo’s employees looked at or uploaded some of the infringing videos in question.

On appeal, the case raised a few significant issues.

First, whether to apply safe harbor to sound recordings created before 1972. Those works are protected by state law, so it was argued that federal law — § 512(c) of the DMCA — couldn’t provide immunity. The 2nd Circuit disagrees.

“A literal and natural reading of the text of § 512(c) leads to the conclusion that its use of the phrase ‘infringement of copyright’ does include infringement of state laws of copyright,” writes 2nd Circuit judge Pierre Leval. “To interpret § 512(c)’s guarantee that service providers ‘shall not be liable … for infringement of copyright’ to mean that they may nonetheless be liable for infringement of copyright under state laws would be, at the very least, a strained interpretation — one that could be justified only by concluding that Congress must have meant something different from what it said.”

Given that lower courts have recently emboldened owners of pre-1972 sound recordings in asserting protection over their works under state law, this development figures to represent a substantial relief for digital services. (Of course, other appellate courts in different parts of the nation haven’t yet ruled on this issue.)

Next, the 2nd Circuit examined red flag knowledge of infringements, and specifically, the district court’s denial of summary judgment based on Vimeo employees who had seen infringements on the video network. That decision by Abrams is overturned.

“The hypothetical ‘reasonable person’ to whom infringement must be obvious is an ordinary person — not endowed with specialized knowledge or expertise concerning music or the laws of copyright,” writes Leval. “Furthermore, as noted above, § 512(m) makes clear that the service provider’s personnel are under no duty to ‘affirmatively seek’ indications of infringement. The mere fact that an employee of the service provider has viewed a video posted by a user (absent specific information regarding how much of the video the employee saw or the reason for which it was viewed), and that the video contains all or nearly all of a copyrighted song that is ‘recognizable,’ would be insufficient for many reasons to make infringement obvious to an ordinary reasonable person, who is not an expert in music or the law of copyright..”

The 2nd Circuit judge adds that when it comes to misconduct or disqualifying knowledge potentially barring a safe harbor defense, it becomes a burden for plaintiff to prove.

“In sum, a showing by plaintiffs of no more than that some employee of Vimeo had some contact with a user-posted video that played all, or nearly all, of a recognizable song is not sufficient to satisfy plaintiffs’ burden of proof that Vimeo forfeited the safe harbor by reason of red flag knowledge with respect to that video,” writes Leval.

Finally, the 2nd Circuit addresses how willful blindness factors into safe harbor.

The record companies argued that Vimeo monitored videos for infringement of visual but not audio content, demonstrating willful blindness related to music. The plaintiffs also argued that Vimeo had awareness of facts suggesting the likelihood of infringements and encouraged users to post infringing matter. Rather than investigate, Vimeo chose to close its eyes, contended the record companies.

Here, the appellate court decides to affirm Vimeo’s victory by a district judge and reject the record companies’ argument that the decision in Viacom v. YouTube was misapplied.

“If the service provider knows of the infringement, or learns of facts and circumstances that make infringement obvious, it must act expeditiously to take down the infringing matter, or lose the protection of the safe harbor,” states the opinion. “But we can see no reason to construe the statute as vitiating the protection of § 512(m) and requiring investigation merely because the service provider learns facts raising a obvious. Protecting service providers from the expense of monitoring was an important part of the compromise embodied in the safe harbor.”

The case is now remanded back to the district court to sort out, but the decision may save Vimeo tens of millions of dollars in liability, and more importantly, become a new guiding post for copyright owners and digital service providers. Here’s the full opinion.