Appeals Court Hands Veoh Another Win in Important Copyright Ruling

The Ninth Circuit Court of Appeals has issued a superseding opinion in the case between Universal Music Group and Veoh.

The case explores issues similar to Viacom vs. Youtube in how ISPs gain statutory "safe harbor" protection from copyright claims. In a ruling in December 2011, the appeals court took Veoh's side that the video-sharing site was protected from copyright liability, and on Thursday, the appellate circuit reaffirmed this with further clarification and an attempt to square the standards brought by last year's Second Circuit YouTube decision.

Here's the full ruling.

Universal Music pushed the appeals court to accept its view that Veoh didn't qualify for safe harbor under section 512 of the Digital Millennium Copyright Act. It gave three main arguments.

First, the appellant argued that the functions performed automatically by Veoh's software didn't fall within the plain meaning of "infringement of copyright by reason of the storage [of material] at the direction of a user." Universal pushed a theory that the DMCA should be interpreted narrowly to apply to web hosting services rather than more general services that including hosting capabilities.

On Thursday, Ninth Circuit Judge Raymond Fisher says this isn't persuasive.

"UMG's theory fails to account for the reality that web hosts, like Veoh, also store user-submitted materials in order to make those materials accessible to other Internet users. The reason one has a website is so that others may view it. As amici note, these access activities define web hosting -- if the web host only stored information for a single user, it would be more aptly described as an online back-up service."

Universal Music also challenged the contention that Veoh was never made aware of infringing material on its network. A big reason why the music giant was unsuccessful in the lawsuit at the district level was because Veoh was able to show that it had removed materials after receiving takedown notices, per the DMCA; Universal pointed to other ways in which Veoh had gained knowledge of infringements on the website.

Judge Fisher notes there are many music videos that could legally appear on Veoh and that it's the responsibility of the copyright holder to let the ISP know of what's not legal.

"Requiring specific knowledge of particular infringing activity makes good sense in the context of the DMCA, which Congress enacted to foster cooperation among copyright holders and service providers in dealing with infringement on the Internet. Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not."

UMG pushed for a broad conception of the knowledge requirement -- for instance, red flags that might compel an ISP to action -- but the Ninth Circuit says it "see(s) no principled basis for doing so."

The ruling continues:

"We therefore hold that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one's services could be used to share infringing material, is insufficent to meet the actual knowledge requirements....We reach the same conclusion with regard to the [DMCA provision's] inquiry into whether a service provider is 'aware of facts or circumstances from which infringing activity is apparent...We hold that Veoh's general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag."

Judge Fisher cautions that a service provider can't "willfully bury its head in the sand" -- known as willful blindness -- but doesn't see any evidence that's what Veoh was up to. The closest that Veoh got to a red flag, the appeals judge writes, is when Veoh investor Michael Eisner got an email from a major copyright holder that Cinderella III and episodes of the TV show Lost were on Veoh without Disney authorization. The judge writes, "If this notification had come from a third party, such as a Veoh user, rather than from a copyright holder, it might meet the red flag test because it specified particular infringing material. As a copyright holder, however, Disney is subject to the notification requirements..."

Finally, Universal Music challenged whether Veoh qualified for safe harbor under the provision that entitles an ISP only if it "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."

The key, hotly disputed phrase there is "ability to control," which Universal Music saw as being inclusive for those with vicarious liability on users' infringements.

Judge Fisher attempts to put the Ninth Circuit in line with the holding in the YouTube case.

"We agree with the Second Circuit and hold that, in order to have the 'right and ability to control,' the service provider must 'exert substantial influence on the activities of users.' 'Substantial influence' may include, as the Second Circuit suggested, high levels of control over activities of users, as in Cybernet. Or it may include purposeful conduct as in Grokster."

Veoh's interactions with users didn't rise to that level, the judge added.

Michael Elkin of Winston & Strawn, Veoh’s lead attorney, commented about today's ruling, “UMG’s attempt to send the case back to trial failed, even though the 9th circuit adopted the more stringent standards set out by the 2nd Circuit in Viacom v. YouTube.”

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