Court Sides with Viacom, but YouTube Can Celebrate Small Victories (Analysis)

Youtube Viacom Split - P 2012

Youtube Viacom Split

If observers could bet on the outcome of appellate decisions, those who gambled on the most predictable course of action by the 2nd Circuit Court of Appeals on Thursday would be richer. In reaching its decision in Viacom's appeal of the $1 billion YouTube case, the appellate judges attempted to find a compromise in the ongoing disputes between copyright holders and content distributors.

The decision largely favored Viacom, kicking the case down to a district court for further proceedings, but it handed YouTube parent company Google enough in the wording of the decision to proclaim some vindication for its interpretation of copyright law. However, it's the vagueness in the ruling that might be of most consequence going forward.

First and foremost: Make no mistake, this is ultimately a huge legal win for Viacom. The parties already have spent tens of millions of dollars litigating this dispute, and Judge Louis Stanton's decision last year to dismiss the case at the summary stage was a huge slap in the face to Viacom's efforts to punish YouTube for what the media giant believed were blatant efforts to ignore copyright infringement.

The case now proceeds, and before any discussion of the precedent set by the 2nd Circuit commences, that reality must be recognized.

As for what the appellate judges decided Thursday on the larger issues, there likely will be tremendous interpretation in the years ahead as ISPs figure out how to set up their operations to escape the wrath of copyright holders.

For the past few years, as evidenced in this case, the hottest dispute in copyright circles has been over the "knowledge" standards under the safe harbor provisions (section 512) of the Digital Millennium Copyright Act.

Everyone agrees that the law requires ISPs to "act expeditiously" when gaining knowledge of infringing materials, but that's where the consensus ends. Viacom, along with many content holders, believe that general knowledge of piracy is sufficient to compel ISPs like YouTube into strong action to clean up their system of infringing content. In contrast, YouTube rejected this interpretation of the DMCA, believing that actual knowledge is required of specific infringements.

Looking at the DMCA, the 2nd Circuit mostly agrees with YouTube’s interpretation of the statute. According to Thursday's decision:

“The nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material, because expeditious removal is possible only if the service provider knows with particularity which items to remove. Indeed, to require expeditious removal in the absence of specific knowledge or awareness would be to mandate an amorphous obligation to 'take commercially reasonable steps' in response to a generalized awareness of infringement.”

The justices then go onto discuss "red flags," which content holders had interpreted to mean that when infringing activity becomes apparent on a system, ISPs have a duty to respond. The justices reframe the argument here, saying, "The difference between actual and red flag knowledge is … not between specific and generalized knowledge, but instead between a subjective and an objective standard" of what the defendant knew about a claimed infringement.

Most important, and a victory for Google/YouTube, the provisions are read to apply to "specific instances of infringement," suggesting that ISPs don't have to shoulder the burden of sweeping monitoring activities.

But that is basically where YouTube's victory ends. The 2nd Circuit also has made moves, in examining the details of the actual case in question, that seem to pull back previous interpretations of the DMCA that were quite generous to ISPs.

The justices are impressed with the statistic that said that YouTube employees conducted website surveys and estimated that 75 percent to 80 percent of all YouTube streams contained copyrighted material. "These approximations suggest that the defendants were conscious that significant quantities of material on the YouTube website were infringing," say the justices in the opinion.

It's not a conclusive indication of YouTube's guilt, but the justices say it supports the idea that a jury should be tasked with figuring out what YouTube actually knew. In other words, in retrospect, had YouTube never made any efforts to do the survey, it might have been in the clear on the "actual knowledge" standard, but because it went through the trouble of checking, the company might have triggered some liability. The same holds true about e-mails by YouTube's various executives about rampant piracy. Had they only shut up

This sort of factual inquiry also will test Viacom's claims that YouTube "willfully blinded" itself to copyright infringements and had the "right and ability to control infringing activity." The DMCA makes no mention of willful blindness, and previous courts and other appellate circuits in big copyright cases post-Grokster haven't given too much thrift to considerations of the relationship between ISPs and its users, including financial benefits herein. But on Thursday, the 2nd Circuit directed a lower court to consider whether the facts support such allegations.

How that will happen, especially on the issue of control, is extremely vague.

The 2nd Circuit concludes that the “right and ability to control” infringing activity under the safe harbor provisions “requires something more than the ability to remove or block access to materials posted on a service provider’s website" but won't get itself dirty by actually figuring out what that "something more" is. It's not the vicarious liability that comes with running a piracy tool, nor is it constrained to just doing something when a takedown notice comes.

It's hard to figure out, and already some are reading this part of the decision as the one that could potentially have the most consequences.

Eric Goldman, an influential Internet lawyer who writes the Technology & Marketing Law blog, says he expects to see "more plaintiffs try to take advantage of the ambiguities identified by this opinion."

And by the plain fact that the case against Google/YouTube continues on questions like whether the ISP had actual knowledge, willfully blinded itself and had the right and ability to control infringing activity, he believes the opinion shows the fragility of the safe harbor defense.

"To get the 512 safe harbor, a defendant must win on dozens of small contestable points," he says. "If it loses any one of those points, it loses the safe harbor, and all hell can break loose."


Twitter: @eriqgardner