Safe Harbor For ISPs And Disappointment For Content Providers

The Ninth Circuit held that a defendant who operates a public website that enables users to share videos is protected from copyright infringement under the “safe harbor” provisions of the Digital Millennium Copyright Act (“DMCA”).  UMG Recordings, Inc. v. Shelter Capital Partners LLC, et al., Case No. 09-55902 (9th Cir. March 14, 2013) (available here).  The Ninth Circuit affirmed the lower court’s summary judgment against Universal Music Group (“UMG”), finding that defendant Internet Service Provider (“ISP”) Veoh Networks was protected by the safe harbor in the DMCA.  17 U.S.C. § 512(c).  The DMCA’s “safe harbor” limits service providers’ liability for copyright infringement “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c). Compare this case to the Columbia Pictures Industries, Inc., et al. v. Fung, et al., Case No. 10-55946 (9th Cir. March 21, 2013) previously written about (available here).

ISP Veoh runs a public website where users can share videos.  UMG is one of the largest recorded music and music publishing companies in the world and also produces music videos.  The ISP has implemented various systems to prevent copyright infringement, such as requiring users to read the Terms of Service or Use (TOS) warning against submitting infringing content, and warning users about uploading infringing content.  In addition, the ISP also has various automated systems that occur once a video is uploaded.  ISP’s software automatically breaks the video file down and extracts the metadata from the information which helps others locate the video.  After that, the software assigns the video a “permalink” (web address) for a direct link to the video.  ISP users can either stream the video from the server or download the video.  If the video is downloaded, it is stored in the user’s file on ISP’s directory, giving the ISP the ability to terminate access to the files.  Other copyright controls include: “hash filtering” software, and audio “fingerprinting.”  After adopting the audio fingerprinting system, the ISP applied it to the backlog of previously uploaded videos and removed more than 60,000 videos.  The ISP also terminated user accounts of users who repeatedly infringe.

Notwithstanding the controls, the ISP users were still able to download videos containing songs that UMG owned the copyrights to without UMG’s permission.  The only notice the ISP received regarding the alleged infringements were sent by the Recording Industry Association of America (RIAA).  The notices did not mention UMG.  The ISP removed the material after receiving RIAA’s notices.

In order for the ISP to qualify for the DMCA § 512(c) safe harbor, the ISP must (1) not have actual knowledge of the infringing material; (2) in the absence of such actual knowledge, be unaware of facts or circumstances suggesting apparent infringement; or (3) upon gaining knowledge or awareness of the infringement, “expeditiously” remove or disable access to the material.  The ISP must also demonstrate that it did not receive any financial benefit from the infringing activity and that, upon notification of the alleged infringement, that the ISP promptly acted to remove or disable access to the infringing material.  17 U.S.C. § 512(c).  The lower court ruled on summary judgment that the ISP’s actions fell within the DMCA safe harbor rules.

UMG raised three arguments on appeal.  First, UMG argued that the infringing material is not within the meaning of “infringement of copyright by reason of the storage [of material] at the direction of a user,” a requirement under § 512(c)(1).  Second, UMG argued that summary judgment was unwarranted because material issues of fact exist as to whether the ISP had actual knowledge, or awareness of facts or circumstances, of the infringement.  Third, UMG asserted that it presented enough evidence to show that the ISP received financial benefits from the infringing activity and had the ability and right to control the activity.  The Ninth Circuit rejected all of UMG’s arguments.

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