Of pirates and safe harbours: UMG, Veoh get their ruling

 

Looking for a safe harbour

Yesterday in the United States the Ninth Circuit Court of Appeals handed down its decision in UMG v Veoh (which can be read in full here; briefly referred to in this blog here), a case addressing copyright liability for ISPs that host infringing works.

Veoh operates a publicly accessible website that enables users to share videos with other users. UMG is one of the world's largest recorded music and music publishing companies. In addition to producing and distributing recorded music, UMG produces music videos.

Although Veoh has implemented various procedures to prevent copyright infringement through its system, users of Veoh's service have in the past been able, without UMG's authorisation, to download videos containing songs for which UMG owns the copyright.

UMG responded by filing suit against Veoh for direct and secondary copyright infringement back in 2007. Two years later, the US District Court for the Central District of California granted summary judgment to Veoh after determining that it was protected by the DMCA "safe harbor" limiting service providers' liability for "infringement of copyright 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).

UMG appealed the decision and made several arguments before the Ninth Circuit, including that the district court too broadly construed the scope of §512(c).

UMG never disputed that, when Veoh became aware of allegedly infringing material as a result of the RIAA's DMCA notices, it removed the files. It claimed, however, that Veoh had knowledge or awareness of other infringing videos that it did not remove. In particular, argued UMG, the district court erred by improperly construing the knowledge requirement to unduly restrict the circumstances in which a service provider has "actual knowledge" under subsection (1) and setting too stringent a standard for "red flag" awareness based on facts or circumstances from which infringing activity is apparent.

Judge Raymond Fisher, in an unanimous decision, referred to Congress' express intention that the DMCA "facilitate making available quickly and conveniently via the Internet ... movies, music, software and literary works". Being this the service Veoh provides, the Court did not find UMG's narrow interpretation of §512(c) be plausible. In fact, if merely hosting material which falls within a category of content capable of copyright protection, with the general knowledge that one's services could be used to share unauthorised copies of copyright-protected material, was sufficient to impute knowledge to service providers, the §512(c) safe harbor would be rendered a dead letter.

The onus to first identify infringing materials is on rights owners. Indeed, said the Court, 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 protected by copyright and what is not. These considerations are reflected in Congress' decision that DMCA notification procedures place the burden of policing copyright infringement on copyright holders, as well as in the "exclusionary rule" which prohibits consideration of substantially deficient §512(c)(3)(A) notices for purposes of "determining whether a service provider has actual knowledge or is aware of facts and circumstances from which infringing activity is apparent."

In the light of these and other considerations, the Court affirmed the district court's determination on summary judgment that Veoh is entitled to §512(c) safe harbor protection.

As our readers will know, many of these issues are at the centre of another case currently pending before the Second Circuit, this being Viacom v YouTube. We'll see what happens there, as well as how the debate around the SOPA develops in parallel with case law.

More on UMG v Veoh on The Hollywood Reporter here.

Blindsided! Will U.S. Supreme Court Patent Ruling on Willful Blindness Determine Standard for Red-Flag Knowledge Under DMCA?

The 1709 Blog has previously reported on developments in the ongoing Viacom v. YouTube litigation in the United States, in which members of the content industry sued the online video-sharing service for copyright infringement based on user's uploading of copyrighted content. YouTube prevailed on summary judgment in the trial court, and Viacom appealed. The appeal is now fully briefed, and has been tentatively scheduled for oral argument on September 12, 2011.

One of the significant issues that the Second Circuit Court of Appeals is expected to address is what constitutes "red-flag" knowledge under Section 512(c) of the Digital Millennium Copyright Act ("DMCA"). The DMCA shields internet service providers ("ISPs") from liability for copyright infringement resulting from user-generated content if the ISP meets certain conditions. Among other requirements, the ISP must not have actual knowledge of infringing material on its service, or, absent actual knowledge, the ISP must not be "aware of facts or circumstances from which infringing activity is apparent." This latter category of knowledge is often referred to as "red-flag" knowledge.

The blind leading the blind

Prior case law provides little insight into what qualifies as "red-flag" knowledge. The legislative history of the DMCA suggests that a "copyright owner could show that the provider was aware of facts from which infringing activity was apparent if the copyright owner could prove that the location was clearly, at the time the directory provider viewed it, a 'pirate' site of the type described below, where sound recordings, software, movies or books were available for unauthorized downloading, public performance or public display. Absent such 'red flags' or actual knowledge, a directory provider would not be similarly aware merely because it saw one or more well known photographs of a celebrity at a site devoted to that person."

In an early case construing the "red-flag" knowledge requirement, however, the Ninth Circuit Court of Appeals held that no red-flag knowledge arose from the fact that the defendant's clients' websites had names like "illegal.net" or "stolencelebritypictures.com." In that case, Perfect 10 v. CCBill, the publisher of adult entertainment photographs sued the provider of webhosting services and the processor of credit card payments, alleging secondary liability for infringement occurring on client sites. In contrast to the above-quoted language from the legislative history, the court held, “When a website traffics in pictures that are titillating by nature, describing photographs as ‘illegal’ or ‘stolen’ may be an attempt to increase their salacious appeal . . . We do not place the burden of determining whether photographs are actually illegal on a service provider.”

Similarly, in UMG v. Veoh, a parallel case to YouTube playing out on the opposite coast of the United States, the trial court found that Veoh’s general awareness that infringement was occurring on its video-sharing site, without more, could not support a finding of “red-flag” knowledge. It reasoned that to hold otherwise would undermine the DMCA’s purpose of enabling the robust development of the Internet and e-commerce. The court granted summary judgment to Veoh in September, 2009, and the case is currently on appeal to the Ninth Circuit Court of Appeals. The Ninth Circuit heard oral argument on May 6, 2001; a decision is expected in Veoh before YouTube is decided.

The trial court in YouTube provided virtually no analysis of “red-flag” knowledge. Indeed, the entire opinion is strikingly devoid of content. The court effectively conflated actual and “red-flag” knowledge by holding that the “tenor” of the DMCA “is that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts and circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough.”

In perhaps the only case where a court has found that an ISP had “red-flag” knowledge, the United States District Court for the Central District of California in Columbia v. Fung found that the operator of a “torrent” filesharing site where users swapped copyrighted television shows and motion pictures “turned a blind eye to ‘red flags’ of obvious infringement.” The operator himself engaged in unauthorized downloads of copyrighted material from the site. Because these downloads were done outside the United States, they could not be used to establish actual knowledge, but they showed that the operator was aware that infringing material was available on the site. The operator also designed the site to categorize copyrighted content into lists with titles such as “Top 20 Movies,” “Top 20 TV Shows,” “Box Office Movies.” These lists included copyrighted works. “Thus, unless Defendants somehow refused to look at their own webpages, they invariably would have been [sic] known that (1) infringing material was likely to be available and (2) most of Defendants’ users were searching for and downloading infringing material.” Overwhelming statistical evidence also showed the prevalence of copyrighted material on the site. Thus, “the only way Defendants could have avoided knowing about their users’ infringement is if they engaged in an ‘ostrich-like refusal to discover the extent to which their systems were being used to infringe copyright.’”

Fung notwithstanding, U.S. case law has not defined what “red-flag” knowledge is. We are thus left with a regime that recalls Supreme Court Justice Potter Stewart’s famous quote regarding obscenity: "I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.”

To blindly go where no DMCA case has gone before?

Against this backdrop, the parties in Viacom v. YouTube are preparing to argue the appeal. In a late-breaking development, Viacom’s attorneys have brought to the appellate court’s attention a recent Supreme Court decision in a patent case that Viacom argues should apply in the context of the DMCA. In Global-Tech Appliances v. SEB, decided May 31, 2011, the Supreme Court construed Patent Act Section 271(b), which provides that whoever actively induces infringement of a patent is liable as an infringer. The language of the section implies some degree of intent, raising the question whether the requisite intent is the intent to induce the act that results in infringement or the intent to induce infringement itself. Put another way, does the inducer need to be aware of the existence of a patent and intend to cause infringement?

The Supreme Court concluded that the inducer must intend to induce infringement and must know of the existence of the patent. The Supreme Court went on to hold, however, that this specific intent standard can be satisfied by a showing of willful blindness, defined as (1) a subjective belief that there is a high probability that a fact exists and (2) the defendant takes deliberate actions to avoid learning that fact. The Supreme Court stated that the doctrine of willful blindness enjoyed a “long history” and “wide acceptance in the Federal Judiciary,” and was “well established in criminal law.” Consequently, the Supreme Court saw “no reason why the doctrine should not apply in civil lawsuits for induced patent infringement.”

Though briefing is closed in YouTube, Viacom wasted no time bringing this decision to the Second Circuit’s attention, arguing that the case “refutes YouTube’s suggestion that the doctrine of willful blindness cannot apply to the knowledge requirements under the DMCA because the doctrine is ‘extra-statutory.’” Without explanation, Viacom also argued that the Global-Tech opinion “refutes YouTube’s argument that recognizing willful blindness is knowledge would impose on all service providers a broad affirmative obligation to ‘seek[] facts indicating infringing activity.’” Such an obligation would run afoul of DMCA subsection (m), which explicitly provides that an ISP need not monitor its service or affirmatively seek facts indicating infringing activity.

YouTube, not surprisingly, responded that Global-Tech has no applicability to a copyright case invoking the DMCA, which contains “express provisions governing knowledge of infringement, including a specific statutory alternative to actual knowledge.” YouTube also pointed out the inherent contradiction between the willful blindness standard and DMCA subsection (m)’s refusal to impose an obligation of monitoring on ISP’s.

Any attempt to predict how the Second Circuit may construe and apply the Supreme Court’s Global-Tech opinion is an exercise in reading tea leaves. The Second Circuit’s 2010 decision in Salinger v. Colting, however, gives some insight. In that case, the author J.D. Salinger sued to enjoin the publication of an unauthorized “sequel” to his iconic novel “Catcher in the Rye” entitled “60 Years Later: Coming Through the Rye.” The trial court granted Salinger’s motion for a preliminary injunction, using the traditional test it had employed in copyright cases for decades: a likelihood of success on the merits coupled with irreparable harm to the plaintiff, with irreparable harm being presumed if the plaintiff could make a prima facie case of copyright infringement. The Second Circuit reversed on the basis of the Supreme Court’s ruling in eBay v. MercExchange, a patent case involving a permanent injunction in which the Supreme Court rejected the practice of presuming irreparable harm. Despite the different substantive context and procedural posture of eBay, the Second Circuit reasoned that the Supreme Court had relied not only on patent law, but on traditional principles of equity, as well as copyright cases, in reaching its conclusion. Thus, it rejected the trial court’s presumption of irreparable harm and remanded the case for further proceedings consistent with eBay.

As it did in Salinger, the Second Circuit could just as easily conclude that since the Supreme Court relied on criminal law and general principles involving knowledge standards, it should apply the Global-Tech standard in YouTube. On the other hand, it could conclude, as YouTube urges, that willful blindness and DMCA subsection (m) are irreconcilable. The panel of judges that will hear YouTube has not yet been announced, so it is unknown whether the panel will include some or all of the same judges that decided Salinger. Of course, however constituted, the panel may well decide the case on other grounds, leaving the state of “red-flag” knowledge squarely in Justice Potter territory.

Ignorance of the Law, an Excuse?

Throughout my childhood my father used to tell me, “Ignorance is no excuse for the law.”  It didn’t matter whether I was jaywalking or learning the hard way that glass jars of pickles don’t bounce; ignorance was no excuse.  Well it looks like there may be one time when ignorance is an excuse.  But I’m in doubt.

Criminal Charges under US Copyright Act Dropped

Many readers may have been following the USA v. Crippen case on other sites.  - Wired has a fairly detailed running account of the case. – This is the case in which California resident Matthew Crippen was criminally charged for violations of the US Copyright Act.  It was to be the first criminal case addressing a violation of the Copyright Act’s restriction against circumvents technical protection measures (TPMs) designed to protect copyrighted works.  “Was” because this past week the prosecution dropped the charges.
The many reports on the prosecution’s decision list a number of factors leading to the decision to drop charges.  Rumors of prosecutorial misconduct and concerns about the jury learning of crimes committed by the prosecution’s witnesses are two of the reasons mentioned.  (See Wired, above, and TechSpot for more on these reasons.)  But it seems like the main reason, which is related to both of these, is Judge Gutierrez’s decision that the prosecution would need to prove that Crippen knew he was violating the law.  (“The government said it would have dropped the case if that more onerous standard was required.” Wired.)

Looking for “Knowledge”

I’m still trying to figure this one out.  According to Wired (specific article link), “Gutierrez ruled that the government had to prove Crippen knew he was breaking the law by modding Xboxes.”  Maybe there’s a nuance that got missed or misinterpreted somewhere between the judge and Wired.
Crippen was modifying X-Boxes, allegedly so that they would play pirated games.  From what I can gather, the statute Crippen was charged for violating was 17 USC 1201.  I am not sure if it was part (a) for “circumventing a technical measure” or part (b) for “circumventing protection afforded by a technical measure.”  However, the rest of the provisions in each section are parallel so we can look into the knowledge element without knowing with which specific provision Crippen was charged.

Subsections (A)

The first requirement, in § 1201 (a)(2)(A) and (b)(1)(A), is that the main purpose of the service be to circumvent a measure that effectively controls access to the work.  This could have a  knowledge element, requiring the defendant to know that the changes he was making would give access to works that were previously not accessible.  But knowing you’re getting access to something you couldn’t access before is not the same as knowing you are breaking the law.  So our knowledge of committing a crime being an element isn’t here.
-- NOTE: There’s a number of elements within this each Subsection.  I am only looking at potential knowledge elements.  For a great in-depth look at each element of the crime, see this post on bunnie studios by someone who was called as an expert witness in this case. --

Subsections (B)

The next subsection, (a)(2)(B) and (b)(1)(B), requires that any commercially significant purposes aside from allowing access to previously restricted items are limited.  No knowledge element there.

Subsections (C)

The last subsection requires that the service be marketed for use in circumventing a TPM.  This requires the same sort of knowledge element as subsection (A), the knowledge that the service is providing access to restricted works.  Again, there doesn’t appear to be anything suggesting that in order to violate this law the person circumventing the TPM needs to know that circumventing TPM is illegal.

So Where’s the Knowledge

Is there a knowledge element elsewhere in the DMCA or in the US Copyright Act that applies to this section?  What am I missing?  Do any of our readers have an idea why the judge would require the prosecution to prove that the defendant knew he was breaking the law?

(over the) Pond Life

The U.S. government has seized control of dozens of websites it says are offering unauthorized copyrighted or counterfeit content. The Department of Homeland Security's Immigration and Customs Enforcement (ICE) division took over 82 domains including Torrent-Finder.com, RapGodFathers.com, DVDProStore.com, Cartoon77.com, NFLJerseySupply.com and Handbag.com. The seizure orders come from courts in eight states and take place shortly after a U.S. Senate Committee approved the Combating Online Infringement and Counterfeits Act (COICA), which aims to empower the Justice Department to use tactics similar to those just employed by Homeland Security and ICE.

Wired.com report that EMI Records has asked the federal judge overseeing the label's copyright infringement lawsuit against music locker service MP3tunes to bar digital civil liberties group the Electronic Frontier Foundation (EFF) from submitting a "friend of the court" brief in the case saying that the EFF brief is "a pure advocacy piece, not a 'friend of the court," and also that the brief is "duplicative," "contains unsupported speculation," and exceeds the court's page length restriction. EMI also argues that, should EFF's brief be allowed, parties supporting EMI's position should be allowed to submit additional briefs.

TorrentFreak reports that the US Copyright Group, which has filed copyright infringement lawsuits against tens of thousands of internet users who have allegedly illegally downloaded movies such as "Far Cry" has been hit with a class action lawsuit by over 4,500 of those sued. The retaliatory class action lawsuit alleges "extortion, fraudulent omissions, mail fraud, wire fraud, computer fraud and abuse, racketeering, fraud upon the court, abuse of process, fraud on the Copyright Office, copyright misuse, unjust enrichment and consumer protection violations" and says that the offences were committed by US Copyright Group in its efforts to extract settlement fees from alleged file-swappers. The claim also says that the producers of "Far Cry" did not secure a copyright registration for the film until after it began collecting information on peer-to-peer traffic, and argues that this fact invalidates any earlier claims of infringement.

In case you missed it, there is a war of words going on over in the USA all about a letter sent to PC Mag by the major record labels and other music industry trade groups in response to a PC Mag story about the demise of Limewire, which the labels say was promoting unauthorized copyright infringement by naming alternatives to the now defunct Limewire. Apart from the fact it seems that the original story was actually published by PC World (a competitor of PC Mag) the accusations stirred up a hornets nest, in particular over the magazine’s right of free speech with PC Mag saying “PC Mag's job is to cover all aspects of technology, which includes the products, services and activities that some groups and individuals might deem objectionable. We covered these Limewire alternatives because we knew they would be of interest to our readers. We understand that some might use them to illegally download content. We cannot encourage that action, but also cannot stop it. Reporting on the existence of these services does neither.” Not content with that, the letter goes on to say “It worries me that the music industry took this action, because it reeks of desperation. The RIAA and other music industry organizations have spent the better part of the decade fighting the digital transition, with only a shrinking business to show for it. In recent years, though, the fist of anger has turned into at least one open hand as the music industry embraces the once shunned digital music industry. Unfortunately, that warm embrace, and the change that comes with it, are not happening fast enough. Clearly the music industry is still losing money to music piracy and even the recalibrated profit margins brought on by legal music sharing services. It's time for these music execs to pull their collective heads out of the sand and fully acknowledge and accept all the ways their industry has changed. They also have to understand that nothing will stop technology's inexorable march forward. Things will continue to change. Music downloads and sharing will never go away. These execs have to find a way to use all that technology allows and make a business”.

A US teenager has failed in her appeal to have her damages for illegally downloading overturned because she didn’t know what she was doing was illegal. As a 16 year old Whitney Harper had used the then popular Kazaa service to download 37 tracks and she was sued by the RIAA and faced damages of $27,750.00. Harper argued that she was not aware that the file-sharing program on her computer was dealing in stolen property saying she thought the songs could be downloaded for free, just like listening to the radio on the Internet. The Supreme Court disagreed (with one judge dissenting) and upheld the 5th Circuit Court of Appeals who ruled in February that Harper could not pay a reduced minimum fine of $200 per infringed track -- instead of $750 -- as an "innocent infringer." The federal appeals court cited a provision that says infringers should know they are breaking the law since a copyright notice "appears on the published phonorecord."

Now on to Sarah Palin, who has secured much needed publicity for her new book after HarperCollins, the publisher of "America By Heart: Reflections on Family, Faith, and Flag", reached a settlement in their a lawsuit with Gawker.com. The website had published several leaked pages of the book and was ordered to take them down by a New York City judge earlier this week. "In settling the case, Gawker has agreed to keep the posted material off its website and not to post the material again in the future" HarperCollins said in an official statement.

And finally to Bradford Cox, the artist behind Deerhunter and Atlas Sound who had a rather unusual weekend after Sony Music issued a DMCA takedown notice against his blog on Friday, it seems in connection with two albums of his own bedroom-made demos which he had uploaded for his fans to download for free. This was somewhat confusing because Cox is not and has never been signed to any Sony Music label so the album's cannot be their property. Deerhunter are signed to Beggar's 4AD while Atlas Sound release via indie label Kranky according to the CMU Daily. The major has now admitted to Billboard that it had made a mistake and that it had made Cox, his manager and music server Mediafire aware of this fact. Which brings us full circle to the first story and the risks we all run when content owners are given legal powers to have allegedly infringing websites taken offline – what happens if they get it wrong?

http://www.pcworld.com/businesscenter/article/211832/courts_shut_down_82_sites_for_alleged_copyright_violations.html

www.techdirt.com

http://www.courthousenews.com/2010/11/29/32147.htm

Jailbreaking through a pile of bricks

As blogger Jeremy reported here, the U.S. Library of Congress issued a statement on Monday that legalized “jailbreaking” wireless telephone handsets. Jailbreaking is a process of modifying the device’s security software in order to enable interoperability with legally obtained software applications or to connect to an alternative network if the alternative network operator authorizes the connection.

This exemption to the Digital Millennium Copyright Act (DMCA) applies equally to all wireless telephone handsets, their manufacturers and their network operators. However, if the consumer and media frenzy in the past few days are any reflection, it would seem to have been written specifically to address Apple’s iron hold over U.S. users of the iPhone, who are typically required to purchase apps from the Apple App Store and to use only AT&T wireless network service. (Apple lobbied aggressively against this DMCA exemption.) To counter previous instances of jailbreaking, Apple had used its operating system upgrades, which automatically install on active iPhones, to lock any unauthorized software. Locking the unauthorized software essentially rendered the phones as useless as a brick for communication purposes (leading to this tactic being known as “bricking the iPhone”). In addition, Apple warned users that jailbreaking violated and invalidated their warranty, so users could not seek free assistance or services from Apple technicians if the user experienced trouble with their iPhone. Apple claimed these consequences were justified because the jailbreaker had violated copyright law.

Then again, looking at this comparison chart, maybe the iPhone isn't that different from a brick after all....

With jailbreaking now legal under copyright law, will Apple continue bricking phones and refusing to service legally jailbroken phones? Apple has already issued a statement reiterating that jailbreaking invalidates its warranty. And it retains the right to do so under the terms of its warranty and user agreements. But will Apple be able to continue the practice of bricking phones during operating system upgrades? Doing so, it seems to me, punishes users for an action that is now perfectly legal under copyright law. It is one thing to invalidate a warranty and refuse free system services, but quite another to render the product inoperable. If anyone has thoughts on Apple’s bricking policy, please feel free to leave comments below.

And if you’re a U.S. iPhone owner considering a jailbreak, I’ve heard that T-Mobile USA offers technical support (to replace the invalidated Apple warranty) to iPhone owners who subscribe their jailbroken iPhones with T-Mobile service.