The Second Circuit’s decision last week in Capitol Records, LLC v. Vimeo, LLC was a victory for internet service providers who host third-party content. It plugged a major loophole in the DMCA safe harbor for information stored on a service provider’s system or network at the direction of a user, 17 U.S.C. § 512(c), by holding that the safe harbor applies to pre-1972 sound recordings. It also forcefully reaffirmed that a service provider must have either actual or “red flag” knowledge of specific copyright infringement—rather than merely generalized knowledge of infringing activity on its system—and fail to remove the infringing material expeditiously, in order to lose the safe harbor and be held liable for that infringement.

Summary of decision

A slew of record companies and music publishers sued Vimeo, the operator of a website on which users can post videos. The parties’ appeal to the Second Circuit followed the district court’s rulings on whether Vimeo was entitled to the DMCA’s safe harbor protections set out in § 512(c). Broadly, the district court ruled in the plaintiffs’ favor that the DMCA safe harbor only absolves service providers from liability based on federal copyright law, which does not apply to pre-1972 sound recordings. The Court granted Vimeo summary judgment as to 153 videos on the basis that plaintiffs lacked evidence Vimeo’s employees had viewed them and denied summary judgment to either side on remaining videos incorporating post-1972 sound recordings, because of a question of material fact as to whether Vimeo had “red flag” knowledge of their infringement.

The Second Circuit granted interlocutory review of three questions:

  • Whether the safe harbor of § 512(c) applies to pre-1972 sound recordings;
  • Whether the evidence that Vimeo employees viewed some videos containing “recognizable” copyrighted songs was sufficient to show Vimeo’s red flag knowledge, rendering it ineligible for the safe harbor; and
  • Whether Plaintiffs showed that Vimeo had a general policy of willful blindness to infringement of sound recordings, justifying imputation to Vimeo of knowledge of the specific infringements at issue.

The Court decided all three issues in Vimeo’s favor and both clarified and strengthened its prior decision in Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012), in the process. We summarize the court’s reasoning and holdings below.

Issue 1 – Whether the safe harbor of § 512(c) applies to pre-1972 sound recordings: Yes

Congress first included sound recordings within the scope of federal copyright protection in 1972, and pre-1972 recordings have never been covered by federal copyright. Section 301 of the Copyright Act asserts federal preemption of state copyright laws, but provides with respect to pre-1972 sound recordings that “any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067,” after which time federal law would preempt state law and cause pre-1972 sound recordings to pass into the public domain. 17 U.S.C. § 301(c). The plaintiffs argued that if § 512(c) were interpreted to protect service providers from infringement liability under state copyright laws, it would be irreconcilable with § 301(c)’s exclusion of pre-1972 recordings from preemption. Thus they argued that § 512(c) should be read to cover only infringement of federal copyright law; because federal copyright law does not apply to pre-1972 recordings, the federal safe harbor could not either.

The Second Circuit saw a stark contradiction between the plain meaning of the safe harbor provision and the Copyright Office’s interpretation of it. According to the Court, “the district court accepted without discussion the position taken by the United States Copyright Office in a report prepared in 2011 that the safe harbor does not protect against liability for infringement of pre-1972 sound recordings.” The Copyright Office had misconstrued the Copyright Act and misapplied certain canons of construction, incorrectly limiting the scope of the safe harbor to federal copyright infringement claims. While the Second Circuit “unhesitatingly acknowledge[d] the Copyright Office’s superior expertise on the Copyright Act,” the court found the Copyright Office’s interpretation of the Copyright Act “not reasonable” and instead held that safe-harbor “protects service providers from all liability for infringement of copyright, and not merely from liability under the federal statute.” Accordingly the Second Circuit reversed the grant of summary judgment to the plaintiff record companies for infringement of the pre-1972 recordings.

Issue 2 – Whether, under YouTube evidence of some viewing by Vimeo employees of videos that played all or virtually all of “recognizable” copyrights songs was sufficient to show red flag knowledge, making Vimeo ineligible for the safe harbor: No

Under YouTube, in order to be disqualified from the safe harbor due to red flag knowledge under § 512(c)(1)(A)(ii), the provider must be “subjectively aware of facts that would have made the specific infringement ‘objectively obvious to a reasonable person.’” This “reasonable person” is an ordinary person without specialized music or copyright law knowledge. The Second Circuit held that merely viewing a video that contains all or nearly all of a “recognizable” copyrighted song is insufficient to make infringement “obvious” to the reasonable person without specialized knowledge. It noted that § 512(m) makes clear that a service provider’s personnel are under no duty to “affirmatively seek” indicia of infringement or “investigate” whether the use was licensed or whether the “fair use” or “parody” exceptions apply.

Significantly, the Second Circuit took the opportunity to clarify the parties’ burdens of proof in a safe harbor case, adopting a description from Nimmer on Copyright. A defendant must show entitlement to the safe harbor by demonstrating its status as a service provider that stores users’ material, that the allegedly infringing matter was placed there by a user, and that it has performed § 512’s conditions of liability, including having a policy to exclude repeat infringers, a designated agent, and standard technical measures to detect infringements. It is the copyright owner’s burden to demonstrate disqualifying knowledge, by showing the service provider (1) acquired knowledge of the infringement or facts and circumstances from which infringing activity was obvious and (2) failed to promptly take down the infringing material.

The Court held that “[a] copyright owner's mere showing that a video posted by a user on the service provider's site includes substantially all of a recording of recognizable copyrighted music, and that an employee of the service provider saw at least some part of the user's material, is insufficient to sustain the copyright owner's burden of proving that the service provider had either actual or red flag knowledge of the infringement.” This is because: (1) the employee’s viewing might have been brief; (2) the employee might have viewed such a video for many different business purposes, such as for technical reasons, to classify by subject matter, to detect obscenity or bigotry, and “innumerable other objectives having nothing to do with recognition of infringing music on the soundtrack”; and (3) the employees cannot be assumed to have copyright law expertise – for example, to know how to distinguish between infringement and fair use parodies or to know whether or not the use is licensed. Accordingly, the court held that “Vimeo is entitled to summary judgment on those videos as to the red flag knowledge issue, unless plaintiffs can point to evidence sufficient to carry their burden of proving that Vimeo personnel either knew the video was infringing or knew facts making that conclusion obvious to an ordinary person who had no specialized knowledge of music or the laws of copyright.”

Issue 3 – Whether Plaintiffs showed Vimeo had a policy of willful blindness to infringement of sound recordings, justifying imputation to Vimeo knowledge of the specific infringements: No

The Second Circuit rejected three arguments made by the plaintiffs that Vimeo was willfully blind to infringement of sound recordings. First, the plaintiffs argued that while Vimeo apparently screened visual content of videos for infringement, it did not screen their audio content. The Second Circuit reasoned that § 512(m) relieves the service provider of obligation to monitor and saw “no reason why Vimeo’s voluntary undertaking to monitor videos for infringement of visual material should deprive it of the statutory privilege not to monitor for infringement of music.” Second, the plaintiffs argued that Vimeo’s awareness of facts suggesting a likelihood of infringement gave rise to a duty to investigate further, combined with its failure to do so, shows liability. But again, the Court could “see no reason to construe [§ 512(c)] as vitiating the protection of § 512(m) and requiring investigation merely because the service provider learns facts raising a suspicion of infringement (as opposed to facts making infringement obvious). Protecting service providers from the expense of monitoring was an important part of the compromise embodied in the safe harbor.” Further, “[i]f service providers were compelled constantly to take stock of all information their employees may have acquired that might suggest the presence of infringements in user postings, and to undertake monitoring investigations whenever some level of suspicion was surpassed, these obligations would largely undo the value of § 512(m).”

Third, the plaintiffs pointed to statements of Vimeo employees apparently actively encouraging users to post infringing videos, such as responding to a question about the use of copyrighted music as audio for original video content with, “Don’t ask, don’t tell ;).” The plaintiffs reasoned that Vimeo could not encourage posting of infringing matter and close its eyes to resulting infringements without liability. The Second Circuit held that the specific evidence cited by Plaintiffs of “a handful of sporadic instances (amongst the millions of posted videos),” none of which related to any videos at issue in the suit, could not support a finding of generalized encouragement or red flag knowledge as to those specific videos, and thus it did not reach Plaintiffs’ argument that “a service provider cannot adopt a general policy of urging or encouraging users to post infringing material and then escape liability by hiding behind a disingenuous claim of ignorance of the users’ infringements.” The Court instead held that “Vimeo can still assert the protection of § 512(m) for the present suit, and claim the benefit of the safe harbor, in the absence of a showing by Plaintiffs of facts sufficient to demonstrate that Vimeo, having actual or red flag knowledge of infringement in the videos that are the subject of Plaintiffs’ suit, failed to promptly take them down.”

Observations

The Court both engaged in a close reading of the statute and gave consideration to the policy purpose of the DMCA safe harbor: to strike a compromise whereby service providers must adopt a notice-and-takedown procedure to avoid the costs of monitoring and liability for user content. It noted in discussing pre-1972 sound recordings, for example, that “[t]he purpose of the compromise was to make economically feasible the provision of valuable Internet services while expanding protections of the interest of copyright owners through the new notice-and-takedown provision.” To leave out state copyright “would defeat the very purpose Congress sought to achieve in passing the statute.”

The Court strongly rejected the Copyright Office’s interpretation of the Copyright Act. The Court stated that, although the Copyright Office’s report does not receive Chevron deference, given the Office’s intimate familiarity with the Copyright Act, the Second Circuit would “give appropriate deference to its reasonably persuasive interpretations of the Copyright Act.” Here, however, the Court found the Copyright Office’s interpretation unpersuasive, flatly rejecting it as a misreading of the law.

The Court was clear that red flag knowledge must be based on knowledge of specific facts going to specific instances of infringement. It clarified and strengthened YouTube, including by precisely allocating the burdens of proof in a DMCA safe harbor case, based on the allocation set out in the Nimmer treatise. The Court even embraced the plaintiffs’ characterizations of its holding as rendering red flag knowledge a very small category, not vastly different than actual knowledge.

Relatedly, while the plaintiffs identified seemingly damning communications in which Vimeo employees seemed to encourage, or at least condone, infringement by users, it was apparently compelling to the Court that none of those communications related to videos in the lawsuit.

This case is not over. The Court remanded to the District Court for further proceedings, and plaintiffs will have the opportunity to prove facts supporting a finding of red-flag knowledge. As of the posting of this advisory, the plaintiffs have made a request for an extension of time to file a petition for rehearing of the Second Circuit’s order.