Yesterday the Ninth Circuit issued an opinion in the heavily followed “dancing baby case,” holding that copyright owners must consider an alleged infringer’s defense of fair use before sending a notice under the Digital Millennium Copyright Act (“DMCA”). Moreover, a copyright owner that fails to conduct a fair use analysis prior to sending a DMCA notice could be subject to a damages claim.

The facts of the case originate in 2007, when Stephanie Lenz posted a video to YouTube entitled “Let’s Go Crazy #1,” a 29-second video of a baby dancing to Prince and the Revolution’s 1984 hit song “Let’s Go Crazy.” Universal Music Corp. and related entities (“Universal”), which controlled the Prince song, evaluated whether the song “was recognizable, was in a significant portion of the video or was the general focus of the video” according to its enforcement guidelines. After considering (i) that the music played loudly in the background, (ii) the music played throughout the entire video, (iii) the song name was the title of the video, and (iv) the song was discussed during the video (the mother asks her dancing son: “What do you think of the music?”), Universal issued a takedown notification to YouTube.

Lenz received a letter from YouTube explaining that “Let’s Go Crazy #1” was taken down from YouTube. In response, Lenz issued a DMCA counter-notification and eventually succeeded in restoring “Let’s Go Crazy #1” to YouTube. Lenz also sued Universal on the basis that Universal misrepresented that it had a good faith belief that the video infringed Prince’s song. The video is available on YouTube, here. Lenz’s claims were winnowed to one cause of action under the DMCA Section 512(f), which imposes liability where a copyright owner “knowingly materially misrepresents … that material or activity is infringing.”

As required by 17 U.S.C. § 512(c)(3)(A)(v), Universal’s takedown notification to YouTube included a statement indicating that Universal had a “good faith belief that the above-described activity is not authorized by the copyright owner, its agent, or the law.” It is the last portion of the statement – “or the law” – that became the focus leading to yesterday’s ruling.

Universal argued that fair use is an affirmative defense that excuses otherwise infringing content and that, therefore, it is not part of “the law” contemplated by Section 512(c)(3)(A)(v). The Ninth Circuit disagreed and found that since fair use is expressly authorized by Section 107 of the Copyright Act, it is incorrect to consider it an affirmative defense that excuses otherwise impermissible conduct. Rather, the Court considered fair use an affirmative defense in the same way that a license is an affirmative defense – only in the sense of its procedural posture. It went on to explain that even if fair use were an affirmative defense excusing otherwise impermissible conduct, it is uniquely situated such that for purposes of the DMCA it should not be treated as such.

Lenz argued that Universal should have known the video was a fair use. Citing a Ninth Circuit decision from 2004, the Court found that a copyright holder need only form a subjective good faith belief that a use is not authorized. Lenz argued that Universal did not form any subjective belief about the video’s fair use because it failed to consider fair use at all, and knew it failed to do so. Universal contended that its guidelines essentially amounted to a consideration of fair use. The Ninth Circuit found that the question whether Universal’s actions were sufficient to form a subjective good faith belief is for a jury to decide.

The Ninth Circuit explained that determining whether a copyright holder “knowingly materially misrepresent[ed]” its “good faith belief” that the activity is not fair use could be established by a “willful blindness” showing. (However, it held that in this case, Lenz did not present evidence that Universal believed there was a high probability that the video was a fair use and therefore could not proceed to trial on a willful blindness theory which requires such a showing.) But the Ninth Circuit decision also balanced the needs of copyright owners, citing the “pressing crush of voluminous infringing content that copyright holders face in a digital age.” Striking that balance, the Ninth Circuit indicated that the consideration of fair use “need not be searching or intensive.” The decision guides “without passing judgment” that the “implementation of computer algorithms appear to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use.” And the Court ruled that Lenz may recover nominal damages as a result of Universal’s actions without showing monetary loss, because the “DMCA is akin to a statutorily created intentional tort.”

Lenz is represented in part by the Electronic Frontier Foundation (“EFF”). The EFF press release discusses far-reaching censorship and free speech ramifications of this issue. In the press release, the EFF states that the ruling “sends a strong message that copyright law does not authorize thoughtless censorship of lawful speech.”