On April 5, 2012, the United States Court of Appeals for the Second Circuit issued its ruling in Viacom Int'l, Inc. v. YouTube, Inc. Any company with a website that permits user-generated content, or the posting of third-party content, on its websites needs to be aware of the implications of this decision, and the impact it has on a proffered defense to copyright infringement under the "safe harbor" provision of the Digital Millennium Copyright Act of 1998 ("DMCA").

FACTUAL AND PROCEDURAL BACKGROUND

YouTube, which needs little introduction, is an extremely popular website that allows users to watch, upload, view and share personal video clips. More than 1 billion videos are viewed daily on the site and 48 hours of new video content is uploaded to the site every minute. Before uploading, users are required to accept YouTube's terms of use, which provide that users will not submit copyrighted material to the site without the permission of the rightful owner. The reality is that YouTube users regularly upload copyrighted material to the site without permission or appropriate licenses. Copyright owners concerned about the infringement may send YouTube a "take-down" notice under the DMCA, and YouTube honors such notices. However, in practice, the volume of infringement on the YouTube site is alleged to be so high that copyright owners cannot keep up. Under YouTube's own FAQ page, 48 hours of video content are uploaded every minute, resulting in nearly eight years of content uploaded every day. The huge volume of take-down notices required to combat the repeated infringement was becoming unduly burdensome and unworkable for the copyright owners, and accordingly, this lawsuit ensued.

The case revolves around the clash between the plain language of the notice and take-down provisions of the DMCA and the practical realities of popular websites handling massive amounts of purportedly user-generated content, some of which is infringing. At the district court level, the court observed that a jury could find that YouTube was not only generally aware of, but welcomed, the placement of infringing material on its site. Nevertheless, the court held that because YouTube designates an agent to receive take-down notices, and swiftly removes infringing material upon receipt of such notices, YouTube has no liability for infringement. The district court ruled that for YouTube to be liable, the plaintiffs would have to show actual knowledge by YouTube that a particular clip on its site was infringing. Generalized knowledge of the prevalence of infringing activity on the site was not enough. The appeal followed.

THE SECOND CIRCUIT'S DECISION

On appeal, the Second Circuit affirmed in part and reversed in part the district court's holding. The court affirmed the district court's holding that the DMCA requires actual or "red flag" (an objective standard of what a reasonable person would conclude) knowledge of specific infringing activity, but remanded the case to the district court because, in the Second Circuit's opinion, a reasonable juror could find that YouTube had such specific knowledge of infringing activity on its site.

The court also remanded on the question of whether YouTube was "willfully blind" to infringement on its site for further fact finding. The court ruled that the willful blindness doctrine may be applied under the DMCA, in appropriate circumstances, to demonstrate knowledge or awareness of specific acts of infringement.

Section 512(c) of the Copyright Act provides that a website must "not receive a financial benefit directly attributable to the infringing activity, in a case where the service provider has the right and ability to control such activity." The Second Circuit affirmed the district court's holding that this "right and ability to control" language also requires specific knowledge of infringing activity, but remanded the issue for further fact finding on the issue of control. The Second Circuit, however, punted on the question of what it takes to have the ability to control. All we know is that control requires "something more" than the ability to block access to or remove infringing materials from a website. It is not apparent how the district court will determine whether there is sufficient evidence to determine whether YouTube had the ability to control infringing activity absent further guidance from the Second Circuit as to what that something more is.

THE IMPLICATIONS

This is a case where, at least as far as the parties are concerned, practical realities and decisions have left the law far in its wake. Since it was originally sued by Viacom in May 2007, Google/YouTube has radically changed its policies with respect to the posting of copyrighted materials on YouTube.

In June 2007, YouTube began the implementation of its Content ID program. This system creates a reference file for copyrighted audio and video material and stores it in a database. Whenever a new video is uploaded to YouTube, it is checked against this database. When a copyright violation is found, the owner is given the choice of blocking the video, tracking its usage, or monetizing the video by adding advertisements. The Content ID program was originally presented by YouTube as a "win-win" solution to allow for creative collaborations to take place between fans and copyright owners. Since its inception, more than 120 million videos have been claimed by Content ID, and over a third of YouTube's total monetized views come from Content ID, suggesting that the program has been largely successful at placating copyright holders and the implications of the Second Circuit's decision on YouTube going forward are likely negligible.

That, however, is not the case for other sites that post user-generated content if they have not developed systems for identifying, deleting, and potentially monetizing infringing content. To the extent that site operators have specific knowledge about infringement prior to the receipt of a take-down notice, they are liable for copyright infringement even if they comply with the DMCA's take-down provisions. The Copyright Act provides for an award of statutory damages, which may in the Court's discretion be as high as $150,000 in cases of willful infringement, as well as an award of attorneys fees and costs. In light of the fact that the determination of "specific knowledge" and "willful infringement" are largely identical, the potential for a site operator to be exposed to significant damage awards is very real.

Fortunately, there are third-party tools and well-known programming techniques for identifying copyrighted material. Sites that allow the posting of user-generated content would be well advised to consider the use of these tools, particularly in light of the recent Viacom decision. Sites that employ such tools should be completely inoculated against future liability, even if a small amount of copyrighted material slips through the filters.