Why it matters: On September 14, 2015, the Ninth Circuit ruled in Lenz v. Universal Music Corp. that, prior to sending a takedown notice under the Digital Millennium Copyright Act, a copyright holder must first evaluate whether the alleged unauthorized performance constituted "fair use." Moreover, the Court held that the failure of the copyright holder to conduct such a prior "fair use" analysis raises a "triable issue" as to whether the notice was sent in good faith. Known as the "Dancing Baby" case, the decision is being viewed as a blow to copyright holders attempting to police widespread online infringement of their works.

Detailed discussion: On September 14, 2015, the Ninth Circuit held in Lenz v. Universal Music Corp. that, prior to sending a takedown notice under the Digital Millennium Copyright Act (DMCA), a copyright holder must first evaluate whether the alleged infringement constituted "fair use," and that a failure to perform such an analysis will raise triable issues of fact as to the good faith intent of the copyright holder in sending the notice.

The Lenz case revolves around a 29-second YouTube video of two young children rocking out to the song "Let's Go Crazy" by the recording artist Prince. The video, titled "Let's Go Crazy #1," was uploaded to YouTube by the children's mother, Stephanie Lenz, on February 7, 2007. In the video, Lenz asks her then 13-month-old son "what do you think of the music?" to which he responds by bopping up and down—hence the "Dancing Baby" moniker. The facts show that, at the time Lenz posted the Dancing Baby video to YouTube in 2007, Universal Music Corp. was Prince's music publishing administrator responsible for enforcing his copyrights. As part of its enforcement measures, Universal's then head of business affairs, Robert Allen, assigned a legal assistant to monitor YouTube on a daily basis for videos that incorporated Prince's songs. When encountering such a video, Allen testified that the assistant "evaluated whether [the video in question] 'embodied a Prince composition' by making "significant use of … the composition, specifically if the song was recognizable, was a significant portion of the video or was the focus of the video." If the video met any of these "guidelines," specifically the "focus" one, Allen said that they would notify YouTube that the video should be removed. As a harbinger of things to come, the Court at this point in the recitation of facts specifically noted that "[n]one of the video evaluation guidelines explicitly include consideration of the fair use doctrine."

Determining that the Prince song "Let's Go Crazy" was indeed the focus of Lenz's Dancing Baby video, the legal assistant included it, along with over 200 other videos, in a takedown notification sent to YouTube pursuant to Section 512(c)(3)(A)(v) of the DMCA. As required by that section, the takedown notification contained a statement as to Universal's "good faith belief that the above-described activity is not authorized by the copyright owner, its agent, or the law."

After receiving Universal's takedown notification, the facts show that YouTube removed the Dancing Baby video and sent Lenz an email notifying her of that fact on June 5, 2007. Two days later, Lenz sent a counter-notification to YouTube seeking to restore the Dancing Baby video to the service pursuant to Section 512(g)(3) of the DMCA, to which Universal filed a protest (the Court again noted at this point that Universal's protest failed to mention fair use considerations). After more back and forth, YouTube reinstated the Dancing Baby video in mid-July 2007. Lenz initially sued Universal in the Northern District of California in July 2007, alleging tortious interference among other causes of action, and much legal action ensued. However, it is the cause of action in her Second Amended Complaint filed on April 18, 2008—which alleged that Universal "knowingly materially misrepresented" Lenz's infringement in its takedown notice in violation of Section 512(f) of the DMCA—that was the subject of the Ninth Circuit's opinion. The matter was certified for interlocutory appeal after the district court denied both Lenz's and Universal's summary judgment motions with respect to the Section 512(f) claim in January 2013.

In the majority opinion written by Judge Richard C. Tallman, the Ninth Circuit began its analysis by framing the Section 512(f) issue upfront, stating that it "boils down to a question of whether copyright holders have been abusing the extrajudicial takedown procedures provided for in the DMCA by declining to first evaluate whether the content qualifies as fair use." The Court concluded that they have, and held that the DMCA "requires copyright holders to consider fair use before sending a takedown notification, and that failure to do so raises a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law."

In reaching this holding, the Court first reviewed the applicable takedown and put-back provisions of the DMCA, including Section 512(c)(3)(A)(v), which requires a takedown notice to include in relevant part a statement as to the sender's "good faith belief that the use of the material in the manner complained of is not authorized by . . . the law." The Court noted that the issue of whether fair use is an "authorization under the law" for purposes of this provision is "one of first impression in any circuit across the nation," and concluded that "the statute unambiguously contemplates fair use as a use authorized by the law." As support for this conclusion, the Court looked to Section 107 of the Copyright Act, which codifies a four-step test for determining fair use and, per the Court, provides that "the fair use of a copyrighted work is permissible because it is a non-infringing use."

The Court rejected Universal's argument that fair use is an affirmative defense that excuses otherwise infringing conduct and therefore cannot be "authorized by the law," stating that "[g]iven that [Section 107] expressly authorizes fair use, labeling it as an affirmative defense that excuses conduct is a misnomer." Even if fair use were to be classified as an affirmative defense, however, the Court continued that for purposes of the DMCA, "fair use is uniquely situated in copyright law so as to be treated differently than traditional affirmative defenses. We conclude that because [Section 107] created a type of non-infringing use, fair use is 'authorized by the law' and a copyright holder must consider the existence of fair use before sending a takedown notification under Section 512(c)."

The Court then moved on to determine whether "a genuine issue of material fact exists as to whether Universal knowingly misrepresented that it had formed a good faith belief the [Dancing Baby] video did not constitute fair use," and concluded that it did. The Court made clear that this line of inquiry looked not to whether a court would find that the Dancing Baby video constituted a fair use but rather "whether Universal formed a good faith belief that it was not." The Court cited Ninth Circuit precedent to establish that a copyright holder's good faith belief in this context need only be subjective, not objective. Noting that the parties had presented opposing fact-based arguments during the summary judgment phase in the lower court as to whether Universal had the requisite good faith belief needed under Section 512(f) to send the takedown notice (Lenz said no because there was no evidence Universal ever considered fair use; Universal said yes because its procedures were tantamount to a consideration of fair use although not labeled as such), the Court held that "[b]ecause the DMCA requires consideration of fair use prior to sending a takedown notification, a jury must determine whether Universal's actions were sufficient to form a subjective good faith belief about the video's fair use or lack thereof."

The Court then examined the actions a copyright holder might take in order to justify a jury finding the existence of subjective good faith belief in this context. For example, the Court clarified that the actions "need not be searching or intensive" nor do they "require investigation of the allegedly infringing conduct." The Court stated that "[w]e are mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age" and noted "without passing judgment, that the implementation of computer algorithms appears 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." Citing from various amicus briefs submitted by industry groups in support of Universal, the Court went on to provide a helpful road map: "For example, consideration of fair use may be sufficient if copyright holders utilize computer programs that automatically identify for takedown notifications content where: '(1) the video track matches the video track of a copyrighted work submitted by a content owner; (2) the audio track matches the audio track of that same copyrighted work; and (3) nearly the entirety . . . is comprised of a single copyrighted work.'" The Court went on to state that a copyright holder may then "employ individuals … to review the minimal remaining content a computer program does not cull."

The Court then considered two other issues raised in the summary judgment motions, which were whether at trial Lenz could (1) argue that the "willful blindness" doctrine applied in the context of Universal's "knowing misrepresentation" of the existence of its good faith belief in the takedown notice (short answer: she couldn't, based on her inability in the summary judgment phase to present evidence meeting the first threshold factor of the doctrine, i.e., evidence from which a juror could infer that Universal was aware of a "high probability" the Dancing Baby video constituted fair use; Lenz could, however, proceed on an actual knowledge theory); and (2) seek nominal damages even though her harm might be unquantifiable (short answer: she could). The Court then affirmed the district court's order denying the parties' cross-motions for summary judgment. The case, which had been stayed pending resolution of the interlocutory appeal, will now return to the district court for further proceedings.

The Court summed up its ruling as follows: "Copyright holders cannot shirk their duty to consider—in good faith and prior to sending a takedown notification— whether allegedly infringing material constitutes fair use, a use which the DMCA plainly contemplates as authorized by the law. That this step imposes responsibility on copyright holders is not a reason for us to reject it." Judge Milan D. Smith, Jr. concurred in part and dissented in part with the majority opinion, and concurred in the judgment. In relevant part, Judge Smith's dissent centers around his construing the "plain text" of Section 512(f) to prohibit a copyright holder from misrepresenting that a work itself is infringing, not, as the majority opinion held, from misrepresenting the copyright holder's diligence in forming a good faith belief about that infringement. Judge Smith also disagreed that there was any material factual dispute about whether Universal first considered fair use before sending the takedown notice—he believed it did not—and thus his view was that Universal could be found liable under Section 512(f) for "knowingly misrepresenting" the Dancing Baby video's infringement on that basis without ever having to address the "willful blindness" question.

Click here to read the Ninth Circuit's 9/14/15 opinion in Lenz v. Universal Music Corp. et al., No. 13-16106 (9th Cir. 2015).