In a recent case, UMG Recordings, Inc. v. Veoh Networks, Inc., 89 U.S.P.Q.2d 1449 (C.D. Cal. 2008), the Central District decided a question of first impression—whether certain activities of a website operator fit within the section 512(c) safe harbor of the Digital Millennium Copyright Act ("DMCA") (found at 17 U.S.C. § 512).

The DMCA provides four safe harbors to claims of copyright infringement against "service providers," i.e., "a provider of online services or network access, or the operator of facilities therefore. . . ." 17 U.S.C. § 512(k)(1)(B). These safe harbors are meant to "appropriately balance[] the interests of content owners, on-line and other service providers, and information users in a way that will foster the continued development of electronic commerce and the growth on the internet." H.R. Rep. 105-551(II), at 21. The section 512(c) safe harbor protects against liability for copyright infringement where it results from the storage of information by a service provider at the direction of users.

In the UMG Recordings case, UMG sued Veoh Networks, Inc. for infringement of copyrighted music incorporated into videos made available online by Veoh. Veoh is an operator of an Internet-based service that allows users to share videos with others for free. Some of the videos available through the Veoh service included sound recordings in which UMG owned the copyrights. As an affirmative defense to UMG's infringement claims, Veoh asserted the 512(c) safe harbor. UMG contended that the functions of the Veoh software did not fit within the safe harbor. The software functions at issue involved: (1) automatically creating "Flash-formatted" copies of video files uploaded by users; (2) automatically creating copies of uploaded video files that are comprised of smaller "chunks" of the original file; (3) allowing users to access uploaded videos via a technology called "streaming"; and (4) allowing users to access uploaded videos by downloading whole video files.

UMG moved for partial summary judgment on Veoh's 512(c) affirmative defense, taking the position that Veoh's software functions were not "by reason of the storage at the direction of a user" and therefore not protected by the 512(c) safe harbor. UMG asserted that the safe harbor did not apply because "Veoh's reproduction, distribution, and public performance activities (among others) do not constitute 'storage,' nor are they undertaken 'at the direction of a user.'"

Veoh countered that, although some of the four software functions do not constitute storage, it is nonetheless entitled to protection under the 512(c) safe harbor because its software functions are what enable users to view and access user uploaded material. In other words, without these functions, material stored by Veoh would not be accessible to the public, making the service unavailable and the safe harbor useless. Veoh's argument relied on the language of the statute and the court agreed with this analysis.

Analyzing the text of the section 512(c) safe harbor, the court found that "the statute extends to functions other than mere storage" and therefore that UMG's "electronic storage locker" interpretation was too limited. It is not the storage itself that must constitute infringing conduct for the safe harbor to apply; rather, the infringing conduct must occur as a result of the storage. The court explained: "If providing access could trigger liability without the possibility of DMCA immunity, service providers would be greatly deterred from performing their basic, vital and salutary function – namely, providing access to information and material for the public."

Looking to the legislative history of the DMCA, the court also found that the purpose of the DMCA, to foster development of electronic commerce and growth of the Internet, would be undercut by UMG's narrow interpretation of the section 512(c) safe harbor. "It is very difficult to see how the DMCA could achieve these goals if service providers . . . were exposed to liability for providing access to works stored at the direction of users."

In conclusion, the court denied UMG's motion for partial summary judgment. The court found the four Veoh software functions challenged by UMG to fall within the section 512(c) safe harbor, "because all of them are narrowly directed toward providing access to material stored at the direction of users."