On May 21, 2020 the Copyright Office published a long-awaited report on Section 512 of the Digital Millennium Copyright Act (DMCA) (the “Report”), which provides limitations on secondary copyright liability for materials published online.  The Section 512 "safe harbor provisions" -- in an attempt to balance the needs of online service providers (OSPs) with those of creators -- allow OSPs to operate platforms without facing secondary liability for infringing content posted by third parties, provided they comply with certain requirements (including taking down infringing content promptly upon notification by a rightsholder). When it enacted the DMCA in 1998, Congress designed the safe harbor provisions to provide “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the online networked environment.”  

The Report -- following many years of study including numerous Congressional hearings, stakeholder round-tables, and calls for public commentary -- examines whether the balance sought by Congress has been achieved in light of the significant changes the internet has undergone in the last twenty-plus years.  According to the Copyright Office, this balance has "tilted askew" in favor of service providers, such that Congressional intervention is now warranted.  The Report suggests that Congress need not make any “wholesale changes” to the DMCA, but that Section 512 may need some fine-tuning to restore this balance.

Now that the Report has finally issued, the critical next step is for Congress to begin the (likely painstaking) process of whether and how to implement some or all of the recommended changes.  The Report is nearly 200 pages (250 including Appendices) and makes twelve “conclusions and recommendations.”  The common theme among these conclusions is straightforward: many court’s interpretations of the various Section 512 provisions over the past twenty years have not aligned with Congressional intent.  Rather than take you on a 200-page journey, however, here are the top 5 takeaways for you and your business:

1.  Repeat Infringers 

To qualify for safe harbor under Section 512, OSPs must adopt a policy addressing the activities of repeat infringers on their platform.  Court decisions have led to concerns that service providers could satisfy statutory requirements on implementing a repeat infringer policy without actually providing a written policy to users.  For example, the Ninth Circuit recently found that service providers do not need to publicly specify what constitutes a repeat infringer because the Section 512(i) is “open-ended.”  As a result, OSPs may decide ex-post what constitutes a repeat infringer and when to remove them from their platform. 

The Report urges Congress to clarify that the repeat infringer provision requirement may not be satisfied with “unwritten” policies.  Although the Report notes that service providers should be allowed some leeway in adopting and implementing policies, it finds that courts have been overly lenient in a way that has undermined the deterrence value of such policies.

In addition, consistent with the Fourth Circuit's interpretation of "repeat infringer," the Office believes that the statute did not intend repeat infringer to mean "repeat adjudicated infringer."  Rather, according to the Report, "any definition must be consistent with the statutory criteria that repeat infringer means repeat alleged infringer, not repeat adjudicated infringer."

To read the full section, see pages 95-110 of the Report.

2.  Actual vs. Red Flag Knowledge 

To qualify for safe-harbor protection, an OSP must lack both "actual" knowledge of the specific infringing content and  “red flag knowledge”—an awareness of facts or circumstances from which infringing activity is apparent.  The Report criticizes courts for effectively reading the red flag knowledge requirement out of the statute by narrowly defining it as knowledge of specific and identifiable infringements. 

The Report also argues that courts have set too high a bar for the "willful blindness" standard.  Absent actual knowledge or red flag knowledge, an OSP covered under the section 512(c) or 512(d) safe harbors will lose that protection if a copyright owner can prove that the OSP was "willfully blind" -- i.e., it acted to avoid obtaining actual or red flag knowledge.  The Report argues that, by requiring knowledge of specific instances of infringing material, the courts have adopted a bar for demonstrating an OSP’s willful blindness that is higher than the criminal willful blindness standard articulated by the Supreme Court.

The Copyright Office acknowledges that the burden imposed on OSPs for identifying infringing content is likely to differ based on the different types and sizes of OSPs.  For example, the Report notes that "a major platform ... with a history of hosting infringing content may need to implement costly filtering technologies, while a small craft sales site might just need to assign content review to an existing employee."  The Office thus recommends that Congress adopt a reasonableness standard for "knowledge" that takes into account relevant characteristics about the size and technical proficiency of a service provider

To read the full section, see pages 111-136 of the Report.

3.  Should Congress Narrow the "Storage" and "Transmission" Safe Harbors?

Section 512 currently enumerates four broadly worded safe harbors tied to specific types of online activities:  (1) storage, § 512(c); (2) transmission, § 512(a); (3) caching,      § 512(b); and (4) referring/linking by using information location tools, § 512(d).  The Copyright Office suggests that Congress reexamine what activities should be protected by Section 512's "storage" and "transmission" safe harbors. 

Per the Copyright Office, the biggest source of conflict between OSPs and rightsholders concerns whether the storage safe harbor has improperly swept in many hosting activities not previously been contemplated by Congress.  Courts have held that Section 512(c)'s storage safe harbor applies to video-hosting sites that make copies of videos in different encoding schemes (transcoding), deliver videos to a user’s browser cache at the user’s request (playback), use algorithms to identify and display related videos, and syndicate content to a third party; online storage lockers that are used to display or disseminate copyright-protected content; and e-commerce sites that provide a platform for users to market and sell their products.  In so holding, these courts have reasoned that these services qualify for the section 512(c) safe harbor because their activities are “related” to the activity of storing user-uploaded content.  The Copyright Office, however, "believes that even if section 512(c) was meant to include some 'related services,' Congress did not intend to include related services that modify the content or that promote consumption of specific content, rather than just increasing access to the content."  To the extent Congress intended Section 512(c) to cover related services, the Office asks Congress to provide clarity on where to draw the line.  

Similarly, the Copyright Office questions whether technology services beyond providing internet infrastructure—such and peer-to-peer (“P2P”) systems and payment processors—should appropriately be included under Section 512(a)'s transmission safe harbor, and asks Congress to provide guidance.

To read the full section, see pages 84-95 of the Report.

4.  Financial Benefit / Right and Ability to Control

In addition to the knowledge requirement, Section 512 requires that service providers do “not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.”  This language was intended by Congress to codify the “financial benefit” and “right and ability to control” prongs of the common law vicarious liability standard. 

The Copyright Office agrees with the many courts who have found that the appropriate test for “financial benefit” is to ask whether the infringing content was a “draw” for users rather than simply an “added benefit.”  The issue of “right and ability to control”, however, is more complicated.  The Second and Ninth Circuits require “something more” beyond the ability to locate and remove infringing material to demonstrate “right and ability to control.”  The Office believes this requirement places too great a burden on rightsholders, observing that “[w]ith so few OSPs found to have been ineligible on both the 'financial benefit' and 'right and ability to control' prongs," rightsholders fear that the “bar has been set so high, services feel they can profit from infringing content with near impunity.”  The Copyright Office agrees, however, that OSPs shouldn't be held liable “merely because they have the ‘ability to block infringers.’”

The Report recommends that the bar be lowered slightly, limiting right and ability to control to “instances of more acute fault than the mere understanding that some of one’s products will be misused.”     

To read the full section, see pages 128-136 of the Report.

5.  Knowing Misrepresentation and Fair Use Issues with Takedown Notices

Section 512(f) contains the infrequently applied liability provision for material misrepresentations under Section 512.  The Copyright Office questions the Ninth Circuit’s decision in Lenz v. Universal Music Corp., which held copyright holders, under the 512(c) good faith requirement for takedown notices, must consider fair use in good faith before issuing a takedown notice for content posted on a service providers platform or face potential 512(f) liability.  The Lenz court reasoned that entities who send takedown notices must consider whether they are targeting lawful fair use, because failure to do so would necessarily mean they could not have formed a good faith belief that the material was infringing, as the DMCA requires.

The Copyright Office expressed concern that, if the Lenz court is correct, rightsholders would be subject to liability “without regard to whether or not the material is actually infringing.” Instead, the Copyright Office asserts that, properly applied, Section 512(f) looks to whether the rightsholders "knowingly materially misrepresent[]" that "the material or activity is infringing.”  Thus, to be found liable under 512(f), the court must determine whether the rightsholder misrepresented the infringing nature of material “knowingly.”  The Report recommends that Congress monitor the impact of Lenz and consider any clarifying language that may be needed.

To read the full section, see pages 145-152 of the Report.

Takeaways

Stepping back from the details of the Report, it's important to recognize that this is a significant, but still early-ish, part of the DMCA reform process.  Nothing in the Report has the force of law and there is no draft bill of which we're aware currently circulated in Congress.  Nevertheless, the Senate Judiciary Committee's Subcommittee on Intellectual Property -- the Senate body overseeing copyright law -- has been conducting a series of DMCA hearings in 2020, which continue through the Fall.  One would expect draft legislation to follow.  

The Report is integral to this process for two reasons.  First, the Report does not simply throw up its hands and state -- as many stakeholders suggested -- that the DMCA is not perfect but it's the best we have and change could cause more harm than good.  The Office carefully reviewed the many submissions and extensive input acquired over the past few years from the copyright community and delineated specific areas for possible reform or clarification.  Second, although Congress will take into account stakeholder viewpoints obtained through hearings and otherwise -- and the OSPs will undoubtedly ensure that their objections to any of the Report's recommendations are heard by lawmakers -- the Copyright Office is an important voice that Congress will respect.  The Report's recommendations will likely form the bedrock of subsequent DMCA reform, even if not adopted wholeheartedly.  

We will be sure to keep you posted...

There is no doubt that the internet, in all its various component parts, has grown successfully and exponentially over the past two decades. However, despite the advances in legitimate content options and delivery systems, and despite the millions of takedown notices submitted on a daily basis, the scale of online copyright infringement and the lack of effectiveness of section 512 notices to address that situation remain significant problems.

 https://www.copyright.gov/policy/section512/section-512-full