In mid-October, the influential United States Court of Appeals for the Second Circuit heard oral arguments in a $1-billion battle over the responsibility of Internet intermediaries for infringing content posted by third parties on their systems. The appeal in Viacom Intl. v. YouTube Inc. involves crucial questions that may have a ripple effect on litigation taking place across the world. Along with the Veoh case being heard by the Ninth Circuit and the iiNet appeal being heard by the High Court of Australia this year, the results in the YouTube appeals will set important ground rules for Internet litigation for years to come.

The YouTube case stems from the early days in which YouTube was only a fledgling video service rather than the dominant source of video streams on the Internet.

Viacom alleged that YouTube became aware at an early date of copyright infringements taking place on its site, but did little to prevent them because traffic would “go from 100,000 views a day down to about 20,000 views or maybe even lower.” It also alleged that when Google purchased YouTube, its due diligence team warned that more than half of YouTube’s views infringed copyright. As a consequence, Viacom submitted that YouTube was liable for direct, contributory and vicarious infringement of some 79,000 copyrighted works between 2005 and 2008.

YouTube relied on the provisions of s. 512(c) of the Digital Millennium Copyright Act (DMCA), a statutory safe harbour available to persons who store information online “at the direction of a user”. YouTube contended that this provision did not require an “arduous screening process for every user-posted text, picture, and video,” as this ”would inhibit free expression and stifle the growth of the Internet.”

Decision Below

At trial, both Viacom and YouTube moved for summary judgment. The United States District Court for the Southern District of New York found that YouTube was entitled to the safe harbour. It dismissed an argument from Viacom that YouTube had become aware of a “red flag” from which infringing activity was apparent and had taken no action to remove or disable access to the infringing material. It concluded that to lose the safe harbour, YouTube had to have “knowledge of specific and identifiable infringements of particular individual items,” including “the works’ locations at the site.” Also importantly, the court concluded that although the safe harbour applied to “storage” activities, the transmission of works to YouTube users via Internet streaming was “within the collateral scope of storage and allied functions” and should also be protected.

Potential Significance

This is a landmark case for the Internet era, and may well go to the U.S. Supreme Court regardless of which side wins on appeal.

Content owners are of the view that the statement of the Southern District creates a landscape in which host sites have too much deniability for infringements that form an essential part of their business models.

Hosts such as YouTube contend that with 48 hours of content uploaded every minute, it is unrealistic to expect it to proactively police infringing activity. This line of thought holds that remedies such as notice-and-takedown in the United States, which create incentives for hosts to swiftly take down infringing content on receipt of a notice of infringement under the DMCA, are sufficient to maintain a balance between societal interests in the protection of copyrighted content and the need for new ways to disseminate such content. Thus far, the iiNet case being heard in Australia has come to similar conclusions, with the arguments of the parties to be heard by the High Court of Australia early in December.

Case Information

Viacom Intl. v. YouTube Inc.

Second Circuit Docket Number: 10-3270-CV

Hearing Date: October 18, 2011