Weekly Update

No third act likely in Viacom vs. YouTube drama

Five years after the case began, the Second Circuit Court of Appeals on Thursday handed Viacom a tactical victory in its copyright infringement case against YouTube. In a 39-page opinion, the three-judge panel vacated the district court’s 2010 ruling in favor of YouTube and sent the case back to the lower court for trial.

It will now be up to the lower court to determine whether YouTube had sufficient knowledge and awareness of specific instances of infringement by users that it should have acted preemptively to remove the material, and whether YouTube illegally made itself willfully blind to obvious infringement occurring on the site. If the court finds that it had such knowledge, or acted with willful blindness, YouTube could be held liable for copyright infringement, notwithstanding the “safe harbor” provisions of the Digital Millennium Copyright Act that normally shield online service providers against inadvertent liability.

The case is unlikely to get that far, however. The court poked enough holes in YouTube’s defense that it now has every incentive to try to settle this thing as quickly as possible and get on about its business. But on the one issue of law that might have made a difference to Viacom’s business at this point, the court ruled in favor of YouTube, so it’s unclear what Viacom would gain from carrying on.

The genesis of the case lies in copyright owners’ long-standing frustration with the “safe harbor” protections in the Digital Millennium Copyright Act. Those provisions shield online service providers from liability for copyright infringement committed by users so long as the service provider is not knowingly assisting in the infringement and meets certain other conditions, such as promptly removing infringing material when informed by the copyright owner and establishing policies for dealing with repeat infringers.

Content owners have long complained that the law creates an incentive for service providers to turn a blind eye to rampant infringement by their users, and have tried repeatedly to get courts to require service providers to act more forcefully in policing their sites where infringement is obvious and widespread. The YouTube case, in fact, is merely the most high-profile in a long string of similar lawsuits over the past eight years in which copyright owners have sought to narrow the the scope of legal protections for service providers under the DMCA.

If successful, those lawsuits might have given copyright owners much greater leverage over service providers in negotiating licensing deals. In each of case, however, the courts ruled that mere knowledge that infringement is occurring is not enough to impose liability. Instead, the courts said, the law only requires service providers to act when given specific notice of specific instances of infringement, leaving most of the burden for policing infringing material with the copyright owners.

The Second Circuit has now done so again. The reason it sent the YouTube case back to the lower court for trial is because it found there are some legitimate questions of fact concerning whether YouTube followed all of the necessary procedures spelled out in the law for claiming the safe harbor protections. Even if a jury were to find YouTube had not fully complied, however, it would not materially change the outcome for Viacom. The basic contours of the safe harbor would not change.

The most critical part of the ruling for Viacom to focus on at this point may be a single sentence at the end of the opinion: “Each party shall bear its own costs.”

Given the huge costs both sides have already incurred through two long, bruising rounds of this fight, and with no chance of shifting those costs to the other party, whatever limited damages Viacom might be able to recover from YouTube at this point probably are not worth the cost of a third round.

Question of the week

What will be the next phase in the battle between copyright owners and service providers?