“It’s Like Déjà Vu All Over Again”

By Dan McPheeters and Michael Stein

Yesterday (presuming you read serials in order), we looked at the lines drawn in the private sector between supporters and opponents of the now-tabled Stop Online Piracy Act. We posited possible overriding concerns for each side, and wondered whether we might have seen this fight once before – like that time when a group of content providers sued a tiny search-engine company over a home-video website it had purchased the year before. All kidding aside, the titanic Viacom v. YouTube lawsuit was in many ways the prequel to the current debate, and the 2010 opinion denying the plaintiffs’ claims may very well have been the catalyst for advancing the legislation now known as SOPA. 

For all the bluster, time, money, and dire warnings invested in and surrounding the case, Viacom v. YouTube turned on the answer to a simple question: Does general knowledge that infringement happens on a system constitute “actual knowledge” or “aware[ness] of facts or circumstances from which infringement is apparent?” To understand why it came down to this, a little background must be laid. In 2005, the Supreme Court handed down a decision in the case of MGM v. Grokster, holding in essence that a company that supplied users with peer-to-peer file-sharing software marketed as a means to infringe copyrights was liable for copyright infringement. It was huge; in essence, P2P file-sharing of music and movies was illegal, and now production companies had a new weapon to enforce their rights. Kazaa, Limewire, Morpheus, all these services that were ubiquitous on college campuses and teenagers’ homes in the early years of the millennium were effectively outlawed. Content producers had tremendous momentum and had secured legal rights within nearly every element involved in the distribution of their product, save for one glaring omission: service providers.

In relevant part, the Digital Millennium Copyright Act (“DMCA”) defines a service provider as “a provider of online services or network access, or the operator of facilities therefor[.]” This definition not only covers the colloquial service providers such as Verizon and Comcast, but also YouTube and other sites that merely relay information at the user’s direction. In the aftermath of Grokster, this was the next big target for content producers – victory would mean complete control and full legal recourse over every element of legal and illegal distribution of content, and the effective deputizing of other companies to help enforce those rights. Following Viacom’s failed attempt to buy YouTube (Google won the bidding war, paying $1.65 billion), this suit was commenced to try to close the gap once and for all. YouTube responded by relying on a DMCA provision that afforded service providers a “safe harbor” from this type of liability provided they met certain conditions, laid out in 17 USC § 512(c)(1).

In many ways, it was the perfect play by Viacom. With the momentum from Grokster, they essentially applied the Court’s reasoning to a superficially similar scenario, arguing that YouTube knew that infringers operated on the site and that YouTube not only tolerated them, but benefitted financially from the infringement due to increased ad revenue brought on by the purported increase in user demand. This complaint may very well prove to have been the high-water mark in the content producers’ fight for control of their product.

In 2010, federal district court in New York rejected the plaintiffs’ arguments and held Grokster’s reasoning inapplicable to service providers as defined in the DMCA. Viacom v. YouTube, 718 F. Supp. 2d 514 (S.D.N.Y. 2010). In distinguishing Grokster and P2P networks in general, the court noted that peer-to-peer networks were not covered by the definition of service provider – that simple. As if to ensure there was no misunderstanding, the court drew stark contrasts between Grokster and YouTube’s relationships with their customers. Grokster had been famous for marketing and branding itself as a replacement for Napster, and targeted those users who relied on Napster as a way to illegally file-share. Id. at 526-27. In contrast, the court cited Viacom’s own general counsel, who noted in an e-mail that “the difference between YouTube’s behavior and Grokster’s is staggering.” Id. at 527 (internal quotations and citations omitted).

The real meat of the Viacom decision was in answering the simple question posed at the beginning of this post – Does general knowledge that infringement happens on a system constitute “actual knowledge” or “aware[ness] of facts or circumstances from which infringement is apparent?” If the Plaintiffs won here, the failure of their Grokster analogy would be forgotten – the DMCA would simply not protect YouTube (and all those following a similar business model), and it could be deputized to ensure content providers maintained control over their product. All websites providing network services or access would have an affirmative duty to police content and ensure infringing materials were not distributed. Sound familiar?

As many people know, the court ruled for the defendant and refused to shift the burden in the manner proposed by the Plaintiffs because the notice and takedown procedure contained within the DMCA makes copyright owners solely responsible for policing the content available on service providers’ networks. Moreover, the core question in the case was answered by finding that “knowledge of specific and identifiable infringements of particular individual items” was required in order to say a service provider had “actual knowledge” of infringement sufficient to defeat the safe harbor of § 512(c). Id. at 523. (“Mere knowledge of prevalence of such activity in general is not enough”). YouTube also did not receive a financial benefit from the infringement because its lack of knowledge as to specific instances of infringement defeated the control element necessary to proving financial gain. Id. at 527.

With a resounding defeat in court that gave companies like YouTube statutory clearance to operate, it is little wonder that the content providers would try to achieve their goal legislatively. As we mentioned in an earlier post, SOPA purported to target foreign websites but the enforcement provision at the heart of last week’s debate would have effectively deputized American companies like YouTube (now a part of Google), Facebook, and countless others that merely allow users to
access a network. In a way, it was a savvy calculation that simply backfired in the face of a committed opponent. The ultimate fallout from this battle will likely not be clear for some time. One major question will be whether content providers will abandon their efforts at broad third-party liability provisions in favor of developing more effective means of self-enforcing.

In our final post on this topic, we will try and determine if this battle has been good for society and whether these two sides might play nice together anytime soon. Next up: Sharing the Sandbox

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One thought on ““It’s Like Déjà Vu All Over Again”

  1. Pingback: “Sharing the Sandbox” | Stein McEwen Blawg

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