The Second Circuit has vacated District Court (S.D.N.Y.) Judge Louis L. Stanton’s June 2010 dismissal of Viacom’s $1 billion copyright infringement suit against YouTube.  In a thorough opinion, the Second Circuit remanded the case to the district court for further consideration of several key aspects of the case, including whether executives at YouTube had actual knowledge of specific infringing content sufficient to bar YouTube’s reliance on the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”).

The dispute stems from a copyright infringement complaint originally filed in 2007.  Viacom (and a variety of other plaintiff content owners) accused YouTube of directly and secondarily infringing copyrights relating to content posted on the site between YouTube’s inception in 2005 and 2007 when suit was filed.  After discovery, the parties cross-filed motions for summary judgment.  The court denied Viacom’s motion but granted YouTube’s, primarily relying on application of the DMCA’s safe harbor.  Viacom appealed.  The Second Circuit has now issued an opinion in which it clarified some key DMCA issues and remanded the case to the district court for further consideration.

Knowledge And The Safe Harbor:

Let’s start with the primary issue by the Second Circuit.  To qualify for the safe harbor protections provided in the DMCA (Section 512(c)(1)(A)), a defendant:  (i) must not have actual knowledge that the material or an activity using the material on the system or network is infringing (the “actual knowledge” provision); or (ii) must not be aware of facts or circumstances from which infringing activity is apparent (the “red flag knowledge” provision); or (iii) upon obtaining such knowledge or awareness, must act expeditiously to remove, or disable access to, the material.  The Second Circuit examined the issue of whether ”red flag knowledge” means that the accused should have known generally that infringement was occurring (i.e. without knowledge of specific instances of infringement).  The Court stated that both actual and red flag knowledge require “specific and identifiable infringement[.]”  The difference is that red flag knowledge precludes application of the DMCA’s safe harbor in cases where the defendant has an awareness of facts or circumstances that should have signaled to a reasonable observer that specific acts of infringement were taking place.  The Second Circuit refused to adopt an interpretation urged by the plaintiffs that ”red flag knowledge” required less specificity than the actual knowledge provision.  To demonstrate that a defendant has “red flag knowledge,” the defendant must be subjectively aware of facts that would make specific infringement ‘objectively’ obvious to a reasonable person.

Even though the Second Circuit upheld the district court’s interpretation, it vacated its decision on this issue because the district court had misapplied that interpretation (resulting in a material question of fact that should have precluded resolution of the matter by summary judgment).  Specifically, the record could have supported the finding by a reasonable trier of fact that YouTube had the actual or red flag knowledge of infringement necessary to bar application of the DMCA safe harbor.  The court cited numerous email examples including one sent among YouTube’s co-founders regarding a CNN video of the space shuttle.  It read: “but we should just keep that stuff on the site. i really don’t see what will happen. what? someone from cnn sees it? he happens to be someone with power? He happens to want to take it down right away. he gets in touch with cnn legal. 2 weeks later, we get a cease & desist letter. we take the video down.”  The Court stated that “a reasonable jury could conclude that YouTube had “knowledge or awareness” of copyright infringement “at least with respect to a handful of specific clips.”  After reviewing such evidence, the Second Circuit vacated the summary judgment order and instructed the district court to determine on remand whether any specific infringements of which YouTube had knowledge or awareness correspond to the content at issue in the litigation.

Willful Blindness:

The Second Circuit also examined whether the common law concept of ”willful blindness” doctrine could constitute “knowledge” under the DMCA for the purposes of finding the accused had actual knowledge of infringement (thus barring it from the safe harbor).  Holding that the doctrine could apply, the Second Circuit cautioned that it could not act to limit a DMCA provision that specifically requires that qualification for the safe harbor cannot be barred because of a lack of the accused’s active monitoring for infringement (Section 512(m)). Though a plaintiff may argue that a defendant willfully ignored facts showing actual infringement was taking place (so it wouldn’t have to remove or disable access to the content on the network) and thus preclude application of the safe harbor, it cannot do so by showing that such willful blindness took the form of failing to actively monitor the network for infringement.

Remaining DMCA Issues:

The Second Circuit also briefly addressed several other contentious DMCA provisions.  First, it held that the right and ability to control infringement, which can bar qualification for the  safe harbor under Section 512(c)(1)(B), should not be defined as merely actual knowledge.  Rather, it requires “something more” than the “ability to remove or block access to materials posted on a service provider’s website.”  The Court cited several cases as examples of this “something more” element.  For example, control has been found where a service provider monitored users’ websites, prohibited certain types of content, and refused access to users who failed to comply with its instructions.  “Something extra” was also found to be present based on the purposeful and culpable inducement of a third party to infringe.

Finally, the Second Circuit addressed four YouTube practices related to how it copied, shared, and promoted videos and whether those practices precluded application of the safe harbor.  For three of the practices (transcoding, playback, and including “related videos”), the Court held that such practices should not preclude the safe harbor.  The fourth practice (allowing third parties to host the videos, such as on mobile phones for example) was a closer call.  As such, the Court remanded the issue to district court for further fact finding.

All eyes will be on the district court now as the Viacom v. YouTube saga continues.