Editor’s note: Sid Venkatesan is an IP partner specializing in high stakes IP disputes and IP counseling for technology companies in the Silicon Valley office of Orrick, Herrington & Sutcliffe LLP. James Freedman is an associate in Orrick’s IP group and a recent Stanford Law School graduate.
Online content providers and aggregators are well aware of the potential penalties that can result from a copyright infringement lawsuit. In addition to being expensive to litigate, a copyright lawsuit can result in statutory damages (which can range between $750 to $30,000 for each infringing work found on a website), some or all of an infringer’s profits and even steeper penalties for willful infringement. A peer-to-peer platform relying on user-uploaded content, for example, can face nearly unlimited liability under this regime. Clearly, a copyright suit can have a crippling effect on an early-stage tech company.
One of Congress’ goals when it passed the Digital Millennium Copyright Act in 1998 was to insulate certain digital content providers (called “service providers” in the statute) as long as they promptly took down infringing works on notice from the copyright holder of those works.Multi-part safe statutory tests are often a litigator’s delight, but they do not always provide clarity for businesses trying to comply with the law.
This protection is called a “safe harbor” and can be used as a defense to a copyright infringement claim. There are several safe harbors in the DMCA (they are contained in Title 17 of the United States Code, Section 512). One important one, set forth in Section 512, subpart (c), protects service providers that offer “storage at the direction of a user” on the provider’s network, i.e. a platform for user-uploaded content. These service providers can rely on the safe harbor as long as they:
Multi-part safe statutory tests are often a litigator’s delight, but they do not always provide clarity for businesses trying to comply with the law. Indeed, Section 512(c) raises a number of questions. For example, what are “facts and circumstances from which infringing activity is apparent”? Does an online ad-supported content-hosting platform “receive financial benefit directly attributable to the infringing activity”? Does a service provider that processes or tags user-uploaded content perform “storage at the direct of a user” or something else?Unpacking Safe Harbor
The boundaries of the safe harbor have been tested in litigation and as a result, some recent federal Court of Appeals decisions have cleared up some of the questions around Section 512(c). Most recently, the Ninth Circuit Court of Appeals – which covers nine states, including the west coast – ruled that the video streaming site Veoh was protected by the safe harbor in a case brought by Universal Music Group (though Veoh’s successor won, the original company went bankrupt following a fire sale in 2010).
The reasoning of the Ninth Circuit was aligned with a 2012 decision in the Second Circuit (which covers Connecticut, New York and Vermont) in Viacom v. YouTube, meaning there is agreement as to some of the rules of the road for courts covering the largest media and technology hubs in the country.
Specifically, the Veoh and YouTube cases make clear that:
Generally, these cases show that a platform that leaves content uploads to the discretion of its users, performs processing specifically related to the display of and access to that content, promptly abides by DMCA takedown requests, and does not close its eyes to specifically infringing works can probably take comfort from Section 512(c).
Less clear is how business models that use user uploaded content for purposes other than general ad-supported storage and viewing or models that limit or direct what users upload will fare. Moreover, though affirmative monitoring is not required under these cases, we can reasonably expect that what constitutes “red flag” knowledge may change over time as technology improves and service providers are more easily able to identify and analyze content on their platforms.
[This column reflects Sid’s and James’ general views and does not constitute legal advice or the views of Orrick or its clients.]