Umg Recordings, Inc. v. Shelter Capital Partners Llc
2013 WL 1092793, 718 F.3d 1006 (2013)
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Rule of Law:
Under the Digital Millennium Copyright Act (DMCA), a service provider's automated functions that facilitate access to user-uploaded content are considered 'by reason of the storage at the direction of a user' and fall within the § 512(c) safe harbor. To lose this protection, a provider must have specific knowledge of particular infringing activity or exert 'substantial influence' over user conduct, which is more than the mere ability to remove or block access to content.
Facts:
- Veoh Networks (Veoh) operated a publicly accessible website that allowed users to upload and share videos.
- Before uploading, users had to agree to terms stating they had sufficient rights to the material and would not upload infringing content.
- When a user uploaded a video, Veoh's software automatically performed several functions: breaking the file into 'chunks,' transcoding the video into a common Flash format, and assigning it a unique web address (permalink).
- Veoh employees did not review user-submitted videos before they were made available on the platform.
- Veoh generated revenue from advertising displayed alongside the videos.
- Veoh implemented automated technologies to prevent copyright infringement, including hash filtering and audio fingerprinting, and had a policy to terminate repeat infringers.
- Despite these efforts, users uploaded videos containing songs for which Universal Music Group (UMG) owned the copyright, without UMG's authorization.
- Prior to the lawsuit, Veoh received notices of infringement from the Recording Industry Association of America (RIAA), not UMG, and removed the material located at the specific links provided in those notices.
Procedural Posture:
- Universal Music Group (UMG) filed a lawsuit against Veoh Networks, Inc. (Veoh) in the U.S. District Court for the Central District of California, alleging copyright infringement.
- UMG amended its complaint to add three of Veoh's investors as defendants on theories of secondary liability.
- The district court granted the investors' motion to dismiss the claims against them with prejudice.
- UMG moved for partial summary judgment on the issue of whether Veoh qualified for the DMCA § 512(c) safe harbor, which the district court denied.
- Veoh subsequently moved for summary judgment, arguing it satisfied all requirements of the § 512(c) safe harbor.
- The district court granted summary judgment in favor of Veoh, holding it was protected by the safe harbor.
- Final judgment was entered for Veoh, and UMG, as appellant, appealed the summary judgment and dismissal rulings to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does an online service provider qualify for the DMCA's § 512(c) safe harbor protection for copyright infringement that occurs 'by reason of the storage at the direction of a user' when its automated systems process and facilitate access to user-uploaded content, and the provider has general knowledge its service could be used for infringement?
Opinions:
Majority - Judge Fisher
Yes, an online service provider qualifies for the DMCA's § 512(c) safe harbor under these circumstances. The court reasoned that the statutory safe harbor encompasses the automated processes necessary for making user-stored content accessible, requires a provider to have more than general awareness of potential infringement, and defines the 'right and ability to control' as something more than the basic capacity to remove user content. The court analyzed three key requirements of § 512(c). First, it held that Veoh's automated processes (transcoding, chunking, creating permalinks) fall within the scope of infringement 'by reason of the storage at the direction of a user.' The court interpreted this phrase broadly, reasoning that the statute's notice-and-takedown procedures, which refer to 'disabl[ing] access,' presuppose that service providers will facilitate access to stored content. UMG's narrow reading would render the safe harbor a nullity for modern web platforms. Second, the court found Veoh did not have the disqualifying 'actual knowledge' or 'red flag' awareness under § 512(c)(1)(A). It held that a service provider's general knowledge that its platform could be used to host infringing material is insufficient. The DMCA requires knowledge of specific infringing activity, placing the burden of identifying such material squarely on copyright holders through the notice-and-takedown process. Requiring providers to police their services based on general awareness would contradict § 512(m), which states that safe harbor protection is not conditioned on monitoring. Third, the court concluded Veoh did not have the 'right and ability to control' the infringing activity under § 512(c)(1)(B). Rejecting the standard from common law vicarious liability, the court held this prong requires 'something more' than the ability to remove or block access to user-posted material. To hold otherwise would create a 'Catch-22' where the very ability to comply with a takedown notice would disqualify a provider from the safe harbor. This control requires 'substantial influence' over user activities, such as actively inducing infringement or exercising high levels of control over user content, which Veoh did not do.
Analysis:
This decision significantly strengthened the DMCA safe harbors for user-generated content platforms, clarifying that essential, automated technical processes for making content accessible do not disqualify a service from protection. By setting a high bar for what constitutes disqualifying 'knowledge' and 'control,' the ruling solidified the principle that copyright holders bear the burden of identifying specific infringements. This precedent protects platforms like YouTube and social media sites from potentially crippling liability for their users' actions, thereby fostering innovation and the growth of online services that rely on third-party content. It established that the fundamental architecture of modern content-sharing sites is compatible with the DMCA's protective framework.
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