What happened? 

On Tuesday, the 9th Circuit Court of Appeals upheld a summary judgment in favor of Veoh Networks, a website that allows people to share video content online. Veoh had been sued by Universal Music Group (UMG) for copyright infringement. In upholding the ruling of the district court for the Central District of California, the 9th Circuit held that Veoh was protected by the so-called "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA), passed by Congress in 1998 to amend the Copyright Act for the online era.

What is the broader significance? 

The safe harbor provisions of the DMCA are the subject of two pending appeals involving high-profile litigants.

In 2006 several movie studios, led by Columbia Pictures, sued IsoHunt, a bit-torrent search engine, for secondary infringements of the Copyright Act. In 2007, the same year that UMG sued Veoh, two more copyright suits -- led by Viacom and the Football Association Premier League Limited -- were lodged against YouTube and Google.

All defendants asserted affirmative defenses under the DMCA safe harbor provisions. The federal court in the Southern District of New York accepted that defense in the YouTube suits; but in the IsoHunt suit, the federal court in the Central District of California granted summary judgment in favor of the plaintiffs. Appeals are underway in both cases.

The litigation is being closely watched by net-freedom advocates who argue that new legislation currently being debated in Congress, the Stop Online Piracy Act, could undercut the DMCA's safe harbor provisions in the future.

What did the 9th Circuit rule on safe harbor? 

The three-judge panel of the appeals court reviewed de novo the district court ruling, and rejected UMG's argument that the trial court incorrectly construed provisions of 17 U.S.C. 512(c), which sets out the conditions for safe harbor under the DMCA.

512(c)(1)

This section grants protection to those who infringe copyright "by reason of the storage at the direction of a user." UMG argued that the district court should have followed the narrow reading of "by reason of" adopted by the U.S. Supreme Court in the 1992 case Holmes v Securities Investor Protection. UMG claimed this would have excluded Veoh from safe harbor on the grounds that its website goes beyond "storage" when it facilitates public access to the user-uploaded content.

The appeals court distinguished the "by reason of" language in Holmes, explaining that it arose from legislation that Congress intended to be read narrowly, whereas Congress intended no such limitation with the DMCA. Moreover, the court found that limiting safe harbor to providers who did not facilitate public access to uploaded content would conflict with other parts of the safe harbor provisions.

512(c)(1)(A)

This section lays out the knowledge provisions that exclude service providers from the protection of safe harbor. UMG argued the district court should read these provisions to include situations where service providers have general awareness that their services could be used to share infringed material.

The court said that accepting UMG's argument would make the safe harbor provisions a "dead letter." Relying on its ruling in Perfect 10 v CCBill, the court concluded that the burden of determining whether uploaded materials were actually illegal was best placed on the copyright holders "who know precisely what materials they own."

512(c)(1)(B)

This section specifies that a service provider only receive safe harbor if it does not receive a direct financial benefit from the infringement activity when it "has the right and ability to control such activity." UMG argued the district court erred by refusing to read the common law vicarious liability standard into the "ability to control" language of the DMCA. UMG claimed that under this reading, Veoh would have fallen outside the safe harbor provisions because it did not "exercise its right to police" material uploaded to its site "to the fullest extent possible."

The appeals court again said UMG's reading of "ability to control" would fall afoul of CCBill, which concluded that the DMCA did not impose investigative duties on service providers but rather placed the burden of policing "squarely on the owners of the copyright."

What happens next? 

The YouTube and Isohunt cases have been argued and await decisions out of the 2d and 9th Circuits, respectively.

The case is UMG Recordings, Inc. v. Shelter Capital Partners in the 9th Circuit Court of Appeals, no. 09-55902

For UMG et al: Steven Marenberg of Irell & Manella.

For Veoh: Michael Elkin and Thomas Lane of Winston & Strawn.

The IsoHunt case is Columbia Pictures Industries et al v. Gary Fung et al in the 9th Circuit Court of Appeals, no. 10-55946.

The YouTube case is Viacomm Int'l v YouTube in the 2nd Circuit Court of Appeals, no. 10-3270 [Heard in tandem with The Football Association v. YouTube, no. 10-3342.]

(Reporting by Rebecca Hamilton)

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