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Article: Second Circuit Provides Much-Needed Guidance to ISPs Seeking DMCA Safe Harbors for New Technologies

November 01, 2016
Business Litigation Reports

A recent decision from the U.S. Court of Appeals for the Second Circuit provides ISPs seeking to introduce new technologies much-needed guidance concerning the scope of statutory copyright liability safe harbors. In Capitol Records, LLC v. Vimeo, LLC, the Second Circuit unanimously found that Vimeo, a website for sharing user-generated videos, was protected from copyright liability by the “safe harbor” provisions of the Digital Millennium Copyright Act of 1998 (“DMCA”), 17 U.S.C. § 512(c)—even for videos that included sound recordings fixed before February 15,1972, which are not protected by federal copyright law.

The emergence of the internet in the 1990s led Congress to realize that copyright law was not well suited to the digital era—while the internet made it easier to disseminate copyrighted material by simply posting it on a website; holding websites liable for their users’ activities could stifle innovation. Congress thus recognized that “without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet.” S. Rep. No. 105-190, at 8 (May 11,1998).

In an effort to solve this problem, Congress unanimously enacted the DMCA in 1998 to update copyright law for the digital age based upon a broad consensus among technology companies, service providers and content owners. This included providing service providers with statutory “safe harbors” from liability: Section 512(c) of the DMCA established a “notice-and-takedown” regime by which a service provider that meets certain threshold criteria cannot be held liable for “infringement of copyright” if, among other things, it “expeditiously” removes content specifically identified in a copyright holder’s takedown notice. 17 U.S.C. § 512(c)(1)(C) & (c)(3).

The DMCA also provides that a service provider cannot avail itself of safe harbor protection, even without receiving a takedown notice, if it fails to remove copyrighted content after it becomes “aware of facts or circumstances from which infringing activity is apparent,” 17 U.S.C. § 512(c)(1)(A)(ii), often referred to as “red flag” knowledge of infringement. However, service providers are not required to monitor for, or affirmatively seek, facts evidencing infringing activity. 17 U.S.C. § 512(m).

Music Companies Lawsuits Against Vimeo
Vimeo operates an online video-hosting and video- sharing platform that allows its users to upload, share and watch original, creative videos ranging from family slideshows to professional films. As of 2012, Vimeo hosted more than 31 million videos, with 43,000 new videos uploaded every day. While Vimeo does not prescreen videos before they are uploaded, Vimeo’s “Community Team” of employees would sometimes “interact” with videos they came across— for example, by “liking” a video, commenting on a video, or selecting a video in its “Staff Picks” channel.

In December 2009, two sets of plaintiffs—the owners of copyrights in certain musical compositions (“EMI”) and sound recordings (“Capitol”)—filed lawsuits against Vimeo, alleging that videos located at 199 URLs hosted by Vimeo contained their copyrighted songs and thus infringed their copyrights under federal and state law. Among these 199 videos were: (1) 18 videos that Vimeo employees “interacted” with and included nearly the entirety of the song; and (2) 20 videos that included sound recordings that were fixed before February 15, 1972, which are protected by state rather than federal law. See 17 U.S.C. § 301(c) (“With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067”). Neither EMI nor Capitol had sent Vimeo any takedown notices for the 199 videos.

After discovery, the parties filed competing motions for summary judgment in the district court on the limited issue of whether Vimeo was entitled to safe harbor. EMI and Capitol argued that Vimeo was not protected by safe harbor because: (1) Vimeo had “red flag” knowledge of infringement for all of the videos with which its employees interacted; and (2) in any event, the videos containing pre-1972 sound recordings are not eligible for DMCA safe harbor at all because Section 301(c) prohibits courts from limiting any state law rights in pre-1972 sound recordings. Vimeo countered that: (1) it did not have “red flag” knowledge of infringement for videos with which its employees interacted because awareness that a song was used in a video does not necessarily mean awareness of an infringing use; and (2) the DMCA’s safe-harbor provisions apply to pre-1972 sound recordings because the DMCA applies to all claims of “infringement of copyright,” including state law copyright claims.

The Courts and the U.S. Copyright Office Weigh In 
At the time the parties filed their motions, no federal appellate court had yet ruled on whether DMCA safe harbor could apply to claims of infringement of pre-1972 sound recordings. A New York state appellate court had held that DMCA safe harbor protections could not apply to pre-1972 sound recordings because such an interpretation would “directly violate” Section 301(c)’s language prohibiting the limitation of state law rights in pre-1972 recordings. UMG Recordings, Inc. v. Escape Media Grp., Inc., 107 A.D.3d 51, 57 (N.Y. App. Div. 2013). But a federal district court in New York had reached the opposite conclusion, holding that “the DMCA applies to sound recordings fixed prior to February 15, 1972” because the DMCA applies to any “infringement of copyright,” which includes state law copyright. Capitol Records, Inc. v. MP3tunes, LLC, 821 F. Supp. 2d 627, 640-42 (S.D.N.Y. 2011).

In 2011, the Copyright Office published a comprehensive report on the state of pre-1972 sound recordings. United States Copyright Office, Federal Copyright Protection For Pre-1972 Sound Recordings (2011), available at pre-72-report.pdf. In that report, the Office argued that, while Congress should federalize pre-1972 sound recordings, Section 301(c), as enacted, prohibited any provisions of the Copyright Act to impede state law rights, including though DMCA safe harbor. Id. at 132. Criticizing the MP3tunes decision, the Copyright Office suggested the court there had misconstrued the statute and argued that any extension of the DMCA was “for Congress, not the courts” to determine. Id.

The District Court Issues a Mixed Decision for Vimeo
In a September 2013 ruling, the district court held that Vimeo satisfied the threshold requirements to qualify for safe harbor. Capitol Records, LLC v. Vimeo, LLC, 972 F. Supp. 2d 500, 510-17 (S.D.N.Y. 2013). The court granted summary judgment to Vimeo on the vast majority of videos at issue on the ground that there was insufficient evidence Vimeo was even aware of their existence, and thus did not have the requisite knowledge for liability. Id. at 519-25. But the court carved out two exceptions.

First, as to whether Vimeo had “red flag” knowledge of the 18 videos with which Vimeo employees “interacted,” the district court noted that a service provider can claim safe harbor only if it is not aware of facts or circumstances that would make a specific act of infringement “obvious” to a reasonable person. Id. at 520, (quoting Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19, 30 (2d Cir. 2012)). In determining whether Vimeo had “red flag” knowledge, the district court ruled that because 18 of the videos at issue included “popular” songs performed by “well-known” artists in their near “entirety,” and because Vimeo staff had “interacted” with, and thus were aware of, the existence of these videos, a question of fact existed as to whether these videos were “obviously” infringing and thus not eligible for safe harbor protection. Id. at 521-23. The district court thus ruled that Vimeo would have to go to trial on whether it could claim safe harbor protection for these 18 videos.

Second, in a brief discussion, the district court relied on UMG Recordings and the Copyright Office’s report in concluding that Section 301(c) of the Copyright Act barred a safe-harbor defense for alleged infringement of pre-1972 sound recordings. Id. at 536-37.

Upon Vimeo’s request, the court certified its order for interlocutory appeal, and the Court of Appeals for the Second Circuit agreed to address these issues.

The Decision on Appeal
Pre-1972 Sound Recordings. In a 55-page opinion authored by Judge Pierre Leval, the Second Circuit addressed the status of pre-1972 sound recordings and held that liability for state law copyright claims was “indisputably” liability for “infringement of copyright,” for which the DMCA provides a safe harbor. Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78, 89 (2d Cir. 2016). Rather than contort the DMCA into a “strained” reading, the correct conclusion was that “Congress meant exactly what it said” when it crafted the DMCA as the governing standard for the obligations of online service providers toward material uploaded to their services by users. Id. Most critically, an alternative interpretation of the statute permitting state law copyright claims against DMCA-compliant services would “substantially defeat” the DMCA’s purpose, requiring online services to “incur enormous expenses to monitor all postings” or else face state law liability, despite Congress’s express declaration that such a duty was unnecessary. Id. at 92-93.

The Second Circuit also specifically addressed the Copyright Office’s report on pre-1972 works, stating that the report’s conclusion about safe harbor was based on a “misreading” of the statute. Id. at 89. The Second Circuit instead clarified its prior holdings (which the Copyright Office had cited) and held that, in light of the DMCA’s plain text and the “purposes the text was intended to achieve,” there was “no reason to doubt” that DMCA safe harbor extended to pre-1972 sound recordings. Id. at 90. Finding the Copyright Office’s report not entitled to deference because it was not “reasonably persuasive,” the court vacated the district court’s ruling on the availability of DMCA safe harbor as a defense for pre-1972 sound recordings, holding that Vimeo could seek safe-harbor protection for videos containing such recordings. Id. at 93.

Red Flag” Knowledge. Pointing out that the DMCA specifically excuses service providers from the duty to “affirmatively seek” signs of infringement, the Second Circuit ruled that merely viewing a video containing a “recognizable” song, even in its entirety, is “insufficient for many reasons” to make infringement “obvious” and create a question of fact as to safe harbor. Vimeo, 826 F.3d at 94.

The Second Circuit directed courts to be mindful of the proper allocation of burdens of proof, and while defendants bear the burden of establishing entitlement to safe harbor, disqualification based on knowledge falls on the plaintiff. Id. at 95. Otherwise, service providers would be forced to “provid[e] affidavits of every person who was in its employ during the time the video was on its site, attesting that they did not know of the infringement and did not know of the innumerable facts that might make infringement obvious.” Id. at 94. The approach most consistent with the statute, the court held, was to require copyright owners “to demonstrate that the service provider acquired knowledge of the infringement, or of facts and circumstances from which infringing activity was obvious,” in order to defeat a prima facie safe harbor defense. Id. at 95.

The Second Circuit also rejected the lower court’s “recognizable” standard as oblivious to the practical challenges of service providers tasked with hiring employees to evaluate accused infringing content. Because employees of an internet service bring different knowledge and experience to their work, a song’s being “recognizable” is insufficient to support liability, as “60-year-olds, 40-year-olds, and 20-year- olds, even those who are music lovers, may know and love entirely different bodies of music.” Id. at 96. Therefore, the proper test for whether infringement is obvious is from the perspective of “a hypothetical ordinary individual who has no specialized knowledge of the field of music.” Id. Likewise, employees of services like Vimeo “cannot be assumed to have expertise in the laws of copyright.” Id. at 96-97. The Second Circuit concluded that “a showing by plaintiffs of no more than that some employee of Vimeo had some contact with a user-posted video that played all, or nearly all, of a recognizable song is not sufficient to satisfy plaintiffs’ burden of proof that Vimeo forfeited safe harbor by reason of red flag knowledge with respect to that video.” Id. at 97.

Current Status. Following the decision, the plaintiffs moved for panel and en banc reconsideration, which were denied. Capitol plans to file a petition for certiorari to the Supreme Court on the issue of pre-1972 sound recordings. That petition will likely come before the Court for consideration in early 2017. (On October 25, another Second Circuit panel followed the Vimeo decision in affirming the district court’s ruling in MP3tunes that DMCA safe harbor protection is available for pre-1972 sound recordings. EMI Christian Music Group, Inc. v. MP3tunes, LLC, No. 14-4369-cv(L), slip op. at 20 n. 6.)

Safe harbors are not safe unless their boundaries are reasonably clear. While written to provide broad protection to online services, the DMCA does not always draw such precise lines, and courts have had to step in to provide the certainty that online services require to run their businesses and introduce innovative technologies. As the Second Circuit succinctly put it, Congress’s “failure to prescribe a roadmap” in analyzing safe harbor has left courts to “muddle through.” Vimeo, 826 F.3d at 94. In the present political environment, it appears unlikely that the conditions that enabled Congress to unanimously enact the DMCA 20 years ago will arise again any time soon. In the meantime, the Second Circuit’s decision in Vimeo provides much-needed guidance for courts interpreting the DMCA to ensure that the law effectuates Congress’s intent that online companies which play by the rules and take the required statutory steps to combat infringement by users of their sites can rely upon statutory safe harbors in conducting their businesses. As technology continues to evolve, courts will continue to play an important role in defining the meets and bounds of the safe harbors that are vital to our digital economy.

Quinn Emanuel represented Vimeo in the matter detailed above.