copyright alert www.fenwick.com
In an important decision upholding the application of
the safe harbors of the Digital Millennium Copyright
Act and addressing claims against investors for
secondary copyright infringement, the Ninth Circuit
Court of Appeals on Tuesday upheld summary
judgment and a Rule 12(b)(6) dismissal in favor of
Veoh Networks Inc. and its investors. UMG Recordings,
Inc. v. Shelter Capital Partners LLC (No. 09-55902);
UMG Recordings, Inc. v. Veoh Networks, Inc. (Nos. 09-
56777, 10-55732) (9th Cir. Dec. 20, 2011).
Defendant Veoh operates a website that allows
users to upload and share video content that they
have created; Veoh’s site also allows users to view
authorized video content from major copyright holders
such as SonyBMG, ABC and ESPN. Plaintiff UMG is
one of the world’s largest recorded music and music
publishing companies. It also produces music videos.
Veoh had implemented what appeared to be an
energetic program to block infringing content,
observing the take-down protocols of the DMCA and
also implementing content filtering using Audible
Magic fingerprinting. Nonetheless, UMG sued for
direct and secondary copyright infringement, decrying
Veoh’s efforts as “too little too late.” UMG also
asserted Veoh’s investors bore secondarily liability
on account of their control of the company. In 2008,
the District Court granted summary judgment to Veoh
and dismissed the claims against its investors. UMG
Recordings, Inc. v. Veoh Networks, Inc., 620 F. Supp.
2d 1081 (C.D. Cal. 2008). The Ninth Circuit has now
affirmed that judgment.
Safe Harbor Rulings
The central issue was whether Veoh was protected
against copyright liability by virtue of the system
storage safe harbor of the DMCA (17 U.S.C.§ 512(c)).
A unanimous Ninth Circuit panel comprised of Circuit
Judges Pregerson, Fisher and Berzon rejected UMG’s
three arguments that Veoh was ineligible for the safe
harbor.
The “Storage at the Direction of a User” Requirement
As a threshold matter, UMG asserted that the safe
harbor did not apply because UMG’s infringement
claims arose out of actions by Veoh other than
storage, and that these actions meant that the
infringements charged were not (as the safe harbor
specifies) “by reason of storage at the direction of a
user.”
Whenever a video was uploaded, Veoh’s software
automatically broke the file into smaller 256-kilobyte
“chunks”; it automatically transcoded video files into
Flash 7 format; and (for some users) Veoh’s software
also automatically converted the uploaded video
into Flash 8 and MPEG-4 formats. Further, Veoh’s
technology allowed users to stream the video content
for viewing and also to download videos. UMG
contended that these automatic processes to facilitate
public access to user-uploaded videos went beyond
mere “storage” and were not at the direction of users.
Reasoning that the “by reason of” language of the
statute embraced a broader scope of infringement
causation than proximate cause, the Ninth Circuit held
that Ҥ 512(c) encompasses the access-facilitating
processes that automatically occur when a user
uploads a video to Veoh,” as well as the transmission
of videos to Internet users.
Actual Knowledge and “Red Flag” Test
Under § 512(c)(1)(A), a service provider cannot receive
safe harbor protection if has actual knowledge that
material on its system is infringing or if it is aware of
facts or circumstances from which infringing activity is
apparent (the “red flag” test).
UMG asserted that Veoh had disqualifying knowledge
of its hosting of infringing content given its general
knowledge that its services could be used to post
infringing matter, its tagging of videos as “music
videos,” its purchase of Google AdWords that included
the names of UMG artists to drive search traffic to
Veoh’s site, its removal of content in response to
Copyright Alert: UMG v. Shelter Capital/Veoh
Video Website and Its Investors Win Another Round
As Ninth Circuit Rejects DMCA Safe Harbor Challenges
by mitchell zimmerman*
