Federal Court Revives Landmark $1 Billion Viacom vs. YouTube Case

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In a potentially costly setback for Google, a federal appeals court on Thursday ruled that its YouTube video site must once again defend itself from a $1 billion copyright infringement lawsuit filed by Hollywood giant Viacom. The decision revives one of the most important Internet intellectual property cases of the last decade — a dispute that became a flashpoint in the ongoing struggle over copyright between big content companies and internet giants.

“This as a big loss for YouTube,” says Eric Goldman, Director of the High Tech Law Institute at Santa Clara University School of Law. “Viacom has to be jubilant. If nothing else they’ve pinned down YouTube for millions more money and months if not years of more litigation, when their case had been ruled dead.”

In its decision, the 2nd U.S. Circuit Court of Appeals in New York affirmed that the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA) protects online companies like YouTube from liability as long as they promptly remove infringing content upon notification. But the panel raised questions about whether YouTube had specific knowledge that such content existed on their site.

“We conclude that the District Court correctly held that [the safe harbor] requires knowledge or awareness of specific infringing activity,” the court wrote, “but we vacate the order granting summary judgment because a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing  activity on its website.”

The case dates back to March of 2007, less than a year after Google purchased YouTube for $1.65 billion. In its lawsuit, Viacom argued that YouTube’s explosive growth was based, in part, on users posting videos of Viacom’s programs, including South Park and The Daily Show. In its defense, Google argued that the DMCA protected YouTube from liablity because the site promptly takes down infringing content once it is notified. According to the DMCA, safe harbor protection applies if an Internet service provider like Youtube “responds expeditiously to remove, or disable access to, the material that is claimed to be infringing.”

(More: Viacom goes nuclear on YouTube)

In one respect, the appeals court ruling is a victory for Internet companies because it rejected an argument frequently advanced by Viacom and other big content companies that websites must take a more proactive role in policing their sites in order to earn DMCA protection. Currently, the burden lies on content companies to notify websites of infringing material, a requirement that goes to the heart of the recent battle over the Stop Online Piracy Act (SOPA), which aimed to shift the onus for monitoring web piracy onto Internet companies and away from rights-holders.

Public Knowledge, a D.C.-based public interest group, praised the court for rejecting Viacom’s attempt “to create a new duty of those hosting content to monitor actively for infringement in order to qualify for the law’s safe-harbor provisions.”’ (Public Knowledge deputy legal director, Sherwin Siy, expands on this point in a blog post here.) NetCoalition, an Internet industry group that represents Google, Yahoo, Amazon and other firms, echoed that sentiment: “The decision allows Internet companies to continue to rely on a legal framework that has fostered unprecedented growth and innovation, creating one of the truly bright spots of the U.S. economy.”

(More: SOPA Protests Gain Steam as Web Activists Flex Growing Clout)

It’s important to note that the case pertains to YouTube’s early days — before 2008, when the site began strict compliance with the DMCA. In his original ruling, U.S. Circuit Judge Louis L. Stanton found that “general knowledge that infringement is ‘ubiquitous’ does not impose a duty on the service provider to monitor or search its service for infringements.” But the appeals court ruled that if YouTube executives had “actual knowledge or red flag awareness” of specific examples of copyright infringement — or demonstrated “willful blindness” by not moving to remove infringing material as its growth skyrocketed — the company may lose its safe harbor protection.

On that score, YouTube may be vulnerable. In court filings, Viacom produced emails showing that YouTube founders Chad Hurley, Steve Chen and Jawed Karim were aware that infringing material was contributing to the company’s rapid growth. At one point, YouTube co-founder Chad Hurley emailed his colleagues: “Save your meal money for some lawsuits!” according to Viacom’s filing.

In a statement, Viacom touted the appeals court’s reversal as a vindication. “We are pleased with the decision by the U.S. Court of Appeals,” said a Viacom spokesperson. “The Court delivered a definitive, common sense message – intentionally ignoring theft is not protected by the law.”

For its part, YouTube emphasized that the appeals court had upheld the safe harbor protections of the DMCA. “All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube,” a YouTube spokesperson said. “Nothing in this decision impacts the way YouTube is operating. YouTube will continue to be a vibrant forum for free expression around the world.”

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