UMG v. Veoh
Like many other companies that host content on behalf of users, video-hosting service Veoh has been bedeviled by copyright lawsuits. The copyright owners make the same argument in each of these suits: the hosting service should be liable for every infringing bit uploaded by naughty users and responsible for the full cost of policing for infringement. Fortunately, Congress enacted the DMCA's safe harbor provisions back in 1998 to protect service providers from exactly these risks--offering immunity from copyright damages to those who implement a notice-and-takedown system and comply with the other requirements of the law. By reducing the legal uncertainty that would otherwise apply, Congress created the innovation environment that has made YouTube, Flickr, eBay, Blogger, and myriad other hosting-based services possible.
In 2007, Universal Music Group (UMG) sued Veoh in an effort to hold the company responsible based on user uploading of UMG music videos. In 2009 UMG lost, with the court concluding that Veoh was protected by the DMCA safe harbors and setting an important legal precedent for all user-generated content ("UGC") hosting services. However, the legal fees helped drive Veoh out of business. Nevertheless UMG pressed an appeal against Veoh, trying to overturn the legal precedent and re-write the DMCA safe harbors. EFF filed an amicus brief supporting Veoh in the appeal.
Perhaps most chilling was UMG's assertion that the DMCA safe harbors simply do not apply to any service that "displays" or "distributes" copyrighted material, rather than simply "storing" it. Of course every web hosting service "displays" and "distributes" the material that its users upload--that's how the Web works. So if UMG's arguments had been accepted, virtually every hosting service would lose the DMCA safe harbors, which in turn would mean that it would be too dangerous to host content without first clearing every bit with every conceivable copyright owner. If this were the law, the Web would be transformed from an open platform for amateur creativity into something a lot more like television where nothing gets on the air until every clip is "cleared" by an army of lawyers.
Fortunately, the Ninth Circuit Court of Appeals disagreed with UMG and affirmed the trial court's ruling in favor of Veoh. The court issued an initial opinion in December 2011, and then reissued the opinion in March 2013, in view of the intervening decision in Viacom v. YouTube. The 2013 opinion rejected UMG's claim that the safe harbors only apply if user-uploaded material is "stored" but not displayed. The opinion relied on EFF's amicus brief to reach that conclusion. The court also rejected UMG's argument that the mere presence of a music video was a "red flag" indicating that copyrighted material was on Veoh's website.
The lawsuit against Veoh was just one of several where major entertainment industries were pressing the courts to re-write the DMCA safe harbors in a manner that would radically increase the copyright risks to online hosting providers, and thereby shift the costs of copyright enforcement onto those providers. More legal risks for service providers means less opportunity for free expression online.