Today the Ninth Circuit handed the Internet a bittersweet and crucial victory by affirming a district court's holding that the safe harbors created by the Digital Millennium Copyright Act (DMCA) protected Veoh, a now-defunct video hosting site, from copyright liability. The case has been pending since 2007, when Universal Music Group (UMG) sued Veoh based on allegedly infringing content in UMG music videos that Veoh users uploaded.  

It's a hefty decision, but here are some highlights:

The sweet: The appellate court squarely rejected UMG's assertion that the DMCA safe harbors do not apply to any service that "displays" or "distributes" copyrighted material rather than simply "storing" it. As EFF (with several other public interest groups) pointed out in an amicus brief on which the court expressly relied, every web hosting service "displays" and "distributes" the material that its users upload -- that's how the Web works. Quoth the court:

UMG's theory fails to account for the reality that web hosts, like Veoh, also store user-submitted materials in order to make those materials accessible to other Internet users.  The reason one has a website is so that others may view it.  As amici note, these activities define web hosting -- if the web host only stored information for a single user, it would be more aptly described as an online backup service.

If UMG's arguments had been accepted, virtually every hosting service could lose the DMCA safe harbors.  That, 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.

The court also dismissed UMG's claim that general awareness that one's site hosted some infringing videos is enough to deprive a service of the safe harbors. UMG's theories, the court explained, would render the safe harbors "a dead letter." Instead, the DMCA requires that service providers act expeditiously when they have specific knowledge of particular infringing activities -- such as information provided by a proper DMCA notice. That is consistent with Congress' intent in drafting the DMCA: to encourage service providers and copyright holders to cooperate in policing infringement but not, as the Ninth Circuit has repeatedly held, to shift the burden identifying and documenting infringement to service providers.

The bitter: The cost of defending the case effectively drove Veoh out of business years ago. If Hollywood manages to get Internet blacklist bills SOPA and PIPA passed, expect to see many more innovative startups meet the same sad fate -- or never get off the ground in the first place. UMG will doubtless claim that this decision is why it needs more arrows in its online enforcement quiver. Given that UMG never bothered to send a single DMCA notice to Veoh before filing suit -- meaning, it never bothered to take advantage of the tools it already had -- this case actually sends a very different message: Don't give Hollywood new ways to impede online innovation and expression.

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