Veoh Wins Important Case Against Universal Music Over DMCA Safe Harbors Again; But Is Still Dead Due To Legal Fees

from the a-sad-tale-of-copyright-destroying-innovation dept

We’ve written a few times about the sad case of Veoh. Veoh was a YouTube-like site, funded by Hollywood insiders like Michael Eisner, but who got sued by Universal Music Group, claiming copyright infringement (using more or less the same theories used by Viacom against YouTube). Technically, Veoh sued first (filing for declaratory judgment after receiving a threat letter from UMG, but UMG quickly followed with its own lawsuit). UMG played dirty, not just suing the company but directly suing its investors as well. This was a pure intimidation technique, designed to scare major investors into either pulling investment or ordering the company to change course, even if what they were doing was legal. While the court dismissed the charges against the investors (and scolded UMG in the process), the intimidation might have worked. In the middle of all of this, Veoh shut down, because it ran out of money, mainly due to the lawsuit. It sold off its assets to another party, and somehow scraped together a little money to keep the lawsuit, and just the lawsuit, going.

Since then, there have been a series of rulings that have repeatedly found Veoh to be legal and protected under the DMCA’s safe harbor. The district court found in Veoh’s favor, as did the 9th Circuit appeals court. Yesterday, the appeals court ruled again on the issue, with a superseding opinion that, once again, says that Veoh was legal. Even though it’s still dead. The ruling not only reiterates the importance of DMCA’s safe harbor protections for user-generated sites like Veoh, but also shows how that still applies even given the 2nd Circuit’s slightly weaker view of the DMCA safe harbors.

The court goes through a nicely detailed explanation for why Universal Music’s interpretation of the DMCA doesn’t make any sense at all and would not only create internal conflict within the law, but also make the safe harbors effectively meaningless. Specifically, Universal Music tries, ridiculously, to argue that DMCA safe harbors aren’t supposed to apply to any service that makes files accessible to the public. As the court points out, if that were the case, the law would be silly, since copyright holders would never learn about that infringement anyway, since the works wouldn’t be available for them to find. The court points out it’s ridiculous to think that DMCA safe harbors were only meant to apply to backup services.

We do not find persuasive UMG’s effort to reconcile the internal contradictions its reading of the statute creates by positing that Congress must have meant § 512(c) to protect only “web hosting” services. Web hosts “host” websites on their servers, thereby “mak[ing] storage resources available to website operators.” The thrust of UMG’s argument seems to be that web hosts do not undertake the sorts of accessibility-facilitating functions that Veoh does, and thus the services they perform “fit within the ordinary meaning of ‘storage,’” and thereby “harmoniz[e]” with the notice and takedown procedures. 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 access activities define web hosting – if the web host only stored information for a single user, it would be more aptly described as an online back-up service.

The court also rejects a theory — popular among some of our maximalist commenters — that the DMCA was only intended for purely “web hosting” companies, rather than being broadly applied across various online services such as user-generated service providers. As the court noted, if Congress wanted to limit the safe harbors in that manner, it would have said so: “Had Congress intended to include such a limitation, it would have said so expressly and unambiguously.”

The next damaging part for Universal Music: Veoh was really good at taking down videos when it received DMCA notices. UMG tried to argue that Veoh had knowledge of infringing works on its site that it didn’t remove. This argument is the crux of the YouTube/Viacom case as well: is “actual knowledge” from DMCA notices, or what kind of knowledge creates “red flag” awareness. The DMCA can be read in self-contradictory ways at points. For example, it says that a provider only has to takedown content if it receives a DMCA notice that follows somewhat strict procedures. But, then, also talks about if there’s “red flag” awareness. Take both literally, and you could, for example, wonder what happens if someone sends an improperly structured DMCA notice (say, missing certain elements), but indicates infringing works, nonetheless. Is that “red flag” knowledge? Here, as in the YouTube case, though, UMG relies on a much broader definition of red flag knowledge, in which it kind does a “but they must have known!” sort of thing. It’s basic argument: there was music on Veoh, and Veoh had to know that was infringing. The court is not buying it. First of all, just because there’s music, it doesn’t mean it’s infringing.

As an initial matter, contrary to UMG’s contentions, there are many music videos that could in fact legally appear on Veoh. “Among the types of videos subject to copyright protection but lawfully available on Veoh’s system were videos with music created by users and videos that Veoh provided pursuant to arrangements it reached with major copyright holders, such as SonyBMG.” Further, Congress’ express intention that the DMCA “facilitate making available quickly and conveniently via the Internet . . . movies, music, software, and literary works” – precisely the service Veoh provides – makes us skeptical that UMG’s narrow interpretation of § 512(c) is plausible. S. Rep. No. 105-190, at 8. Finally, if merely hosting material that falls within a category of content capable of copyright protection, with the general knowledge that one’s services could be used to share unauthorized copies of copyrighted material, was sufficient to impute knowledge to service providers, the § 512(c) safe harbor would be rendered a dead letter: § 512(c) applies only to claims of copyright infringement, yet the fact that a service provider’s website could contain copyrightable material would remove the service provider from § 512(c) eligibility.

Later on, the court makes a key point that we’ve reiterated over and over again — every time copyright holders and maximalists insist that service providers need to become copyright cops — that the service can’t become copyright cops because they have no idea if stuff is actually authorized or not:

Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.

That message is something that the various lawyers representing MPAA and RIAA affiliated companies should be forced to write on a blackboard over and over again until the point is driven home.

Of course, in the YouTube case, with the original district court ruling, there were similarly strong statements, but the 2nd circuit walked it back somewhat, suggesting that a different standard need apply to “red flag” knowledge. Here the court points out that, even if that’s true, Universal Music would need to show a lot more to prove any red flag knowledge.

Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge. See Viacom Int’l v. YouTube…. Even viewing the evidence in the light most favorable to UMG as we must here, however, we agree with the district court there is no evidence that Veoh acted in such a manner. Rather, the evidence demonstrates that Veoh promptly removed infringing material when it became aware of specific instances of infringement. Although the parties agree, in retrospect, that at times there was infringing material available on Veoh’s services, the DMCA recognizes that service providers who do not locate and remove infringing materials they do not specifically know of should not suffer the loss of safe harbor protection.

The ruling goes on in this nature. It’s definitely a good ruling that lays out, yet again, why the DMCA safe harbors protect internet companies, and blasts holes in the silly theories of some of the big legacy players that have tried to wipe out those safe harbors. It does send one small issue back to the lower court — an exploration of whether or not Veoh is due certain fees (excluding attorneys fees). This is more of a procedural issue than anything else.

So, once again, Veoh has proven that internet services like it are protected by the DMCA from being blamed for users infringing. And yet, the fact that it had to effectively shut down and just sell off its assets, is a reminder of just how much the big copyright players can stifle and kill off innovative services via copyright law, even when they have no case.

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Companies: umg, universal music group, veoh, viacom, youtube

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Comments on “Veoh Wins Important Case Against Universal Music Over DMCA Safe Harbors Again; But Is Still Dead Due To Legal Fees”

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Anonymous Coward says:

It may be a win for Veoh but its also a win for the copyright holders as they got what they wanted in the fact Veoh is out of business.

Just goes to show that the copyright holders can bully and threaten someone with legal action and take the someone to court just to get the someone bankrupt and out of business to get rid of the competition even if the they knew that the someone was not doing anything illegal.

out_of_the_blue says:

At times, you describe Congress as clueless if not backward.

But when you need to slant an item against copyright, you take the position that super-brilliant Congress left huge loopholes on purpose.

Anyway, the conflict here arises more from well-established copyright than from new-fangled DMCA terms. I’m forced to side with Big Media that Congress didn’t actually intend loopholes that lett “file hosting” sites “legally” serve out unlimited infringing content to any number of users with no responsibility when it’s obvious that’s happening.

Mike always wants “safe havens” for pirates. So it’s his basic pro-piracy position of effectively doing away with copyright that he’s yet again arguing here. Rest is just fog to cover that. — And now his piratey fanboys who want free content can deny it.

Take a loopy tour of! You always end up at same place!
Where Mike “supports copyright” — except when he supports piracy.

out_of_the_blue says:

Re: At times, you describe Congress as clueless if not backward.

PS: I don’t agree with all of UMG’s legal position. I think their lawyers screwed it up severely with quibbling weenie-isms instead of fundamental law. UMG should have taken the position of my 2nd para and show where DMCA (as written by clueless idiots) undermines copyright.

PaulT (profile) says:

Re: At times, you describe Congress as clueless if not backward.

“Mike always wants “safe havens” for pirates.”

And innocent people and useful services that are doing nothing illegal. More accurately, he wants exceptions to force idiots like you to go after the people actually committing the crime, rather than some random service providers. Somehow, you always forget them in your race to claim everyone is guilty.

Anonymous Coward says:

Re: At times, you describe Congress as clueless if not backward.

You are just naffed off that the ruling didn’t go in your favour.

If Big Media and Congress didn’t intend for loopholes that let “file hosting” sites “legally” serve out unlimited infringing content etc. then they shouldn’t have allowed for loopholes in the first place. It must be really hard work for them to get their finger out of their backside and to close these loopholes to their advantage. Oh wait there are other important things for them to do right so don’t hold your breath waiting for them to write up new laws and force into law to close the loopholes.

Englebert the Immensely Well Endowed In Trouser Sn says:

Re: At times, you describe Congress as clueless if not backward.

I’m forced to side with Big Media

You’re not forced – you choose to.

In the same way, I’m sure you’d choose to disbelieve that, statistically, the majority of music is not under copyright and so there’s a whole lot of music that can legally be on a web hosts server.

Beech says:

Re: At times, you describe Congress as clueless if not backward.

Ootb owns a store. I walk in, look at the shelves for a bit, then initiate a drug deal with an undercover cop. Before he can slap the cuffs on, I run and get away clean. By Ootb’s own logic he should be the one arrested and sent to jail because it “should have been obvious” drug deals were going on in his store, then sued for every penny he has and any penny he may earn at any point in the future. If it doesn’t make sense in meatspace, it doesn’t make sense on the internet.

PaulT (profile) says:

Glorious, so at least we have more facts to defend with when the trolls start claiming Veoh were shut down for criminal behaviour (as a couple of them have tried claiming about the perfectly legal recently).

Rewriting history to pretend they’ve always been on the right side of history instead of wrong at every step seems to be the most recent tactic.

AzureSky (profile) says:

Re: Re: Re:

sorry to have to say this, as i dislike modern repuglicans, but the repug party was the one for freeing slaves(endling slavery), dem’s back then(or what became dem party) where the ones pushing hard to keep their slaves….

pretty fucked up if you look how it is today….then again, republicans where the first to size with the people against pipa/sopa and many dem’s kept supporting it even after it was clearly dead…..

Anonymous Coward says:

whenever the entertainment industries see something that could threaten their monopoly, they take this course of action. bear in mind, it is all done with the blessing of the government and the politicians who are paid a lot of money to look the other way and allow this extortion practice exist. what should happen is that the industries that brought the law suit, then lost, should not only be forced to pay all fees and compensation to the winners, they should also be forced to fund what has been shut down because of their false actions. that would not only be fair, it would rub salt into the wound as well and hopefully slow down the desire to make all but their own business offerings available by taking court action when they have no right to do so.

Anonymous Coward says:

The people who filed the lawsuits should have to pay massive punitive damages to the investors they sued. It’s clearly written the law that you CANNOT sue investors for what wrong doing the corporations they invest in do. You have to sue the corporation itself, and possibly an employee or two doing the wrong doing.

Add that on top of the fact that there was no wrong doing, and this just becomes even more outrageous.

Aidian Holder says:

Re: Bad law doesn't become good because it works once

I dunno if I’d personally want to take a strong stand in favor of the corporate liability shield. It is used all the time to let real scumbags get away with their bankroll intact — in everything from Enron-scale corruption down to your local crooked insurance agent or mechanic — it’s used to make sure that whatever happens, the bad guys won’t have to give up their ill-got gains, because it was the company at fault.

Mason Wheeler (profile) says:

The ruling not only reiterates the importance of DMCA’s safe harbor protections for user-generated sites like Veoh, but also shows how that still applies even given the 2nd Circuit’s slightly weaker view of the DMCA safe harbors.

Wrong. Absolutely and completely 100% inside out, wrong. The DMCA’s “safe harbor” “protection” neither kept Veoh safe nor protected it from anything; it was what killed Veoh by legally establishing a doctrine of ambiguity in which providers might be found liable depending on whether or not certain conditions are met.

If there had been no DMCA and no Safe Harbor, service providers would be operating under the older and more benevolent Common Carrier doctrine, in which they cannot be held liable for transmitting illegal content, period, so long as they treat all content fairly.

If there was no DMCA, that would long since be the established case law, and this lawsuit would never have been filed. And if it had, they’d have been laughed out of court just as fast as someone who tried to sue Fedex or UPS for shipping a gun that was later used to kill somebody, and for the same reason.

All the Safe Harbor does is create chilling effects, secondary liability, and extrajudicial law enforcement in the form of the abominable “DMCA takedown” system, and it’s a bit astounding the way people who care about the Internet continue to talk about it as if it were somehow a good thing.

special-interesting (profile) says:

The tactic for attacking around the fringe of a, publicly controversial, concept under siege is effective. It is the same tactic used to splinter off a digital letter sent over a wire and a physical letter from firmly established constitutional law. What is the price of vigilance anyway?

The (sneaky?) arguments used by UMG to misdirect from Safe Harbor legal cannon by obfuscation through increased technical detail should fall flat. It is unfortunate that it took the courts so long as to red-line the very firm defending such.

Its kind of ironic that big wigs like Eisner suffered this huge DMCA kick in the face. I wonder if this will change any internal corporate minds about the eternal copyright monopoly’s on the loose today. -skepticism-

I do hope Veoh has some legal recourse left in recouping legal fees.

For the life of me I cannot find any support for the DMCA take-down notice thing whatsoever. It ignores so much more than just free speech is just so hard to comprehend it breaks my head just to try.

(Scathing opinion) If anyone has any beef or truck with a website (or anyone!) they must prove it under judicial review. Or why even have a Justice branch at all? It seems so weak as to be ready to fall off the three branch tree we call division of (federal government) powers. They seem more interested in the internal rule violation enforcement than chewing on the meat of monopolistic corporate ill we suffer from lately. Not a bad thing, in itself, but is that all?

Example: The current Prenda scandal. Will they be put in jail or sued out of existence for the likely racial (and or other specifically targeted vulnerable social groups) vulture-like profiling? Probably not. Jail or at least large fines for submitting false documents? Likely.

Please vote out the entire copyright amendment and start from scratch. So bloated with corruption and current ancillary law to burden society with. The legal expense of copyright civil law being supplanted with criminal law is as damaging, and even more far reaching, as the Drug Wars have been to society. (Such incalculable loss/expense might, in reality, even eclipse the ridiculous trillion dollar media loss submitted to congress.) Why even engage in a religiously rooted concept anyway??

If any group supports such legally enforced nonsense as the DMCA… they need to go out of business now. Good riddance. -washes hands-

I have already stated my belief that the **AA’s seem more like criminal agencies than real associations that actually benefit society in any way. Any candidate that accepts contribution from these groups is an instant no vote and or impeachment at a later date. (Don’t forget to throw out the purchased appointee slots/positions.)

Anonymous Coward says:

so at least we have more facts to defend with when the government officials starts claiming Veoh were shut down for criminal behavior (as a couple of them have tried claiming about the perfectly legal recently). Rewriting history to pretend they’ve always been on the right side of history instead of wrong at every step seems to be the most recent tactic.

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