VIACOM V. YOUTUBE: The Main Event
The Contestants: Viacom International vs. YouTube and Google
Background
In 2007, Viacom, the global mass media company, filed a lawsuit in U.S. District Court in New York against YouTube and its then-new owner, Google, Inc., alleging that YouTube had engaged in copyright infringement by allowing its users to upload and view thousands of videos owned by Viacom without its permission. Since the lawsuit was filed, YouTube has continued to grow and attract enormous numbers of users. In fact, YouTube is now included in Billboard magazine’s charts, as it has become a preferred destination for music and music videos. The case, Viacom International, Inc. v. YouTube, Inc., which could have a significant impact on YouTube and other similar services, is still going strong after six years of litigation. Like a great title prize fight, there have been victories and setbacks for both sides during the case. So, will this titanic clash between the two media giants be resolved any time soon?
Round One—The Complaint
In its Complaint filed in 2007, Viacom claimed that YouTube had infringed on its copyrights by performing, displaying, and reproducing Viacom’s copyrighted works. It characterized this as “brazen” and “massive” copyright infringement. The lawsuit, which sought $1 billion in damages, alleged that over 150,000 unauthorized clips of Viacom’s programming, such as SpongeBob SquarePants and The Daily Show, had been made available on YouTube, and that these clips had collectively been viewed more than 1.5 billion times. Most significantly, the lawsuit alleged that YouTube engaged in, promoted and induced the infringement, and that they had deliberately built up a library of infringing works in order to increase YouTube’s site traffic (and, consequently, its advertising revenue).
Even though YouTube implemented a “Content ID filtering system” to automatically identify and prevent uploading of certain copyrighted materials in 2008, Viacom did not agree to dismiss the lawsuit (although it is not seeking damages for infringements after that date). It still seeks a judgment that YouTube/Google are liable for copyright infringement.
At the core of the case is the extent to which Section 512 of the Copyright Act, also known as the Digital Millennium Copyright Act (“DMCA”), particularly its “Safe Harbor” provision for internet service providers, provides YouTube (and other content hosts) with immunity from copyright infringement liability for the infringing posts of its users. DMCA, which became effective in October 1998, set up a system whereby an internet service provider (“ISP”) would not be liable for copyright infringement for materials posted by a third party on the ISP’s site merely because it provided the “conduit” for a user to post infringing material, as long as a mechanism was put into place to enable a party which claims that its content has been posted unlawfully to demand that it be taken down. The immunity provisions of DMCA do not apply when an ISP posts materials itself.
YouTube, of course, claimed that DMCA shields it from immunity, as it did not “post” any of Viacom’s content to the YouTube site, but merely provided the platform on which its users posted (and continue to post) such content. Viacom claimed that YouTube encouraged and, in any event, clearly was aware that such infringing content was being posted on a massive scale by its users and, as such, YouTube should not be able to cloak itself with the immunity bestowed by DMCA.
Round Two—The First District Court Ruling
Judge Louis Stanton, the U.S. District Court judge presiding in the case, granted Google/YouTube’s motion for summary judgment seeking dismissal of the case in 2010. For you non-lawyers, a “summary judgment” essentially says that, viewing the facts most favorably to the party not seeking the summary judgment, such facts would not amount to a violation of the law. Judge Stanton agreed that DMCA’s immunity provisions shielded YouTube from liability.
Round Three—The First Appeal
Viacom appealed that decision to the United States Court of Appeals for the Second Circuit. In 2012, the Second Circuit overturned in part the lower court’s summary judgment ruling and ordered that the lower court rehear certain aspects of the case. Last month, the Judge Stanton again granted summary judgment in favor of YouTube and once again that decision has been appealed.
In the original 2010 summary judgment ruling, Judge Stanton agreed that YouTube undeniably had general knowledge that some copyrighted material had been uploaded by its users. However, the court felt that YouTube did not know which clips had been uploaded with permission and which had not. Judge Stanton also said in his ruling that mandating video-sharing sites to proactively police every uploaded video “would contravene the structure and operation of the DMCA.” As evidence that the notification and takedown procedures specified by DMCA were effective, Judge Stanton noted that YouTube had successfully addressed a mass take-down notice issued by Viacom in 2007. Significantly, Judge Stanton felt that YouTube’s actions were not comparable to those of other Internet-based, media-sharing companies, such as Grokster, that had previously been found guilty of indirect copyright infringement.
In the original appeal to the Second Circuit following Judge Stanton’s grant of summary judgment the first time, Viacom (by then joined by other plaintiffs in the case, including the English Premier Soccer League), focused on a series of internal emails among YouTube employees who made clear in those e-mails that they were aware of infringement, including specific instances. The District Court previously had indicated that such actual knowledge could be considered to be sufficient to disqualify YouTube from DMCA’s immunity.
The Second Circuit, finding merit in those arguments, reversed Judge Stanton’s grant of summary judgment, and held that a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website and that the right and ability to control infringing activity need not require knowledge of specific infringements. While the Second Circuit overturned the lower court’s granting of summary judgment in favor of Viacom, its ruling ordering the case back to the lower court was limited. The court did reject Viacom’s argument that YouTube automatically would not be entitled to the immunity simply because YouTube’s software allowing users to upload videos has certain functionality (specifically transcoding of content, playback of content and related-video thumbnails). The Second Circuit felt, however, that a fourth function of YouTube’s software, syndication (that would allow others to share and generate revenue from sharing videos), should be examined more closely by the lower court.
Round Four—The Second District Court Ruling
The latest development in the case occurred on April 18, 2013, when Judge Stanton, after reconsidering the case after it was sent back down to him by the Second Circuit, issued yet another order granting summary judgment in favor of YouTube. This time, Judge Stanton’s decision addressed four issues: 1) Whether YouTube had knowledge or awareness of any specific infringements; 2) Whether YouTube willfully “blinded” itself to the infringements; 3) Whether YouTube had the “right and ability to control” infringing activity on its site by its users; and 4) Whether any clips were syndicated.
In his latest ruling, Judge Stanton ruled in favor of YouTube on all four issues, finding that YouTube had no actual knowledge of any specific instance of infringement of Viacom’s works, and therefore could not have “willfully blinded itself” to the infringements. Further, the court found that YouTube did not have the “right and ability to control” infringing activity because “there is no evidence that YouTube induced its users to submit infringing videos, provided users with detailed instructions about what content to upload or edited their content, prescreened submissions for quality, steered users to infringing videos, or otherwise interacted with infringing users to a point where it might be said to have participated in their activity.”
Round Five—Viacom’s Latest Appeal
As might have been predicted, Viacom and the other plaintiffs, once again, have appealed the lower court’s latest decision and it appears that the fight will continue into the later rounds. I don’t expect either side to throw in the towel on this one any time soon.
“USED MP3s:” Can You Resell Them?
We’ve all been there. You had to have the latest release by Mariah Carey (you may begin thinking up an excuse for that), and you went on Amazon and purchased the CD. After listening to it a couple of times (and experiencing a case of buyer’s remorse), you decide that you want to sell the CD. Under the Copyright Act’s First Sale Doctrine (which I discussed in another context in a prior blawg post ), it is perfectly legal to do so. You may sell it, rent it or give it away and you owe the copyright owner nothing further.
However, what if, instead of purchasing the Mariah Carey album in CD format, you elected to purchase the mp3 version on iTunes. Can you sell the mp3s just as you can sell the CD? According to a Federal court in New York in the case of Capitol Records LLC v. ReDigi Inc., the answer is “no.”
Capitol Records sued startup company ReDigi, claiming that ReDigi had infringed Capitol’s copyrights. ReDigi, which calls itself “the world’s first pre-owned digital marketplace,” was founded in 2011. ReDigi’s platform allows listeners to swap music tracks for substantially less than the traditional $.99 cost to purchase new on iTunes. ReDigi makes its money by charging fees on each transaction conducted on its platform.
Capitol Records’ lawsuit claimed that the Copyright Act’s First Sale Doctrine is not applicable to sales of “used” digital copies. The court agreed. It distinguished the situation of the resale of physical CDs (which, of course, are bought and sold in used music stores all the time) from the attempted creation of a marketplace for digital copies. Because ReDigi’s service requires the seller to upload the digital music on ReDigi’s servers, the court held that this was creating a new copy of the music. As a result, the First Sale Doctrine did not apply. The court found that in ReDigi’s situation, the original digital copy is reproduced when it is uploaded to ReDigi’s cloud service. ReDigi argued that there was no reproduction because the original digital copy would be removed as part of the process of reselling a digital file on its service. The court was not persuaded by that argument and, instead, simply focused on the fact that an unauthorized reproduction had been made. It stressed that the First Sale Doctrine only applies to the resale of lawfully made copies.
For reasons that are not clear, the court did not focus on another key issue raised by digital resales—whether the “purchaser” of digital music is an owner of a copy or merely a licensee of the copyright holder. iTunes and similar services make it clear that the content they offer is licensed, not sold. The First Sale Doctrine only applies to copyrighted works that have been purchased. This factor alone could have been enough to rule in favor of Capitol.
Instead, the court quoted and appeared to place a good deal of emphasis on a 2001 United States Copyright Office report to Congress that argued forcefully against allowing for a right to resell digital works. The report stated, in part:
“Physical copies of works degrade with time and use, making used copies less desirable than new ones. Digital information does not degrade, and can be reproduced perfectly on a recipient’s computer. The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work. Time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost. Then need to transport physical copies of works, which acts as a natural brake on the effect of resales on the copyright owner’s market, no longer exists in the realm of digital transmissions.”
Clearly, the Copyright Office’s position was based, in large part, on the assumption that people selling digital copies would simply retain the original digital copy. Compare this to the situation of the resale of a CD in which that particular physical copy is sold. In my view, a key fact here is that the original owner of a CD no longer possesses that copy after it is sold. At the time of the 2001 report, a good technical solution to ensure that the original digital copy would be deleted in such a transfer situation did not exist. However, technology has advanced and there are more viable (albeit, imperfect) ways to assure that the original is deleted today. Nonetheless, this decision in favor of the copyright owners clearly draws the distinction between the treatment of digital and physical copies.
I believe this case could have a wide reaching impact beyond music to other types of digital works, such as games, movies and books.
MARK YOUR CALENDARS: DATA Awards
My law firm, Buchanan Ingersoll & Rooney, is sponsoring the 2013 Pittsburgh Technology Council Design, Art, and Technology (“DATA”) Awards to be held Wednesday, May 15, 2013 from 5:00 pm until 9:00 pm at The Grand Hall at the Priory in Pittsburgh. The DATA awards honor those working at the intersection of artistic creativity and technology, and showcase the amazing innovation happening in the Pittsburgh region. The awards are part of the Pittsburgh Technology Council’s Art & Technology Initiative which was formed in 2008 in an effort to unite and cultivate the creative and technology communities in the Pittsburgh region. By exploring the various intersections of Art and Technology, and creating unprecedented strategic partnerships, the initiative aims to enhance the productivity of both groups, while fostering this nexus to spur regional progression. Founded on the idea that art and technology share the fundamental characteristic of innovation, as well as a synergy at the forefront of cultural innovation, the Initiative and its partners are dedicated to unearthing the possibilities of this leading-edge fusion.
For those of you in the Pittsburgh region, it will be a great event. For more information, click on this link: http://www.pghtech.org/events/art-and-technology/events.aspx.
BITCOINS: What’s in Your Wallet?
Chances are you have heard about Bitcoins because lately the news has been full of stories about them. If you have not already, you will.
What is a Bitcoin?
A Bitcoin is a form of intangible virtual currency that is not backed nor regulated by any governmental entity. Despite this, Bitcoins are actual currency in that they are accepted in trade for real goods and services and can be exchanged for other, tangible currency.
So, then, WHAT is a Bitcoin?
This is where the explanation gets complicated. The Bitcoin is the brainchild of a computer programmer, or group of programmers, who go by the alias Satoshi Nakamoto. (The actual identity of Nakamoto remains a mystery.) It was developed as an alternative to governmentally issued currency. Although a Bitcoin does not exist in tangible form, it is an actual measure of value. Bitcoins, like gold, are “mined.” Rather than digging up the earth, Bitcoin miners use powerful computers to solve complex mathematical problems by “digging” through possible solutions. The correct answer to each problem is a unique number. Finding this number yields the miner a block of Bitcoins. These are monitored from the beginning of their existence by a computer network that maintains the authenticity of each Bitcoin, thereby making it impossible to “counterfeit” Bitcoins. This is the simple explanation for a very complicated process, but it will serve the purpose of this discussion. Click here for an in-depth discussion of this “mining” process.
While Bitcoins can only be used to pay persons and merchants willing to accept Bitcoins as payment, the number of merchants willing to do so (especially in larger cities) is growing. An owner of a Bitcoin can transfer it to a party willing to accept it as payment through a computer or smartphone without an intermediate financial institution. Those merchants accepting Bitcoins (both e-commerce and brick and mortar businesses) use the Bitcoin symbol which is a dollar-like double-barred “B” (shown in the photo, above).
Most business will not set their prices in Bitcoins because of value fluctuations. Some creative companies are working to make Bitcoins more mainstream, especially in the e-commerce realm. One such company, BitPay, handles Bitcoin transactions for over 4,500 companies, most of which are e-commerce websites, but some of which are traditional brick and mortar retailers. BitPay takes payments in Bitcoins, converts them based on the then-current value, and forwards the cash equivalent to the merchant. This places the risk of such volatility on BitPay, not the merchant. The value of Bitcoins is highly volatile these days. It was recently reported that the total value of Bitcoins in “circulation” currently is over $2 billion. Just a year ago, that number was a small fraction of the current value. The value of a Bitcoin a year ago was approximately $10. However, a couple of weeks ago, the value of a Bitcoin had shot up to an all-time high (over $250). By the end of the same day, the value had dropped back to $100. A cottage industry has arisen with people speculating over the value of Bitcoins (as they would with other precious commodities like diamonds and gold).
For a currency that only exists in a virtual world, it is gaining traction nonetheless. In fact, there are reports of people who have traded in their real world savings in exchange for Bitcoins in the hope that the value of Bitcoins (like any item that is scarce) will increase in value. Others simply choose to use Bitcoins because of the unregulated nature of transactions involving them.
While Bitcoins certainly can be and are used for completely legitimate purposes, their unregulated nature also lends themselves to use in connection with illegal activities such as drug trafficking, illegal weapons deals and other criminal ventures. This is causing concern with law enforcement officials.
While this could be a passing Internet fad, I don’t think so. I think that we will all be hearing more about Bitcoins in the coming months and years.
THINKING ABOUT BUYING GOOGLE GLASS? Consider This.
Google, in an effort to control the market for its Google Glass computer eyewear (cost $1500), is prohibiting purchasers from reselling or even lending them to another person. If someone tries to do that, Google has stated that they will disable the software that runs the device. Can they do this legally? Well, since the software is licensed, not sold, the Copyright Act’s First Sale Doctrine does not apply and the terms of Google’s license agreement (which prevent such sales or lending), will likely control.
Think about that before plunking down $1500 to be the first on your block to have these.
http://www.cnn.com/2013/04/18/tech/innovation/google-glass-resales/index.html?hpt=hp_t5
