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Safe Harbor Ruling Vacated In $1 Billion YouTube Copyright Case

NEW YORK - (Mealey's) A New York federal judge's determination that YouTube LLC is entitled to safe harbor immunity from copyright infringement claims was largely vacated April 5 by the Second Circuit U.S. Court of Appeals, which found that a reasonable jury could conclude that the video-sharing site had "actual knowledge or awareness of specific infringing activity" (Viacom International Inc., et al. v. YouTube Inc., et al., No. 10-3270, 2nd Cir.; 2012 U.S. App. LEXIS 6909). 

(Decision. Document #16-120416-006Z.)  

The appellate panel also rejected the interpretation of Section 512(c)(1)(B) of the Digital Millennium Copyright Act (DMCA) by U.S. Judge Louis L. Stanton of the Southern District of New York that the "right and ability to control" infringing activity requires "item-specific" knowledge.  

"The trouble with this construction is that importing a specific knowledge requirement into § 512(c)(1)(B) renders the control provision duplicative of § 512(c)(1)(A)," the Second Circuit said. 

"Any service provider that has item-specific knowledge of infringing activity and thereby obtains financial benefit would already be excluded from the safe harbor under § 512(c)(1)(A) for having specific knowledge of infringing material and failing to effect expeditious removal.  No additional service provider would be excluded by § 512(c)(1)(B) that was not already excluded by § 512(c)(1)(A).  Because statutory interpretations that render language superfluous are disfavored . . . we reject the District Court's interpretation of the control provision," the panel added. 

$1 Billion Sought

Plaintiffs Viacom International Inc., Comedy Partners, Country Music Television Inc., Paramount Pictures Corp. and Black Entertainment Television LLC (collectively, Viacom) own the copyrights in movies and television shows that were uploaded to the YouTube website, which is operated by YouTube Inc., YouTube LLC and Google Inc. (collectively, YouTube).  In a March 2007 complaint, Viacom accused the defendants of allowing "rampant infringement" and of building their business "based on piracy."  The plaintiffs sought damages of $1 billion on their claims of direct and secondary copyright infringement. 

YouTube countered by asserting an affirmative defense under the safe harbor provisions of Section 512 of the DMCA, on grounds that YouTube -- as an Internet service provider (ISP) -- could not be held liable for any infringement that occurred on its website.  Additionally, YouTube maintained that it consistently removes any allegedly infringing content for which copyright holders filed a DMCA takedown notice.   

The judge, in a June 2010 ruling, granted YouTube summary judgment based on a finding that the defendants' "general awareness" of infringing activity was not sufficient to confer liability.  Judge Stanton also found that item-specific knowledge of infringing activity is required for a service provider to have the "right and ability to control" infringing activity under Section 512(c)(1)(B) and that the replication, transmittal and display of videos on YouTube constituted activity "by reason of the storage at the direction of a user" within the meaning of Section 512(c)(1)." 

Viacom -- along with The Football Association Premier League Ltd. and other entities in a related, consolidated case (The Football Association Premier League Ltd., et al. v. YouTube Inc. [No. 10-3342]) -- appealed to the Second Circuit. 

Knowledge Contemplated

The appellate panel as an initial matter found that Judge Stanton properly interpreted the safe harbor provision as requiring knowledge or awareness of specific infringing activity.  Under Section 512(c)(1)(A), the Second Circuit noted, knowledge or awareness alone does not disqualify the service provider from immunity; instead, it is a provider's failure to "act expeditiously to remove, or disable access to, the material" that removes entitlement to safe harbor. 

"Thus, the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material, because expeditious removal is possible only if the service provider knows with particularity which items to remove.  Indeed, to require expeditious removal in the absence of specific knowledge or awareness would be to mandate an amorphous obligation to 'take commercially reasonable steps' in response to a generalized awareness of infringement.  Such a view cannot be reconciled with the language of the statute, which requires 'expeditious action' to remove or disable 'the material' at issue," the Second Circuit said, citing the DMCA. 

Internal E-Mails, Reports

However, the appellate panel nonetheless vacated Judge Stanton's grant of summary judgment in favor of YouTube, on grounds that sufficient evidence exists to demonstrate that YouTube was aware of specific infringing material on its site.  To that end, the Second Circuit cited internal emails sent from the director of video partnerships for Google and YouTube to colleagues requesting a calculation of the number of daily searches for certain terms -- including "soccer," "football" and "Premier League" -- in advance of a bid by YouTube on the global rights to Premier League content.  Additionally, YouTube founder Jawed Karim formerly boasted that YouTube users enjoyed access to several Viacom-owned television series, according to the appellate panel; in the same March 2006 report, Karim opined that "although YouTube is not legally required to monitor content," the service "would benefit from preemptively removing content that is blatantly illegal and likely to attract criticism." 

"A reasonable juror could conclude from the March 2006 report that Karim knew of the presence of Viacom-owned material on YouTube, since he presumably located specific clips of the shows in question before he could announce that YouTube hosted the content '[a]s of today.'  A reasonable juror could also conclude that Karim believed the clips he located to be infringing (since he refers to them as 'blatantly illegal'), and that YouTube did not remove the content from the website until conducting 'a more thorough analysis,' thus exposing the company to liability in the interim," the Second Circuit said. 

"On these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent.  Accordingly, we hold that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature," the panel added. 

Willful Blindness

Next, in an issue of first impression, the Second Circuit addressed application of the common-law willful blindness doctrine in a DMCA context.  Although the statute makes no explicit reference to willful blindness, Section 512(m) of the DMCA provides that safe harbor cannot be conditioned on the affirmative monitoring of content by a service provider.  According to the appellate panel, therefore, Section 512(m) "limits -- but does not abrogate -- the doctrine," and willful blindness "may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA." 

"The District Court cited § 512(m) for the proposition that safe harbor protection does not require affirmative monitoring, but did not expressly address the principle of willful blindness or its relationship to the DMCA safe harbors.  As a result, whether the defendants made a 'deliberate effort to avoid guilty knowledge' remains a fact question for the District Court to consider in the first instance on remand," the Second Circuit wrote, citing In re:  Aimster Copyright Litig. (334 F.3d 643, 650 [7th Cir. 2003]). 

Regarding Judge Stanton's interpretation of "right and ability to control," the panel rejected both parties' arguments as "fatally flawed."  YouTube's proposed construction -- that a provider must know of a particular infringement before it can be controlled -- renders the control provision duplicative of Section 512(c)(1)(A), according to the Second Circuit, which similarly dismissed Viacom's construction that the control provision codifies the common-law doctrine of vicarious copyright liability.  To that end, the appellate panel noted that under a common-law vicarious liability standard, the ability to block access is evidence of the right and ability to supervise; in a DMCA context, however, such a standard is internally inconsistent. 

"Section 512(c) actually presumes that service providers have the ability to 'block . . . access' to infringing material.  Indeed, a service provider who has knowledge or awareness of infringing material or who receives a takedown notice from a copyright holder is required to 'remove, or disable access to, the material' in order to claim the benefit of the safe harbor.  But in taking such action, the service provider would -- in the plaintiffs' analysis -- be admitting the 'right and ability to control' the infringing material.  Thus, the prerequisite to safe harbor protection under §§ 512(c)(1)(A)(iii) & (C) would at the same time be a disqualifier under § 512(c)(1)(B)," the Second Circuit said. 

'Something More''

Having concluded that the "right and ability to control" infringing activity requires "something more than the ability to remove or block access" to materials posted on a website, the panel directed Judge Stanton on remand to consider in the first instance whether Viacom has "adduced sufficient evidence to allow a reasonable jury to conclude that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity." 

Lastly, the Second Circuit affirmed the judge's determination that three YouTube software functions fall within the safe harbor for infringements that occur "by reason of" user storage.  Immunity for a fourth software function -- involving the third-party syndication of videos uploaded to YouTube -- requires "further fact-finding" by Judge Stanton, however, according to the panel.  

Viacom is represented by Paul M. Smith of Jenner & Block in Washington, D.C.  The Premier League is represented by Charles S. Sims of Proskauer Rose in New York.  Andrew H. Schapiro of Mayer Brown in New York represents YouTube. 

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