Where’s the Beef?
YouTube Opinion Lacks Heft

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In sharp contrast to the voluminous materials submitted by the parties in support of their cross-motions for summary judgment in the Viacom v. YouTube litigation, the court’s opinion granting judgment in favor of YouTube is surprisingly lean.  Indeed, a third of the 30-page opinion is devoted to verbatim quotes of the statute and legislative history.  The opinion represents a resounding victory for YouTube and, by extension, the rest of the user-generated content industry (for the time being, anyway – Viacom, not surprisingly, has indicated that it will appeal the decision).  But – leaving the merits of the dispute aside for a moment – it also represents a lost opportunity for a thoughtful contribution to the jurisprudence in this developing area of law. 

Copyright Act Section 512(c) creates a “safe harbor” for internet service providers who allow users to upload copyrighted content to their services.  The “safe harbor” shields ISPs from liability for copyright infringement “by reason of the storage at the direction of a user” of infringing material if the service provider meets certain criteria.  The ISP must follow prescribed “notice and takedown” procedures to remove materials identified by  copyright owners as infringing.  Moreover, the ISP must neither have “actual knowledge” that material on the system is infringing nor be aware of “facts or circumstances from which infringing activity is apparent.” 

The court’s opinion centers on construing these knowledge provisions.  Specifically, “the critical question is whether the statutory phrases . . . mean a general awareness that there are infringements . . . or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items.”

Actual vs. “red flag” knowledge

In my initial post on this decision, I stated that the court “analyzes the Section 512 safe harbor for ISPs and corresponding legislative history.”  Upon a closer reading of the opinion, this turned out to be something of an overstatement.  Rather, after reciting Sections 512(c) and (m) verbatim, as well as lengthy passages from the legislative history, the court simply concluded, with no discussion whatsoever, ”The tenor of the foregoing provisions is that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items.  Mere knowledge of the prevalence of such activity in general is not enough.”  Given the size of the case (the complaint sought $1 billion in damages), the significance of the legal issues, and the need for a well-developed body of jurisprudence to guide the ongoing development of new business models and to create settled expectations among copyright owners and users of content, it would have been nice to see a little closer parsing of the language in the statute and legislative history.  Clients, in my experience, are never thrilled to be advised on the tenor of the law – they want to know what the law is, so they can act accordingly. 

The one comment that the court made on the actual statutory language was in connection with subsection (m), which “explicit[ly]” states that the DMCA “shall not be construed to condition ‘safe harbor’ protection on ‘a service provider monitoring its service or affirmatively seeking facts indicating infringing activity . . .”  Seizing on that language, the court noted, as a policy matter, that letting “knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation fo the DMCA.”

Having thus dispensed with statutory analysis, the court went on to recite the holdings of the Ninth Circuit and two of its district courts in cases where similarly situated defendants were found to be unaware of “facts and circumstances” sufficient to constitute red flags under the DMCA.  As with its discussion of the statute itself, the court engaged in no meaningful analysis of these opinions.  The court also cited favorably the Second Circuit’s opinion in Tiffany v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010), a trademark case.  In eBay, Tiffany sued eBay for contributory trademark infringement because eBay allow sellers of counterfeit goods to continue to operate despite knowing, generally, that counterfeit Tiffany goods were being sold “ubiquitously” on the site.  The Second Circuit ruled for eBay, holding that it could not be liable unless it had knowledge of particular listings of counterfeit goods; the Viacom court concluded, “[a]lthough by a different technique, the DMCA applies the same principle. . . .”

Direct financial benefit where the ISP has the right and ability to control the infringing activity

Section 512(c) also prohibits an ISP from receiving “a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity . . .”  The parties hotly disputed whether YouTube had the right and ability to control the activity of users who uploaded infringing content, with each side devoting several pages of briefing to the issue.  Again, the court’s opinion gave the issue short shrift, holding without citation or elucidation that “[t]he ‘right and ability to control’ the activity requires knowledge of it, which must be item-specific,” and citing back to the sections of the opinion addressing the knowledge requirement. 

I was especially disappointed that the court did not address the question whether YouTube received a direct financial benefit from the allegedly infringing activity, though I recognize that the court did not need to reach the issue given its ruling (however cursory) on the right and ability to control the activity.  But there is a bothersome discrepancy between the traditional common-law doctrine of vicarious liability and the form of it enacted in the DMCA.  Recall that in Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), a flea-market operator was held vicariously liable for the sale of bootleg recordings because it received a “direct financial benefit” from the infringing activity in the form of booth rental fees, admission fees, parking payments, concession stand revenues, and the like.  Even though these revenues were not directly tied to the sale of infringing goods, they were held to provide a direct financial benefit because the sale of pirated recordings was a “draw” for customers. 

The legislative  history of the DMCA, in part, states that the drafters intended to leave “current law in its evolving state” rather than “embarking on a wholesale clarification” of the doctrines of contributory and vicarious liability – suggesting that it did not intend to modify Fonovisa and its progeny.  Yet elsewhere, the legislative history states that “a service provider conducting a legitimate business would not be considered to receive a ‘financial benefit directly attributable to the infringing activity’ where the infringer makes the same kind of payment as non-infringing users of the provider’s service.”  This statement suggests that the booth rental fees and other revenues not directly tied to bootleg sales in Fonovisa would not constitute a direct financial benefit – setting up a conflict within the legislative history and with Fonovisa

“Where does this appeal go?  It goes up.” (bonus points if you can identify the riff)

It can come as no surprise that Viacom intends to appeal, and it will be very interesting to see what the Second Circuit thinks of this opinion.  I will post appeal briefs when they are available. 

For those of you feeling nostalgic for the ’80s after seeing the photograph at the beginning of this post, you can view the clip of the original Wendy’s “Where’s the Beef” commercial here, thanks to one laconic judge in the Southern District of New York.

2nd Circuit Rejects Crumby Old PI Standard
Applies eBay to Preliminary Injunctions in Copyright Cases

Holden Caulfield might have called it a crumby old rule.  Using more diplomatic terms, the Second Circuit concluded that the standard it has long applied to preliminary injunctions in copyright cases is “inconsistent with the ‘test historically employed by courts of equity,’” and has been abrogated by the Supreme Court’s ruling in eBay v. MercExchange.  Salinger v. Colting, __ F.3d __ (2d Cir. 2010).

Salinger pitted J.D. Salinger against an author who wrote a sequel to the iconic novel “Catcher in the Rye” entitled “60 Years Later: Coming Through the Rye.”  As its title implies, “60 Years Later” picks up the story of Holden Caulfield (referred to as “Mr. C”) in his 70’s, in a world that also includes Mr. C’s now-elderly author, a fictionalized Salinger.  Faux Salinger is haunted by his creation and wants to bring him to life to kill him, but ultimately cannot bring himself to do so.  Instead, he frees Mr C, who then reunites with his younger sister, Phoebe, and estranged son, Daniel.

Consistent with his famous and longstanding practice of refusing to authorize adaptations of his work, Salinger sued to enjoin the U.S. publication of “60 Years Later.”  In July 2009, the District Court granted Salinger’s motion for a preliminary injunction, finding that (1) Salinger has a valid copyright in “Catcher” and the Holden Caulfield character; (2) “60 Years Later” does not constitute a fair use; and (3) “60 Years Later” infringes Salinger’s copyrights.  Courts in the Second Circuit have long issued preliminary injunctions in copyright cases upon a finding of irreparable harm to the plaintiff coupled with a likelihood of success on the merits; significantly, courts presumed irreparable harm if the plaintiff could establish a prima facie case of copyright infringement. The District Court adhered to this standard in granting Salinger’s request for a preliminary injunction.  Though the court noted that the Supreme Court had recently rejected the practice of presuming irreparable harm in the eBay case, it reasoned that eBay “dealt only with the presumption of irreparable harm in the patent law context, and thus is not controlling in the absence of Second Circuit precedent applying it in the copyright context.” Salinger v. Colting, 641 F. Supp. 2d 250, 268 n.6 (S.D.N.Y. 2009).

The Second Circuit held that the standard enunciated in eBayapplies to preliminary injunctions in copyright cases, reasoning that the the Supreme Court relied not merely on patent law, but on traditional principles of equity as well as copyright cases in reaching its conclusion.  Thus, in order to obtain a preliminary injunction in a copyright case in the Second Circuit, the plaintiff must demonstrate (1) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the plaintiff’s favor; (2) a likelihood that the plaintiff will suffer irreparable harm absent the injunction; (3) the balance of hardships between the plaintiff and defendant tips in the plaintiff’s favor; and (4) issuance of the injunction will not disserve the public interest.  Courts may no longer presume irreparable harm.  Rather, they must “actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the remedies available at law, such as monetary damages, are inadequate to compensate for that injury.”

In considering the first factor – the probability of success on the merits – the Second Circuit cautioned courts to be “particularly cognizant of the difficulty of predicting the merits of a copyright claim at a preliminary injunction hearing,” especially where the defendant has raised a “colorable” fair use defense.  With respect to the second and third factors – irreparable harm and balancing of hardships – the only relevant harm is that which occurs to the parties’ legal (commercial) interests and which cannot be remedied after a final adjudication.  Both plaintiffs and defendants in copyright suits have property interests in their respective works, as well as First Amendment rights of expression (including, on the part of plaintiff copyright owners like Salinger, the right not to speak) at stake. 

The Second Circuit vacated the preliminary injunction and remanded to the District Court to consider the remaining eBayfactors.  It was careful to note, however, that it agreed with the District Court that Salinger was likely to prevail on the merits and would not disturb that finding.  Moreover, it cautioned that its ruling “is not to say that most copyright plaintiffs who have shown a likelihood of success on the merits would not be irreparably harmed absent preliminary injunctive relief.  As an empirical matter, that may well be the case, and the historical tendency to issue preliminary injunctions readily in copyright cases may reflect just that.”  This caveat seems practically to invite district courts to continue to find irreparable harm as a matter of course where the plaintiff has established a likelihood of success on the merits.