The death of "red flag" infringement
Section 512(c) of the DMCA identifies two triggers for the obligation of the host to remove the subject material (if it wants to maintain the safe harbor). First is actual knowledge of infringement (which can be obtained through receipt of a facially valid takedown notice pursuant to Section 512(c)(3)). Second is where the host becomes "aware of facts or circumstances from which infringing activity is apparent." Id. § 512(c)(1)(A)(ii). This latter situation is known as "red flag" infringement; the idea is that the host can't claim the safe harbor if red flags are being waved in its face, suggesting the obvious presence of infringing activity. The Ninth Circuit gutted the red flag doctrine in Perfect 10 v. CC Bill, specifically in this thoroughly unconvincing paragraph:
Perfect 10 alleges that CCBill and CWIE were aware of a number of "red flags" that signaled apparent infringement. Because CWIE and CCBill provided services to "illegal.net" and "stolencelebritypics.com," Perfect 10 argues that they must have been aware of apparent infringing activity. We disagree. When a website traffics in pictures that are titillating by nature, describing photographs as "illegal" or "stolen" may be an attempt to increase their salacious appeal, rather than an admission that the photographs are actually illegal or stolen. We do not place the burden of determining whether photographs are actually illegal on a service provider.In other words, under Ninth Circuit precedent (which bound Judge Matz), having material identified by its poster as "illegal" and "stolen" is not a red flag that infringing activity is taking place. One is left to wonder whether the panel would have ruled the same way had actual red flags been waved in the defendants' faces.
Judge Matz's decision, which cited the "high bar" for red flag infringement placed by CCBill, further renders Section 512(c)(1)(A)(ii) a dead letter. He rejected UMG's argument that Veoh had red flag knowledge "because its founders, employees, and investors knew that widespread infringement was occurring on the Veoh system," and because of several other alleged "red flags," including Veoh's knowledge that music is protected by copyright, and its tagging of videos as "music videos." I'm unaware of a single case from any jurisdiction where a court has actually relied on the "red flag" portion of the statute to conclude that a site is not entitled to the Section 512(c) safe harbor. Courts, including this one, simply read it so narrowly that, for all intents and purposes, it might as well not even exist.
"Right and ability to control"
A host loses the safe harbor where it "receive[s] 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." 17 USC § 512(c)(1)(B). Judge Matz gave a very narrow reading to "right and ability to control" -- one narrower than the standard in the 9th Circuit's Napster decision and the "right and ability to control" standard under the common law vicarious liability doctrine. But the 9th Circuit in CC Bill said the "direct financial benefit" in the same clause does get the same definition as in the common law. I think this part of the ruling is fairly vulnerable on appeal, though it may not be enough for the whole thing to get overturned. (I love the way Prof. Eric Goldman put it: "This dichotomous language parsing seems particularly unstable." That's a polite, academic way of saying that Judge Matz's ruling on this point is simply inconsistent with CC Bill and Napster.)
What about inducement?
Judge Matz's opinion never explains how a site can induce users to infringe (which UMG alleged) and yet still be protected by the DMCA safe harbors. It seems incoherent to me to say that a site can take steps to actively encourage users to infringe (a rough description of the inducement doctrine), and then still be able to claim the safe harbor (which, broadly speaking, covers only those sites that act in good faith to combat infringement). Can it really be the case that a hypothetical UGC site that advertises "Upload primetime TV, Hollywood movies, and top 40 hits here!" really claim the safe harbor as long as it takes down infringing material promptly upon receipt of takedown notices? As absurd as it sounds, that seems to be the logic of Judge Matz's decision.
Can a takedown notice include a mere "representative list" of infringements?
Among the elements that must be included in a takedown notice under Section 512(c)(3)(A) is the following:
Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.Id. § 512(c)(3)(A)(ii) (emphasis added). This clause suggests that, at least in some circumstances, a DMCA notice need not list every single instance of infringement; a "representative list" is enough to trigger takedown obligations (in order to stay within the safe harbor). In other words, a site would need to take down not just the works specifically identified, but also those within a category of which the copyright owner provided a representative list. UMG (through its agent the RIAA) apparently provided lists of artists whose recordings it owns, with the implication that Veoh had to search for videos containing those artists' songs. But the court rejected UMG's argument, holding that a list of artist names doesn't suffice.
I'm not aware of any case where a court has actually held that the provision of a "representative list" of infringed works places the onus on the site to take down works not specifically referenced -- even though that appears to be the import of the statute. Judge Matz's decision does not provide much clarity as to when such a "representative list" will suffice.
***Again, this was undoubtedly a big win for Veoh. But does it necessarily mean a loss for Viacom and the other plaintiffs in the YouTube suits? Not at all. This is a district court opinion that binds no one except UMG and Veoh; Judge Stanton in New York is perfectly free to ignore it. And the facts in the YouTube litigation may be different; the fruits of discovery have not yet been made public, so no one except the parties and their attorneys know for sure.