1) A disappointing opinion
Put aside, for a moment, whatever you may think of Judge Stanton's ultimate holding absolving YouTube of copyright infringement. Purely as a matter of judicial crafting and analysis, I found the court's order to be extremely cursory. While I certainly don't equate quality with quantity, this opinion was just too damn short to do justice to the complex, heavily-litigated issues in the case. It was nominally 30 pages, but about 11 of those were just long block quotes from Section 512 of the DMCA and its legislative history. Both parties amassed, and cited, thousands of pieces of evidence. The court was of course under no obligation to discuss them all individually. But it barely mentioned them at all! What about all the evidence of specific -- not just general -- knowledge on YouTube's part of infringing Viacom works on its system? See Viacom Motion at 25 n. 15 (citing Statement of Undisputed Facts Paras. 32, 59, 69, 105, 110, 116-17, 122, 130, 132, 165) (e.g., March 2006 memo from YouTube co-founder Jawed Karim: "As of today episodes and clips of the following well-known shows can still be found: Family Guy, South Park, MTV Cribs, Daily Show, Reno 911, Dave Chapelle. This content is an easy target for critics who claim that copyrighted content is entirely responsible for YouTube's popularity."). Judges have almost complete freedom to craft their opinions as they see fit, but I think the court fell short here by failing to engage the evidence, especially the evidence garnered by the party against whom it granted summary judgment. Judge Stanton issued his opinion barely a month after briefing was completed -- a very quick result. I don't think I've ever said this about a judge before, but I wish he had taken a lot longer.
2) What in the world is "red flag" infringement?
As I noted last September when a court in the Central District of California granted summary judgment to Veoh in the copyright suit brought by UMG, 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..., 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 Stanton, incorrectly in my view, adopted CCBill's holding without much analysis, further rendering red flag infringement a dead letter. The statute (and legistlative history) clearly indicate that some form of knowledge beyond that imparted via DMCA notices qualifies as knowledge of "facts or circumstances from which infringing activity is apparent," thus triggering a site's takedown obligation (on pain of losing the safe harbor). But after reading Judge Stanton's opinion several times, I simply have no idea what would actually constitute such "red flag" knowledge. And, again, his opinion does not even scratch the surface of the evidence presented by Viacom on this issue, see, e.g, Viacom Br. at 5-24, 50-56, and explain why none of it would raise a red flag for a reasonable service provider in YouTube's position.
3) The interplay between the DMCA safe harbor and inducement
Can a site induce infringement by third parties, and yet still claim safe harbor under Section 512? At least two courts have said no. See Columbia v. Fung at 43 ("inducement liability and the Digital Millennium Copyright Act safe harbors are inherently contradictory. Inducement liability is based on active bad faith conduct aimed at promoting infringement; the statutory safe harbors are based on passive good faith conduct aimed at operating a legitimate internet business."); Arista v. Usenet at 17 ("if Defendants...encouraged or fostered such infringement, they would be ineligible for the DMCA’s safe harbor provisions."). But Judge Stanton appears to have rejected the holding of Fung (from the CD of Cal.) and Usenet (from his court in the SDNY). At page 23 of his order, Judge Stanton appears to be saying that a site that takes down infringing material upon receipt of DMCA notices qualifies for the safe harbor, even if it is inducing that very infringement. For immediately following his discussion of Grokster and inducement, Judge Stanton concludes, "To such a provider [i.e., one that complies with DMCA notices], the DMCA gives a safe harbor, even if otherwise he would be held as a contributory infringer under the general law." (my emphasis).
But that can't be true, at least as so broadly stated. Can a site really run banners saying, "Upload the top 20 movies, TV shows, and songs here! And everyone else: watch and listen!" And then walk away from a copyright suit as long as it complies with DMCA notices regarding those very works whose infringement it induced? Judge Stanton's words certainly suggest so. But I think that's contrary to the statute (Section 512(c) only applies to material on a system "by reason of the storage at the direction of a user," which is not the case when the site induces the infringement), as well as the legislative history and common sense. Perhaps there was sufficiently conflicting evidence on the issue of inducement that Judge Stanton could not make a finding that YouTube induced infringement (as he suggests on page 22), but I don't think it was correct as a matter of law for him to conclude that YouTube was not liable even if it induced infringement. I expect this to be a major issue on appeal.
4) How important is this decision?
No doubt, it puts an end (for now) to a massive potential liability hanging over YouTube's head. And that's important in and of itself. But this decision is probably not as important as everyone appears to have concluded in the initial analysis last week. First, Viacom has already said it's appealing, and I think it's likely that the Second Circuit will at least modify parts of Judge Stanton's rather thin opinion. Second, keep in mind something I wrote just after the first round of briefing in March: Viacom effectively dropped any claim based on YouTube's activities after May 2008, when, according to Viacom, YouTube began filtering for Viacom content without requiring Viacom to license its videos. In other words, Viacom is (relatively) OK with the way YouTube operates now; the worst of the conduct, which provided much of the most damning evidence against YouTube, occurred well before that. As long as YouTube continues to operate its content ID system -- and I have no reason to believe that it won't -- even Viacom has effectively conceded that it's not worth suing over YouTube's current practices (though the Premier League plaintiffs appear to disagree).
And keep in mind that of the six major film/TV studios, and the four major record labels -- none of whom are exactly shy about litigating to protect their copyrights -- Viacom is the only one that actually pulled the litigation trigger against YouTube. The others, due to a combination of private enforcement, business deals, technology, and ownership of their own UGC sites, appear to have reached a form of détente with YouTube. They may not like YouTube, and the fact that it profits from infringement of their works. But for a variety of reasons, each decided not to sue. And I suspect even a victory by Viacom in this case would not have caused them to do so.
Disclosure: As I've previously noted, I work at NBC Universal, which signed on to an amicus brief in this case, though I did not work on it. As always, the views expressed here are my own.