YouTube Enters the Arena

by
Christina I. Ryan

YouTube, Incorporated enters the legal arena of secondary copyright infringement liability following predecessors Sony, Napster, and Grokster.  See Tur v. YouTube, Inc., No. CV 06-4436-GAF (FMOx) (C.D. Cal. filed July 14, 2006).  It is an arena already replete with nebulous concepts and intricate laws, and the following is intended to provide a general overview of the basic concepts at issue.

SETTING THE STAGE

In general, direct copyright infringement consists of violating the exclusive rights held by a copyright owner, which can include the following: (1) reproduction; (2) preparation of derivative works; (3) distribution; (4) public performance; and (5) public display.  17 U.S.C. §106.  A copyright owner has the ability to do or authorize any of these things.  By way of example, in the Napster, peer-to-peer file sharing context, users who uploaded copyrighted files violated copyright owners’ distribution rights, while users who downloaded those same files violated the owners’ reproduction rights.
Absent direct infringement, there can be no secondary liability for copyright infringement.  Presuming direct infringement exists, YouTube faces three theories of indirect liability: 1) contributory copyright infringement; 2) intent to induce copyright infringement; and 3) vicarious copyright infringement.  The Digital Millennium Copyright Act provides a safe harbor from liability for copyright infringement, and as such is another key legal concept in YouTube’s ensuing litigation.  See 17 U.S.C. §512; Tur v. YouTube, Inc., No. CV06-4436 GAF (FMOx) (C.D. Cal. filed July 14, 2006) (Def.’s Answer at 7, available at http://news.findlaw.com/hdocs/docs/ip/turyoutube101106answr8.html).  The interplay of these prominent aspects of copyright law, addressed in some detail below, will determine YouTube’s future.

I. Contributory Copyright Infringement

A party is liable for contributory infringement when “with knowledge of the infringing activity, [the party] induces, causes or materially contributes to the infringing conduct of another.’”  A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019 (9th Cir. 2001) [hereinafter Napster] (quoting Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)).  Requisite knowledge exists if the party knows or has reason to know of the direct infringement.  Id. at 1020.

• Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).

In 1984, Sony Corporation was sued for its manufacture and marketing of videocassette recorders (VCRs).  Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).  The United States Supreme Court held Sony not liable for copyright infringement.  The Supreme Court analogized to the patent context and instituted a modified staple article of commerce doctrine.  464 U.S. 417 (1984).  The effect of this doctrine is that a distributor cannot be held liable for contributory infringement based solely on the distribution of a product which is “capable of commercially significant noninfringing uses.”  Id. at 442.  Sony avoided liability under this doctrine because “time-shifting”  is fair use of copyrighted material, and a commercially significant noninfringing use of VCRs.  Id.

• A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)

Napster, Inc., the infamous facilitator of a peer-to-peer file sharing system, was unable to align itself with Sony Corporation and escape a preliminary injunction based on noninfringing uses of its system.  A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).  Unlike Sony, Napster had “actual, specific knowledge of direct infringement,” as evidenced by internal documents urging continued ignorance of users’ identities to avoid liability for piracy, as well as notices from the Recording Industry Association of America regarding more than 12,000 infringing files.  Id. at 1020 n.5.  Additionally, Napster executives were familiar with copyrights and the recording industry, Napster’s own executives participated in direct copyright infringement by downloading copyrighted songs, and Napster promoted its site with screen shots displaying infringing files.  Id.
A preliminary injunction was entered against Napster, on the basis that Napster would likely be found liable for contributory infringement at trial.  “[I]f a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement.”  Id. at 1021.  Napster was likely liable for contributory infringement because it knew of the direct infringement, and “materially contributed to the direct infringing activity” by providing the site, facilities, and support services.  Id. at 1022.

A. Intentional Inducement of Copyright Infringement

Another theory of indirect liability related to contributory infringement is intent to induce copyright infringement, or “the inducement rule.”  Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).  The inducement rule imposes liability where a distributor intentionally acts to promote the use of its device for copyright infringement.  It “premises liability on purposeful, culpable expression and conduct.”  Id. at 923–24.

• Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

The inducement rule was delineated by the United States Supreme Court in relation to a copyright infringement lawsuit against Grokster, an entity similar to Napster.  Id.  Grokster operated a peer-to-peer file sharing system using a “supernode” system, where select computers acted as indexing servers.   MELVILLE B. NIMMER & DAVID NIMMER, 3 NIMMER ON COPYRIGHT § 12.04[A][3], at 12-97–98 n. 193 (2006).  Grokster could not escape copyright liability simply because it was also capable of and engaged in noninfringing uses.  Grokster intended to induce copyright infringement and was thus subject to liability.
Grokster’s intent to market its products as a means for copyright infringement was clear.  Id. at 923–24.  Grokster acted to step into Napster’s shoes following the preliminary injunction which effectively derailed Napster’s operation.  The record in Grokster was replete with evidence of “express promotion, marketing, and intent to promote” direct copyright infringement by end-users.  Grokster’s illegal intent was further evidenced by its business model, which generated income from the sale of advertising space.  Grokster’s sale of advertising space was based on the number of end-users, and the “substantive volume [was] a function of free access to copyrighted work.”  Id. at 926.
The Supreme Court did not address vicarious liability in Grokster, nor did it further clarify its holding in Sony, however the Supreme Court did note that “mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability.  Nor would such ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves.”  Id. at 937.

II. Vicarious Copyright Infringement

Vicarious copyright infringement exists where a party “has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.”  A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir. 2001).  Unlike contributory infringement, a party’s knowledge of the infringing activity is not a precursor to vicarious copyright infringement liability.   The “financial interest” element of vicarious liability is satisfied “where the availability of infringing material ‘acts as a draw for customers.’” Id. at 1023 (quoting Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 263-64 (9th Cir. 1996).  “[E]ven absent the recipt of any revenues whatsoever, a future hope to ‘monetize’ suffices.”  MELVILLE B. NIMMER & DAVID NIMMER, 3 NIMMER ON COPYRIGHT § 12.04[A][2], at 12-82 (2006) (citing Napster, 239 F.3d 1004.).

• A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir. 2001)

Napster was likely liable for vicarious copyright infringement under the foregoing standard.  Napster’s express reservation of rights policy included the right to terminate service at its discretion, and affirmed Napster’s “ability to block infringers’ access to a particular environment for any reason whatsoever.”  This policy evidenced Napster’s right and ability to supervise, and thus helped to establish Napster’s vicarious copyright infringement liability. Napster, 239 F.3d at 1023.  In Napster, the Ninth Circuit noted that “[t]o escape imposition of vicarious liability, the reserved right to police must be exercised to its fullest extent.  Turning a blind eye to detectable acts of infringement for the sake of profit gives rise to liability.”  Id. at 1023.

III. Digital Millennium Copyright Act, 17 U.S.C. §512

Terms of Use and Reservation of Rights policies are additionally important in the context of the Digital Millennium Copyright Act’s safe harbor provisions.  17 U.S.C. §512.  Under §512(a), a service provider can protect itself from monetary liability for copyright infringement in limited circumstances if the provider creates a specific operational procedure to address infringing activity.  See 17 U.S.C. § 512(i).  Providers are required to inform users of the procedures they adopt, which is typically accomplished via Terms of Use or Reservation of Rights policies.
Section 512(a) protects “service providers” from copyright liability for “transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider.”  Napster attempted to avoid copyright liability under §512(a), but the safe harbor did not apply because Napster did not provide connections, route or transmit files “through” its system.  A&M Records Inc. v. Napster Inc., 54 U.S.P.Q.2d 1746 (N.D. Cal. 2000); see also Napster, 239 F.3d at 1025.  Rather, the MP3 files at issue were “transmitted from the Host user’s hard drive and Napster browser, through the Internet to the recipient’s Napster browser and hard drive.”  Id. at 1751.
In fact, it is unclear whether Napster even constitutes a “service provider” within §512(a)’s safe harbor.  See Napster, 239 F.3d at 1025. In addition to the other limitations listed in §512(a), the safe harbor only protects “service providers” as specifically defined in §512(k)(1)(A): “As used in subsection (a), the term ‘service provider’ means an entity offering the transmission, routing, or providing connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.”

SUMMARY

YouTube’s copyright infringement liability depends on a fact-based inquiry into its operational system and business model, its knowledge of direct infringement, its ability to control or supervise infringing activity, and the actions it has taken to address existing and future infringing activity.  In its efforts to avoid liability, YouTube will assert the Digital Millennium Copyright Act’s safe harbor provision, and failing application of this provision, will try to align itself with Sony Corporation and establish the commercially significant noninfringing uses of its service.  YouTube’s future will be determined, positively or negatively, by the facts surrounding its operation and by the application and resolution of legal concepts which remain less than straightforward.

Author Christina Ryan is an attorney with Stites & Harbison, P.L.L.C.