Second Circuit Sends Viacom/YouTube Dispute Back to the SDNY

Because this decision was well covered during my hiatus from blogging, I'll (try to) keep this brief.

In June 2010, the Southern District of New York granted summary judgment in favor of YouTube on all of Viacom's copyright claims, finding that YouTube was entitled to the protections of the Digital Millennium Copyright Act's ("DMCA") safe harbor provisions.  (SDNY's decision here; my discussion of the decision here.)

On appeal, the Second Circuit:

  • concluded that the SDNY correctly held that the safe harbor provision of Section 512(c)(1)(A) "requires knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement";
  • concluded that the "willful blindness doctrine" may apply "in appropriate circumstances" to demonstrate the knowledge or awareness of specific instances of infringement required under Section 512(c)(1)(A);
  • vacated the grant of summary judgment because a reasonable jury could conclude that YouTube had the requisite knowledge or awareness under Section 512(c)(1)(A) and remanded for the SDNY to determine that issue and to consider the application of the "willful blindness doctrine";
  • concluded that the SDNY erred "by requiring 'item-specific' knowledge of infringement in its interpretation of the 'right and ability to control' infringing activity under 17 U.S.C. 512(c)(1)(B)," and reversed and remanded for further fact-finding on the issues of control and financial benefit;
  • concluded that the SDNY "correctly held that three of the challenged YouTube software functions--replication, playback, and the related videos feature--occur 'by reason of the storage at the direction of a user' within the meaning of 17 U.S.C. 512(c)(1)," but remanded for further fact-finding regarding a fourth software function, specifically involving syndication of YouTube videos to third parties.

In case its directions for remand were not clear, the Second Circuit also specifically directed that the parties be allowed to brief specific issues "with a view to permitting renewed motions for summary judgment as soon as practicable," including:

  • "Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);"
  • "Whether, on the current record, YouTube willfully blinded itself to specific infringements;"
  • "Whether YouTube had the 'right and ability to control' infringing activity within the meaning of [Section] 512(c)(1)(B); and"
  • "Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred 'by reason of the storage at the direction of the user' within the meaning of [Section] 512(c)(1), so that YouTube may claim the protection of the [Section] 512(c) safe harbor."

The case cite is Viacom Int'l, Inc. v. YouTube, Inc., Docket Nos. 10-3270-cv, 10-3342-cv (2d Cir. Apr. 5, 2012).

There was extensive coverage of the Second Circuit's decision but Eric Goldman's Technology & Law Blog provides an excellent discussion of the case as well as a number of links to case materials.

Virtual Horses and Bunnies Smackdown -- Court Concludes that DMCA Preempts State Law Claims Based on Alleged Misuse of DMCA Takedown Notification

This is a case that I always intended to blog about but never quite got to; a recent decision in the case gave me an opportunity to follow up on the case.

Plaintiff Amaretto Ranch Breedables filed its original complaint against Ozimals in December 2010, alleging claims for, among others, misrepresentation under the Digital Millennium Copyright Act ("DMCA"), tortious interference, unfair competition and misuse of copyright.  The parties competed in the "market of virtual animal sellers" in Second Life; "Amaretto created a breedable horse and associated virtual horse food" and Ozimals sold "virtual breedable bunnies."

According to the original complaint, the dispute generally involved Ozimals' DMCA takedown notification issued to Second Life:

13.  On or about December 1, 2010 Ozimals submitted a DMCA Notification to Linden Research, Inc., owners of Second Life, claiming copyrights to "in world" items, such as "the scripts, the screen displays, expression and game play generated by those scripts for a breedable virtual animal in the form of a bunny" and that the "in world" Amaretto Horses Product Line infringed Ozimals' alleged copyrights, therefore requiring Second Life, pursuant to its Terms of Service and 17 U.S.C. [Section] 512, in order to preserve its Safe Harbor status, to takedown Amaretto's products during the present busy holiday shopping season.

14.  On or about December 9, 2010, Amaretto submitted a Counter DMCA Notification to Linden Research, Inc. requesting that it reject Ozimals [sic] claims for copyright infringement because the claimed copyright violation was based on mistaken information, misidentification of material in question, or deliberate misreading of the law.

At the time the original complaint was filed, no takedown of content had actually occurred however and the Court subsequently entered both a temporary restraining order and a preliminary injunction preventing a takedown of plaintiff's "Horse Product Line" in Second Life.

Ozimals then filed a motion to dismiss plaintiff's claims for (1) misrepresentation under the DMCA; (2) tortious interference; (3) unfair competition under California statutory law; and (4) copyright misuse, as stated in plaintiff's first amended complaint.

In April 2011, the Court granted Ozimals' motion to dismiss in part.  Specifically, the Court dismissed with prejudice plaintiff's claim for misrepresentation under the DMCA because there had been no takedown of plaintiff's content, which is required under the statute.  The Court likewise dismissed plaintiff's tortious interference claim but without prejudice to amend the claim to allege additional facts.

Plaintiff then filed a second amended complaint now alleging claims for:  (1) a declaratory judgment of invalidity and/or non-infringement of copyright and of misuse of copyright; (2) unfair competition under California law; (3) defamation; (4) trade libel; (5) intentional interference with contract; and (6) tortious interference with prospective business advantage.

Ozimals again moved to dismiss certain of the claims in plaintiff's second amended complaint, which the Court similarly granted in part.  Specifically, the Court granted the motion to dismiss plaintiff's common law unfair competition claim, its tortious interference claim and the other state law claims to the extent they were based on Ozimals' DMCA takedown notification.

As to the latter part of the Court's order, the Court held that plaintiff's state law claims based on Ozimals' allegedly improper DMCA takedown notifications were preempted by the DMCA, thereby agreeing with two earlier decisions from the Northern District of California.  See Lenz v. Universal Music Corp., No. C 07-03783 JF (N.D. Cal. Apr. 8, 2008); Online Policy Group v. Diebold, Inc., 337 F. Supp. 2d 1195 (N.D. Cal. 2004).  The Court concluded that

[t]hese cases stand for the propositions that (1) a DMCA Takedown Notification is a creature of a federal statutory regime, and (2) that regime preempts any state law claim based on an allegedly improper DMCA Takedown Notification.

The Court acknowledged the "rhetorical thrust" of plaintiff's argument against preemption, namely that "it is unfair to leave it without a remedy by holding both that (1) it cannot state a DMCA misrepresentation claim because no takedown occurred and (2) its related state law claims are preempted."

But the preemption analysis did not turn on whether plaintiff would be left without a remedy; rather,

the preemption analysis turns on whether federal law conflicts with state law and/or occupies a particular field.  Such is the case here because DMCA Takedown Notifications are a creature of federal law, and there is a specific federal remedy for their misuse.

Result...preemption.

The case cite is Amaretto Ranch Breedables, LLC v. Ozimals, Inc., No. C 10-05696 CRB (N.D. Cal. July 8, 2011).

Ninth Circuit Concludes that Violation of WoW TOU Did Not Give Rise to Copyright Infringement Claim

On June 7, 2010, the Ninth Circuit heard oral argument in Seattle in three cases raising important and interesting issues under the Copyright Act.  The three cases are:  UMG Recordings, Inc. v. Augusto, No. 08-55998 (9th Cir.) from the Central District of California; MDY Industries, LLC v. Blizzard Entertainment, Inc., Nos. 09-15932, 09-16044 (9th Cir.) from the District of Arizona; and Vernor v. Autodesk, Inc., No. 09-35969 (9th Cir.) from the Western District of Washington.

The Ninth Circuit issued its first opinion in the cases on September 10, 2010 in the case of Vernor v. Autodesk, discussed previously here.  On December 14, 2010, the Ninth Circuit issued its second decision, this time in the case of MDY Industries, LLC v. Blizzard Entertainment, Inc.

The most complicated—both factually and legally—of the three appeals pits the creator of the wildly successful MMORPG World of Warcraft (Blizzard) against the creator of a piece of add-on software used in connection with WoW called Glider (MDY and its founder, Michael Donnelly).

Described at its most basic level, WoW allows players to assume the roles of various races (e.g., humans, elves, trolls, orcs, etc.) and level those characters from, currently, level 1 to 85 by, among other things, completing quests.  Reaching the maximum level (a time-consuming task) is desirous because it gives players access to more challenging content through which players can obtain better gear and other desirable items.  WoW also incorporates a "complex closed economy" in which players can buy and sell virtual items for virtual gold.  At the time of the District Court's opinions, WoW had some 10 million active players and generated more than $1.5 billion in revenue annually.

To play WoW, users must install the game client software during which they must choose to accept the End User License Agreement (“EULA”). Users must also create an account with Blizzard in order to play the game and pay a subscription fee.  As part of the account creation process, users are asked to accept or decline the Terms of Use Agreement (“TOU”). Once these steps are taken, users can begin playing by launching the WoW client and logging into the game server. Additionally, each time Blizzard updates the game with new content or fixes (known as "patches"), users must again accept both the EULA and the TOU before being able to play the game.

WoW has spawned a large market for "add-on" software to be used, in some form, in conjunction with WoW.  For example, numerous add-ons have been developed to allow customization of the WoW user interface, to provide information relating to the WoW economy, and to gather information and provide warnings during combat in the game.

Michael Donnelly, a software developer, created a software program called Glider, which played WoW for its owner, intended to speed up the leveling process.  Glider is known as a "bot," short for robot.  Donnelly offered Glider for sale through his company, MDY Industries, apparently with significant success.

In October 2006, three representatives of Blizzard appeared at Donnelly's home, demanding, according to Donnelly, that he stop selling Glider and turn over that day all the profits MDY had earned that day.  In response, Donnelly filed a declaratory judgment action against Blizzard, which responded with counterclaims against MDY and a third party complaint against Donnelly for tortious interference with contract, contributory copyright infringement, vicarious copyright infringement, violation of the Digital Millenium Copyright Act ("DMCA"), trademark infringement, unfair competition and unjust enrichment.

The District Court's Decisions.

As relevant to the appeal, the District Court issued two opinions in the case, one on July 14, 2008 on the parties' motions for summary judgment, and another on January 28, 2009 following a two-day bench trial.

Continue Reading...

Fifth Circuit Defines "Access" for DMCA Circumvention Claim

MGE sued Power Maintenance International, Inc. and GE ("GE/PMI") for, among other things, violations of the Digital Millennium Copyright Act in connection with MGE's uninterruptible power supply machines ("UPS") and MGE's copyrighted software used on those machines.

As to MGE's DMCA claim, MGE's UPS machines require use of MGE's copyrighted software to complete full servicing of the machines.  MGE instituted security measures related to use of its software, succinctly described by the Fifth Circuit:

The software requires connection of an external hardware security key (called a "dongle") to the laptop serial port.  Each dongle has an expiration date, a maximum number of uses, and a unique password.  When the software is activated, it searches for a properly programmed dongle before it will fully launch.  Once launched, the software will go through a second series of protocol exchanges with the data located on the UPS machine's microprocessors to confirm that MGE software is communicating with MGE hardware.  If the protocol exchange is successful, MGE's software proceeds to collect system status information for the technician.

After MGE introduced the security technology, hackers published information on the Internet disclosing how to defeat the security features of a hardware key.  Once that key is defeated, the software can be accessed and used without limitation.  GE/PMI apparently admitted that it recovered a laptop that contained hacked MGE software and had used the software in five instances.

During an off-record jury charge conference, the District Court dismissed MGE's DMCA claim and MGE appealed that decision, among others.

But the Fifth Circuit affirmed the dismissal of the DMCA claim, concluding that MGE had not shown that GE/PMI circumvented MGE's software protections in violation of the act.  Specifically, the Fifth Circuit found that MGE had not shown that bypassing its "dongle" infringed a right protected by the Copyright Act, which is the type of "access" the DMCA was intended to reach.  The Fifth Circuit concluded that the DMCA required that the "owner's technological measure must protect the copyrighted material against an infringement of a right that the Copyright Act protects, not from mere use or viewing."  MGE's "dongle" only prevented initial access to the software rather than protecting against copyright violations and therefore circumventing the "dongle" did not give rise to a DMCA claim.

The case cite is MGE UPS Systems Inc. v. GE Consumer & Indus. Inc., No. 08-10521 (5th Cir. July 20, 2010).

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SDNY Grants Summary Judgment to YouTube on Viacom's Copyright Infringement Claims

The Southern District of New York brought an end to the copyright infringement case brought by Viacom against YouTube and Google (referred to collectively as YouTube) by granting summary judgment in favor of YouTube on all of Viacom's claims for direct and secondary copyright infringement.

Despite its length, the Court's conclusion was short:  YouTube was entitled to the protections of the Digital Millennium Copyright Act's ("DMCA") "safe harbor" provisions, 17 U.S.C. 512(c).  The "critical question," according to the Court, was whether the knowledge required under the DMCA's language was "a general awareness that there are infringements (here, claimed to be widespread and common), or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items."

Based on lengthy excerpts of legislative history supported by case law, the Court concluded that "[g]eneral knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements."  Rather, the burden is on the copyright owner to identify infringements.  But if a service provider knows of specific instances of infringement from notice from the copyright owner, that provider must promptly remove the infringing material.  Because in this case it was uncontroverted that YouTube removed material when it was given notices, it was protected "'from liability for all monetary relief for direct, vicarious and contributory infringement'" under the DMCA.

The case cite is Viacom Int'l Inc. v. YouTube, Inc., 07 Civ. 2103 (LLS) (S.D.N.Y. June 23, 2010) and the Court's opinion can be found here.

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Copyright Owners Must Consider Fair Use in Connection With DMCA Notices

In February 2007, Stephanie Lenz videotaped her young children dancing in the family's kitchen while a song, "Let's Go Crazy" by Prince, played in the background.  Lenz uploaded the 29 second video to YouTube.  (Although the song purportedly can be heard for about 20 seconds of the video, I have to admit that I could hear very little of it because of the admittedly "poor sound quality" and the sounds the children were making as they pushed toys around the family's kitchen.)

Universal then sent a takedown notice pursuant to Section 512 of the DMCA to YouTube, which stated in part that Universal had a "good faith belief" that the video "is not authorized by the copyright owner, its agent, or the law."  In response, YouTube took down the video although it was re-posted approximately six weeks later after Lenz sent a DMCA counter-notification.

Lenz then sued Universal for several claims, two of which were dismissed upon Universal's first motion to dismiss.  Lenz then filed an amended complaint that asserted a single claim under Section 512(f) of the DMCA that Universal "knowingly materially misrepresent[ed]" that the home video of her dancing children infringed Universal's copyright in the Prince composition.  Specifically, Lenz asserted that her use of the song was a "self-evident non-infringing fair use" under the Copyright Act and that Universal's DMCA notice stating to the contrary was an actionable misrepresentation under Section 512(f) of the DMCA.

Although Universal claimed that "it [was] time for this case to be over," the Court apparently did not agree and denied Universal's motion to dismiss the amended complaint.

Essentially, Universal argued that (1) it did not send a DMCA notice because, although it was sent to the email address dedicated to such notices and contained all the necessary elements of a DMCA notice, Universal apparently "does not agree that YouTube is eligible for protection under the DMCA's 'safe harbors,'"; (2) there was no knowing misrepresentation because fair use is an affirmative defense to otherwise infringing conduct; (3) fair use is never "self-evident" because of its "fact-specific, equitable nature"; and (4) as a fact-specific matter, Lenz's use was not "self-evidently" a fair use.  (As a side-note, it seems problematic for Universal to be claiming that it can and does make legal and factual conclusions about whether YouTube is "eligible for protection under the DMCA's 'safe harbors'" but cannot be expected to consider the fair use doctrine.)

Stating as a fact that Universal did send a DMCA notice to YouTube, the Court characterized the issue before it as follows:  "whether 17 U.S.C. [Section] 512(c)(3)(A)(v) requires a copyright owner to consider the fair use doctrine in formulating a good faith belief that 'use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.'"  Noting that the Copyright Act expressly provides that "fair use of a copyrighted work . . . is not an infringement of copyright," the Court concluded that the copyright owner must consider the fair use doctrine in evaluating its "good faith belief that use of the material in the manner complained of is not authorized by . . . the law."  Thus, the Court concluded that an allegation that the copyright owner acted in bad faith by issuing a takedown notice without consideration of the fair use doctrine is sufficient to state a misrepresentation claim under Section 512(f) of the DMCA.

You can find the Court's opinion here (PDF, 10 pages), and for an interesting read, the parties' lengthy briefing on the motion here (PDF, 24 pages), here (PDF, 28 pages) and here (PDF, 18 pages).

 

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"Paranormalist" Spoon-Bender Sued

The Electronic Frontier Foundation filed suit against "paranormalist" Uri Geller (apparently also known as, according to the complaint, Uri Geller Freud), in the United States District Court for the Northern District of California on behalf of Brian Sapient, a member of the "Rational Response Squad."  According to the complaint, Uri Geller is a well-known performer who claims to have psychic abilities that he apparently uses to, among other things, bend spoons with his mind.

Brian Sapient, as part of the Rational Response Squad's activities attempting to debunk what it contends are irrational beliefs and theories, posted a portion of a NOVA video called "Secrets of the Psychics" on YouTube that apparently challenged Geller's "performance techniques."  Geller responded by demanding that YouTube take down the video under the DMCA, which YouTube did.  It is not clear how much of the NOVA video was posted on YouTube but according to the complaint, only three seconds of the video is subject to a copyright owned by Geller or the company of which he is a director and controlling shareholder, "Explorologist Ltd."

The complaint alleges that Geller and Explorologist Ltd. misrepresented that the NOVA video infringed their copyright and seeks, among other things, a declaration of non-infringement.

To read a copy of the complaint check out the EFF's website.
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