YouTube LLC may have been far more successful in attracting users, but a rival video-sharing website has has had better luck in winning court decisions. The latest triumph for now-defunct Veoh Networks Inc. came on Thursday, when the U.S. Court of Appeals for the Ninth Circuit dismissed—for the second time in two years—a pioneering copyright suit brought by Universal Music Group.
In a 61-page decision, a three-judge circuit panel rejected UMG’s claims that Veoh is liable for infringing activity by its users. The panel held that Veoh is shielded by the so-called "safe harbor provisions" of the Digital Millennium Copyright Act, because it made a good faith effort to take down pirated content. The same panel had previously reached an identical conclusion, but agreed to revisit the case in light of a conflicting decision by the U.S. Court of Appeals for the Second Circuit in a similar infringement action brought by Viacom International Inc. against YouTube.
Veoh was launched in 2005 with much fanfare and with millions of dollars in venture capital funding. Its backers included Michael Eisner, the former CEO of The Walt Disney Company. UMG sued Veoh in 2007, calling the company "a massive copyright infringer that has built its business on the back of others’ intellectual property." Veoh declared bankruptcy in 2010, in part because it burned through money fighting UMG’s lawsuit.
Viacom also sued YouTube in 2007. Both defendants scored early wins. A U.S. district judge in Los Angeles sided with Veoh’s lawyers at Winston & Strawn and tossed UMG’s claims in 2009. The judge ruled that Veoh was entitled to DMCA protection because it removed infringing content after copyright holders complained. Crucially, the judge also held that Veoh did not have an affirmative duty to investigate telltale signs that users were uploading pirated videos. A judge in New York similarly dismissed Viacom’s claims against YouTube in 2010.
But Veoh and YouTube’s fates diverged on appeal. In 2011, the Ninth Circuit affirmed the dismissal of UMG’s claims against Veoh. In 2012, the Second Circuit revived Viacom’s suit against YouTube and remanded the case to the district court judge for further discovery.
While the Ninth Circuit and Second Circuit rulings shared plenty of common ground, they diverged on the standard for proving actual knowledge. Unlike the Ninth Circuit, the Second Circuit held that user-generated sites can be liable if they are "willfully blind" to infringement. In an unusual move, the Ninth Circuit vacated its decision and asked for additional briefing on whether the Second Circuit ruling was correct.
The Ninth Circuit ruled on Thursday that, even under the "willful blindness" standard adopted by the Second Circuit, Veoh should win. "[T]he evidence demonstrates that Veoh promptly removed infringing material when it became aware of specific instances of infringement," the court ruled. "Although the parties agree, in retrospect, that at times there was infringing material available on Veoh’s services, the DMCA recognizes that service providers who do not locate and remove infringing materials they do not specifically know of should not suffer the loss of safe harbor protection."
In an interview, Veoh counsel Michael Elkin of Winston & Strawn said, "The Second Circuit departed from the Ninth Circuit in a couple respects which were harmonized by yesterday’s decision." Elkin added that with Thursday’s ruling, user-generated companies now have a clearer set of ground rules to follow to get DMCA protection. (Sibling publication Corporate Counsel wrote about Elkin’s work on the case in this 2010 article.)
Irell & Manella partner Steven Marenberg, who represents UMG, declined to comment.