It was, according to some experts, a major victory for copyright owners in their battle against online infringement. Other experts, however, have a very different view of the 2nd Circuit’s decision in Viacom International, Inc. v. YouTube, Inc. They see the April 5 ruling as largely a win for YouTube, Facebook, Twitter and the many other online businesses that allow users to post content online.

Both sides may turn out to be right. Viacom confirmed that an online business faces no liability when its users post infringing material so long as the business satisfies the safe harbor provisions of the Digital Millennium Copyright Act (DMCA). More significantly, the decision held that an online company does not lose this safe harbor protection just because it knows, in general, that many of its users are posting infringing items.

This interpretation of the DMCA is a big win for online service providers (OSP). These companies long have argued that the DMCA does not require them to act like copyright police whenever they become aware there is some infringing activity occurring on their service.

Viacom, however, also poked some holes in the DMCA’s safe harbor—and it is unclear how large these holes may be. They may be so large that, in order to stay within the safe harbor, OSPs may need to spend a great deal of time and money on proactively fighting copyright infringement. “A lot depends on how Viacom is interpreted,” says Prof. Neil Netanel of UCLA School of Law.

Safe Standard

This legal battle began in 2007, when Viacom and a number of other copyright owners sued YouTube for infringement. They sought to hold YouTube liable for tens of thousands of allegedly infringing videos that users had posted on YouTube’s website.

A federal district court in Manhattan dismissed the suit in 2010, ruling that the DMCA’s safe harbor protected YouTube. That ruling was partially reversed in April by a two-judge panel of the 2nd Circuit. (A third judge heard the case but died prior to the decision.) The 2nd Circuit found that the lower court’s interpretation of the DMCA was partly incorrect and remanded the case for further fact-finding on whether YouTube satisfied the safe harbor’s requirements.

The 2nd Circuit agreed with the district court that an OSP does not fall out of the safe harbor merely because it generally knows that many of its users have posted infringing material. Should an OSP know of specific infringements (and do nothing about them), then the company loses safe harbor protection.

So far, so good, for online businesses. Then the court added a qualification.

It held that an OSP will be considered to know of specific infringements if the company is willfully blind to those infringements. Unfortunately, the court failed to specify when an OSP would be considered willfully blind.

Blind Injustice

According to some experts, an OSP is willfully blind—and thus loses the safe harbor—if it knows many of its users are committing infringement but it deliberately refuses to take effective remedial actions. There are “lots of ways you can go about policing your site, and if an OSP deliberately avoids using those techniques, it will be willfully blind,” says Paul Smith, a partner at Jenner & Block who represents Viacom in this litigation.

Some language in the 2nd Circuit’s opinion casts doubt on this interpretation. For instance, the court wrote that the DMCA does not require an OSP “to monitor or otherwise seek out infringing activity based on general awareness that infringement may be occurring.” That is not a condition for safe harbor protection, the court stated.

Elsewhere in its decision, the 2nd Circuit stated that the DMCA does not impose on any OSP “an amorphous obligation to ‘take commercially reasonable steps’ in response to a generalized awareness of infringement.” Requiring an OSP to satisfy such an obligation (in order to get safe harbor protection) “cannot be reconciled with the language of the statute,” the court wrote.

Some experts thus believe an OSP can be “willfully blind” by deliberately taking steps to keep itself in the dark when it would otherwise have learned about specific infringements.

The issue, however, is far from settled. “A key question on remand will be, ‘What is willful blindness?’” says Netanel.

Defining Control

Another central question will be, “What is control?” The DMCA safe harbor protects an OSP only insofar as the business does not have the “the right and ability to control” users’ infringing activities (and the business does not receive a direct financial benefit from such infringements).

In order for an OSP to control users’ infringements, it must know of the specific infringements, the 9th Circuit held in a 2011 decision, UMG Recordings, Inc. v. Shelter Capital Partners LLC. The 2nd Circuit, in Viacom, disagreed. It held that an OSP has the ability to control users’ infringing acts without being aware of particular infringements.

“This ruling provides a powerful tool for copyright owners,” says Clifford Sloan, a partner at Skadden, Arps, Slate, Meagher & Flom. It allows copyright owners to argue that an OSP was generally aware of infringing activity, had the ability to control this activity and failed to do so—and thus should be denied safe harbor protection.

Depending on how “control” is defined, many online businesses could find themselves outside the safe harbor unless they spend a great deal of time and money to stop their users from posting infringing material.

But it is unclear whether sites such as YouTube and Facebook have the ability to control users’ infringing activities because the 2nd Circuit failed to define “control.” The court wrote that control means “something more than the ability to remove” infringing material posted by users. Then the judges largely
sidestepped what they admitted was “the remaining—and more difficult—question” of “how to define the ‘something more.’”

“The 2nd Circuit doesn’t say how much control an online company must have in order to fall out of the safe harbor. The court ducked that issue completely,” says Prof. Jessica Litman of University of Michigan Law School.

The litigation now returns to the district court. Because the legal ramifications are so great, however, many expect the case to return to the 2nd Circuit.

“Unless it settles, the Viacom case will be kicking around for a while,” Netanel says. “Both the content industry and the technology industry will be watching to see what happens.”