In mid-October, the influential United States Court of Appeals
for the Second Circuit heard oral arguments in a $1-billion battle
over the responsibility of Internet intermediaries for infringing
content posted by third parties on their systems. The appeal in Viacom Intl. v. YouTube Inc. involves
crucial questions that may have a ripple effect on litigation
taking place across the world. Along with the Veoh case being heard by the Ninth
Circuit and the iiNet appeal being heard by the High Court of
Australia this year, the results in the YouTube appeals will set
important ground rules for Internet litigation for years to
The YouTube case stems from the early days in which YouTube was
only a fledgling video service rather than the dominant source of
video streams on the Internet.
Viacom alleged that YouTube became aware at an early
date of copyright infringements taking place on its site, but did
little to prevent them because traffic would "go from 100,000
views a day down to about 20,000 views or maybe even lower."
It also alleged that when Google purchased YouTube, its due
diligence team warned that more than half of YouTube's views
infringed copyright. As a consequence, Viacom submitted that
YouTube was liable for direct, contributory and vicarious
infringement of some 79,000 copyrighted works between 2005 and
YouTube relied on the provisions of s. 512(c) of the Digital Millennium Copyright
Act (DMCA), a statutory safe harbour available to persons who
store information online "at the direction of a user".
YouTube contended that this provision did not require an
"arduous screening process for every user-posted text,
picture, and video," as this "would inhibit free
expression and stifle the growth of the Internet."
At trial, both Viacom and YouTube moved for summary judgment.
The United States District Court for the Southern District of New
York found that YouTube was entitled to the safe
harbour. It dismissed an argument from Viacom that YouTube had
become aware of a "red flag" from which infringing
activity was apparent and had taken no action to remove or disable
access to the infringing material. It concluded that to lose the
safe harbour, YouTube had to have "knowledge of specific and
identifiable infringements of particular individual items,"
including "the works' locations at the site." Also
importantly, the court concluded that although the safe harbour
applied to "storage" activities, the transmission of
works to YouTube users via Internet streaming was "within the
collateral scope of storage and allied functions" and should
also be protected.
This is a landmark case for the Internet era, and may well go to
the U.S. Supreme Court regardless of which side wins on appeal.
Content owners are of the view that the statement of the
Southern District creates a landscape in which host sites have too
much deniability for infringements that form an essential part of
their business models.
Hosts such as YouTube contend that with 48
hours of content uploaded every minute, it is unrealistic to
expect it to proactively police infringing activity. This line of
thought holds that remedies such as notice-and-takedown in the
United States, which create incentives for hosts to swiftly take
down infringing content on receipt of a notice of infringement
under the DMCA, are sufficient to maintain a balance between
societal interests in the protection of copyrighted content and the
need for new ways to disseminate such content. Thus far, the iiNet case being heard in Australia has come to
similar conclusions, with the arguments of the parties to be heard
by the High Court of Australia early in December.
A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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