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DMCA Safe Harbor for Service Providers Also Protects Non-Storage Activities Designed to Facilitate Access to User-Stored Content



Author: Stuart Loh

Universal Music Group (“UMG”) sued Veoh Networks, Inc. (“Veoh”), an Internet-based service that allows users to share videos online, for copyright infringement. In the present proceedings, UMG moved for partial summary judgment that Veoh was not entitled to protection under 17 U.S.C. § 512(c), a safe harbor of the Digital Millennium Copyright Act designed to shield a service provider from liability arising from infringing conduct occurring “by reason of storage at the direction of the user.” In addition to storing videos uploaded by users, Veoh engaged in other activities (e.g., converting the format of the videos) to provide other users with access to them. UMG argued that because those other activities do not actually constitute storage, Veoh may not rely on § 512(c) as a shield to liability. The court denied UMG’s motion and rejected UMG’s narrow interpretation of the phrase “by reason of,” holding that such an interpretation was not consistent with its common meaning and that it would undermine the ability of § 512(c) to shield service providers from liability if they did anything with user-uploaded materials other than store it untouched. Instead, the court held that § 512(c) covers Veoh’s activities because they were designed to facilitate access to user-stored content.

The defendant, Veoh Networks, Inc. (“Veoh”), operates an Internet-based service similar to YouTube that allows users to share videos online. Members of the Universal Music Group (“UMG”) sued Veoh for copyright infringement. While both parties agreed that Veoh did not have UMG’s authorization to make certain of UMG’s copyrighted works available for download, Veoh asserted an affirmative defense under 17 U.S.C. § 512(c), one of the safe harbors of the Digital Millennium Copyright Act (“DMCA”), which protects service providers from being held liable for “infringement of copyright by reason of storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” In the current proceedings, UMG moved for a partial summary judgment that Veoh was not entitled to rely on that defense. The court denied UMG’s motion.

Apart from allowing users to upload videos, Veoh’s service also performed additional functions, including: automatically converting movie files uploaded by users into Flash-formatted video files; automatically creating copies of uploaded video files which are split up into smaller “chunks”; allowing users to access uploaded videos by streaming (whether through Veoh’s website or its standalone application); and allowing users to download uploaded videos. UMG argued that none of these functions constituted “storage at the direction of a user,” which therefore meant that § 512(c) was inapplicable.

The parties agreed that the additional functions at issue did not constitute “storage,” so the issue in this case was whether the phrase “by reason of” in § 512(c) should be construed broadly to encompass incidental activities arising as a result of storage by users, or, as UMG argued, whether it should be limited to storage functions only. The court held that the meaning of “by reason of” was “pretty clear,” pointing to the common sense usage of the phrase to mean “something that can be attributed to.”

The court also held that such an interpretation was necessary in order to give effect to the goals of the DMCA as disclosed by its legislative history – in particular, to limit the liability of service providers in certain situations so as to foster the continued development of the Internet. For example, if UMG’s narrow interpretation was adopted, the notice and takedown procedure in § 512(c) would be hamstrung by leaving a service provider liable for having provided access to stored material, despite complying with the procedure and taking down the infringing material. (Veoh had complied with such procedure in relation to UMG’s copyrighted works.) Furthermore, although no cases have expressly interpreted the “by reason of” language, service providers in cases with similar fact patterns have successfully employed the § 512(c) defense.

While the court did not identify the outer limits of its broad interpretation of the safe harbor, it held that the four activities conducted by Veoh were all designed to facilitate access to user-uploaded content and were, therefore, covered by the safe harbor. By contrast, the court distinguished a case involving similar language in § 512(d), Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007), in which the defendant allowed consumers to use credit cards to pay for website subscriptions. The court said that the allegedly infringing activity in CCBill was too far removed from the function of providing access to qualify for protection under the safe harbor.

The court’s reasoning appears sound. It is difficult to envision an online service that would store material at the direction of users but would not offer any way to access that material. The commercial reality is that any service like Veoh must also provide access, in one form or another, to what users upload to it. The implication of UMG’s interpretation is that no service provider would be effectively shielded by the DMCA’s safe harbor provisions if it did anything with stored data other than storing it untouched.

More: http://www.eff.org/files/UMG%20v%20Veoh%20order.pdf

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