Targeting Safe Harbors to Solve the Music Industry’s YouTube Problem

Last week, the International Federation of the Phonographic Industry (IFPI) released its 2015 Digital Music Report—an annual state of the industry update for digital recorded music. Included in the report, along with year-over-year information about industry initiatives, revenue sources, and consumer preferences, is a policy agenda that highlights where the IFPI will be concentrating its lobbying efforts. This year, the IFPI is gunning for safe harbors like the one in the Digital Millennium Copyright Act (DMCA) that insulates user-generated content sharing sites from claims of copyright infringement. The IFPI is demanding that policy makers internationally “[make] clear that any liability exemptions can only apply to genuinely neutral and passive online service providers, and not to services that play an active role in distributing, promoting and monetising content.” The Report expressly names YouTube as a service that should not qualify for safe harbor, and it argues that YouTube is hiding in the DMCA safe harbor to avoid paying its fair share of music licensing fees.

It’s no secret that the motion picture and recording industries are unhappy with the current state of U.S. law on the scope of safe harbors for online intermediaries—most notably the safe harbor in section 512(c) for service providers that provide “storage at the direction of…user[s].” In two big cases, UMG Recordings v. Shelter Capital Partners (2013) in the Ninth Circuit and Viacom v. YouTube (2012) in the Second Circuit, rights owners urged the courts to interpret the safe harbor narrowly by holding that the automatic processes that video-sharing sites engage in to enable public access to user-uploaded videos fall outside the safe harbor. On that narrow reading of the statute, any UGC site that allows users to stream or view content rather than simply parking it on a server would be ineligible for safe harbor. In other words, all content-sharing sites would effectively be disqualified.

In both UMG v. Shelter Capital and Viacom v. YouTube, the court rejected that narrow reading of the safe harbor and adopted a broader interpretation that includes ancillary activities necessary to provide users with access to their stored material. One of the reasons why the courts were not persuaded by the argument that “storage” means only passive hosting is that Congress defined “service provider” broadly in the DMCA and required strictly passive handling of user content only for a separately defined subset of service providers seeking safe harbor for routing functions under section 512(a). If Congress had intended to do so, the Ninth Circuit said, it could have expressly required storage service providers to have the same passive relationship to user content that it required of routing service providers (e.g., broadband Internet access providers). The fact that it didn’t do so signaled to the court that Congress intended the section 512(c) storage safe harbor to protect functions beyond the passive hosting of user content.

In seeking to narrow the scope of storage safe harbors to strictly passive hosts, the IFPI is seeking to push YouTube, a UGC site, into a licensing deal like the ones the recording labels have with on-demand streaming services like Spotify. That would, the IFPI asserts, close an unfair “value gap” between streaming services, which pay market rates for content, and the safe-harbored YouTube, which offers copyright owners the option to take down their infringing content or to monetize it (on YouTube’s terms) through participation in ContentID. What the IFPI ignores in its proposal to amend or narrow intermediary safe harbors is the immense collateral damage to all UGC-sharing services that would occur if storage safe harbors like the one in section 512(c) of the DMCA were restricted to cover only passive hosting sites. Sites where millions and millions of people share huge amounts of their own copyrighted content—photos, videos, and music—can exist only because they are covered by statutory safe harbors. Much, if not most, of the content on YouTube is purely amateur. To restrict the scope of the storage safe harbor primarily to secure increased rents from YouTube for user uploads that include copyrighted sound recordings would benefit one industry at the expense of all online content-sharing services and their users. There has to be a better, more surgical way for the music industry to solve its YouTube problem.