Legal Commentary

Yesterday's decision in Io Group, Inc. v. Veoh Networks, Inc. is generally being hailed around the blogosphere as a win, or at least a bit of good news, for YouTube in its ongoing infringement fight against Viacom. See the L.A. Times, CNet, Wired, Silicon Alley Insider, Techdirt, TechCrunch. Certainly Google is trumpeting the case as a win.

The piece of the decision most commenters are focusing on is the holding that Veoh's automated reformatting of uploaded materials does not create copies for which Veoh is responsible. That's clearly a good precedent for ISPs that process uploaded content somehow (and follows on the heels of the Second Circuit's similar decision in the Cablevision case).

But there's a key component of the decision that is not at all helpful to YouTube.

The Io court specifically noted that Veoh was able to invoke the DMCA safe harbor, shielding it from liability, because "there is no indication that Veoh has failed to police its system to the fullest extent permitted by its architecture." (Slip op. at 29.) Among those policing efforts was Veoh's practice of using "digital fingerprint technology" to "prevent[ ] the some infringing content from ever being uploaded again." But as I've said before, I believe the real driver behind Viacom's suit to be its claim that YouTube has filtering technology that it refuses to use to police Viacom's content. From Paragraph 7 of the Viacom First Amended Complaint:

Moreover, YouTube has deliberately withheld the application of available copyright protection measures in order to coerce rights holders to grant it licenses on favorable terms. YouTube?s chief executive and cofounder Chad Hurley was quoted in the New York Times on February 3, 2007, as saying that YouTube has agreed to use filtering technology ?to identify and possibly remove copyrighted material,? but only after YouTube obtains a license from the copyright owner.... Those who refuse to be coerced are subjected to continuing infringement.

So Viacom's claim is that YouTube is not policing its system to the fullest extent permitted by its architecture, and in fact is holding some tools back as a bargaining chip. To the extent Io and other decisions are holding that, to preserve its DMCA immunity, an ISP has to police its system to the best of its abilities, YouTube may be in trouble (assuming Viacom's facts are accurate).

It's important to note that in the Io decision, the implicit requirement to police the system comes up in the context of discussing vicarious liability, which is not immunized under the DMCA safe harbor. And vicarious liability has two prongs to it, (1) the "right and ability to supervise the infringing activity" and (2) a "direct financial interest" in those activities. The Io court's discussion of policing occurred in the context of addressing the first prong. The second prong would still need to be demonstrated, and that would likely require a showing that, e.g., YouTube's ability to sell ads was somehow enhanced by the infringing content. Maybe that would succeed, maybe it wouldn't.

But I think the same "duty to police" theory may apply under the core of the safe harbor itself, Section 512(c)(1)(A)(ii). Section 512(c)(1) was not at issue in Io because Io never actually even sent a takedown notice; after spotting infringing files on Veoh's site, it decided to proceed directly to an infringement complaint. (Is this another case of, perhaps, some pre-1998 law school grads being a menace?) Section 512(c)(1) says that, in order to keep its immunity, an ISP hosting infringing content must do a few things, one of which is "act[ ] expeditiously to remove, or disable access to, [infringing] material" if it becomes "aware of facts or circumstances from which infringing activity is apparent." Congress called this a "red flag" provision in the legislative history; an ISP cannot simply ignore red flags indicating infringement and wait for the takedown notices to flow in, if it wants to preserve its immunity.

Does choosing not to use a filter that would screen out additional copies of a work cited in a takedown notice constitute ignoring a red flag? Io suggests that the answer may be yes, and if so, YouTube may be in trouble.