UMG Recordings v. VEOH Networks

Citation

UMG Recordings, Inc. v. VEOH Networks, Inc., No. CV 07-5744, 2008 U.S. Dist. LEXIS 104980 (C.D. Cal. December 29, 2008).

Factual Background

VEOH Networks, Inc. ("VEOH"), maintains an online service that allows users to share videos through its website or through a standalone application known as "VeohTV." UMG Recordings, Inc. ("UMG"), controls the rights to sound recordings and musical compositions contained within five (5) of the videos found on the VEOH System at the time the complaint was filed.

Users upload videos after reading, and agreeing to, VEOH's "Publisher Terms and Conditions" and "Terms of Use," which grant VEOH:

1. a license to "publicly display, publicly perform, transmit, distribute, copy, store, reproduce and/or provide" the uploaded video "through the VEOH Service, either in its original form, copy or in the form of an encoded work"
2. and a license "to use, reproduce, modify, distribute, prepare derivative works of, display, publish and transmit" the video.

and provides that the users:

1. "may not submit [material] . . . that contains any . . . infringing . . . or illegal content"
2. "expressly represent and warrant" that the users "have the necessary licenses, rights, consents, and permissions to use and authorize Veoh to use all . . . copyrights or other proprietary rights in and to any and all uploaded material."

Once a video is uploaded the VEOH system performs a number of automatic functions, including creating a Flash-formatted copy, creating copies comprised of smaller "chunks" of video, allowing users to access files via "streaming", and allowing users to access files by downloading them.

UMG brought this action against VEOH seeking partial summary judgment precluding VEOH from claiming an affirmative defense under one of the DMCA "safe harbor" provisions for copyright infringement of UMG's controlled works.

District Court Proceedings

UMG's motion was limited to the question of whether the alleged infringement on VEOH's system was "by reason of the storage at the direction of a user." UMG argued that the automatic functions performed by the VEOH system, while admittedly facilitating user access to stored content, did not actually constitute "storage" at the direction of a user. Under its interpretation of the Act a service provider's infringing conduct must be "storage" and that storage must be "at the direction of a user" for the protection from liability to apply.

VEOH's interpretation of the safe harbor provided under section 512(c) of the DMCA did not require all infringing conduct to constitute storage in its own right, only that the conduct "occur as a result of the storage." The District Court agreed with VEOH's interpretation and denied UMG's motion finding the automatic functions in question to be "narrowly directed toward providing access to material stored at the direction of users."

The Digital Millennium Copyright Act ("DMCA") provides safe harbor to service providers, precluding the imposition of monetary liability, "for infringement of copyright by reason of the 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" so long as the provider complies with a number of statutory requirements.

Under section 512(c) of the DMCA, a service provider is eligible for protection from liability only if it:

1. Does not have actual knowledge that the material or an activity using the material on the system or network is infringing;
   1. In the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or
   2. Upon obtaining such knowledge or awareness, acts expedititiously to remove, or disable access to, the material;
2. Does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and
3. Upon notification of claimed infringement . . . responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

Under section 512(i) of the DMCA, which applies to all safe harbors, a service provider is eligible for protection from liability only if it:

1. Has a policy, communicated to its users, which it reasonably implements regarding the termination of repeat infringer accounts
2. Accomodates and does not interfere with standard technical measures

The District Court found no language in section 512(c) to limit its applicability merely to operational features that constitute "storage." In fact, a service provider's infringing activity can constitute much more than mere storage so long as it complies with the notice and takedown procedures found in the Act. Looking to the legislative history the court reasoned that the DMCA was enacted to limit service provider liability to ensure the efficiency of the Internet and the variety and quality of services provided while still preserving "strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital networked environment."