Kevin Kickstarter Visits His Attorney for an Update on the DMCA Following Capitol Records v. Vimeo

by Lee Gesmer on July 15, 2016

Kevin Kickstarter Visits His Attorney for an Update on the DMCA Following Capitol Records v. Vimeo

The fictional Kevin Kickstarter last met with his lawyer, Mr. Jaggers, in January 2014. Still pondering Mr. Jaggers advice (following the then-recent Second Circuit’s decision in Viacom v. Youtube), he recently heard of the Second Circuit’s new DMCA ruling in Capitol Records v. Vimeo, and he set up an appointment with Mr. Jaggers to get an update on the law.

Before listening in on this fictional conversation, a brief recap: YouPostVid is a small “you post, we host” music video website. Kevin Kickstarter is its sole owner. YouPostVid is struggling to meet the confusing  requirements necessary to receive safe harbor protection for copyright infringement under the Digital Millennium Copyright Act (the DMCA).  (See the earlier transcript to be updated on how the DMCA can protect web hosts, aka “service providers”, from copyright liability for works uploaded by users).

Two years ago Mr. Jaggers advised Kevin on how to stay on the safe side of the DMCA. But Kevin was frustrated by the confusing law, to the point where he even considered selling his business.  However, demonstrating true grit he has soldiered on and now, more than two years later, he’s back, ready to discuss the latest developments with his lawyer. We are privileged to listen in ….

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Kevin Kickstarter: Wassup Mr. Jaggers? I almost didn’t want to see you today for fear of the latest. It has sure been hard playing it safe with the law, as you suggested last time.

Mr. Jaggers: Hello Kevin. I am pleased to tell you that for once, your worries are not to be realized. The Court of Appeals for the Second Circuit, based in New York and arguably the most influential copyright court in the country, has made some progress in clarifying the scope of the DMCA in a case called Capitol Records, LLC v. Vimeo, LLC. The decision was written by Judge Pierre Leval, who authored the Google Books decision last year, and who may be the single most influential living judge on matters of copyright law.

The decision leaves many remaining uncertainties under this law, but it gives companies like yours more protection from claims of copyright infringement based on uploads by your customers. And coming from Judge Leval in the Second Circuit, it carries a lot of weight.

Kevin: Sounds good, dude, tell me more.

Mr. Jaggers: Quite. So do you remember how I explained that YouPostVid had the burden of proving it has complied with certain DMCA safe harbor legal requirements in order to avoid liability for copyright infringement based on user uploads? Well this is still the case. So first up, to qualify a video must be uploaded by a user outside your company. Therefore, be sure to continue to instruct your employees not to upload videos that infringe copyright, a mistake the owners of Grooveshark made, to their regret. And, of course, you have registered a contact agent with the Copyright Office and identified that person on your website for receipt of notices of infringement. Plus, you have a repeat infringer policy.

Kevin: OK, I’m with you so far. I’ve done all that stuff. What was the next requirement under this crazy law?

Mr. Jaggers: Well this is the tricky part we discussed last time. An internet service provider with “actual” knowledge” or “red flag” knowledge must remove or take down the offending material expeditiously.

Kevin: Ugh, the red flag stuff. This gives me a headache. I don’t know how you lawyers do it, Mr. Jaggers. Remind me of what “actual” knowledge and “red flag” knowledge mean.

Mr. Jaggers: Yes, it is confusing, as it requires application of a mixed subjective/objective legal standard – I’m not sure how a jury would ever understand this enough to apply it in a trial. This remains the most perplexing aspect of the DMCA.

According to the Second Circuit in Vimeo, “actual” knowledge means that you actually, “subjectively” know of a specific infringement. If you do, you need to remove the item from your site. An example of this might be if Capital Records writes to you, informs you that they are the owner of a specific video, that its publication on your site is unauthorized, and demands that you take it down. Even though they have not sent you a formal DMCA “takedown notice” that complies with the DMCA “to the letter,” you should take the video down as soon as possible, or to quote the DMCA, “expeditiously.”

“Red flag” knowledge, on the other hand, means that you are subjectively aware of facts that would have made the specific infringement objectively obvious to a reasonable person.

Kevin: Mr. Jaggers, this is the same legal mumbo jumbo as last time. “Red flag,” “objective,” “subjective”! Who can understand this stuff? Normal people don’t even talk like that. But Mr. Jaggers, were there formal takedown notices from Capitol Records in this case – you know, a formal notice identifying the URL and containing the stuff the DMCA requires in a takedown notice?

Mr. Jaggers: No Kevin, there were no takedown notices in this case.

Kevin: Why not?

Mr. Jaggers: I think the large copyright owners, in this case Capital Records, want to expand the scope of the DMCA, and avoid having to serve formal notices – formal notices are too burdensome, and one of their goals is to persuade the courts to shift responsibility for locating and removing infringements to web sites like yours. However, that strategy failed in this case.

Kevin: OK, I think I get it. So, to return to “red flag” knowledge, the last time we met you said if my employees view any clip where the existence of copyright protection would be “objectively obvious to a reasonable person”, then it’s a red flag, and needs to be taken down. You even told me that my own employees couldn’t view videos on the site unless they were trained in this “objectively obvious” standard. This, despite the fact that most of them are part-time high school kids and college students! As a result I’ve told my employees to try to avoid viewing videos – do I still have to do that?

Mr. Jaggers: Kevin, in 2013 the district court in the Vimeo case held that Vimeo had to determine the type of music, that is, professional v. amateur. The court assumed that any “professional” material was posted without the consent of the copyright owner. The court held that a “recognizable song,” played essentially in its entirety and in unedited form triggered the red flag, and a website owner like Vimeo was required to either take it down, or investigate to confirm it was not a copyright violation. The last time we met I advised you based on the law as described in that case.

The good news is that the Second Circuit disagreed with the district court. The Second Circuit held that the fact that an uploaded video contains recognizable, or even famous, copyrighted music and was viewed, even in its entirety, by an employee of a service provider is insufficient, without more, to establish red flag knowledge.

The judges also held that when applying the “red flag” test, the hypothetical “reasonable person” to whom infringement must be obvious is an ordinary person – not someone with specialized knowledge or expertise concerning music or the laws of copyright. In other words, your employees no longer need to be trained in how to sort out the nuanced details of fair use and copyright law. If copyright infringement isn’t obvious to a reasonable person, then the standard is satisfied in your favor.

Kevin: Well, OK, but what does “obvious to a reasonable person” mean? How am I supposed to apply that rule in my company. Remember, I have around 15 kids – well, ok, young adults – working for me. How do I apply this standard to them? Frankly, I wouldn’t call many of “reasonable,” if you get my drift …

Mr. Jaggers: Well, the problem for you, and other web sites that rely on user generated content, is that even there remains a great deal of gray area in this law. Courts have a tendency to decide the narrow issue before them, and usually don’t address hypothetical situations. In the case of the DMCA, that has meant that our understanding of the law has crept forward at a glacial pace.

In this case the Second Circuit didn’t provide any examples of when an infringement would be obvious to a reasonable person, leaving that for the lower courts to work out on a case-by-case basis. But, they did provide an example that shows how difficult it will be for a copyright owner to prove red flag knowledge under this standard. As I mentioned, it’s not enough to establish red flag knowledge to show, without more, that an employee viewed a full length video containing a recognizable song by a well-known artist containing a copyright notice. The video could have been authorized or be fair use – how is the employee to know? Any way you look at it, it’s now much more difficult for a copyright owner to prove red flag knowledge.

Kevin: That’s good as far as it goes, Mr. Jaggers, but it doesn’t go very far. And, what does “without more” mean?

Mr. Jaggers: We don’t know yet, Kevin, the Second Circuit didn’t explain what additional facts would push this into “red flag” territory. Again, the bad news is that this will have to be worked out by the trial courts. But let me give you an example. Assume that you’ve received a valid, formal takedown notice for a specific video, and you’ve told an employee to take the video off your site. If that employee sees the same video re-uploaded shortly afterwards, that would probably trigger a red flag. The employee should take that video down. Anything short of that I can’t say at this point – we’ll have to see what the courts do in follow-up cases. But, if you come across a situation where you are in doubt, you should do one of two things – take the clip down, to be safe. Or, call me to discuss it, and I’ll advise you.

And, to answer your earlier question as to how to apply the  “reasonable person” standard, that’s the kind of instruction that is often left in the hands of juries.

Kevin: I think I get it, Mr. Jaggers, and I can’t say I like it. Except at either extreme, this law remains unpredictable, and that means risks I can’t afford to take. And, it creates opportunities for the large copyright owners to make me spend money on defense, and that alone could force me out of business. The fact that the district court viewed the law one way, and that we tried to live under that legal regime for two years, only to have the Second Circuit provide a different rule of law, is incomprehensible to me. Don’t judges even know what the law is? If they can’t agree, how are we supposed to figure it out? What a crazy system.

Mr. Jaggers:  It’s a crazy system, but it may be better than any of the alternatives. Do you have any questions, Kevin?

Kevin: This all sounds like the law is moving in the right direction – for me, at least.  Before we break – what about the “willful blindness” doctrine? You said last time that it was hard to distinguish from the “red flag” rule.

Mr. Jaggers: That’s correct. “Red flag, “actual knowledge,” “willful blindness” – there are three separate doctrines at work in the DMCA, and it’s difficult to say where one ends and the other begins. In fact, the DMCA doesn’t even mention “willful blindness” – it seems to be a concept the Second Circuit grafted on to the statute.

Kevin: They can do that?

Mr. Jaggers: I’m afraid so. But, in a nutshell, a service provider is “willfully blind when it is aware of a high probability of an infringement and it consciously avoids confirming that fact.

Kevin: How is that any different from “red flag” knowledge?

Mr. Jaggers: Yes, it’s confusing. This willful blindness concept is still up in the air, I’m sorry to say. But, in the Vimeo case the Second Circuit discussed three situations where Capital Records argued Vimeo was willfully blind, and it rejected all of them. The first argument would be applicable to you Kevin, with regards to your community flagging system, which allows users to report videos that are pornographic or that contain hate speech. However, your system is not configured to allow users to flag possible copyright infringements. Vimeo similarly monitored its website, but in its case the monitoring was for infringement of visual copyrighted content as opposed to audio content. Remember that the DMCA has an explicit “no-duty-to-monitor” rule – there is no duty for service providers like you to monitor user content. This rule protected Vimeo – the court held that there was no reason that voluntarily monitoring a site for one type of infringement requires monitoring for a different type of infringement. In other words, even if you monitor for one thing, you’re not willfully blind if you don’t monitor for another. This means you don’t need to add flagging for possible copyright infringement.

Kevin: OK. What were the other two arguments relating to willful blindness?

Mr. Jaggers: The second is simple, and again you don’t need to worry. The Second Circuit held that “suspicion” of copyright infringement is not the same as knowing facts that make infringement obvious, nor does it trigger the “red flag.” In other words, if you or one of your employees is merely suspicious that a video is infringing, you are not obligated to investigate, and failure to do so does not mean you are “willfully blind.”

The third argument is slightly more complicated, and Vimeo skated very close to the line on this one. Believe it or not, Vimeo employees encouraged users to post videos containing infringing material. However, this was sporadic, and there was no evidence that this encouragement led to posting of any of the videos at issue in the suit.

Capitol Records argued that Vimeo’s generalized encouragement of copyright infringement should result in Vimeo being stripped of its DMCA protection altogether, but the Second Circuit rejected this argument.

I think Vimeo narrowly escaped disaster on this issue. It’s reasonable to think that you can’t encourage people to infringe, turn a “blind eye” to infringements and expect the courts to overlook your behavior. The only reason Vimeo won this argument is that the encouragement was minimal and sporadic, and it was not encouraged by company management.

Not only could encouragement rise to the level of “willful blindness,” but it could be viewed as inducement to infringe under the Supreme Court 2005 decision in Grokster. So, my advice is that you should instruct your employees about this in the strongest terms. They should not encourage infringement.

Kevin: OK. So, this last area is certainly more problematic for my business. It’s difficult for me to control my employees, or monitor what they are telling users. Maybe I’ll set up a system where all outgoing company emails get routed to one person, whose job it will be to review them to make sure my employees follow these rules.

But, not to change the subject, the thing that really confuses me is how all of this fits in to the law on sound recordings created prior to 1972. Last time you told me that I had to monitor my website for those because they were governed by some other laws, and DMCA protection didn’t apply. I’ve heard a lot about this pre-1972 sound recording issue, and Flo and Eddie’s lawsuits over their ‘60’s recordings, and I’m still confused by that. Did the court touch on that issue?

Mr. Jaggers: This is where I have saved the best until last. The Second Circuit held that Congress intended the DMCA to apply to all sound recordings, not just post-1972 recordings. The Second Circuit is the first federal appeals court to make this ruling so it is very important. While other courts could disagree, and the issue is not definitively resolved, I’m comfortable saying that you no longer have to treat pre-1972 recordings as a special case – you can treat them the same as everything else for purposes of the DMCA.

Kevin: Wow Mr. Jaggers! That will make life easier. But, I have to say this whole DMCA thing is crazy. The DMCA is still so unsettled that large companies like Capitol Records can still sue me and make me spend a fortune defending, right?

Mr. Jaggers: Yes, we can’t do much about that, I’m afraid. And, in fact, the Second Circuit did remand the Vimeo case so Capitol Records could conduct further discovery into some the “red flag” issues – presumably, this means they’ll be deposing Vimeo employees and questioning them about specific videos they viewed. This is a major problem, Kevin. I know that neither you nor any other startup can afford to defend a case like this if it drags on for years – the cost alone could put you out of business and scare off investors. I’m hopeful that the courts will short-circuit cases like this in the future, to save companies like yours the cost of defending. The Second Circuit hinted as much. We’ll see.

But keep your nose clean, Kevin, and you have a good chance of avoiding a case like this.

Kevin:  So, that’s a bummer. And this whole law seems so complicated and crazy! Do you think it will ever be changed, or do we have to live with this forever? In my weaker moments, I even feel sorry for the copyright owners, who have to play “whack a mole” sending takedown notices over and over again for the same music!

Mr. Jaggers: Yes Kevin, content owners are lobbying Congress to change the law, and it’s not just big companies like Universal, Sony and Warner that are complaining , and hundreds of artists have complained about how unfair the DMCA is to them. Of course, internet service providers like you are not happy with the complexities of the law, either. Everyone is dissatisfied and thinks the law should be changed to favor them. Whether anything gets done to correct these problems, and if so when, is anyone’s guess.

Capital Records, LLC v. Vimeo, LLC (2nd Cir. June 16, 2016)

My thanks to Alice Lomas, a UK law student who interned with my firm this summer, for her assistance with this post.

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