SDNY Reconsiders MP3tunes in Light of Second Circuit's Viacom v. YouTube Decision

Practical Law Legal Update 9-529-3705 (Approx. 5 pages)

SDNY Reconsiders MP3tunes in Light of Second Circuit's Viacom v. YouTube Decision

by PLC Intellectual Property & Technology

Key Litigated Issue

In Capitol Records, Inc. v. MP3tunes, LLC, the key issue before the US District Court for the Southern District of New York was whether the court's October 25, 2011 memorandum and order in this case warranted reconsideration in light of the US Court of Appeals for the Second Circuit's April 5, 2012 decision in Viacom International, Inc. v. YouTube, Inc. Among other things, the court addressed:

Whether, following Viacom's precedent, the plaintiffs had raised issues of material fact that rendered summary judgment for the defendants inappropriate on the Digital Millennium Copyright Act (DMCA) issues of:
- red-flag knowledge; and
- willful blindness.
Whether MP3tunes' cover-art function fell within the scope of the DMCA's "by reason of storage at the direction of a user."
The different direct financial benefit standards under the DMCA and for common law vicarious liability.

Background

This case arose when EMI, Inc. and 14 record companies and music publishers (the plaintiffs) sued MP3tunes, LLC and its CEO and founder, Michael Robertson ( the defendants) for copyright infringement. MP3tunes operated now-defunct websites that allowed users to:

Store music files in personal online storage lockers.
Search the internet for free song files and transfer them to their lockers.

Among other motions by the parties, MP3tunes moved for summary judgment that the DMCA's safe harbors for storing material at the direction of users and information location tools shielded it from liability. In an October 25, 2011 memorandum and order (the October 2011 order), the SDNY granted MP3tunes' motion for songs and links that either EMI did not sufficiently identify in its takedown notices or MP3tunes removed from its service after receiving DMCA takedown notices. The court relied on Judge Stanton's 2010 ruling in Viacom International, Inc. v YouTube, Inc. in finding, among other things, that the defendants:

Lacked both actual and red-flag knowledge of the infringements.
Were not willfully blind to repeat infringing activity.

On April 5, 2012, the Second Circuit issued its opinion in Viacom, reversing portions of the 2010 ruling. In light of the Second Circuit's decision, the plaintiffs and Robertson filed motions for reconsideration of the October 2011 order.

Outcome

In its May 14, 2013 memorandum and order, the SDNY most notably:

Granted in part the plaintiffs' motion for reconsideration on whether the defendants qualified for the DMCA safe harbors, finding issues of fact on whether the defendants were willfully blind to or had red-flag knowledge of certain infringing activities.
Denied Robertson's motions for reconsideration regarding infringement of the plaintiffs' cover art and denied summary judgment on Robertson's vicarious liability.

The court also denied the plaintiff's motion for rehearing on the issue of inducement of infringement, and granted in part and denied in part motions by Robertson on the issues of direct copyright infringement and jurisdiction.

Willful Blindness

The SDNY vacated its grant of summary judgment to the defendants on the issue of contributory infringement liability for the songs that were not identified in DMCA-complaint takedown notices. The SDNY concluded that to determine eligibility for the DMCA safe harbors, the Second Circuit's decision in Viacom required it to conduct fact-finding on whether the defendants were willfully blind to its users' infringements.

The Second Circuit in Viacom held that in appropriate circumstances, the common law doctrine of willful blindness may be applied to demonstrate a service provider's knowledge or awareness of specific infringements that would disqualify it for the DMCA's safe harbor protections. Rather than adopting a bright line rule, the Second Circuit favored explicit fact finding.

Applying this standard, the SDNY found that a jury could reasonably interpret several documents in the record as imposing a duty to make further inquiries into specific and identifiable instances of possible infringement, including communications received by MP3tunes where:

A user acknowledged that the music he posted violated the DMCA.
An e-mail stated that search results for a particular song pointed users to websites that blatantly acknowledged that they contain infringing MP3s.
An MP3tunes employee acknowledged in an e-mail that certain content was probably copyrighted material.

The SDNY further rejected the defendants' argument that the court had already considered the issue in its earlier ruling when it found that MP3tunes does not blind itself to users' identities and activities. The court reasoned that it had considered the issue only in the context of whether MP3tunes had a sufficient repeat infringers policy and that its inquiry did not address whether MP3tunes was deliberately blind to infringements.

Red-Flag Knowledge of Infringement

The SDNY also withdrew its grant of summary judgment on the issue of red-flag knowledge. The court found material issues of fact on whether the defendants had red-flag knowledge of specific infringements that would disqualify them from safe-harbor protection.

In Viacom, the Second Circuit found summary judgment was premature where the plaintiffs had introduced evidence that YouTube executives had decided not to take down from their service materials they acknowledged internally was almost certainly infringing. That court remanded the case for specific fact finding on the clips at issue. Reading Viacom to mean that something less than formal takedown notices may establish red-flag knowledge, the SDNY found it inappropriate to resolve red-flag knowledge on summary judgment in this case, too, where the plaintiffs introduced internal communications that acknowledged likely infringements.

Scope of "By Reason of Storage at the Direction of a User"

In ruling on Robertson's motion for reconsideration on direct infringement of EMI's cover art, the SDNY addressed the scope of the DMCA's safe harbor for infringement "by reason of storage at the direction of a user."

The Second Circuit in Viacom and other courts have interpreted this language as covering more than just storage lockers to include software functions that facilitate access to material uploaded by users. The Second Circuit found this to include YouTube's related-videos function, which uses algorithms to identify and display thumbnails of clips related to the uploaded video.

However, the SDNY declined to extend this reasoning to MP3tunes' cover-art function, which uses an algorithm to retrieve and display cover art from Amazon.com. The court found this function distinguishable and outside the safe harbor's scope because in contrast with the related-video function:

The cover art is not provided by users, but obtained by MP3tunes from a third party (Amazon.com).
The cover-art function was not primarily for facilitating access to users' material, but intended to drive traffic to Amazon.com.

Vicarious Liability for Copyright Infringement

In denying Robertson's motion for summary judgment on the issue of vicarious liability, the SDNY clarified the distinction between the direct financial benefit standards for:

Common law vicarious liability.
DMCA safe harbor ineligibility.

Robertson argued that he was entitled to summary judgment that he was not vicariously liable for MP3tunes' contributory infringement because in its 2011 opinion the SDNY found that MP3tunes did not receive a direct financial benefit from infringing activity that would disqualify it from DMCA protection. The court disagreed, finding that the financial benefit prong of vicarious liability is construed more broadly than it is under the DMCA.

The SDNY went on to find that there is an issue of material fact on whether Robertson benefited from the infringement in satisfaction of the common law vicarious liability standard and therefore denied Robertson's motion for summary judgment on this issue.

Practical Implications

This decision suggests that following Viacom International, Inc. v YouTube, Inc. courts in the Second Circuit may require more extensive fact finding before disposing of copyright infringement cases under the DMCA safe harbors, particularly on the issues of willful blindness and red-flag knowledge. This area is likely to continue evolving as more courts construe Viacom. Regardless of what evidence courts may find relevant in evaluating willful blindness and red-flag knowledge, copyright owners should generally consider sending DMCA takedown notices to ensure a service provider has actual knowledge. To ensure they comply with the safe harbor requirements, online service providers should ensure their policies do not tolerate any copyright infringement and employ measures to ensure they are followed.

SDNY Reconsiders MP3tunes in Light of Second Circuit's Viacom v. YouTube Decision | Practical Law