UMG Recordings, Inc. v. Veoh Networks, Inc., 2008 WL 5423841 (C.D.Cal. December 29, 2008) (order denying UMG’s motion for partial summary judgment) (A. Howard Matz, j.)

Veoh Networks, Inc. runs a site, veoh.com, that allows users to share videos.  UMG brought suit alleging direct, contributory, and vicarious copyright infringement, and for inducement of copyright infringement. Veoh asserted, as an affirmative defense, that their actions were shielded under the DMCA’s safe harbor provisions.  In this motion, UMG sought partial summary judgment, asking the Central District Court of California to find that Veoh is not entitled to the safe harbor provisions codified in 17 U.S.C. 512(c). 17 U.S.C. 512 states, in part, that a service provider shall not be liable for “infringement of copyright by reason of the storage at the direction of a user of  of material that resides on a system or network controlled or operated by or for the service provider”; provided that the service provider:

(A)(i)  does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

(B) 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

(C) upon notification of claimed infringement as described . . . responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

UMG argued that four of Veoh’s software functions were neither “storage” nor undertaken “at the direction of a user”; and thus, didn’t qualify to be shielded from liability under 512(C):

1. automatically creating “Flash-formatted” copies of video files uploaded by users;
2. automatically creating copies of uploaded video files that are comprised of smaller “chunks” of the original file;
3. allowing users to access uploaded videos via “streaming”;
4. allowing users to access uploaded videos by downloading whole video files.

The Court denied UMG’s motion for partial summary judgement, finding that the four software functions fall within the DMCA’s safe harbor provision, “because all of the[ functions] are narrowly directed toward providing access to material stored at the direction of users.”

(1.)  Flash-Formatted Copies:  In regards to the first software function, flash-formatting copies, Judge Matz found that the question was already settled by previous case law.   The Court cited Lo Group, Inc. v. Veoh Networks, Inc. No. C06-03926 HRL, 2008 WL 4065872 (N.D. Cal Aug. 27, 2008) for the holding that flash-formatting copies were shielded by the safe harbor provision.

(2., 3. and 4.) Chunks, Streaming, and whole video files:  UMG argued that § 512(c) didn’t apply because Veoh’s activities didn’t constitute “storage,” and weren’t undertaken “at the direction of a user.”

Veoh agreed that some of the software functions at issue didn’t constitute “storage,” but forwarded that it wasn’t excluded from the safe harbor provisions on two grounds.  First, Veoh argued that the “by reason of the storage” language in 512(c) is “broad causal language that is clearly meant to cover more than mere electronic storage lockers.” Veoh forwarded that 512(c) doesn’t require that the infringing conduct constitute storage in and of itself.  Instead, under the provision, the infringing conduct must only occur as a result of the storage.

Secondly, Veoh argued that the language in 512(c) “presupposes that the service provider will be providing access to the user’s material.”

Judge Matz found UMG’s interpretation of § 512(c), that the safe harbor applied “only to operational features that provide or constitute storage-and nothing more,” was overly restrictive and not consistent with the plain wording of the statute or Congressional intent:

Common sense and widespread usage establish that “by reason of” means “as a result of” or “something that can be attributed to ….“ So understood, when copyrighted content is displayed or distributed on Veoh it is “as a result of” or “attributable to” the fact that users uploaded the content to Veoh’s servers to be accessed by other means. If providing access could trigger liability without the possibility of DMCA immunity, service providers would be greatly deterred from performing their basic, vital and salutary function-namely, providing access to information and material for the public.

Counsel:

• UMG Recordings, Inc. et al: Irell & Manella (Los Angeles, CA).
• Veoh Networks, Inc.: Winston & Strawn (Los Angeles, CA).

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