This article written by Fred von Lohmann, attorney with the Electronic Frontier Foundation, examines how YouTube would fare under the copyright law and, in particular, the Digital Millennium Copyright Act (“DMCA”).  According to the author, the stakes are tremendous because YouTube’s website hosts infringing copyrighted material but it also facilitates the free flow of information and spawns original and transformative creativity.  The author opines that in light of YouTube’s business operations it legally should be shielded by the safe harbor provisions of the DMCA.  However, he cautions that YouTube must continue to walk a careful line so as not to run afoul of the safe harbor requirements.

       The article examines several of the DMCA’s requirements mandated by Congress.  First, the author examines YouTube’s policy in implementing the termination of repeat infringers and the removal of infringing content.  He concludes that YouTube’s written policy and implementation meet the DMCA’s requirements concerning termination, as well as notice and take-down.  Second, the author finds no obvious pirate sites on YouTube which is an important factor in analyzing the knowledge requirement.  Third, in examining the direct financial benefit test, Mr. von Lohmann explains that it represents an important hurdle for service providers.  In the case of YouTube, he finds that it has chartered a cautious course by putting advertising only on search result pages rather than on the clip pages themselves.  He suggests, however, that YouTube may feel increasing pressure to develop innovative business opportunities other than by limiting the placement of advertising on its website.  In that regard, YouTube will have to experiment with different revenue strategies that do not run afoul of the DMCA. 

       For purposes of my paper, this article provides valuable information on YouTube's business operations.  According to the author, YouTube largely complies with the requirements mandated by the DMCA, but the financial benefit test could be problematic for it.  In determining whether YouTube should successfully meet the requirements of the DMCA, an examination of YouTube's operations will be critical and this article will be helpful in that regard.

       In denying Viacom’s allegations of direct and secondary copyright infringement, YouTube will seek to obtain the protection of the safe harbor provisions of the 1998 Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. 512.  A finding that YouTube satisfies the DMCA’s safe harbor requirements would immunize it from monetary damages or injunctions even if it were found to have directly or secondarily violated the copyright laws.  The statute explicitly mandates a series of threshold requirements (17 U.S.C. 512(i)) and core requirements (17 U.S.C. 512(c)(1)) that a service provider must meet to be entitled to safe harbor protection.  Most problematic for YouTube will be whether it meets the DMCA’s core requirements under section 512(c)(1)(A),(B), and (C).  Subpart A requires that the service provider not have actual or apparent knowledge that the material on its network infringes on the rights of a copyright holder.  The legislative history will be examined to determine the scope of “apparent knowledge” including an examination of the “red flag” test stated in the Congressional Reports dealing with the DMCA.  Subpart B requires that the service provider not receive a financial benefit directly attributable to the infringing activity where it has the right and ability to control such activity.  Of critical importance to Subpart B will be YouTube’s business model for generating revenue from advertisements.  Subpart C requires the service provider, upon notification by the copyright holder of claimed infringement on its website, respond “expeditiously to remove” the infringing work.  Both Viacom’s arguments and YouTube’s counter arguments will be examined in an effort to determine whether YouTube’s removal policy conforms to the DMCA requirements.

       My paper will address some of the conflicting cases that have examined the various sections of the DMCA described above and rely on the legislative history at H.R. Rep. No. 105-551 (1998) and S. Rep. No. 105-190 (1998) to amplify congressional intent.  Critical to my analysis will be the application of the facts of this lawsuit to the language of the DMCA, taking into account its legislative history, to determine whether YouTube should meet the requirements of the DMCA’s safe harbor provision.

       This article written by Michael Fricklas, general counsel at Viacom, sets forth Viacom’s legal and factual arguments supporting its position that YouTube should not be afforded safe harbor protection under the Digital Millennium Copyright Act (“DMCA”).  First, he argues that YouTube is not the kind of entity envisioned by Congress in enacting the DMCA.  YouTube, he claims, is more than a storage service provider; it is an entertainment destination.  Second, Viacom’s attorney claims that YouTube’s policies with regard to infringing content are selectively implemented with more proactive action given to companies in which it has a licensing agreement.  Third, the rampant unauthorized copyrighted material on YouTube demonstrates that it has the requisite knowledge of infringing activity.  He cites as further support for a finding of knowledge the fact that YouTube creates a list of “featured videos” on its home page.  Fourth, Mr. Fricklas states that YouTube receives a direct financial benefit from infringing activity.  He contends that infringing content generates popularity and more viewers which increase advertising revenue.  Fifth, he asserts that YouTube has the ability to control content.  As evidence of this fact, Mr. Fricklas states that YouTube’s managers remove pornography.  Finally, as a policy matter, he claims that requiring copyright owners to patrol the web on an ever burgeoning number of sites would be unfair.  Forcing YouTube to obey copyright laws would not stifle innovation.  Instead, Viacom’s attorney argues that protecting intellectual property spurs investment and thereby the creation of new technologies.  It is, therefore, critical that the law ensure that YouTube respect the rights of copyright owners, like Viacom.

       Mr. Fricklas’ arguments are, of course, partisan.  However, they shed light on Viacom’s perspective and the facts that it may rely upon during the lawsuit.  The article also crystallizes some of the hurdles that YouTube will have to overcome if YouTube is to receive safe harbor protection.  In reaching my conclusion as to whether YouTube should meet the DMCA’s requirements, it will be necessary to present and analyze Viacom’s arguments.  This article will be helpful in that regard.

       In this case, Costar Group Inc. v. Loopnet, Inc., Costar, the owner of numerous copyrighted photographs, sued Loopnet, an internet company that listed commercial real estate on its website which included some of CoStar’s copyrighted photographs, for direct and contributory copyright infringement.  As in the YouTube case, Loopnet sought refuge in the protection of the Digital Millennium Copyright Act (“DMCA”).  One of the critical issues for YouTube to successfully invoke the protections of the DMCA will be whether or not it receives a direct financial benefit from the infringing material on its website.  The Costar case sheds light on this element of the DMCA.  

       In the Costar case, the court ruled that Loopnet did not receive a financial benefit directly attributable to the infringing photographs.  In reaching that conclusion, the Costar court relied on the legislative history of the DMCA and related case law.  The court found significant that Loopnet did not charge a fee for posting any real estate listing, whether it was with a photograph (thus potentially infringing) or without a photograph (non-infringing).  It rejected Costar’s claim that Loopnet financially benefited by having infringing works on its website which enhanced the attractiveness of its website to potential customers.  The Costar court found that this type of financial benefit was an indirect benefit, not the type of direct benefit required by section 512(c)(1)(B) of the DMCA.  However, there is another line of cases (one of which is included in my Annotated Bibliography – Perfect 10 v. Cybernet) which concludes that there is a direct financial benefit where the infringing material acts as a draw that attracts subscribers to the website.  That line of cases could be problematic for YouTube.  In the case of YouTube, the manner in which it generates income will be critical to the application of the financial benefit test.  Specifically, YouTube’s advertising revenue will be considered in light of the Costar financial benefit analysis as well as the alternative analysis that focuses on the potential draw of the infringing material.

       Perfect 10, an adult entertainment website, sued Cybernet Ventures, an online age verification service, for infringing photographs found on its affiliated websites.  In this case, the court refused to provide Cybernet with safe harbor protection under the Digital Millennium Copyright Act (“DMCA”).   The reasoning of the court provides some insights into whether or not YouTube will be protected by the DMCA.

       In determining whether Cybernet would be afforded safe harbor protection, the court analyzed each of the DMCA’s requirements.  The court looked to the legislative history as guidance and relied upon Congress’ mandate to “take a common-sense, fact based approach not a formalistic one.”  Overshadowing much of the court’s discussion was evidence of Cybernet’s attempt to undermine the intent of the DMCA to forge a working relationship between copyright holders and service providers.  Of particular importance was the fact that Cybernet, after receiving notice from the copyright holder, failed to expeditiously remove infringing material from its system evidencing bad faith and undermining congressional intent. 

       Also significant for purposes of my paper is the Cybernet court’s analysis of the DMCA’s direct financial benefit test.  Here, the court found a direct financial benefit where Cybernet’s income was based on the number of new users to affiliated sites including infringing sites.  The court found that the quality of Perfect 10’s copyrighted images attracted new subscribers.  Thus, the infringing images acted as a draw which increased Cybernet’s revenue.  This case could be problematic for YouTube since Viacom has argued that the infringing works on YouTube’s website attracts more users which in turn drives higher advertising revenue.  Accordingly, the manner in which YouTube generates its revenue will be highly relevant to the financial benefit test.  Whether YouTube satisfies the financial benefit test will be analyzed under Cybernet’s reasoning, other court opinions, and the legislative history that interprets the direct financial benefit test.