This case provides an example of when a service provider was not granted the safe harbor protection of the DMCA.  Perfect 10, a nude-women-photos website and magazine, claim copyright, trademark, and rights of publicity violations against Cybernet Ventures, an age-verification service (AVS).

            Cybernet Ventures is the largest web AVS and it create revenue from users registering their website, usually getting there via links from affiliated sites, to whom Cybernet pays commission.  In response to Perfect 10’s  claims, Cybernet attempted to hide its direct financial interest or relationship, claiming that even 10,000 infringing images wouldn’t establish significant worth (pg 25 of pdf).  In doing this, it attempted to cover up a strong argument that wouldn’t allow it to afford DMCA protection.  In addition (on pg 25), we see that Cybernet failed to quickly take action in removing infringing material after Perfect10 produced a copyright infringement notice.  This conflicts with the DMCA’s “notice and take-down” provision. 

            The court refused to apply the DMCA safe harbor protection on Cybernet, due to those mentioned reasons.  Cybernet simply did not meet the requirements as stated in section 512(c) regarding financial benefits and immediate takedowns.  Between these two ideas, the financial benefits test will be of most relevance to YouTube’s standing, as we know much of its revenue is based off ads and user visits.  Just as the infringing pictures helped boost Cybernet’s revenues, the infringing videos probably increases YouTube advertisement revenues.  I think this could provide a historical case for the determination of YouTube’s legality, depending on what is found concerning YouTube’s ad placements.

       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.