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.