Does the DMCA Work?

If you are a copyright owner, two recent cases involving the Digital Millennium Copyright Act (“DMCA”) must have you feeling like Mugato (Will Ferrell) in Zoolander:

[youtube http://www.youtube.com/watch?v=4DVAsmrwdtQ&w=560&h=315]

In UMG Recordings, Inc. v. Veoh Networks, Inc., No. 09-56777 (9th Cir. Dec. 20, 2011), the Ninth Circuit affirmed a Central District of California court’s order granting summary judgment to Veoh after determining that it was protected by the DMCA “safe harbor” limiting service providers’ liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c).

In Megaupload Ltd. v. Universal Music Group, Inc., 11-cv-6216-CW (N.D. Cal. Dec. 16, 2011), alleged piratical website operator Megaupload moved ex parte for a temporary restraining order against record label UMG for “sabotaging [Megaupload’s promotional video] campaign through abuse of the notice and takedown procedures of the” DMCA.  Although the TRO motion was denied as moot, the underlying suit remains.

These two cases exemplify the Bizarro World the DMCA has become, in which the business models of service providers require copyright infringement on a massive scale (e.g., Sina Simantob, a principal at Highlander Wealth Services and Chairman of Grooveshark, in an email to Drew Lipsher, a partner at media VC firm Greycroft, stated “we bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission. … I think [Grooveshark has] a real chance to settle with UMG within a year and by that time [Grooveshark will] be up to 35m uniques and a force to be dealt with.”  UMG Recordings, Inc. v. Escape Media Group, Inc., 11-civ-8407 (Nov. 18, 2011, S.D.N.Y)), but labels get sued over takedown notices.

Megaupload v UMG

The Megaupload case involves a promotional video it made available on YouTube that included many famous celebrities and artists endorsing the Internet locker service.  In its complaint and application for a temporary restraining order Megaupload alleged that UMG filed a takedown notice with YouTube knowing that it did not own any copyright in the Megaupload video.  Before turning to the merits of Megaupload’s case, a word about the promotional video at issue…

If you thought the Rebecca Black video was annoying, wait until you see the Megaupload video:

[youtube http://www.youtube.com/watch?v=K9caPFPQUNs&w=560&h=315]

With lyrics such as the following, it rivals the lyrics to “Friday” (e.g., “Kickin’ in the front seat; Sittin’ in the back seat; Gotta make my mind up; Which seat can I take?”)

Users 1 billion
Per day 50 million
4 percent
of the Internet
Get the Mega Manager
Its 10 times faster
Bit by bit
Unlimited
It’s a hit
It’s a hit
M
E
G
A
Upload to me today
Send me a file
Megaupload

The Megaupload video features endorsements by several “famous” “celebrities” and artists, including Kasseem Dean (Swizz Beatz), Kanye West, Mary Jane Blige, Estelle Swaray (Estelle), Ciara Harris (Ciara), Jayceon Taylor (Game), Carmelo Anthony, Will Adams (Will.i.am), Kim Kardashian, Sean Combs (Diddy), Alicia Keys, Chris Brown, Floyd Mayweather, Jamie Foxx, Jonathan Smith (Lil Jon), Brett Ratner, Serena Williams, and Russell Simmons.  Megaupload claims that it obtained very broad releases from every artist who appears in its promotional video, including consents to record the artist’s “performance and interview (called the “Appearance”), editing it, and publishing it on the Internet through streaming media, precisely as [Megaupload] has done.”  Megaupload also claims that its releases grant it the right to

“copyright, record, reproduce, broadcast, distribute, edit, publish, exhibit, disseminate, couple and use in any way throughout the universe and in perpetuity the audio and/or visual portions of any videotape, film, pictures, negatives, prints, photographs, stills or other recordings of the Appearance, and any reproduction thereof.”  These celebrities also relinquished any right to inspect or approve any finished product or “derivatives thereof, or any subsequent uses made of the Appearance.”

Three things come to mind:

(1) Did Their Lawyers Review the Release?  I can’t imagine a lawyer from a white shoe entertainment firm such as Greenberg Traurig, Mitchell Silberberg & Knupp, or Fenwick & West, which represents Megaupload, letting a client sign a release that didn’t provide the artist—particularly an artist of the prominence appearing in the Megaupload video—with the right to inspect or approve the final product.

(2) Did Megaupload Pay These Artists?  Megaupload doesn’t say whether it paid for the celebrities to appear in the video, other than to note that it “invested heavily [in the video] to ensure that the music, number and selection of celebrities, and video design would appeal to a large audience that would then continue virally to spread the word.”  I find it hard to believe that Megaupload didn’t pay these artists a lot of money.  And this certainly wouldn’t be the first time artists took money and later regretted it.  Remember when Nelly Furtado, Mariah Carey, and Beyonce “discovered” that Saif al-Islam Gaddafi, who had paid each of them million dollar fees to perform at his parties in 2007, 2008 and 2009, respectively, was the son of ruthless Libyan dictator Muammar Gaddafi.  While appearing in a Megaupload video isn’t equivalent to performing for the son of the “mad dog of the Middle East,” it does suggest that artists are sometimes willing to be “naive and unaware,” as Mariah claimed she was, when a contract comes with a check for a million dollars.

(3) Do These Artists Even Know What Megaupload Is or Actually Use It?  Do we really believe that Lil’ Jon or Kim Kardashian personally spend any time uploading videos to the Internet?  (ok, maybe Kim used to, but those were the naughty kind)

The Problem with the DMCA

While this suit will probably unfold like the kerfuffle that ensued after Prince issued a DMCA takedown notice to YouTube over a home video Stephanie Lenz posted of her children dancing to Prince’s song “Let’s Go Crazy,” the suit signifies a broader problem with the DMCA.  The DMCA was intended to facilitate the legal distribution of digital copyrighted works and encourage investment in the Internet.  As the Senate Report explains

Due to the ease with which digital works can be copied and distributed worldwide virtually instantaneously, copyright owners will hesitate to make their works readily available on the Internet without reasonable assurance that they will be protected against massive piracy. Legislation implementing the treaties provides this protection and creates the legal platform for launching the global digital on-line marketplace for copyrighted works. It will facilitate making available quickly and conveniently via the Internet the movies, music, software, and literary works that are the fruit of American creative genius. It will also encourage the continued growth of the existing off-line global marketplace for copyrighted works in digital format by setting strong international copyright standards.

At the same time, without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet. In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand. (emphasis added)

When the Senate writes about “making available quickly … via the Internet” it clearly assumed that the copyright owners would be authorizing the “making available.” As the Senate Report emphasizes, the goal of the DMCA is to encourage (1) the Internet to become a “legal platform” for digital distribution of copyright works and (2) investments in the “speed and capacity” of the Internet.  From the perspective of the copyright owner, however, the recent jurisprudence regarding the obligations of the copyright owners and the service providers under DMCA is creating a frustrating situation where service providers appear to build their websites in response to the latest legal interpretation of the DMCA.  This is eerily reminiscent of the evolution of the audio file sharing services; i.e., as the result of lawsuits, Napster and its centralized server model gave way to Grokster and its distributed content model, which gave way to BitTorrent and its use of “swarms” to download a “bits” of a single file from many users simultaneously.

In a blog post, Megaupload’s Dotcom described the situation thusly:

“When one of the top artists endorsing Mega received a letter from the CEO of the RIAA with some active download links on Megaupload containing that artist’s music it was shocking at first. But in the same letter it was described how those links were found with a Google search. Giving Mega a hard time when we don’t even provide a search feature on Megaupload? It’s bizarre. And at the same time you find the world’s largest piracy index on Google and most other search engines. But hey, these guys are not rogue. They are just rich.” (emphasis added)  Dotcom’s comment describes exactly what is so frustrating about the DMCA.

How Does Megaupload Work?

In her recent order regarding Megaupload’s motion to dismiss a lawsuit brought by Internet pornographer Perfect 10, Inc., (Perfect 10, Inc. v. Megaupload Limited, 11-cv-191-IEG (SD. Cal. July 27, 2011) Chief Judge Irma Gonzalez of the federal District Court for the Southern District of California described Megaupload thusly (internal citations omitted)

After a file is uploaded to megaupload.com, Megaupload creates a unique Uniform Resource Locator (“URL”). The URL is the address of the file on the internet. Anyone with the URL can download the file from Megaupload’s servers. Megaupload and its users disseminate URLs for various files throughout the internet. In order to view, copy, or download such files from the Megaupload websites without waiting, users must pay a membership fee. … This much is clear: Megaupload allegedly stores billions of dollars of “pirated” full-length movies, songs, software, and images on its servers. Megaupload apparently depends on, and provides substantial payouts to, affiliate websites who catalogue the URLs providing access to the mass of “pirated” content on Megaupload’s servers. For example, at the affiliate search engine megaupload.net, users who perform a search are directed to Megaupload’s website and offered the opportunity to purchase a membership. Megaupload also encourages its users to upload materials through its “Rewards Programs.” Megavideo.com and megaporn.com have a rewards program called “Megaporn Rewards.” Megaupload.com also has a rewards program, which it runs in a similar fashion, stating:

The more downloads your files get, the more you can earn through our Megaupload Rewards program. Every qualifying download of one of your files will earn you a reward point. When you have reached a certain number of points, you can redeem them for premium status or even cash. There is no limit! And even better: The more downloads your files get, the more you can earn through our Megaupload Rewards program.

Megaupload offers $10,000 for 5,000,000 reward points.  So, while Megaupload doesn’t offer a search function as part of the Megaupload site itself, it has created a complex (and effective) means of cataloging all the content stored in its digital lockers.  Why would Megauload go to the trouble and expense of offering $10,000 bonuses in a rewards program rather than simply include a search function that would accomplish the same outcome?  I can’t believe that the one-time cost of incorporating search functionality is more expensive than the on-going expense of maintaining its rewards program.  The answer must lie in Megaupload’s lawyers reading of the safe harbor provisions of § 512, especially § 512(c), which as we will see in the next case the Ninth Circuit views as quite broad.

UMG v Veoh

Like YouTube and other Internet video aggregators, Veoh’s business model involved building a large user base by offering as much content as possible and later generate profits from paid advertising.  Just like its competitors, in order to aggregate the content necessary to build a user base large enough to monetize, Veoh allowed users to upload to the Veoh website without Veoh reviewing such videos[i], wherein the user would provide identifying information about the video, including its title, a description of its contents, a descriptive category (e.g., music), and keyword “tags” for the video.  The information and “tags” entered by the user became the video’s “metadata” and were used by Veoh to return search results initiated by other users of its service.  In addition, Veoh used recommendation software to return additional videos that might be of interest to a particular user based on that user’s past viewing history.

UMG objected to Veoh’s site because thousands of UMG’s music videos were uploaded without authorization.  Before the district court and on appeal, UMG argued that Veoh was not entitled to the safe harbor protection of § 512 because it engaged in activities beyond “storage at the direction of a user;” e.g., “Veoh’s infringement … arises by reason of its decision to copy, publicly perform, and distribute UMG’s protected works.”  As UMG argued in its appeal brief, “The District Court’s opinion absolves Veoh of responsibility for conduct as or more egregious than that which led to Napster’s, Grokster’s, or Kazaa’s liability.  Napster, Grokster, and Kazaa offered indices that helped their users find infringing content and obtain it from other users. But they neither stored the infringing files nor directly distributed those files, as Veoh did.”

In affirming the district court’s grant of summary judgment in favor of Veoh, the Ninth Circuit first considered what “by reason of the storage at the direction of a user” means under § 512(c)(1).  While UMG argued that “nothing in the ordinary definition of ‘storage’ encompasses” the automatic processes undertaken to facilitate public access to user uploaded videos,” the Ninth Circuit concluded that the notice and takedown provisions of § 512 would be meaningless if public access to uploaded videos weren’t contemplated by the DMCA safe harbor provisions.  As the Ninth Circuit explained,

Section 512(c) codifies a detailed notice and takedown procedure by which copyright holders inform service providers of infringing material accessible through their sites, and service providers then “disable access to” such materials. 17 U.S.C. § 512(c)(1)(A)(iii), (c)(1)(C) & (c)(3)(A)(iii). This carefully considered protocol, and the statute’s attendant references to “disabl[ing] access” to infringing materials … would be superfluous if we accepted UMG’s constrained reading of the statute. … Indeed, it is not clear how copyright holders could even discover infringing materials on service providers’ sites to notify them as the protocol dictates if § 512(c) did not contemplate that there would be access to the materials.

The legislative history does not seem to me, however, to support such a wide read of § 512(c).  In the Senate Report on the DMCA, the examples used to illustrate the types of behaviors in which a service provider might engage that could expose such service provider to liability is much narrower in scope than the actions of Veoh.  As the Senate Report states

In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites.

When discussing § 512(c) in particular, the Senate Report notes “Examples of such storage include providing server space for a user’s web site, for a chatroom, or other forum in which material may be posted at the direction of users.”  The “chatroom or other forum” examples make sense, as the House Report on the DMCA indicated that “the [DMCA] essentially codifies the result in the leading and most thoughtful judicial decision to date: Religious Technology Center v. Netcom On-line Communications Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995),” which held that a web-hosting service provider (as distinct from a website operator like Veoh) was not liable for direct copyright infringement where users posted materials to a Usenet site whose protocols automatically transmitted those materials.

By way of background, as explained in Arista Records LLC v. Usenet.com, Inc., 07-cv-8822 (S.D.N.Y. June 30, 2009),

The USENET network, created over twenty years ago, is a global system of online bulletin boards on which users (or “subscribers”) may post their own messages or read messages posted by others.  To obtain access to the USENET, a user must gain access through a commercial USENET provider … or an internet service provider.  Messages posted to the USENET are commonly known as “articles.”  Articles, in turn, are posted to bulletin boards called “newsgroups.”  Newsgroups often are organized according to a specific topic or subject matter, and are oftentimes named according to the subject matter to which the articles posted to the newsgroup relate.  The USENET is divided into nine major subject headings known as “hierarchies,” one of which is the alt.* hierarchy.  Content files known as “binaries,” which represent computer files such as images, videos, sounds, computer programs and text, are found in the alt.* hierarchy.  These binary files are encoded in text form for storage and processing, and require a software program to convert the text into a content file such as an image or music file.

It should be noted that Judge Baer granted Arista’s motion for summary judgment on both direct and secondary copyright infringement against Usenet.com.

The point of the above is that when Congress passed the DMCA, it envisioned a world in which users posted content in chatrooms and forums.  That is vastly different than the aggregation of content onto searchable websites the very purpose of which is to make it easy for people who did not upload content to view content uploaded by others, the copyright for which content is often owned by someone other than the user doing the uploading.

Compare § 512(d), which “provides a safe harbor that would limit the liability of a service provider that refers or links users to an online location containing infringing material or activity by using ‘information location tools,’ such as hyperlink directories and indexes.”  So, for example, Google enjoys a safe harbor when it returns search results that point to websites that contain infringing materials, just as Megaupload’s Dotcom notes in his blog post.  Would Veoh likewise qualify for a safe harbor if the search results that it returned were URLs on its website?  I think this juxtaposition explains, in part, why Megaupload decided not to include a search function as part of its locker service.


[i] It is true that Veoh’s terms of service included a provision whereby users represented that they owned all of the copyright in the uploaded content and affirmed that they would not upload copyrighted content without permission.