The dispute between Universal Music Group and the video-sharing site Veoh over infringing music videos on Veoh’s website has been closely watched as one of the few recent circuit-level cases to address the scope of, and exceptions to, the safe harbors in the DMCA. The Ninth Circuit’s decision in UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022 (9th Cir. 2011) was widely viewed as a major victory for those advocating an expansive view of the DMCA safe harbor. The Ninth Circuit has now replaced that decision with a new superseding opinion, UMG Recordings v. Shelter Capital Partners, No. 09-55902, 2013 WL 1092793, -- F.3d.-- (9th Cir. March 14, 2013) (“Shelter Capital”), which repeats some of the problematic holdings of its predecessor but also includes some silver linings for copyright plaintiffs.
By way of background: Veoh operated as one of the many video-sharing websites where users could upload videos, which Veoh would then reformat and then host on its site for viewing by Veoh’s users. Among other things, the site allowed users to tag content with a category for “music videos,” and many of the videos uploaded by users were, in fact, copyrighted videos belonging to UMG and other record labels. (Also somewhat damaging for Veoh, it had bought advertising terms linked to a number of UMG artists and even for specific UMG music videos, strongly suggesting that the site knew perfectly well that it was a destination for watching music videos it did not have the rights to). The district court, however, found that even if Veoh had generalized awareness of infringement on its service, it did not know of specific infringing music videos. See UMG Recordings, Inc. v. Veoh Networks, Inc., 665 F. Supp. 2d 1099, 1111 (C.D. Cal. 2009). In its original opinion in the case, the Ninth Circuit treated this supposed lack of item-specific knowledge as fatal to UMG’s claims. It reasoned first that the two knowledge-based exceptions to the DMCA – the “actual knowledge” of infringement exception in Section 512(c)(1)(A)(i) and the “aware[ness] of facts or circumstances from which infringing activity is apparent” exception in Section 512(c)(1)(A)(ii) (also known as the “red flag” exception) – both required knowledge of specific infringements, as opposed to generalized knowledge that infringing activity was taking place. 667 F.3d at 1038-40. Second, the Ninth Circuit’s original holding reasoned that since Veoh lacked item-specific knowledge of the infringing videos, it also could not have had the “right and ability to control” the infringing activity, such that Veoh could not be disqualified from the DMCA under the 512(c)(1)(B) “financial benefit” and “control” exception either. 667 F.3d at 1041-45.