Oh, the halcyon days of the summer of ’07! Your kids (or you) were enthralled with their first chance to read Harry Potter and the Deathly Hallows. Your 401(K) balance probably had an extra zero or two on the end of it. The “steroid era of baseball” was a mere virtual certainty, rather than a documented fact. None of us had ever heard of a collateralized debt obligation or credit default swap. And I, but a baby lawyer, was enthralled with this crazy new lawsuit filed by Viacom against Google, alleging that Google was itself responsible for $1 billion worth of copyright infringement on its recently-acquired YouTube service. And oh, how the world has changed in these last three years! Teenage vampires have supplanted teenage wizards, you can safely assume that the slugger in your kid’s little league was juicing, we’re all experts on the vagaries of inventing nonexistent wealth with inscrutable financial instruments and then destroying it with other inscrutable financial instruments, and the Viacom lawsuit…well, that’s still going.

But this week marked a major turn in the case, as U.S. District Judge Judge Louis Stanton, on a summary judgment motion, ruled in Google’s favor on its principal liability defense: that it is insulated from liability by virtue of the Digital Millennium Copyright Act, or DMCA. Naturally, a frenzy followed in the geekier and more entertainment-obsessed corners of the Internet, featuring brave stances of confident defiancefurrowed-brow analysisangry recriminationseager speculationniche obsessiveness, and general panic. But in the midst of this frenzied Internet-wide look forward, we here at Law Law Land thought it would be interesting to look back.

In August 2007, Richard Neff — then chair of my firm’s intellectual property and technology practice group — and I took a first look at the Viacom-Google lawsuit, and considered the prospects of Google’s inevitable DMCA defense. Notwithstanding the bold pronouncements from both sides throughout the course of this litigation, Google’s DMCA defense has always been something of a close call. And while Google’s district court victory should not be undervalued, this case is still at least a few years — and a few judicial decisions — away from its conclusion, which means you can expect the issues and arguments below to remain major factors in the battles ahead.

Basic positions
Google is relying on the “safe harbor” provisions of the Digital Millennium Copyright Act. But it might have overestimated the scope of the safe harbor.

The cases might turn on how much control over content a service provider should exercise under the DMCA. With the Supreme Court’s Grokster decision in mind, Viacom alleges that Google and YouTube “know and intend that much of the content on the YouTube site consists of unlicensed infringing copies of copyrighted works” and that they “actively engage in, promote and induce this infringement.”

The claims focus primarily on YouTube’s failure to implement technological measures that could automatically screen for infringing content and prevent the reposting of removed videos. The plaintiffs also point to YouTube’s practice of offering more comprehensive copyright protection to content owners that reach licensing agreements with the Web site as an indication of its bad faith.

DMCA rules
Google senior counsel Alexander Macgillivray has hinted at the company’s litigation strategy regarding infringing content on the site. “This is an area of law where there are a bunch of really clear precedents,” he told Reuters, “so Amazon and eBay have both been found to qualify for the safe harbor. ….”

There is little question that YouTube, by storing information at the direction of a user on a network under its control, falls into the broad category of “service provider” eligible for protection under the DMCA. Courts interpret the term “service provider” very broadly. See e.g.,Hendrickson v. Amazon.com, 298 F.Supp.2d, 914, 915 (CD Cal. 2003).

However, there are seven tests that Google must meet to qualify for protection from liability under the safe harbor; three have to do with notice-and-takedown procedures and four require a policy for terminating repeat infringers. Although some of YouTube’s business practices demonstrate a conscious effort to satisfy these tests, YouTube’s position might be more tenuous than Google seems to think.

1. No actual knowledge
The safe harbor requires that YouTube not have actual knowledge of specific infringing material that is available through its service, and that it not be aware of circumstances from which infringing activity is apparent. Generally, this only requires content owners to take action in response to specific DMCA-compliant notices from content owners. But the DMCA’s legislative history makes clear that a service provider might be charged with apparent knowledge where it turns a blind eye to “red flags” of obvious infringement. Indeed, the unauthorized presence of films like “Sicko” on YouTube weeks before their theatrical release might be enough to charge YouTube with apparent knowledge of infringement.

YouTube’s failure to implement technological screening measures for uploaded videos may also play a role. In the Aimster case, the 7th Circuit held that a service provider could not obtain immunity by using encryption to shield itself from actual knowledge of the unlawful activities occurring on its service. In re Aimster Copyright Litig., 334 F.3d 643, 650 (7th Cir. 2003). Such a strategy would be tantamount to willful blindness, and willful blindness legally constitutes knowledge. Id.

YouTube has announced its testing of a digital fingerprinting system that could identify copyrighted material regardless of who uploads it or the clip’s title. YouTube’s apparent capacity to implement this technology but failure to do so may convince a court that YouTube is intentionally depriving itself of easily obtained knowledge about infringing activity.

2. No financial benefit from activities Google controls
To qualify for DMCA safe harbor, a service provider also must not receive a financial benefit “directly attributable to the infringing activity” where it has “the right and ability to control” that activity. The plaintiffs point to YouTube’s financial success, at least since Google paid $1.65 billion to acquire it. YouTube now runs advertisements only on search results pages and pages that display properly licensed content. This selective strategy allows Google to argue plausibly that YouTube does not derive a direct financial benefit from the infringing content.

Whether such a service provider derives a direct financial benefit is an evolving issue. Napsterheld that “(f)inancial benefit exists where the availability of infringing material “acts as a ‘draw’ for customers.” 239 F.3d 1004, 1023 (9th Cir. 2001). Several cases, notably Parker v. Google, Inc., 422 F. Supp. 2d 492 (E.D. Pa. 2006) and Ellison v. Robertson, 353 F.3d 1072, 1079 (9th Cir. 2004), hold that specific evidence of a direct financial benefit must be shown (and none was shown in those cases).

But this does not necessarily let YouTube off the hook. Ellison also held that the extent of the draw need not be “substantial.” A recent case raised the threshold slightly on “direct financial benefit,” holding that the issue is “whether the infringing activity constitutes a draw for subscribers, not just an added benefit.” Perfect 10, Inc. v. CCBill Llc., 481 F.3d 751 (9th Cir. 2007).

Viacom presumably must show that YouTube’s financial benefit from infringement on the site is direct and that it constitutes a draw, not just an attractive feature, which might be difficult to prove.

Moreover, YouTube’s ability to terminate users who post infringing content is not by itself the “right and ability to control” needed to make financial benefit an issue. YouTube claims it does not screen videos before they are posted to the site or edit the descriptions of those videos or screen postings for duplicative content — all activities that courts have considered in assessing the right and ability to control. One court noted: “Congress could not have intended for courts to hold that a service provider loses immunity under the safe harbor provision of the DMCA because it engages acts that are specifically required by the DMCA.” Hendrickson v. Ebay Inc., 165 F. Supp. 2d 1082, 1093-1094 (C.D. Cal 2001).

But as YouTube learned in June when its motion for summary judgment in the Tur case was denied, to satisfy a court on the issue it will have to offer specific information about the precise nature and extent of the management it exerts over its site from the time a user submits a video clip to the point of display on the site. The analysis is complicated even further because service providers are expected to exercise control in other contexts, such as to keep pornography (especially child pornography) and defamatory material off the site. Some screening (“control”) should not sacrifice the immunity.

3. Compliance with notice and takedown procedures
YouTube seems to be meticulous in providing content owners channels for reporting infringing material and following carefully prescribed DMCA notice-and-takedown procedures. Although the plaintiffs assert that this places the burden of copyright enforcement on them rather than on YouTube, this does track the law, so a court might be reluctant to impose requirements on YouTube beyond the statute.

4. Adopting a termination policy for repeat infringers
YouTube’s Terms of Use state that it will terminate a user’s access if the user is determined to be a repeat infringer. A repeat infringer is a user who has been notified of infringing activity more than twice and/or has had a submission removed from the site more than twice.

In requiring its users to agree to the Terms of Use, YouTube appears to fully satisfy the legal requirement that a termination policy be adopted for repeat infringers.

5. Informing users of the policy for repeat infringers
The publication of Terms of Use on the Web site satisfies YouTube’s obligation to communicate its termination policy to its users.

6. Implementing termination policy for repeat infringers
YouTube has been accused of inconsistent application of technological measures designed to identify and screen or remove copyrighted works, because greater protection is offered to content holders who enter into content license agreements with YouTube. Perhaps YouTube’s greatest challenge in claiming DMCA protection is showing that its policy for terminating repeat infringers is being implemented reasonably.

The few courts that have interpreted the DMCA’s requirement have focused on two issues: whether a service provider has a procedure for receiving and conveying complaints; and whether it tolerates flagrant or blatant copyright infringement. See, e.g., Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004); Corbis Corp. v. Amazon.com, 351 F.Supp.2d 1090 (W.D. Wash. 2004). The notice-and-takedown procedures adopted by YouTube provide a basic framework for implementing its termination policy for repeat infringers. But even though its Terms of Use allow termination of repeat infringers, the largely anonymous registration system permits terminated users to reregister under a new name.

In Napster, the court noted that preserving the anonymity of its users might have allowed Napster to turn a blind eye when terminated users returned under new names. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). That court stated that the failure to block the IP address of repeat infringers might have constituted an unreasonable implementation of its termination policy.

This might apply equally to YouTube. The burden, however, would be on the plaintiff to identify specific measures that YouTube could take to prevent terminated users from re-accessing the site. The fact that YouTube’s implementation is apparently more vigilant for its business partners than for other content holders is arguably unreasonable in itself.

7. Accommodating ‘standard technical measures’
In focusing on YouTube’s failure to implement technical measures that would block the reposting of removed videos or automatically screen for copyrighted material, the plaintiffs might argue that YouTube had the right to implement “standard technical measures” to identify copyrighted works and failed to do so.

However, given some of the unusual statutory language around this requirement — e.g., that such measures “have been adopted pursuant to a broad consensus of copyright owners and service providers” — the plaintiffs may not get far with this argument.

Law vs. Facts
YouTube’s fit within the DMCA safe harbor is not as snug as Google assumes. While bootlegs and pirated works are also present on Amazon and eBay, such works likely represent a much less significant presence there than on YouTube. A court might find that YouTube more closely resembles Napster on the copyright compliance scale.

MySpace, in contast, launched a program in May called “Take Down, Stay Down,” which creates a digital fingerprint of any video that has been taken down at a copyright holder’s request and places that fingerprint into a filter that blocks users from uploading that video. This is evidence that a service provider can be more technically proactive.

Even if YouTube doesn’t actively promote copyright infringement, it appears disingenuous to say that it is truly unaware or does not benefit from that infringement. Pending copyright cases will test the willingness of federal courts to respect that claim.

Even if Google can convince a district court that it fully complies with the DMCA requirements,Grokster and Aimster show that when it comes to copyright and the Internet, courts that can’t use existing law to right wrongs sometimes feel free to make new law instead.