In the latest twist in the epic feud between Viacom (NYSE: VIA) and YouTube (NSDQ: GOOG), an appeals court has zeroed in on a narrow question: how to define the ‘red flag’ that indicates someone should have known about copyright infringement.
The issue came to the fore when the 2nd Circuit Court of Appeals issued an unusual order to the parties 10 days after an October court hearing. The proceedings, which began in 2006, turn on whether YouTube should be liable for clips of South Park, The Daily Show and other copyrighted material that was uploaded by users in the early days of the site. Viacom is appealing a lower court’s decision to throw out the case last year.
In its order, the appeals court asked YouTube to explain how the court should interpret “red-flag knowledge.” The red flag rule refers to a situation where a service provider can lose a legal shield (known as a safe harbor) because they turned a blind eye to copyright infringement. The safe harbors protect ISP’s and web hosts like YouTube from being liable for the actions of third parties who use their services to breach copyright law.
The red flag provision has come up in a series of high profile copyright cases in the last two years, including one involving image company Perfect 10 and another involving cyber-locker site MP3tunes.com. Courts have typically refused to find “red flag” knowledge and, in the MP3 case, a judge ruled there is no red flag if a website has to investigate whether or not something infringes copyright. The judge said that a website with the word “pirate” or “bootleg” in its name would be a red flag but that the words “file-sharing” or “free” are not.
Despite these cases, the appeals court appears to be worried that YouTube’s interpretation of the “red flag knowledge” provision does not spell out any practical difference from the law’s “actual knowledge” provision. This outcome would be a problem because there is a legal principle that Congress does not write redundant rules.
In a filing last week, YouTube argued that Congress intended for there to be a very high bar before “red flag” liability is triggered and cited a famous copyright scholar who concluded that “the flag must be brightly red indeed — and be waving blatantly in the provider’s face.” And in response to the redundancy issue, YouTube seemed to suggest that the red flag rule was there to prevent a site from avoiding liability by claiming that, in its own mind at least, there was no infringement (even if anyone else would have concluded otherwise):
The awareness provision thus prevents a service provider from claiming that, because it did not actually believe the material was infringing, it had no duty to remove it, even though it was aware of facts that would have made the infringement obvious to a reasonable person.
The distinction between “actual” and “red flag” knowledge is important in the YouTube-Viacom context because the lower court threw out the case after finding that YouTube had only a general knowledge of copyrighted material on the site rather than a specific knowledge of individual URL addresses where the infringing videos could be found. Viacom and other plaintiffs, including the English Premier League, believe the lower court judge ignored factual questions about what YouTube and its new owner, Google, knew about copyright infringement on the site. They want the appeals court to reinstate the case before a jury.
The YouTube-Viacom appeal comes at a time when content owners are pushing courts and Congress to re-evaluate the safe harbor rules created under the 1998 Digital Millennium Copyright Act. The purpose of the safe harbors is to ensure that companies could provide services that would allow the Internet to flourish without having to worry about being sued over the actions of third parties. But content owners argue that the safe harbors are too broad and that service providers should play a greater role in helping them combat copyright infringement.
Viacom is expected to submit a reply to Google’s red flag arguments this week. In light of the new filings, the appeals court is unlikely to issue a final decision for several weeks at least.