In a significant across-the-board victory for internet service providers hosting user-generated content (UGC), on June 16, 2016, the Second Circuit Court of Appeals issued its much anticipated decision in Capitol Records, LLC v. Vimeo, LLC. The ruling reaffirmed and clarified the Digital Millennium Copyright Act (“DMCA”) safe harbor for hosting potentially infringing UGC when they are unaware of the infringement. The Court closed a major gap in the application of the DMCA to find that the safe harbor applies to pre-1972 sound recordings, an unresolved issue with conflicting results in district and state courts to date. The Second Circuit also held that, for a service provider to be disqualified from the safe harbor, the burden is placed squarely on the copyright holder to prove the service provider’s actual or red flag knowledge of specific copyright infringement obvious to an ordinary person, i.e., a non-lawyer, non-expert, and mere interaction by a service provider’s employees with user videos incorporating recognizable songs did not meet that bar. In a similar vein, the Court found that Vimeo employees’ mere suspicion that infringement was taking place on the site and sporadic incidents of alleged employee encouragement of user infringement, was insufficient to demonstrate Vimeo’s willful blindness and remove it from DMCA safe harbor protection.
Although most commentators have focused their attention on the significant impact of the Court’s pre-1972 recordings decision, the Court’s holdings on establishing proof of red flag knowledge and willful blindness are critical to service providers’ entitlement to the protections of the DMCA’s safe harbor and the long term viability of the UGC business model. This post focuses on the Court’s red flag knowledge and willful blindness rulings concluding with key takeaways for service providers. Continue Reading