Blindsided! Will U.S. Supreme Court Patent Ruling on Willful Blindness Determine Standard for Red-Flag Knowledge Under DMCA?

The 1709 Blog has previously reported on developments in the ongoing Viacom v. YouTube litigation in the United States, in which members of the content industry sued the online video-sharing service for copyright infringement based on user's uploading of copyrighted content. YouTube prevailed on summary judgment in the trial court, and Viacom appealed. The appeal is now fully briefed, and has been tentatively scheduled for oral argument on September 12, 2011.

One of the significant issues that the Second Circuit Court of Appeals is expected to address is what constitutes "red-flag" knowledge under Section 512(c) of the Digital Millennium Copyright Act ("DMCA"). The DMCA shields internet service providers ("ISPs") from liability for copyright infringement resulting from user-generated content if the ISP meets certain conditions. Among other requirements, the ISP must not have actual knowledge of infringing material on its service, or, absent actual knowledge, the ISP must not be "aware of facts or circumstances from which infringing activity is apparent." This latter category of knowledge is often referred to as "red-flag" knowledge.

The blind leading the blind

Prior case law provides little insight into what qualifies as "red-flag" knowledge. The legislative history of the DMCA suggests that a "copyright owner could show that the provider was aware of facts from which infringing activity was apparent if the copyright owner could prove that the location was clearly, at the time the directory provider viewed it, a 'pirate' site of the type described below, where sound recordings, software, movies or books were available for unauthorized downloading, public performance or public display. Absent such 'red flags' or actual knowledge, a directory provider would not be similarly aware merely because it saw one or more well known photographs of a celebrity at a site devoted to that person."

In an early case construing the "red-flag" knowledge requirement, however, the Ninth Circuit Court of Appeals held that no red-flag knowledge arose from the fact that the defendant's clients' websites had names like "illegal.net" or "stolencelebritypictures.com." In that case, Perfect 10 v. CCBill, the publisher of adult entertainment photographs sued the provider of webhosting services and the processor of credit card payments, alleging secondary liability for infringement occurring on client sites. In contrast to the above-quoted language from the legislative history, the court held, “When a website traffics in pictures that are titillating by nature, describing photographs as ‘illegal’ or ‘stolen’ may be an attempt to increase their salacious appeal . . . We do not place the burden of determining whether photographs are actually illegal on a service provider.”

Similarly, in UMG v. Veoh, a parallel case to YouTube playing out on the opposite coast of the United States, the trial court found that Veoh’s general awareness that infringement was occurring on its video-sharing site, without more, could not support a finding of “red-flag” knowledge. It reasoned that to hold otherwise would undermine the DMCA’s purpose of enabling the robust development of the Internet and e-commerce. The court granted summary judgment to Veoh in September, 2009, and the case is currently on appeal to the Ninth Circuit Court of Appeals. The Ninth Circuit heard oral argument on May 6, 2001; a decision is expected in Veoh before YouTube is decided.

The trial court in YouTube provided virtually no analysis of “red-flag” knowledge. Indeed, the entire opinion is strikingly devoid of content. The court effectively conflated actual and “red-flag” knowledge by holding that the “tenor” of the DMCA “is that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts and circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough.”

In perhaps the only case where a court has found that an ISP had “red-flag” knowledge, the United States District Court for the Central District of California in Columbia v. Fung found that the operator of a “torrent” filesharing site where users swapped copyrighted television shows and motion pictures “turned a blind eye to ‘red flags’ of obvious infringement.” The operator himself engaged in unauthorized downloads of copyrighted material from the site. Because these downloads were done outside the United States, they could not be used to establish actual knowledge, but they showed that the operator was aware that infringing material was available on the site. The operator also designed the site to categorize copyrighted content into lists with titles such as “Top 20 Movies,” “Top 20 TV Shows,” “Box Office Movies.” These lists included copyrighted works. “Thus, unless Defendants somehow refused to look at their own webpages, they invariably would have been [sic] known that (1) infringing material was likely to be available and (2) most of Defendants’ users were searching for and downloading infringing material.” Overwhelming statistical evidence also showed the prevalence of copyrighted material on the site. Thus, “the only way Defendants could have avoided knowing about their users’ infringement is if they engaged in an ‘ostrich-like refusal to discover the extent to which their systems were being used to infringe copyright.’”

Fung notwithstanding, U.S. case law has not defined what “red-flag” knowledge is. We are thus left with a regime that recalls Supreme Court Justice Potter Stewart’s famous quote regarding obscenity: "I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.”

To blindly go where no DMCA case has gone before?

Against this backdrop, the parties in Viacom v. YouTube are preparing to argue the appeal. In a late-breaking development, Viacom’s attorneys have brought to the appellate court’s attention a recent Supreme Court decision in a patent case that Viacom argues should apply in the context of the DMCA. In Global-Tech Appliances v. SEB, decided May 31, 2011, the Supreme Court construed Patent Act Section 271(b), which provides that whoever actively induces infringement of a patent is liable as an infringer. The language of the section implies some degree of intent, raising the question whether the requisite intent is the intent to induce the act that results in infringement or the intent to induce infringement itself. Put another way, does the inducer need to be aware of the existence of a patent and intend to cause infringement?

The Supreme Court concluded that the inducer must intend to induce infringement and must know of the existence of the patent. The Supreme Court went on to hold, however, that this specific intent standard can be satisfied by a showing of willful blindness, defined as (1) a subjective belief that there is a high probability that a fact exists and (2) the defendant takes deliberate actions to avoid learning that fact. The Supreme Court stated that the doctrine of willful blindness enjoyed a “long history” and “wide acceptance in the Federal Judiciary,” and was “well established in criminal law.” Consequently, the Supreme Court saw “no reason why the doctrine should not apply in civil lawsuits for induced patent infringement.”

Though briefing is closed in YouTube, Viacom wasted no time bringing this decision to the Second Circuit’s attention, arguing that the case “refutes YouTube’s suggestion that the doctrine of willful blindness cannot apply to the knowledge requirements under the DMCA because the doctrine is ‘extra-statutory.’” Without explanation, Viacom also argued that the Global-Tech opinion “refutes YouTube’s argument that recognizing willful blindness is knowledge would impose on all service providers a broad affirmative obligation to ‘seek[] facts indicating infringing activity.’” Such an obligation would run afoul of DMCA subsection (m), which explicitly provides that an ISP need not monitor its service or affirmatively seek facts indicating infringing activity.

YouTube, not surprisingly, responded that Global-Tech has no applicability to a copyright case invoking the DMCA, which contains “express provisions governing knowledge of infringement, including a specific statutory alternative to actual knowledge.” YouTube also pointed out the inherent contradiction between the willful blindness standard and DMCA subsection (m)’s refusal to impose an obligation of monitoring on ISP’s.

Any attempt to predict how the Second Circuit may construe and apply the Supreme Court’s Global-Tech opinion is an exercise in reading tea leaves. The Second Circuit’s 2010 decision in Salinger v. Colting, however, gives some insight. In that case, the author J.D. Salinger sued to enjoin the publication of an unauthorized “sequel” to his iconic novel “Catcher in the Rye” entitled “60 Years Later: Coming Through the Rye.” The trial court granted Salinger’s motion for a preliminary injunction, using the traditional test it had employed in copyright cases for decades: a likelihood of success on the merits coupled with irreparable harm to the plaintiff, with irreparable harm being presumed if the plaintiff could make a prima facie case of copyright infringement. The Second Circuit reversed on the basis of the Supreme Court’s ruling in eBay v. MercExchange, a patent case involving a permanent injunction in which the Supreme Court rejected the practice of presuming irreparable harm. Despite the different substantive context and procedural posture of eBay, the Second Circuit reasoned that the Supreme Court had relied not only on patent law, but on traditional principles of equity, as well as copyright cases, in reaching its conclusion. Thus, it rejected the trial court’s presumption of irreparable harm and remanded the case for further proceedings consistent with eBay.

As it did in Salinger, the Second Circuit could just as easily conclude that since the Supreme Court relied on criminal law and general principles involving knowledge standards, it should apply the Global-Tech standard in YouTube. On the other hand, it could conclude, as YouTube urges, that willful blindness and DMCA subsection (m) are irreconcilable. The panel of judges that will hear YouTube has not yet been announced, so it is unknown whether the panel will include some or all of the same judges that decided Salinger. Of course, however constituted, the panel may well decide the case on other grounds, leaving the state of “red-flag” knowledge squarely in Justice Potter territory.