UMG RECORDINGS, INC., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal-Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music-MGB NA LLC, a California Limited Liability Company; Universal Music-Z Tunes LLC, a New York Limited Liability Company; Universal Music-MBG Music Publishing Ltd., a UK Company, Plaintiffs-Appellants, v. VEOH NETWORKS, INC., a California corporation, Defendant-Appellee, and SHELTER CAPITAL PARTNERS LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants-Appellees. UMG RECORDINGS, INC., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal-Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music-MGB NA LLC, a California Limited Liability Company; Universal Music-Z Tunes LLC, a New York Limited Liability Company; Universal Music-MBG Music Publishing Ltd., a UK Company, Plaintiffs-Appellants, v. VEOH NETWORKS, INC., a California corporation, Defendant. VEOH NETWORKS, INC., a California corporation, Defendant-Appellee, and SHELTER CAPITAL PARTNERS LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants. UMG RECORDINGS, INC., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal-Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music-MGB NA LLC, a California Limited Liability company; Universal Music-Z Tunes LLC, a New York Limited Liability company; Universal Music-MBG Music Publishing Ltd., a UK company, Plaintiffs-Appellees, v. VEOH NETWORKS, INC., a California corporation, Defendant-Appellant.
Nos. 09-55902, 09-56777, 10-55732
United States Court of Appeals, Ninth Circuit
Argued and Submitted May 6, 2011. Filed Dec. 20, 2011.
Michael S. Elkin (argued), Thomas P. Lane (argued), Jennifer A. Golinveaux and Erin R. Ranahan, Winston & Strawn LLP, Los Angeles, CA, for the defendant-appellee-cross-appellant.
Robert G. Badal (argued), Joel S. Cavanaugh and Emily S. Churg, Wilmer Cutler Pickering Hale and Dorr LLP, Los Angeles, CA; Glen L. Kulik (argued) and Alisa S. Edelson, Kulik, Gottesman, Mouton & Siegel, LLP, Sherman Oaks, CA, for the defendants-appellees.
Jeffrey G. Knowles and Julia D. Greer, Coblentz, Patch, Duffy & Bass LLP, San Francisco, CA; Eric J. Schwartz, Mitchell Silberberg & Knupp LLP, Washington, D.C., for amici curiae Broadcast Music, Inc., and American Society of Composers, Authors and Publishers.
Ronald L. Johnston, Sean Morris and Emilia P.E. Morris, Arnold & Porter LLP,
Daniel J. Popeo and Cory L. Andrews, Washington Legal Foundation, Washington, D.C.; Clifford M. Sloan, Mary E. Rasenberger and Christopher G. Clark, Skadden, Arps, Slate, Meager & Flom LLP, Washington, D.C., for amicus curiae Washington Legal Foundation.
Corynne McSherry and Michael Barclay, Electronic Frontier Foundation & Internet Archive, San Francisco, CA, for amici curiae Electronic Frontier Foundation, Internet Archive, American Library Association, Association of College and Research Libraries, Association of College and Research Libraries, Computer and Communications Industry Association, Public Knowledge, Center for Democracy and Technology and Netcoalition.
Matthew M. Werdegar, Michael S. Kwun and Benjamin Berkowitz, Keker & Van Nest LLP, San Francisco, CA, for amici curiae eBay Inc., Facebook, Inc., Google Inc., IAC/InterActiveCorp., and Yahoo! Inc.
Before: HARRY PREGERSON, RAYMOND C. FISHER and MARSHA S. BERZON, Circuit Judges.
OPINION
FISHER, Circuit Judge:
Veoh Networks (Veoh) operates a publicly accessible website that enables users to share videos with other users. Universal Music Group (UMG) is one of the world‘s largest recorded music and music publishing companies, and includes record labels such as Motown, Def Jam and Geffen. In addition to producing and distributing recorded music, UMG produces music videos. Although Veoh has implemented various procedures to prevent copyright infringement through its system, users of Veoh‘s service have in the past been able, without UMG‘s authorization, to download videos containing songs for which UMG owns the copyright. UMG responded by filing suit against Veoh for direct and secondary copyright infringement. The district court granted summary judgment to Veoh after determining that it was protected by the Digital Millennium Copyright Act (DMCA) “safe harbor” limiting service providers’ liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.”
BACKGROUND1
Veoh allows people to share video content over the Internet. Users can view videos uploaded by other users as well as authorized “partner content” made available by major copyright holders such as SonyBMG, ABC and ESPN. There are two ways to use Veoh‘s service: through a standalone software client application launched in late 2005, or through the veoh.com website launched in early 2006 that users access via a standard web browser. Both services are provided free of charge. Veoh generates revenue from advertising
Before a user may share a video through Veoh, he must register at veoh.com by providing an email address, user name and password. He must then state that he has read and agreed to Veoh‘s “Publisher Terms and Conditions” (PTC). The PTC instructs users that they “may not submit[material] . . . that contains any infringing . . . or illegal content” and directs that they “may only upload and publish[material] on the Veoh Service to which[they] have sufficient rights and licenses to permit the distribution of[their] [material] via the Veoh Services.” The PTC agreement also gives Veoh a license to “publicly display, publicly perform, transmit, distribute, copy, store, reproduce and/or provide” the uploaded video “through the Veoh Service, either in its original form, copy or in the form of an encoded work.”
A user who wants to share a video must also agree to Veoh‘s “Terms of Use,” which give Veoh a license “to use, reproduce, modify, distribute, prepare derivative works of, display, publish, perform and transmit” the video. The Terms of Use provide that “you expressly represent and warrant that you own or have the necessary licenses, rights, consents, and permissions to use and authorize Veoh to use all . . . copyright or other proprietary rights in and to any and all[material shared on Veoh].” Users must agree “not to (a) take any action or (b) upload, download, post, submit or otherwise distribute or facilitate distribution of any [material] . . . through the Veoh Service, that . . . infringes any . . . copyright.” Once a user agrees to the PTC and Terms of Use, he may upload a video. Each time a user begins to upload a video to Veoh‘s website, a message appears stating, “Do not upload videos that infringe copyright, are pornographic, obscene, violent, or any other videos that violate Veoh‘s Terms of Use.”
When a video is uploaded, various automated processes take place. Veoh‘s software automatically breaks down the video file into smaller 256-kilobyte “chunks,” which facilitate making the video accessible to others. Veoh‘s software also automatically converts, or “transcodes,” the video file into Flash 7 format. This is done because “the vast majority of internet users have software that can play videos” in this format. Veoh presets the requisite settings for the Flash conversion. If the user is a “Pro” user, Veoh‘s software also converts the uploaded video into Flash 8 and MPEG-4 formats, which are playable on some portable devices. Accordingly, when a Pro user uploads a video, Veoh automatically creates and retains four copies: the chunked file, the Flash 7 file, the Flash 8 file and the MPEG-4 file. None of these automated conversions affects the content of the video.
Veoh‘s computers also automatically extract metadata from information users provide to help others locate the video for viewing. Users can provide a title, as well as tags or keywords that describe the video, and can also select pre-set categories describing the video, such as “music,” “faith” or “politics.” The Veoh system then automatically assigns every uploaded video a “permalink,” or web address, that uniquely identifies the video and makes it available to users. Veoh employees do not review the user-submitted video, title or tags before the video is made available.2
Veoh‘s system allows users to access shared videos in two ways. First, the video may be “streamed” from a server, whereby the user‘s web browser begins displaying the video almost immediately, before the entire file has been transmitted to the user‘s computer. Depending on whether the user stops his web browser from streaming the full video, a partial or full copy of the video is stored temporarily on the user‘s computer. Second, the user can download a copy of the video through Veoh‘s website or client software application. Veoh transfers a “chunked” copy of the file to the user‘s computer, and the software reassembles the chunks into a viewable copy. The downloaded file is stored on the user‘s computer in a Veoh directory, which gives Veoh the ability to terminate access to the files.
Veoh employs various technologies to automatically prevent copyright infringement on its system. In 2006, Veoh adopted “hash filtering” software. Whenever Veoh disables access to an infringing video, the hash filter also automatically disables access to any identical videos and blocks any subsequently submitted duplicates. Veoh also began developing an additional filtering method of its own, but in 2007 opted instead to adopt a third-party filtering solution produced by a company called Audible Magic. Audible Magic‘s technology takes audio “fingerprints” from video files and compares them to a database of copyrighted content provided by copyright holders. If a user attempts to upload a video that matches a fingerprint from Audible Magic‘s database of forbidden material, the video never becomes available for viewing. Approximately nine months after beginning to apply the Audible Magic filter to all newly uploaded videos, Veoh applied the filter to its backlog of previously uploaded videos. This resulted in the removal of more than 60,000 videos, including some incorporating UMG‘s works. Veoh has also implemented a policy for terminating users who repeatedly upload infringing material, and has terminated thousands of user accounts.
Despite Veoh‘s efforts to prevent copyright infringement on its system, both Veoh and UMG agree that some of Veoh‘s users were able to download unauthorized videos containing songs for which UMG owns the copyright. The parties also agree that before UMG filed its complaint, the only notices Veoh received regarding alleged infringements of UMG‘s works were sent by the Recording Industry Association of America (RIAA). The RIAA notices listed specific videos that were allegedly infringing, and included links to those videos. The notices did not assert rights to all works by the identified artists, and did not mention UMG. UMG does not dispute that Veoh removed the material located at the links identified in the RIAA notices.
In September 2007, UMG filed suit against Veoh for direct, vicarious and contributory copyright infringement, and for inducement of infringement. UMG contended that Veoh‘s efforts to prevent copyright infringement on its system were “too little too late” because Veoh did not adopt filtering technology until “after Veoh harbored infringing material for its own benefit,” and initially it ran the filters only on newly uploaded videos. UMG also argued that Veoh “remove[d] copyrighted material only if identified specifically in a notice of infringement,” and “[e]ven then, Veoh would only remove the video associated with the particular URL and bit-for-bit copies of that same video.”
In UMG‘s first amended complaint (FAC), it added three of Veoh‘s investors
Veoh asserted as an affirmative defense that it is protected by the DMCA safe harbor provisions. UMG moved for partial summary judgment that Veoh is not entitled to protection under the
Veoh moved for an award of costs and attorney‘s fees under
DISCUSSION
I.
The district court had jurisdiction over these matters under
II.
“Difficult and controversial questions of copyright liability in the online world prompted Congress to enact Title II of the DMCA, the Online Copyright Infringement Liability Limitation Act (OCILLA).” Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004). Congress recognized that “[i]n the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability.” S.Rep. No. 105-190, at 8 (1998). Although Congress was aware that the services provided by companies like Veoh are capable of being misused to facilitate copyright infringement, it was loath to permit the specter of liability to chill innovation that could also serve substantial socially beneficial functions. Congress decided that “by limiting [service providers‘] liability,” it would “ensure[] that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.” Id. To that end, OCILLA created four safe harbors that preclude imposing monetary liability on service providers for copyright infringement that occurs as a result of specified activities. The district court concluded that Veoh qualified for one such safe harbor, under
There are a number of requirements that must be met for a “service provider”4 like Veoh to receive
(c) Information residing on systems or networks at direction of users.—
(1) In general.—A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider—
(A)(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;
(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or
(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;
(B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and
(C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.
On appeal, UMG contends that three of these requirements were not met. First, UMG argues that the alleged infringing
A.
We must first decide whether the functions automatically performed by Veoh‘s software when a user uploads a video fall within the meaning of “by reason of the storage at the direction of a user.”
The district court concluded that UMG‘s reading of
UMG‘s argument that the district court too broadly construed the scope of
Ordinarily we presume that “similar language in similar statutes should be interpreted similarly.” United States v. Sioux, 362 F.3d 1241, 1246 (9th Cir. 2004); see also Northcross v. Bd. of Educ. of Memphis City Schs., 412 U.S. 427, 428 (1973) (noting that the “similarity of language” in two statutes is an indicator that the statutes “should be interpreted pari passu,” particularly when they “share a common raison d‘etre” (internal quotations omitted)). In this case, however, there are important differences between the statutes and their purposes. The reasoning underlying Holmes counsels against extending its reading to the DMCA, and the language and structure of
The Holmes Court began its analysis by recognizing that “by reason of” “can, of course, be read to mean that . . . the defendant‘s violation was a ‘but for’ cause of plaintiff‘s injury.” 503 U.S. at 265-66.6 Ultimately, however, Holmes held that the “unlikelihood that Congress meant to allow all factually injured plaintiffs to recover persuades us that RICO should not get such an expansive reading.” Id. at 266. Holmes explained that “[t]he key to the better interpretation lies in some statutory history,” and traced the “by reason of” language back to § 4 of the Clayton Act, which courts had long held required proximate causation. Id. at 267. Because RICO was specifically modeled on § 4, Holmes concluded that the Clayton Act‘s interpretation was particularly persuasive. See id. at 267-68.
Holmes also explained that “such directness of relationship” between the harm and the alleged wrong is a “central element[]” of “Clayton Act causation” for three primary reasons, and, significantly, concluded that all three “apply with equal force to suits under[RICO].” Id. at 269-70. First, “the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff‘s damages attributable to the violation.” Id. at 269. Second, “recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries.” Id. “And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems at-
None of these concerns applies to the DMCA, which, unlike the Clayton Act and RICO, involves a narrow affirmative defense rather than the expansion of liability. Further, unlike in Holmes, there is no indication that Congress modeled the DMCA on the Clayton Act or RICO. We are therefore doubtful that in this quite different context, Holmes’ strict reading of “by reason of” is what Congress intended.7
Our doubts are confirmed by the fact that UMG‘s reading of the “by reason of” language would create internal statutory conflicts. By its terms,
dure by which copyright holders inform service providers of infringing material accessible through their sites, and service providers then “disable access to” such materials.
In addition, the technological processes involved in providing web hosting services require those service providers to make, transmit and download multiple copies of users’ stored materials. To create a website, the user uploads content to the web host‘s computers, which make an initial copy. “Content may be any number of things—family photos, poems, . . . even sound clips and movies.” Preston Gralla, How The Internet Works 132 (2d ed. 1999). Then, when another Internet user wants to access the website by clicking a link or entering the URL, all the website‘s relevant content is transmitted to the user‘s computer, where another copy is automatically made by the user‘s web browser software in order to assemble the materials for viewing and listening. See id. at 157. To carry out their function of making websites available to Internet users, web hosting services thus routinely copy content and transmit it to Internet users. See id. We cannot see how these access-facilitating processes are meaningfully distinguishable from Veoh‘s for
Further, the language of the statute recognizes that one is unlikely to infringe a copyright by merely storing material that no one could access, and so includes activities that go beyond storage. Section
Finally, if Congress wanted to confine
adopting UMG‘s novel theory that Congress intended
OCILLA‘s two “service provider” definitions also undermine UMG‘s argument that the automatic processes that make user-uploaded videos accessible are not undertaken “at the direction of the user.” The narrower definition that applies exclusively to
“Veoh has simply established a system whereby software automatically processes user-submitted content and recasts it in a format that is readily accessible to its users.” Id. at 1148. Veoh does not actively participate in or supervise file uploading, “[n]or does it preview or select the files before the upload is completed.” Id. Rather, this “automated process” for making files accessible “is initiated entirely at the volition of Veoh‘s users.” Id.; see also CoStar Grp., Inc. v. Loopnet, Inc., 373 F.3d 544, 555 (4th Cir.2004). We therefore hold that Veoh has satisfied the threshold requirement that the infringement be “by reason of the storage at the direction of a user of material” residing on Veoh‘s system.
B.
Under
1.
It is undisputed that, until the filing of this lawsuit, UMG “had not identified to Veoh any specific infringing video available on Veoh‘s system.” UMG‘s decision to forgo the DMCA notice protocol “stripped it of the most powerful evidence of a service provider‘s knowledge—actual notice of infringement from the copyright holder.” Corbis Corp. v. Amazon.com, Inc., 351 F. Supp. 2d 1090, 1107 (W.D.Wash.2004) (citing 3 M. Nimmer & D. Nimmer, Nimmer on Copyright § 12B.04(A)(3), at 12B-53 (hereinafter “Nimmer“])); see also Io Grp., 586 F. Supp. 2d at 1148. Nevertheless, UMG contends that Veoh hosted a category of copyrightable content—music—for which it had no license from any major music company. UMG argues Veoh thus must have known this content was unauthorized, given its general knowledge that its services could be used to post infringing material. UMG urges us to hold that this sufficiently demonstrates knowledge of infringement. We cannot, for several reasons.
As an initial matter, contrary to UMG‘s contentions, there are many music videos that could in fact legally appear on Veoh. “Among the types of videos subject to copyright protection but lawfully available on Veoh‘s system were videos with music created by users and videos that Veoh provided pursuant to arrangements it reached with major copyright holders, such as SonyBMG.” UMG II, 665 F. Supp. 2d at 1109. Further, Congress’ express intention that the DMCA “facilitate making available quickly and conveniently via the Internet . . . movies, music, software, and literary works“—precisely the service Veoh provides—makes us skeptical that UMG‘s narrow interpretation of
vices could be used to share unauthorized copies of copyrighted material, was sufficient to impute knowledge to service providers, the
Cases analyzing knowledge in the secondary copyright infringement context also counsel against UMG‘s general knowledge approach. In Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 104 S. Ct. 774, 78 L.Ed.2d 574 (1984), the Supreme Court held that there was “no precedent in the law of copyright for the imposition of” liability based on the theory that the defendant had “sold equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorized copies of copyrighted material.” Id. at 439. So long as the product was “capable of substantial noninfringing uses,” the Court refused to impute knowledge of infringement. Id. at 442. Applying Sony to the Internet context, we held in A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir.2001), that “if a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement.” Id. at 1021. But “absent any specific information which identifies infringing activity, a computer system operator cannot be liable for contributory infringement merely because the structure of the system allows for the exchange of copyrighted material.” Id.
Requiring specific knowledge of particular infringing activity makes good sense in the context of the DMCA, which Congress enacted to foster cooperation among copyright holders and service providers in dealing with infringement on the Internet. See S.Rep. No. 105-190, at 20 (noting OCILLA was intended to provide “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements“); H.R.Rep. No. 105-551, pt. 2, at 49 (1998) (same). Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not. See S.Rep. No. 105-190, at 48; (“[A] [service] provider could not be expected, during the course of its brief cataloguing visit, to determine whether [a] photograph was still protected by copyright or was in the public domain; if the photograph was still protected by copyright, whether the use was licensed; and if the use was not licensed, whether it was permitted under the fair use doctrine.“); H.R.Rep. No. 105-551, pt. 2, at 57-58 (same).
These considerations are reflected in Congress’ decision to enact a notice and takedown protocol encouraging copyright holders to identify specific infringing material to service providers. They are also evidenced in the “exclusionary rule” that prohibits consideration of substantially deficient
UMG asks us to change course with regard to
We reach the same conclusion with regard to the
service provider. See Id. at 1114. The plaintiffs in CCBill argued that there were a number of red flags that made it apparent infringing activity was afoot, noting that the defendant hosted sites with names such as “illegal.net” and “stolencelebritypics.com,” as well as password hacking websites, which obviously infringe. See id. We disagreed that these were sufficient red flags because “[w]e do not place the burden of determining whether [materials] are actually illegal on a service provider,” and “[w]e impose no such investigative duties on service providers.” Id. For the same reasons, we hold that Veoh‘s general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag.
2.
We are not persuaded that UMG‘s other purported evidence of Veoh‘s actual or apparent knowledge of infringement warrants trial. First, UMG points to the tagging of videos on Veoh‘s service as “music videos.” Relying on the theory rejected above, UMG contends that this demonstrates Veoh‘s knowledge that it hosted a category of infringing content. Relatedly, UMG argues that Veoh‘s purchase of certain search terms through the Google AdWords program demonstrates knowledge of infringing activity because some of the terms purchased, such as “50 Cent,” “Avril Lavigne” and “Britney Spears,” are the names of UMG artists.
UMG also argues that Veoh‘s removal of unauthorized content identified in RIAA notices demonstrates knowledge, even if Veoh complied with
UMG also points to news articles discussing the availability of copyrighted materials on Veoh. One article reported that “several major media companies . . . say that Veoh.com has been among the least aggressive video sharing sites in fighting copyrighted content,” and has thus “become a haven for pirated content.” Brad Stone, Veoh‘s Vexing Visitor Numbers, N.Y. Times Bits Blog (July 15, 2007, 9:35 AM), http://bits.blogs.nytimes.com/2007/07/15/veohs-vexing-visitor-numbers/. Another article reported that,
Veoh Networks CEO Dmitry Shapiro acknowledges that only a week after the company‘s official debut, Veoh.com is host to a wide range of unauthorized and full-length copies of popular programs. But Shapiro says it‘s not his upstart company‘s fault: . . . “We have a policy that specifically states that when we see copyright material posted, we take it down,” Shapiro said. “This problem is the democratization of publishing. Anyone can now post a video to the Internet. Sometimes the material belongs to someone else. We take this very seriously.”
Greg Sandoval, A new copyright battlefield: Veoh Networks, CNET News (Feb. 21, 2007, 4:00 AM), http://news.cnet.com/A-new-copyright-battlefield-Veoh-Networks/2100-1026_3-6160860.html. UMG elicited deposition testimony from Shapiro that he had heard of these articles, and was aware that, “from time to time,” “material belonging to someone else end[ed] up on” Veoh. UMG argues that this evidence of knowledge that, as a general matter, unauthorized materials had been previously posted on Veoh is sufficient to meet the
At base, this argument relies on UMG‘s primary theory, which we rejected above. Here, as well, more specific information than UMG has adduced is required. The
UMG comes closer to meeting the
has actual knowledge or is aware of facts or circumstances from which infringing activity is apparent.”
UMG also points to an email from a Veoh user whose video was rejected for containing infringing content. Upset that Veoh would not post his unauthorized material, he stated that he had seen “plenty of [other] copyright infringement material” on the site, and identified another user who he said posted infringing content. It is possible that this email would be sufficient to constitute a red flag under
C.
A service provider is eligible for the
“Statutory interpretation begins with the language of the statute.” Children‘s Hosp. & Health Ctr. v. Belshe, 188 F.3d 1090, 1096 (9th Cir.1999). When terms are not defined within a statute, they are accorded their plain and ordinary meaning, which can be deduced through reference sources such as general usage dictionaries. See Bilski v. Kappos, 130 S. Ct. 3218, 3226 (2010). “[S]tatutory language must always be read in its proper context,” McCarthy v. Bronson, 500 U.S. 136, 139 (1991), and “[i]n determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy,” Crandon v. United States, 494 U.S. 152, 158 (1990). We must, if possible, interpret a statute such that all its language is given effect, and none of it is rendered superfluous. See TRW Inc., 534 U.S. at 31.
Whether Veoh had the requisite “ability to control” the infringing activity at issue depends on what the statute means by that phrase, which the statute does not define. Looking first to the dictionary, “ability” is defined as “the quality or state of being able: physical, mental, or legal power to perform: competence in doing“; and “able” is in turn defined as “possessed of needed powers (as intelligence or strength) or of needed resources (as means or influence) to accomplish an objective . . .: constituted or situated so as to be susceptible or readily subjected to some action or treatment.” Webster‘s Third New International Dictionary 3, 4 (2002). “Control” is defined as having the “power or authority to guide or manage: directing or restraining domination.” Id. at 496. Where, as here, it is a practical impossibility for Veoh to ensure that no infringing material is ever uploaded to its site, or to remove unauthorized material that has not yet been identified to Veoh as infringing, we do not believe that Veoh can properly be said to possess the “needed powers . . . or needed resources” to be “competen[t] in” exercising the sort of “restraining domination” that
As discussed, in the knowledge context it is not enough for a service provider to know as a general matter that users are capable of posting unauthorized content; more specific knowledge is required. Similarly, a service provider may, as a general matter, have the legal right and necessary technology to remove infringing content, but until it becomes aware of specific unauthorized material, it cannot exercise its “power or authority” over the specific infringing item. In practical terms, it does not have the kind of ability to control infringing activity the statute contem-
Our reading of
Second,
UMG seeks to avoid our reading of the statute‘s plain language and structure by arguing that we should instead interpret
First,
Second, Napster was decided after the DMCA was enacted, so Congress could not have intended to codify Napster‘s precise
Subsequent legislative statements help clarify Congress’ intent. First, Congress explicitly stated in three different reports that the DMCA was intended to “protect qualifying service providers from liability for all monetary relief for direct, vicarious and contributory infringement.” H.R. Conf. Rep. No. 105-796, at 64, 1998 U.S.C.C.A.N. at 649 (emphasis added); S.Rep. No. 105–190, at 18, 36; H.R.Rep. No. 105-551, pt. 2, at 50. Under UMG‘s interpretation, however, every service provider subject to vicarious liability would be automatically excluded from safe harbor protection. Second, Congress made clear that it intended to provide safe harbor protection not by altering the common law vicarious liability standards, but rather by carving out permanent safe harbors to that liability for Internet service providers even while the common law standards continue to evolve. See S.Rep. No. 105-190, at 17 (“There have been several cases relevant to service provider liability for copyright infringement. Most have approached the issue from the standpoint of contributory and vicarious liability. Rather than embarking upon a wholesale clarification of these doctrines, the Committee decided to leave current law in its evolving state and, instead, to create a series of ‘safe harbors,’ for certain common activities of service providers. A service provider which qualifies for a safe harbor, receives the benefit of limited liability.” (footnote omitted)).
Given Congress’ explicit intention to protect qualifying service providers who would otherwise be subject to vicarious liability, it would be puzzling for Congress to make
It is conceivable that Congress [would have] intended that [service providers] which receive a financial benefit directly attributable to the infringing activity would not, under any circumstances, be able to qualify for the subsection (c) safe harbor. But if that was indeed their intention, it would have been far simpler and much more straightforward to simply say as much. The Court does not accept that Congress would express its desire to do so by creating a confusing, self-contradictory catch-22 situation that pits
In light of the DMCA‘s language, structure, purpose and legislative history, we are compelled to reject UMG‘s argument that the district court should have employed Napster‘s vicarious liability standard to evaluate whether Veoh had sufficient “right and ability to control” infringing activity under
III.
UMG also appeals the district court‘s
UMG first alleges that the Investor Defendants are liable for contributory infringement. “[O]ne who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.” Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir.1996) (quoting Gershwin Publ‘g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir.1971)) (alteration in original) (internal quotation marks omitted); see also Grokster, 545 U.S. at 930 (“One infringes contributorily by intentionally inducing or encouraging direct infringement.“). In Fonovisa, 76 F.3d at 264, we established the “site and facilities” test: “providing the site and facilities for known infringing activity is sufficient to establish contributory liability” where the defendant “actively strives to provide the environment and the market for counterfeit . . . sales to thrive.” The district court con-
cluded this test was not met, dismissing the complaint because UMG did “not allege sufficiently that[the Investor Defendants] gave material assistance in helping Veoh or its users accomplish infringement.” We agree.
UMG acknowledges that funding alone cannot satisfy the material assistance requirement. It thus argues that the Investor Defendants “provided Veoh‘s necessary funding and directed its spending” on “basic operations including . . . hardware, software, and employees“—“elements” UMG argues “form ‘the site and facilities’ for Veoh‘s direct infringement.” UMG thus attempts to liken its case to UMG Recordings, Inc. v. Bertelsmann AG et al., 222 F.R.D. 408 (N.D.Cal.2004), where the district court denied an investor‘s motion to dismiss claims of contributory infringement. In Bertelsmann, however, the investor was Napster‘s “only available source of funding,” and thus “held significant power and control over Napster‘s operations.” Id. at 412. Here, by contrast, there were multiple investors, and none of the Investor Defendants could individually
Even assuming that such joint control, not typically an element of contributory infringement, could satisfy Fonovisa‘s site and facilities requirement, UMG‘s argument fails on its own terms, because the complaint nowhere alleged that the Investor Defendants agreed to work in concert to this end. UMG suggests that it “did allege that the [Investor] Defendants agreed to ‘operate’ Veoh jointly—UMG alleged that the [Investor] Defendants operated Veoh by ‘s[eeking] and obtain[ing] seats on Veoh‘s Board of Directors as a condition of their investments.‘” But three investors individually acquiring one seat apiece is not the same as agreeing to operate as a unified entity to obtain and leverage majority control. Unless the three independent investors were on some level working in concert, then none of them actually had sufficient control over the Board to direct Veoh in the way UMG contends. This missing allegation is critical because finding secondary liability without it would allow plaintiffs to sue any collection of directors making up 51 percent of the board on the theory that they constitute a majority, and therefore together they control the company. Without this lynchpin allegation, UMG‘s claim that the Investor Defendants had sufficient control over Veoh to direct its spending and operations in a manner that might theoretically satisfy the “site and facilities” test falls apart. We therefore affirm the dismissal of UMG‘s contributory infringement claim.
This missing allegation likewise requires us to affirm the district court‘s dismissal of UMG‘s vicarious liability and inducement of infringement claims. Inducement liability is proper where “one [] distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement.” Grokster, 545 U.S. at 936-37. Vicarious liability is warranted if “the defendant profits directly from the infringement and has a right and ability to supervise the direct infringer.” Id. at 930 n. 9; see also Visa, 494 F.3d at 802. UMG‘s arguments that the Investor Defendants “distribute[d]” Veoh‘s services and had the right and ability to supervise the infringing users are premised on the unalleged contention that the Investor Defendants agreed to act in concert, and thus together they held a majority of seats on the Board and “maintained operational control over the company.” We therefore affirm the dismissal of the complaint against the Investor Defendants.19
IV.
Veoh appeals the district court‘s refusal to grant it costs and attorney‘s fees under
Veoh contends that it was entitled to receive
A.
In Marek, the Supreme Court held that “the term ‘costs’ in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute.” 473 U.S. at 9 (emphasis added). We have interpreted this to mean that attorney‘s fees may be awarded as
We confronted the same issue with regard to a different substantive statute in Champion. There, we considered whether
[j]ust as attorneys’ fees are not “properly awardable” to a defendant in a Clean Air Act case unless “the court finds that such action was unreasonable,” Trident, 92 F.3d at 860, attorneys’ fees are not “properly awardable” to a defendant in a case where the relevant statute awards attorneys’ fees to a prevailing party un-
less the defendant is a prevailing party within the meaning of that statute.
Id. at 1031 (citing Payne v. Milwaukee Cnty., 288 F.3d 1021, 1026 (7th Cir.2002) (“Briefly put, ‘costs’ cannot encompass more than the rules or other relevant statutes authorize.“)). Although we have not yet confronted this question in a Copyright Act case, Trident and Champion make clear that in this context as well, because the district court determined that attorney‘s fees were not “properly awardable” to Veoh under
B.
Even though Veoh is not entitled to attorney‘s fees under
Second, Veoh can recover
We cannot reasonably conclude that the drafters of the Federal Rules intended on the one hand affirmatively to grant the district judge discretion to deny costs to the prevailing party under Rule 54(d) and then on the other hand to give defendants—and only defendants—the power to take away that discretion by performing a token act.
Id.; see also MRO Commc‘ns, Inc. v. Am. Tel. & Tel. Co., 197 F.3d 1276, 1280 (9th Cir.1999) (“Where a defendant prevails after making an offer of judgment, ‘the trial judge retains his Rule 54(d) discretion.‘” (quoting Delta, 450 U.S. at 354)).
Veoh argues that Delta does not apply because UMG “actually obtained certain relief” in the form of the parties’ stipulation that Veoh would continue removing infringing content discovered by its hash filtering system, and thus UMG rather than Veoh “obtained the judgment.” Delta, 450 U.S. at 352. Although the district court determined that Veoh was “the prevailing party on the core issue in the litigation” for
CONCLUSION
We affirm the district court‘s determination on summary judgment that Veoh is entitled to
The parties shall bear their own costs on appeal.
The motions of the Recording Industry Association of America et al., the Electronic Frontier Foundation et al., and eBay Inc. et al., for leave to file amicus curiae
AFFIRMED in part and REMANDED in part.