When Google acquired user-generated video hosting service, YouTube.com for $1.65 billion, it not only bought a highly trafficked site, it also bought itself a potential legal headache. As a start-up, YouTube founders did not focus on the copyright issues that are at hand when users upload copyrighted, non-original material. Now, as a part of Google, intellectual property holders may be more apt to sue with the knowledge that there are deep pockets. What are the potential legal liabilities that YouTube/Google may face?
Section 512 of the Digital Millennium Copyright Act
Under Section 512 of the Digital Millennium Copyright Act of 1998, a Website or hosting company will not be legally liable for infringement if they respond quickly to notifications from copyright holders and remove the infringing material. The Website or hosting company must clearly post their DMCA policy somewhere on the site; YouTube does have a formal DMAC policy that is posted which prohibits uploading of unauthorized videos "more than ten minutes in length." Under Section 512, four more requirements must be met in order for the Website/host to have "safe harbor." These include:
In the case of YouTube, all material resides and is stored at the direction of the user, according to the terms of the site's user agreement. This agreement helps YouTube shed primary responsibility for observing copyright laws. Furthermore, federal law recognizes that YouTube would face a monumental task if required to vet each of the thousands of new videos posted every day, prior to putting it up on the site.
However, YouTube still runs the risk of being exposed to "secondary liability" for copyright infringement, based on the Supreme Court ruling in Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd. (where it was found that secondary liability will arise when there are "statements or actions that promote infringement"). In its defense, YouTube can argue that it does not in anyway promote infringement and immediately removes an offending video when requested.
In October of 2006, days after Google's acquisition, media companies including News Corp, NBC Universal and Viacom, banded together to assess the damage that YouTube brought to its intellectual property. Lawyers for these entities determined that YouTube would be liable for up to $150,000, per infringed video. Yet, in recognition of the important role YouTube plays in generating interest in their properties, many media giants have entered into contractual agreements where automated identification of copyrighted material occurs. These agreements also allow for shared revenue between the copyright owner and the YouTube. Further, YouTube has been true to its word, consistently removing offending videos upon request of the copyright holder (i.e. for example, NBC's recent request for removal of Saturday Night Live clips).
Under the terms of service, YouTube users are responsible for all content placed on the site, indemnifying the host from any liability. Consequently, users have recently reported receipt of cease and desist letters from copyright holders, where the user has placed a video on YouTube. One user who posted highlights from NFL games received a third party notice from the NFL advising of the infringement and possible legal action; the video was quickly removed by the YouTube staff. Clearly, third party legal letters to YouTube users will cause users to think twice before posting copyright protected work.
Recent news reports have suggested that Google is committed to entering into licenses with copyright holders which will protect the site from any infringement. These agreements could cost as much as $100 million in license fees. But such fees pale in comparison to legal fees or potential penalties for infringement. The YouTube model and its success depend upon the use and ability to put up videos that may have copyrighted elements embedded within. It makes absolute business sense for Google/YouTube to be sensitive to and resolve these issues as quickly as possible. So far, they seem to be successful.