UMG_Petition-for-Rehearing-En-Banc

Document Sample
UMG_Petition-for-Rehearing-En-Banc Powered By Docstoc
					Case: 09-56777       01/24/2012   ID: 8043246    DktEntry: 66-1   Page: 1 of 27




                             No. 09-55902, No. 09-56777
                          Opinion Filed December 20, 2011
          Before: Harry Pregerson, Raymond C. Fisher and Marsha S. Berzon,
                                    Circuit Judges
                                    ____________
                IN THE UNITED STATES COURT OF APPEALS
                        FOR THE NINTH CIRCUIT
                           ___________________
 UMG RECORDINGS, INC.; UNIVERSAL MUSIC CORP.; SONGS OF
  UNIVERSAL, INC.; UNIVERSAL-POLYGRAM INTERNATIONAL
  PUBLISHING, INC.; RONDOR MUSIC INTERNATIONAL, INC.;
   UNIVERSAL MUSIC—MGB NA LLC; UNIVERSAL MUSIC—Z
   TUNES LLC; UNIVERSAL MUSIC—MBG MUSIC PUBLISHING
                          LTD.,
                               Plaintiffs-Appellants
                                         v.
  SHELTER CAPITAL PARTNERS LLC, SHELTER VENTURE FUND
   LP, SPARK CAPITAL LLC, SPARK CAPITAL, L.P., TORNANTE
          COMPANY, LLC, AND VEOH NETWORKS, INC.,
                    Defendants-Appellees.
                          _______
              On Appeal from the United States District Court
    for the Central District of California, Western Division—Los Angeles
                 Honorable A. Howard Matz, District Judge
                   __________________________________
          PETITION FOR REHEARING AND REHEARING EN BANC
                 _____________________________________
                                                Steven A. Marenberg, Esq.
                                                State Bar No. 101033
                                                Brian D. Ledahl, Esq.
                                                State Bar No. 186579
                                                IRELL & MANELLA, LLP
                                                1800 Avenue of the Stars
                                                Suite 900
                                                Los Angeles, California 90067
                                                Telephone: (310) 277-1010
                                                Facsimile: (310) 203-7199

                                                ATTORNEYS FOR
                                                APPELLANTS


2560535
Case: 09-56777           01/24/2012          ID: 8043246           DktEntry: 66-1          Page: 2 of 27



                                     TABLE OF CONTENTS

                                                                                                          Page
BACKGROUND .............................................................................................. 3	

ARGUMENT .................................................................................................... 5	

          A.	 The Issues Presented Are Exceptionally Important Because
               Of Their Sweeping Impact On Internet Commerce. .................... 5	

          B.	 The Panel's Decision Undermines Copyright Protection On
               The Internet Contrary To Prior Precedents. ................................. 8	

                  1.	 The panel decision renders the language
                        "infringement of copyright by reason of the storage
                        at the direction of a user , . ." superfluous void or
                        insignificant. ...................................................................... 8	

                  2.	 The panel decision all but eviscerates Section
                        512(c)(1)(A)(ii) and its "red flag" knowledge
                        standard. ........................................................................... 12	

                  3.	 The panel decision also renders Section 512(c)(1)(B)
                        meaningless. ..................................................................... 15	

                  4.	 The panel decision improperly rewrites Section
                        512(c). .............................................................................. 17	

          C.	 The Panel Decision Conflicts With Precedent Regarding
               Secondary Liability. ................................................................... 18	




2560535                                              -i-
Case: 09-56777           01/24/2012          ID: 8043246          DktEntry: 66-1         Page: 3 of 27



                                  TABLE OF AUTHORITIES

                                                                                                    Page(s)

Cases 

A&M Records, Inc. v. Napster, Inc.,
    239 F.3d 1004 (9th Cir. 2001) ............................................................ 2, 19

Buck v. Jewell-La Salle Realty Co.,
      283 U.S. 191 (1931) ..................................................................................9

Duncan v. Walker,
     533 U.S. 167, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) .........................11

Fair Housing Council of San Fernando Valley v. Roomates.com, LLC,
      521 F.3d 1157 (9th Cir. 2008) ...................................................................6

Holmes v. Securities Investor Protection Corp.,
     503 U.S. 258 (1992) ................................................................................11

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
     545 U.S. 913 (2005) ..................................................................... 2, 16, 19

Perfect 10, Inc. v. Amazon.com, Inc.,
      508 F.3d 1146 (9th Cir. 2007) .................................................... 16, 18, 19

Religious Technology Center v. Netcom On-Line Communication
      Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995) ..................................9

TRW, Inc. v. Andrews,
     534 U.S. 19 (2001) ........................................................................... 11, 17

United States v. Daas,
      198 F.3d 1167 (9th Cir. 1999). ................................................................17

United States v. Wenner,
      351 F.3d 969 (9th Cir. 2003) ...................................................................11

Statutes 
17 U.S.C. § 504(c)(2)...........................................................................................9

17 U.S.C. § 512 .......................................................................................... passim


2560535                                             - ii -
Case: 09-56777           01/24/2012          ID: 8043246          DktEntry: 66-1         Page: 4 of 27



                                                                                                      Page(s)

Other Authorities 
http://en.wikipedia.org/wiki/World_Wide_Web .................................................8

Kozinski and Goldfoot, A Declaration of the Dependence of
     Cyberspace, 32 Colum. J.L. & Arts 365 (2009) ................................ 7, 16

Menell, Indirect Copyright Liability and Technological Innovation, 32
     Colum. J. L. & Arts 375 (2009) ................................................................7

William F. Patry, Patry on Copyright, § 9.5 (2011)............................................8

Rules 
Fed. R. Civ. P. 12(b)(6) .......................................................................................5




2560535                                            - iii -
Case: 09-56777       01/24/2012    ID: 8043246    DktEntry: 66-1    Page: 5 of 27



          Appellants UMG Recordings, Inc.; Universal Music Corp.; Songs Of

Universal, Inc.; Universal-Polygram International Publishing, Inc.; Rondor

Music International, Inc.; Universal Music—MGB NA LLC; Universal

Music—Z Tunes LLC; and Universal Music—MBG Music Publishing Ltd.

(collectively "UMG") respectfully seek rehearing and suggest rehearing en

banc of the panel decision in UMG Recordings, Inc., et al. v. Veoh Networks,

Inc. ("Veoh"), et al., Nos. 09-55902 and 09-56777.1

          This case is one of the most closely watched and anticipated copyright

decisions in years. It presents critical issues concerning the enforcement of

copyrights on the internet. The panel's decision creates different principles of

copyright liability for the internet than those applicable in the brick and mortar

world. In the latter, copyright liability is indisputably a strict liability offense.

After the panel's decision, even a website like Appellee Veoh's, that hosts,

distributes and provides free downloads of tens of thousands of copyrighted

works, without a license for any of them, is only financially responsible for

infringement if it ignores a statutorily compliant "take down notice" from the

copyright owner.




          1
       The panel decision also addressed Docket No. 10-55732, but UMG
does not seek rehearing of that portion.


2560535                                 -1-
Case: 09-56777       01/24/2012    ID: 8043246    DktEntry: 66-1   Page: 6 of 27



          As a legal matter, the panel's decision conferring such broad immunity

seriously upends the carefully-crafted balance between the interests of

copyright owners and internet service providers embodied in Section 512 of the

Copyright Act, which was enacted as part of the Digital Millennium Copyright

Act ("DMCA"). Rather than adhering to the balance struck by Congress, the

panel created its own balance and thereby rendered multiple provisions of

Section 512 a nullity. The end result was a decision that finds no support in the

language of Section 512 and which conflicts with important precedents of this

Court (such as A&M Records v. Napster) and the United States Supreme

Court's landmark decision in MGM v. Grokster.

          As a practical matter, the decision shifts burdens to content owners,

while shifting benefits to internet providers. It places an impossible burden on

copyright owners such as UMG whose businesses depend on payment for the

use of their copyrighted works, but who receive no payment from unauthorized

distributors like Veoh and who must now incur the expense of constantly

scouring the tens of thousands (or indeed millions) of internet sites for each

copy of their works. Under the panel's regime, content owners bear this burden

while the internet sites reap the financial benefits of displaying and distributing

pirated copyrighted works (by, among other things, deriving advertising

revenues when the copyrighted works are displayed). This regime eviscerates



2560535                                  -2-
Case: 09-56777       01/24/2012    ID: 8043246   DktEntry: 66-1   Page: 7 of 27



any incentives to undertake precautions to prevent infringement in the first

instance or obtain licenses for copyrighted works because the panel holds that

their only obligation is to respond to take down notices regardless of their own

knowledge of infringement.

                                  BACKGROUND

          Veoh operated an internet service designed to derive advertising revenue

from video content. Veoh encouraged millions of users to uploaded videos,

and then distributed those videos to the entire world – for free. Veoh (not its

users) did this by copying the videos into different formats and then making

them available for unlimited, on-demand viewing through Veoh's internet site,

and also by the inclusion of a "download button" which allowed anyone to

make a perfect, permanent, digital copy – in much the same way one could

purchase a legal copy of a copyrighted video through Apple's iTunes online

store. Veoh used these videos to make money for itself, not for content

owners. Veoh sold advertising to accompany the videos. The more viewers

the content attracted, the more money Veoh made. And Veoh knew that

professionally-produced copyrighted videos, like UMG's, attracted viewers.

Veoh did not pay for the content it distributed, and made no effort to obtain

permission from the creators of that content. Veoh also eschewed readily-

available technology to limit its widespread copyright infringement. Veoh



2560535                                 -3-
Case: 09-56777        01/24/2012   ID: 8043246   DktEntry: 66-1   Page: 8 of 27



could have used Audible Magic filtering technology to identify and remove

copyrighted material. Instead, Veoh avoided such filters for as long as possible

so that tens of thousands of popular copyrighted videos would remain on its

site, knowing that removing them would hurt its business. Veoh not only

understood that its system could be used to infringe, it knew to a certainty that

its system was being used to infringe. A Veoh employee wrote, "isn't

[infringing content] a majority of Veoh content? . . . And what should i do, for

example, with music videos which are all copyrighted?" A Veoh executive

responded, "You are correct, we have many unauthorized content" and

encouraged him to avoid referring to copyrighted materials in email or text

messages (to conceal evidence of Veoh's extensive knowledge of

infringement).2 The panel held this knowledge irrelevant because it did not

come from a take-down notice – elevating form over substance. Veoh's

knowledge of its infringement was so extensive that it purchased search terms

from Google containing the names of UMG's copyrighted songs – advertising

Veoh's unauthorized exploitation of this material.

          UMG is in the content creation business. UMG produces and sells

recorded music and musical compositions. UMG sued Veoh because Veoh

was using thousands of UMG's copyrighted works to reap advertising revenue

          2
              RE 1233-34.


2560535                                -4-
Case: 09-56777       01/24/2012    ID: 8043246   DktEntry: 66-1   Page: 9 of 27



without permission. Veoh copied these works, held them on its own

computers, displayed them works along with its advertising, and distributed

additional copies of them as downloads. These actions constitute infringement

of UMG's exclusive rights under copyright. UMG also brought suit against

several owner-operators of Veoh who actively facilitated and directed Veoh's

infringement.

          In two separate decisions, the District Court dismissed UMG's claims.

First, it granted a Rule 12(b)(6) motion to dismiss UMG's secondary liability

claims against Veoh's owner-operators, creating an entirely new requirement of

complete control over the direct infringer. Second, it granted Veoh's motion

for summary judgment, finding that, as a matter of law, Veoh established every

element of its affirmative defense under Section 512(c). UMG appealed these

decisions, identifying multiple errors. The panel, however, affirmed.

                                   ARGUMENT

          A.    The Issues Presented Are Exceptionally Important Because Of

                Their Sweeping Impact On Internet Commerce.

          This case presents serious issues addressing the balance between

copyright holders and internet providers. Many of these issues are also

presented in a case pending before the Second Circuit - Viacom v. YouTube.

There, as here, the panel is weighing the proper interpretation of the DMCA



2560535                                 -5-
Case: 09-56777    01/24/2012    ID: 8043246    DktEntry: 66-1    Page: 10 of 27



standards for knowledge. After hearing, the Second Circuit requested

supplemental briefing explaining what the "red-flag" knowledge requirement

actually meant, and how YouTube's syndication of videos to third parties could

fall within a "safe harbor" for "storage at the direction of a user." Because of

their importance, these are two of the most closely-watched copyright cases in

many years. The interest of numerous Amici that submitted briefs, both in this

case and in the YouTube case, also highlights their importance. The panel

decision undermines this Court's caution that courts must take care not to give

internet businesses an unfair advantage by exempting them from laws of

general application that apply to their "real-world counterparts."3 The panel

decision notes that Section 512 was intended to provide "strong incentives for

service providers and copyright owners to cooperate to detect and deal with

copyright infringements."4 Yet, the result conflicts with that

acknowledgement. The panel decision overwhelmingly shifts the balance to

internet business, holding that they need only respond to specific take down

notices (on a url by url basis) received from the copyright owner and have no

obligation to make any effort to avoid infringing the copyrights of others.

This is not a model for cooperation. It is a model for massive, widespread



          3
       Fair Housing Council of San Fernando Valley v. Roomates.com, LLC,
521 F.3d 1157, 1164, n. 15 (9th Cir. 2008).


2560535                               -6-
Case: 09-56777         01/24/2012   ID: 8043246   DktEntry: 66-1   Page: 11 of 27



infringement. If service providers need only wait to be told of infringement,

why would they ever undertake more? What possible incentive would they

have to obtain a license to copyrighted material, or implement technology to

limit infringement? This is not the "balance" Congress intended.

          The panel decision will facilitate the very behavior society has

prohibited.5 Moreover, it will dramatically handicap copyright holders in their

efforts to deter infringement. The panel decision renders the "notice-and-

takedown" process as the sole recourse for copyright holders, regardless of the

knowledge of the internet provider, regardless of the intent of the internet

provider, and regardless of the internet provider's financial benefit from the

infringement.

          The panel's holding imposing all of the burdens on copyright holders

ignores what Congress did and why it did it. Such "policing" of the entire

internet would be a Sisyphean task for copyright holders, and Congress knew

it. When the DMCA was enacted in 1998, Congress noted that the Yahoo!




          4
              Opinion at 21082.
          5
        See Kozinski and Goldfoot, A Declaration of the Dependence of
Cyberspace, 32 Colum. J.L. & Arts 365, 370-71 (2009); see also Menell,
Indirect Copyright Liability and Technological Innovation, 32 Colum. J. L. &
Arts 375, 399 (2009) (discussing the fallacy that enforcing the law stifles
innovation and noting that broad immunity "fosters deployment of parasitic
technologies that tend to drive out balanced technologies [those that tend to

2560535                                  -7-
Case: 09-56777          01/24/2012    ID: 8043246    DktEntry: 66-1    Page: 12 of 27



directory of the internet at that time categorized more than 800,000 online

locations.6 By the end of 2005, studies indicated that the internet contained

more than 11.5 billion publicly accessible web pages.7 By March 2009, less

than four years later, that number had more than doubled to more than 25

billion.8

          B.        The Panel's Decision Undermines Copyright Protection On

                    The Internet Contrary To Prior Precedents.



          1.        The panel decision renders the language "infringement of

                    copyright by reason of the storage at the direction of a

                    user , . ." superfluous void or insignificant.

          "Copyright is a strict liability tort; as such, intent to infringe is not an

element of plaintiff's prima facie case for most allegations of direct

infringement. Thus, a publisher who is unaware that its author has

incorporated infringing material is liable, as is the printer . . . ."9 This principle




balance incentives to create copyrighted works with advances in information
dissemination]."
          6
              S. REP 105-190, *49.
          7
              See http://en.wikipedia.org/wiki/World_Wide_Web
          8
              Id.
          9
              William F. Patry, Patry on Copyright, § 9.5 (2011)


2560535                                     -8-
Case: 09-56777         01/24/2012       ID: 8043246   DktEntry: 66-1   Page: 13 of 27



features in Supreme Court precedent for decades.10 Copyright infringers may

be liable for statutory damages even if they prove they were unaware their

conduct was infringing.11

          Congress enacted Section 512 in 1998, partly in reaction to the Netcom

case in the Northern District of California.12 Section 512 created four "safe

harbors" for discrete activities. Section 512(a) created protections for

transitory digital network communications, Section 512(b) for system caching

(temporary storage of information), and Section 512(d) for information

location tools. Section 512(c) – at issue here – created protections for storage

of material at the direction of a user. These separate activities must be

understood as separate – protection for one does not extend to others.13 And

the four certainly were not intended to cover all activities on the internet.

These provisions were designed to protect the internet highway itself, not the

trucks that use that highway. The panel misconstrues this structure and allows

Veoh – one of the trucks – to invoke the protections of Section 512(c) to




          10
               See Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 198 (1931).
          11
               17 U.S.C. § 504(c)(2).
          12
         Religious Technology Center v. Netcom On-Line Communication
Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995).
          13
               17 U.S.C. § 512(n).


2560535                                      -9-
Case: 09-56777         01/24/2012   ID: 8043246   DktEntry: 66-1   Page: 14 of 27



immunize all of its activities, including knowing unauthorized distribution of

copyrighted content.

          Section 512(c) limits 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." While Veoh did

store material, it did not stop there. Veoh went on to make multiple copies,

display the copies, and distribute copies to others. The panel decision

overstates the 512(c) defense as an automatic protection for all activity

associated with stored material. To reach this incorrect result, the panel

critically changes the statutory language when it asks whether "infringing

conduct" was by reason of storage.14 The panel incorrectly conflated whether

the infringement was by reason of storage (i.e. the storage was the

infringement), with the idea that some separate infringing conduct was

undertaken due to the storage of material. This ruling conflicts with Supreme

Court precedent that "by reason of" must be construed narrowly in federal

statutes.15

          The panel decision also incorrectly focuses on an entirely separate

provision of Section 512. Section 512 broadly defines "internet service




          14
               Opinion at 21072.


2560535                                 - 10 -
Case: 09-56777       01/24/2012   ID: 8043246    DktEntry: 66-1   Page: 15 of 27



provider" in Section 512(k), but sets forth specific so-called "safe harbors" that

might apply to certain activities of such service providers in Sections 512(a)-

(d). The panel reasons that if Congress intended to limit these "safe harbors" in

Sections 512(a)-(d), it would not have broadly defined "service providers" and

thus the activities of all service providers must be included. The panel misses

the point. Veoh fits this broad definition because it is potentially immunized –

such immunity only applies to the specifically enumerated activities, not other,

additional activities.

          The panel's reasoning renders the statutory language defining the

contours of the "safe harbors" a nullity – a result contrary to established

Supreme Court precedent regarding statutory interpretation.16 Congress used

broad language to define the entities potentially qualifying for the "safe

harbors," but used narrow language to define when each "safe harbor" actually

applied. If Congress intended all "service providers" to be protected for their


          15
        See Holmes v. Securities Investor Protection Corp., 503 U.S. 258,
267-68 (1992).
          16
         "It is 'a cardinal principle of statutory construction' that 'a statute
ought, upon the whole, to be so construed that, if it can be prevented, no clause,
sentence, or word shall be superfluous, void, or insignificant.'" TRW, Inc. v.
Andrews, 534 U.S. 19, 31 (2001), quoting Duncan v. Walker, 533 U.S. 167,
174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) (internal quotation marks
omitted); see also United States v. Wenner, 351 F.3d 969, 975 (9th Cir. 2003)
("[A] statute should not be construed so as to render any of its provisions mere
surplusage.").


2560535                                - 11 -
Case: 09-56777           01/24/2012    ID: 8043246   DktEntry: 66-1   Page: 16 of 27



activities, it would have had no need for the specific requirements of each "safe

harbor" in Sections 512(a)-(d). Nothing in the statute suggests that every

"internet service provider" must be protected, or that all of the activities of a

provider qualifying for some protection are thereby protected. The panel

misapplies these principles when, for example, it examines the activities

involved in operating a website in order to determine what is protected.17

Congress spelled out what activities are to be protected. The panel opinion

substitutes its own judgment by making the unsupported assumption that all

activities involved in operating a website should be within the storage "safe

harbor." For example, it considers the transmission of information as within

Section 512(c), even though transmission is separately addressed in Section

512(a).18 This approach is contrary to that required by Section 512,

particularly Section 512(n).

          2.         The panel decision all but eviscerates Section 512(c)(1)(A)(ii)

                     and its "red flag" knowledge standard.

          Even if infringement was by reason of storage, protection by the "safe

harbor" is not assured. Congress set out additional requirements in Section

512(c)(1)(A). Under Section 512(c)(1)(A)(i), the service provider must "not


          17
               See Opinion at 21077.
          18
               Id.


2560535                                    - 12 -
Case: 09-56777         01/24/2012   ID: 8043246   DktEntry: 66-1   Page: 17 of 27



have actual knowledge that the material or an activity using the material on the

system or network is infringing." Section 512(c)(1)(A)(ii) further requires that

"in the absence of such actual knowledge, [the service provider] is not aware of

facts or circumstances from which infringing activity is apparent." This is

often referred to as "red flag" knowledge. These two different provisions must

mean two different things. The second standard must apply even where actual

knowledge is lacking (given its use of the phrase "in the absence of such actual

knowledge"). The panel decision never states what kind of knowledge less

than actual knowledge could satisfy this requirement – the precise question on

which the Second Circuit requested supplemental briefing in YouTube.

Instead, the panel decision renders this second requirement meaningless by

equating it with the actual knowledge standard, leaving no daylight between

the two. The panel decision concludes that the burden is on a copyright holder

to place a service provider on notice of a specific act of infringement to create

either actual or "red-flag" knowledge.19 Thus, if the actual knowledge standard

were not satisfied, the lesser, "red flag" standard could never be satisfied. This

interpretation renders Section 512(c)(1)(A)(ii) mere surplusage, violating clear




          19
               Opinion at 21082-21085.


2560535                                  - 13 -
Case: 09-56777      01/24/2012    ID: 8043246   DktEntry: 66-1   Page: 18 of 27



precedent and leading the panel to ignore significant evidence of Veoh's

knowledge.20

          The panel decision draws heavily from the separate, notice-and-take-

down provisions of Section 512(c)(3) – essentially importing those

requirements as the sole basis by which any relevant knowledge may be

acquired. This effectively renders all of Section 512(c)(1) redundant and

meaningless.21 Had Congress meant to enact a regime where internet service

providers could only be liable for infringement if they refused to remove


          20
         The panel decision also failed to apply the appropriate standard of
review. Though the decision below granted summary judgment for Veoh, the
panel failed to construe the evidence in the light most favorable to UMG and
draw inferences in UMG's favor. For example, UMG presented evidence that
Veoh purchased Google search terms that specifically identified UMG's
copyrighted works (Excerpts of Record, NO. 09-56777, 389-90, 393, 395, 399,
407, 414, 587, 596, 604-605, 613-614, 665, 1537). The panel hypothesized an
explanation of why Veoh might have done this even if it did not have the
content referenced in the search terms on its service in order to conclude that it
did not support a finding of knowledge. (Opinion at 21085). The panel
ignored record evidence in which a Veoh executive testified they would not
buy such terms if they did not know they had the content. (RE 374-376).
          21
          The panel decision relies heavily on Section 512(m) in an effort to
justify its evisceration of other provisions of Section 512 by holding that
Section 512(m) would somehow prohibit any requirement that an internet
provider undertake any efforts to avoid infringement. The fact that this
interpretation would render so many other provisions of Section 512 a nullity
confirms that it is incorrect. Section 512(m) merely provides that absent some
kind of knowledge or financial benefit, a service provider need not seek out the
possibility of infringement. Knowledge, even "red flag" knowledge, creates an
obligation to do more. Section 512(m) does not simply eliminate this
obligation as the panel holds.


2560535                                - 14 -
Case: 09-56777         01/24/2012   ID: 8043246   DktEntry: 66-1   Page: 19 of 27



specific material identified to them by the copyright holder, it could have done

so with a far simpler structure than Section 512.

          3.      The panel decision also renders Section 512(c)(1)(B)

                  meaningless.

          In addition to the actual knowledge and "red flag" knowledge provisions,

Congress enacted another eligibility requirement for the "safe harbor".

Congress literally copied the common law standard for vicarious liability.

Under Section 512(c)(1)(B), a service provider must "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." The panel

excises this provision wholesale by substituting in the actual knowledge

standard: "we conclude that a service provider must be aware of specific

infringing material to have the ability to control that infringing activity within

the meaning of § 512(c)(1)(B)."22 If a service provider lacked actual

knowledge under Section 512(c)(1)(A)(i), then Section 512(c)(1)(B) would

never apply. The Court must presume Congress intended this provision to

have meaning. The panel decision eliminates that meaning.

          The panel decision also renders Section 512(c)(1)(B) a nullity in another

way. It holds that to have the "right and ability to control" infringing activity, a

          22
               Opinion at 21091.


2560535                                 - 15 -
Case: 09-56777         01/24/2012    ID: 8043246    DktEntry: 66-1   Page: 20 of 27



service provider must be able to "ensure that no infringing material is ever

uploaded to its site."23 This standard of perfection could never be met. Reason

dictates that Congress did not intend to enact such a meaningless provision.

The panel decision conflicts with governing precedents that businesses must

police their activities to the extent reasonably possible in order to avoid

infringement. For example, this Court held that internet service providers must

take the steps reasonably available to them to avoid infringement.24 Chief

Judge Kozinski summarized this principle: "if people are using your stuff to

infringe copyrights, and you know about it, and you can easily stop them, but

you do not, then you are on the hook."25 The Supreme Court applied the same

principle. It held that Grokster's failure to implement tools to reduce

infringement showed Grokster's culpability and reversed this Court's holding

that such evidence was irrelevant.26 Record evidence showed that Veoh

delayed implementation of available filtering technology to continue its

infringement. As acknowledged by the panel, Veoh began operations in 2005,


          23
               Opinion at 21090.
          24
               Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1172 (9th Cir.
2007).
          25
       Kozinski and Goldfoot, A Declaration of the Dependence of
Cyberspace, 32 Colum. J.L. & Arts 365, 367 (2009).
          26
        Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913,
939 (2005).


2560535                                   - 16 -
Case: 09-56777         01/24/2012    ID: 8043246    DktEntry: 66-1   Page: 21 of 27



but did not implement filtering technology until 2007 and further delayed

applying the filter to videos already on its service.27 Summary judgment

evidence showed that Veoh continued to exploit more than 60,000 infringing

videos due to this delay.28 The panel held such evidence irrelevant, contrary to

established precedent.

          4.       The panel decision improperly rewrites Section 512(c).

          The rules governing statutory interpretation are clear. Statutory

language should be accorded its plain meaning.29 All provisions of the statute

must be given meaning.30 Instead, the panel displaced Congress's considered

judgment with its own views regarding what laws should apply to businesses

on the internet. Far from deferring to Congress, the panel essentially rewrote

Section 512(c). As a consequence of the panel's decision Section 512(c) is

effectively rewritten as follows:

                   (c) Information residing on systems or networks at the 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

          27
               Opinion at 21065-21066.
          28
               Opinion at 21066-21067.
          29
               United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999).
          30
               TRW, Inc. v. Andrews, 534 U.S. 19, 31 (2001).


2560535                                   - 17 -
Case: 09-56777       01/24/2012    ID: 8043246     DktEntry: 66-1   Page: 22 of 27



                service provider or subsequent copying, display, or distribution of
                such material, if the service provider –
                (A)(i) does not have actual knowledge that the specific material or
                an activity using the specific 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 that
                the specific material or an activity using the specific material on
                the system or network is infringing; or
                (iii) upon obtaining such specific knowledge or awareness, acts
                expeditiously to remove, or disable access to, the specific
                material;
                (B) does not receive a financial benefit directly attributable to the
                infringing activity, in a case in which the service provider has
                actual knowledge that the specific material or an activity using the
                specific material on the system or network is infringinghas 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 specific material that is claimed to be infringing or to be the
                subject of infringing activity.

          Congress could have drafted Section 512(c) this way. It did not, nor did

it intend to.

          C.    The Panel Decision Conflicts With Precedent Regarding

                Secondary Liability.

          UMG also appealed the District Court's ruling that several owner-

operators of Veoh ("Shelter Defendants") were not subject to secondary

liability. In this Court's Perfect 10 decision, the Court held that "an actor may

be contributorily liable for intentionally encouraging direct infringement if the

actor knowingly takes steps that are substantially certain to result in such direct



2560535                                 - 18 -
Case: 09-56777         01/24/2012    ID: 8043246    DktEntry: 66-1   Page: 23 of 27



infringement."31 The panel decision rejects this precedent and instead requires

that to be liable, an entity must actually have full control of the direct

infringer.32 The prior decisions of this Court in Napster,33 and of the Supreme

Court in Grokster,34 hold that the knowing facilitation of infringement is

sufficient – without imposing a complete control requirement. If one were

fully in control of Veoh, as the panel requires, he would be a direct infringer.

The panel decision would eliminate contributory liability by requiring

complete control over the direct infringer rather than applying clear

precedent.35




          31
               Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1171 (9th Cir.
2007).
          32
               Opinion at 21099.
          33
               A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).
          34
               Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913
(2005).
          35
          As with its consideration of summary judgment, the panel decision
also misapplies the standard of review regarding this motion to dismiss issue.
The panel failed to credit UMG's allegations that each of the Shelter defendants
had the ability to supervise Veoh's infringing activity, including as shown by
the fact that when any one of them demanded removal of content, it was
removed, and that each individually had the power to require Veoh to
implement filtering technology. (Excerpts of Record, No. 09-55902, at 68-69).


2560535                                   - 19 -
Case: 09-56777   01/24/2012   ID: 8043246     DktEntry: 66-1   Page: 24 of 27



Dated: January 24, 2012                    IRELL & MANELLA LLP
                                           Steven A. Marenberg
                                           Brian D. Ledahl



                                           By: /s Brian D. Ledahl
                                              Brian D. Ledahl

                                           Attorneys for Appellants




2560535                           - 20 -
Case: 09-56777       01/24/2012    ID: 8043246      DktEntry: 66-1   Page: 25 of 27




                        CERTIFICATE OF COMPLIANCE

          Pursuant to Fed. R. App. P. 32(a) and Circuit Rule 40-1, I certify that the

attached petition complies with the type-volume limitations because it contains

4160 words .

          This petition complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it

has been prepared in a proportionally spaced typeface using Microsoft Word

2011 in 14-point font size and Times New Roman font style.

Dated: January 24, 2012                          IRELL & MANELLA LLP
                                                 Steven A. Marenberg
                                                 Brian D. Ledahl



                                                 By: /s/ Brian D. Ledahl
                                                    Brian D. Ledahl

                                                 Attorneys for Appellants




2560535                                 - 21 -
Case: 09-56777       01/24/2012     ID: 8043246    DktEntry: 66-1    Page: 26 of 27




                               CERTIFICATE OF SERVICE

          I hereby certify that on January 24, 2012, I electronically filed the

foregoing with the Clerk of the Court for the United States Court of Appeals

for the Ninth Circuit by using the appellate CM/ECF system.

          Participants in the case who are registered CM/ECF users will be served

by the appellate CM/ECF system.

          I further certify that some of the participants in the case are not

registered CM/ECF users. I have mailed the foregoing document by First-

Class Mail, postage prepaid, or have dispatched it to a third party commercial

carrier for delivery within three calendar days, to the following non-CM/ECF

participants:

          Alisa Shu Edelson
          Kulik Gottesman Mouton & Siegel, LLP
          Suite 1400
          15303 Ventura Blvd.
          Sherman Oaks, California 91403

          Maria K. Vento
          Wilmer Cutler Pickering Hale and Dorr LLP
          950 Page Mill Road
          Palo Alto, California 94304

          Mark G. Matuschak
          Wilmer Cutler Pickering Hale and Dorr LLP
          60 State Street
          Boston, Massachusetts 02109-1803




2560535                                  - 22 -
Case: 09-56777      01/24/2012   ID: 8043246     DktEntry: 66-1   Page: 27 of 27



          Rebecca L. Calkins
          Winston & Strawn, LLP
          38th Floor
          333 South Grand Avenue
          Los Angeles, California 90071


                                              By: /s/ Brian D. Ledahl
                                                 Brian D. Ledahl




2560535                              - 23 -

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4180
posted:1/26/2012
language:English
pages:27