"YouTube's strategy has been to avoid taking proactive steps to curtail the infringement on its site. Their business model, which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws," said a Viacom representative in 2007.
The Digital Millennium Copyright Act has some provisions that protect web services by creating a safe harbor against copyright liability. To be protected by the DMCA, online service providers must not make money from the infringing activities, must not be aware of the presence of infringing material and must remove the infringing material if the copyright owners send a notice to the service provider. Viacom said that YouTube's employees were aware that the site hosted copyright infringing videos, but the court didn't think that it was enough.
Here's a relevant excerpt from the court's decision:
Mere knowledge of prevalence of [copyright infringement] activity in general is not enough. That is consistent with an area of the law devoted to protection of distinctive individual works, not of libraries. To let knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users' postings infringe a copyright would contravene the structure and operation of the DMCA.
That makes sense, as the infringing works in suit may be a small fraction of millions of works posted by others on the service's platform, whose provider cannot by inspection determine whether the use has been licensed by the owner, or whether its posting is a "fair use" of the material, or even whether its copyright owner or licensee objects to its posting. The DMCA is explicit: it shall not be construed to condition "safe harbor" protection on "a service provider monitoring its service or affirmatively seeking facts indicating infringing activity".
This decision is not important only for YouTube and Google, it's important for any other sites that host user-generated content.
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