In Capital Records v. Vimeo, the Second Circuit Court of Appeals issued an important decision on the Digital Millennium Copyright Act § 512 safe harbor. Capitol Records and a number of other record labels had sued Vimeo, a video-hosting platform, over user-uploaded videos that contained songs in which plaintiffs claimed copyright ownership. Capitol Records had never sent any takedown notices for these videos, and Vimeo claimed the DMCA safe harbor's immunity from monetary damages.

Reversing the district court, the Second Circuit found that the safe harbor covers state copyrights in pre-1972 sound recordings. Section 301 of the Copyright Act of 1976 specified that the Act's preemption of state copyright law rights and remedies for pre-1972 sound recordings would not kick in until February 2047. The 1998 amendments extended copyright terms and the time period before preemption for 20 years. Rejecting a 2011 Copyright Office statutory interpretation, which concluded that § 512 did not give protection against state law copyright claims due to § 301 and its amendment in 1998 at the same time Congress passed the DMCA, the Second Circuit found that the Copyright Office had misread the statute and incorrectly applied canons of statutory interpretation. Leaving state copyright law out of the safe harbor's scope was at odds with the DMCA's wording and would have substantially defeated its purpose to allow Internet service providers to store materials at the direction of users without expensive monitoring or screening. This decision puts the Second Circuit, the only federal appellate court to rule on the issue, directly at odds with a New York state appellate court decision in UMG v. Escape Media, which held that the safe harbor does not apply to state law copyright claims on pre-1972 sound recordings. While the Second Circuit did not address the conflict, this new ruling may give future defendants incentive to push any New York state law copyright claims to federal courts under the Second Circuit's umbrella.

The Second Circuit also affirmed the district court's ruling that plaintiffs had not shown systematic willful blindness by Vimeo. Vimeo did not proactively screen for potentially infringing audio in the videos users uploaded, though it did screen against some visual elements, and in isolated instances, some Vimeo employees appeared to encourage infringement in communications with specific users. This was insufficient. Plaintiffs' interpretation was at odds with § 512(m)'s statement that service providers had no general obligation to monitor for infringements to enjoy the safe harbor's protection, and the isolated instances of encouragement did not concern the songs at issue (where they might have been red flags of specific infringements).

As to specific videos, the Second Circuit affirmed the district court's grant of summary judgment to Vimeo, stating that plaintiffs had no evidence that Vimeo employees had viewed them. It also remanded to the district court with instructions to grant summary judgment to Vimeo as to any videos where plaintiffs had failed to present evidence of specific disqualifying knowledge. Building on Viacom v. YouTube, which held that disqualifying "red flag" knowledge requires actual knowledge of facts that would make the specific infringement at issue objectively obvious to a reasonable person, the court ruled that the "reasonable person" under this test is an ordinary person with no specialized knowledge or expertise concerning music or copyright law (emphasis added). Under this test, the mere fact that an employee viewed a video containing all or nearly all of a "recognizable" song, without more, is insufficient. Furthermore, while the initial burden of proof for demonstrating safe harbor qualification is on the service provider, the burden of proof for showing disqualifying "red flag" knowledge lies on the party claiming infringement (although it is entitled to discovery on the service provider's knowledge, a holding that may exacerbate service providers' defense costs in future cases). Thus, as to each specific video, unless plaintiffs could point to subjective belief of infringement or "facts making that conclusion obvious to an ordinary person," Vimeo was entitled to summary judgment.

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