Entertainment Attorney, Danny Andrews Co-Authors Article in Los Angeles Lawyer Magazine: “Applying Copyright Law to User-Generated Content”

ON THE INTERNET, user-generated content (UGC) has created the need for lawmakers and copyright owners to find ways of addressing intellectual property issues specific to this new media form. The need grows daily, as UGC becomes an increasing portion of the media that the average American consumes. Articles concerning UGC are no longer relegated to the tech press and now are regular features in the entertainment and business sections of numerous periodicals. This importance is reinforced by the enormous prices being paid for services that rely on UGC: “Indeed, in the year since the News Corp purchase, MySpace’s net worth has nearly tripled, to $1.5 billion, according to Soleil-Media Metrix.”¹

In a recent statement by Nokia, following a study it commissioned of its over 900 million customers worldwide, “up to 25% of the entertainment consumed by people in five years time will have been created, edited and shared within their peer circle rather than coming out of traditional media groups.”² In addition to an avalanche of new content, the virtual worlds popping up on the Internet represent significant real as well as virtual economies. Many players earn a living within virtual worlds by buying and selling game items in the real-world marketplaces. A study of the Sony created virtual world, Norrath, part of the massively multiplayer online game (MMOG) Everquest, reveals that Norrath’s per capita wealth, in the real-world value of its virtual goods, ranked Norrath 77th in the world, slightly higher than Bulgaria.³

UGC encompasses numerous types of media content that is produced and submitted by everyday consumers or users of Web services. Unlike traditional media content, which is usually produced only by professional writers, directors, and media companies, UGC content is frequently created by people with virtually no level of technical or creative experience. Some of the most popular Web sites that incorporate UGC—and there are hundreds—are the video-sharing site YouTube, the social networking site MySpace, the Internet-based virtual world Second Life, and the virtual worlds of such MMOGs as World of Warcraft and Everquest. UGC differs from traditional content not only in the manner in which it is created but also in the way rights to and liabilities arising from such content are allocated. Typically, with traditional content, creators and distributors enter into binding, bilaterally negotiated contracts, including representations and warranties, indemnification clauses, and other familiar language allocating their respective liabilities and designating ownership rights. In the UGC universe, these issues are typically dealt with through end user license agreements (EULAs). Despite such license agreements, however, copyright infringement issues continue to emerge from the use of UGC in new media. Some of those disputes are between individual users and creators of UGC. The deep pockets in the relationship are services that host UGC and Internet service providers (ISPs), and they are particularly likely to be subjected to claims that arise. Passed in 1998, the Digital Millennium Copyright Act (DMCA) protects copyright holders from technology that facilitates piracy while offering protection to certain ISPs by limiting their liability in cases in which their customers are found guilty of copyright infringement.⁴ More specifically, Section 512 of the DMCA governs the relationship between certain ISPs and individuals who upload content on their sites.⁵

While there is some ambiguity associated with what constitutes an ISP, generally, an entity owning or operating a Web site that does not alter the content uploaded by its users is likely to be considered an ISP for Section 512 purposes, provided the ISP implements certain notice and takedown procedures. Under Section 512, if an ISP qualifies for the safe harbor exemption, only the infringing user or creator or uploader is liable for monetary damages. The Web site through which the infringing user engaged in the alleged infringing activities is not. Section 512 is particularly important for online services such as YouTube and MySpace, and the virtual worlds such as Second Life, where users upload third-party content (including clips from movies, television shows, record albums, and concerts) without proper authorization from the copyright owner. Without the provisions of Section 512, an ISP that hosted such infringing content would find itself liable as a direct copyright infringer (e.g., for displaying allegedly infringing works) or as a vicarious or contributory infringer—analogous to being an accomplice of the infringer—and subject to large damages awards, statutory fines, and other liability. However, despite the safe harbor provided by Section 512, ISPs that comply with Section 512 have still found themselves the subject of litigation by aggressive copyright owners.⁶

Takedown

At the core of the protection that ISPs enjoy from Section 512 are its notice and takedown provisions. In general, Section 512 provides that an ISP will not be liable for damages associated with copyright infringement if it develops notice provisions and takes down allegedly infringing materials upon receiving the proper notice. However, the notice and takedown steps are not as simple as they might seem: Even if an ISP complies with the safe-harbor provisions of Section 512, the ISP will not obtain safe-harbor protection from claims of copyright infringement 1) if the ISP has actual knowledge that the materials in question are infringing, 2) if the ISP receives a financial benefit directly related to the infringement and the ISP has the ability to control the infringing activity, or 3) the ISP is aware of facts and circumstances that should have put it on notice that infringing activity was taking place.⁷ The ISP must create and conspicuously post a copyright law compliance policy on its site, which must include a notice, takedown, and counter notice policy consistent with the provisions of Section 512. This copyright compliance policy must also include the contact information of an agent specifically designated by the ISP to receive notices of copyright infringement on behalf of the ISP. The ISP must also register the designated agent in a public database at the U.S. Copyright Office. In practice, Section 512 works in the following manner: A copyright owner browsing a site that incorporates UGC sees what it believes to be its copyrighted material being used without authorization. The owner finds the site’s copyright infringement takedown policy (including the contact information for the designated agent) and sends a takedown notice to the designated agent. To be effective, the takedown notice must include the following information:

1) the name, address, and electronic signature of the complaining party, 2) a description of the allegedly infringing materials and their Internet location, or if the Internet service provider is an “information location tool” (such as a search engine), the reference or link to the infringing material, 3) sufficient information to identify the copyrighted works, 4) a statement by the owner that it has a good faith belief that there is no legal basis for the use of the allegedly infringing materials, and 5) a statement of the accuracy of the notice, and, under penalty of perjury, that the complaining party is authorized to act on behalf of the owner.⁸ Once the copyright owner has issued an effective takedown notice, the ISP is required to expeditiously remove or disable access (including links) to the allegedly infringing material. Although the ISP has no affirmative duty to determine whether material that has been uploaded to its site is infringing before receiving a takedown notice, if the ISP discovers that there is infringing material on its site, the ISP will not receive Section 512 protection unless it promptly removes the allegedly infringing material. The takedown provisions of Section 512 do not require the ISP to notify the individual responsible for the allegedly infringing material before removing it, but it does require that the ISP notify the alleged infringer after the material is removed and provide the alleged infringer with an opportunity to send a written counter notice to the ISP stating that the material does not infringe any third party’s rights and was wrongly removed.⁹ To be effective, the counter notice must contain the following information:

1) the user’s name, address, phone number, and physical or electronic signature,¹⁰

2) identification of the material and its location before removal,¹¹

3) a statement under penalty of perjury that the material was removed by mistake or misidentification,¹² and

4) consent to local federal court jurisdiction, or if overseas, to an appropriate judicial body.¹³
Once a user has provided the counter notice, the ISP must then promptly notify the claiming party of the alleged infringer’s objection.¹⁴ If the copyright owner does not bring a lawsuit in federal district court within 14 days, the ISP must repost the material to its location on its site.¹⁵ Moreover, if the copyright owner is found to have misrepresented its claim regarding the infringing material, it may become liable to the ISP for any damages resulting from the removal of the material.¹⁶

Copyright Ownership of UGC

Existing copyright laws, including the DMCA, do not always resolve the issue of copyright ownership of UGC. UGC copyright ownership issues are usually dealt with at two distinct periods in the content creation process, either: 1) the front end (contractually), or 2) the back end (through litigation). Many sites that utilize UGC include language in their terms and conditions and EULAs requiring users to warrant that their submitted content does not infringe on any third party’s intellectual property rights. These sites generally allow users to retain ownership of the content they create (to the extent that the content is non-infringing and otherwise permissible by law); require users to grant the ISP and its users very broad licenses to reproduce, transmit, or otherwise use the content; and provide dispute resolution procedures, which often include mandatory arbitration and other provisions required by the DMCA. The most binding of these contracts are those that are clickwrapped— i.e. those that require users to affirmatively agree to be bound by the terms, such as by clicking a check box, before they can use the Web site or upload content.¹⁷

Perhaps as a result of the pervasive use of click-wrap contracts, there have been relatively few instances in which, despite the dispute resolution clauses or an ISP’s compliance with Section 512 notice and takedown provisions, a copyright holder has sued an ISP, the alleged infringer, or both. However, there is little established case law dealing specifically with copyright infringement as it relates to UGC. A few cases, nonetheless, may provide some guidance to ISPs and content makers. One recent case, which has not yet been decided, is Lenz v. Universal Music Group. This case deals with YouTube and the Section 512 takedown provisions.¹⁸ In June, Universal Music sent YouTube a takedown notice requesting that YouTube remove a clip of Lenz’s toddler dancing to the Prince song “Let’s Go Crazy,” claiming copyright infringement. On June 6, 2007, in accordance with its Section 512 provisions, YouTube notified Lenz that it had removed the video. On June 27, 2007, Lenz filed a counter notice asserting that the video was noninfringing and thus improperly removed from YouTube. After being unavailable on YouTube for more than six weeks, and as a result of Universal’s failure to file a copyright infringement suit against Lenz pursuant to Section 512(g)(2)(C), YouTube placed the video back on its site in July.¹⁹ On July 24, 2007, Lenz filed a lawsuit against Universal alleging that Universal violated her right to free speech because it sent a Section 512 takedown notice, which resulted in the removal of her video, when the studio knew or should have known that the video was a noninfringing fair use of the Prince song. Section 512(f) of the DMCA provides that a person who sends a takedown request knowingly misrepresenting that the material is infringing will be responsible for resulting damages to the party whose material was removed. Lenz seeks damages for misrepresentation of copyright claims under the DMCA and interference with contract (i.e. the contract between Lenz and YouTube to host the video pursuant to YouTube’s terms of use). In addition, Lenz seeks a declaratory judgment that her use of the song was non-infringing and an injunction to prohibit Universal from bringing or threatening to bring a copyright infringement suit in connection with the video. Universal may assert the defense that its takedown notice was supported by a good faith belief that the video was infringing, as required by Section 512, and thus that it did not violate Lenz’s right to free speech by sending the takedown notice.²⁰

At the center of the case is whether fair use is ever self-evident (as Lenz claims) or is a fact-specific determination that must be made on a case-by-case basis in court. While many understand the fair use defense to be a fact-specific inquiry, Lenz’s legal theory is that her specific use of the copyrighted work is so clearly fair use that a copyright infringement suit based on the use should be deemed frivolous and a blatant violation of her right to free speech. If the court agrees with Lenz, then Universal and other copyright owners will be forced to make an analysis of fair use, in each instance, and decide whether a work is fair use before they send takedown notices to potential infringers—or risk exposure to liability for damages associated with the removal of the content. If, however, the court decides that fair use is never self-evident, then copyright owners who send takedown notices may avoid liability under Section 512(f) by simply exercising subjective good faith. Of course, the court might also decide only that Lenz’s particular use was not self-evident fair use, leaving for another day whether any use could be.

In another guiding case, Rossi v. Motion Picture Association of America,²¹ the MPAA requested that an Internet service provider shut down the site www.internetmovies.com, which offered users the ability to download movies in an allegedly infringing manner. It was later discovered that the Web site did not contain any infringing material. Nevertheless, the court found that because the MPAA had a subjective good faith belief that the site, which allowed users to download movies, was infringing its copyrights, the MPAA did not violate Rossi’s right to free speech. This case demonstrated that, at least in the Ninth Circuit, a subjective and not an objective good faith belief is the requisite standard for sending a takedown notice. While such a standard does little to encourage copyright owners to work cooperatively with ISPs, it is consistent with the literal wording of Section 512, which appears intended to avoid imposing a high bar on copyright owners seeking to protect their rights. The copyright issues related to UGC also plague virtual worlds. Second Life, a popular Internet virtual world, has been the center of many novel intellectual property related issues. One such issue arose in a case filed in Florida in June 2007.²² Second Life is an online virtual world where users, called residents, interact through computer graphic representations of people and places. Individual users have characters, virtual people called avatars, for which they control the appearance, names, and other qualities. Residents interact with each other through their avatars. The Second Life world also has virtual objects, such as clothing and houses, which can be interacted with and exchanged, and a system of currency, Linden dollars (named after the company that runs the world, Linden Labs), which can be converted into real currency. Kevin Alderman runs an adult content company called Eros LLC. He also has an avatar in Second Life, named Stroker Serpentine. Through Serpentine, Eros sells virtual items in Second Life, including a piece of furniture called the SexGen bed, which contains more than 150 sex animations. Serpentine sells the SexGen bed to Second Life residents for L$12,000, which has a value of roughly $45.²³ Eros filed a copyright infringement lawsuit against Second Life resident Volkov Catteneo (an avatar)²⁴ accusing Catteneo of making and offering for sale unauthorized copies of Eros’s SexGen bed and other items. Because Eros did not know the identity of the resident who owned the Catteneo avatar, however, it had to file the case against John Doe. Filing copyright infringement cases against John Doe is an established practice in Internet cases. Eros later served a subpoena on Linden Labs to force disclosure of the alleged infringer’s identity.  Section 512(h)(2)(c) of the DMCA permits a copyright owner to subpoena the identity of the individual allegedly responsible for copyright infringement on the condition that the information about the individual’s identity can only be used in connection with protecting the intellectual property rights of the copyright owner.²⁵ The subpoenas Eros filed led to two computers allegedly used by Robert Leatherwood. Eros later named Leatherwood as the defendant in the case. He did not answer or otherwise respond to the complaint, so a default judgment was entered, which operates as a judgment on the merits and allows Eros to seek damages, fees, and injunctive relief and use the judicial system to attach Leatherwood’s assets to satisfy any award of damages. While the court did not have to reach the substantive legal issues in the Eros case, it did at least establish that copyright owners have rights in virtual worlds and that existing laws and procedures can be used to enforce those rights.

Content Owners

In addition to courts and lawmakers, major content owners and distributors are trying to play an active role in balancing the varied interests of those using and creating UGC. On October 18, 2007, companies including CBS, Dailymotion, Disney, Fox, NBC Universal, Microsoft, Veoh, and Viacom released a document titled “Principles for User Generated Content Services.”²⁶ The UGC principles document incorporates many of the provisions of the DMCA and Section 512 and urges Web site operators to adopt the principles. Although the principles are obviously not law and compliance is voluntary, they are intended to guide the discourse about UGC. To that end, the text of the UGC principles expressly states the principles are not intended to be construed as a concession or waiver with respect to any legal or policy position or as creating any legally binding rights or obligations. The broadly stated objectives of the UGC principles are to: 1) eliminate infringing content on user-generated services, 2) encourage uploading of wholly original and authorized user-generated audio and video content, 3) accommodate fair use, and 4) protect legitimate interests of user privacy. The UGC principles provide some specific steps that user-generated services may incorporate to achieve these objectives, such as: 1) include relevant and conspicuous language on Web sites that incorporate UGC that promotes respect for intellectual property rights and discourages users from uploading infringing content, 2) inform users during the uploading process that uploading infringing content is prohibited and causing the user to affirm that the content is not infringing, 3) incorporate content identification technology, which blocks the uploading of any infringing content that matches with the reference materials provided by copyright owners, 4) identify Web sites that are predominantly used for the dissemination of infringing content and block or remove all links to such sites, 5) incorporate searching mechanisms that would allow copyright owners registered with the service to search for infringing content, and 6) implement a notice, takedown, and counter notice procedure, similar to that required by Section 512 and other policies that accommodate fair use. The UGC principles also include various liability-limiting provisions for those complying with the principles. UGC continues to grow in popularity and is increasingly a feature of major new media projects. As UGC becomes more prevalent, its economic value will become more significant, likely resulting in increasing disputes over ownership and rights. Existing laws and contracts, such as the DMCA and individual EULAs, will govern how many of those disputes are resolved, but they are only a starting point. Cases like Lenz and Eros require courts to apply existing laws in new and unusual situations and will inevitably lead to new standards governing relationships between rights holders and users in new media. For now, ISPs, content makers, and hosts are best served by becoming familiar themselves with the detailed requirements of the DMCA and taking traditional steps to protect themselves from contributing to or supporting infringement while new law develops around use of UGC in new media.

Written by: Danny Andrews and Jeff Biederman, Attorneys at Manatt, Phelps & Phillips, LLP in Los Angeles