NEW YORK (AdAge.com) -- A District Court judge threw out Universal Music Group's copyright infringement suit against Veoh, a decision that gives some breathing room to other video-sharing websites, including YouTube, which is facing a similar $1 billion lawsuit from Viacom.
Judge A. Howard Matz issued a summary judgment in Universal's case, which has been winding its way through the federal court system since 2007. At issue is whether Veoh -- or any video-sharing site -- is responsible for preventing users from uploading copyrighted material, or if it can simply react when it is notified of an alleged infringement.
In accordance with copyright act
In his ruling, Judge Matz said Veoh acted in accordance with the Digital Millennium Copyright Act by quickly taking down copyrighted materials once notified by the owners, in this case the world's largest record label, Universal Music Group.
"UMG contends that Veoh had knowledge of infringing material that it did not act expeditiously to remove," Judge Matz wrote. "But Veoh has shown when it did acquire knowledge of allegedly infringing material -- whether from DMCA notices, informal notices, or other means -- it expeditiously removed such material."
Although UMG can still appeal, the ruling effectively shuts down its case and removes a thorn in the side of the beleaguered video startup, which was funded to the tune of nearly $70 million by the likes of former Disney chairman Michael Eisner, Time Warner and former Viacom CEO Tom Freston.
Aside from the suit, Veoh faced some tough competition from YouTube and Hulu and wound down its business earlier this year to focus on developing its core technology, a content search and recommendation engine, and to package the company and its audience for potential sale. A person familiar with the situation said "three or four" potential buyers had been circling, but the suit was a major concern.
"This has been a very large drain of time and resources both human and financial," said Veoh Networks' founder and CEO, Dmitry Shapiro. "Getting rid of this ball and chain and looming cloud opens up many more opportunities for the company."
Because there is so little case law on the subject, and because the facts alleged are very similar to those in the much bigger Viacom suit against YouTube, the ruling could have wide-ranging implications.
UMG and others have argued that because sites such as Veoh and YouTube earn ad revenue, they are in full control of their sites and should be liable when infringing material is contributed to them. But the sites argue they don't have full control over the behavior of users. This ruling affirms that the onus is on copyright holders, and that any potential liability is that of the users.
Today, YouTube operates a sophisticated system to prevent the upload of copyrighted materials, but in the early days, much copyrighted TV, music and film made it onto its servers. Viacom works nicely with YouTube now; its suit is about what YouTube did before it implemented filtering, essentially asking whether YouTube knew that copyrighted content was being uploaded and what did it do about it.
But the ruling establishes that the onus is on the copyright holder to police its own content. And while Viacom's case is being heard in a separate jurisdiction, Frederick Von Lohmann, staff attorney for the Electronic Freedom Foundation, believes it will be difficult for the New York judge in Viacom's case to rule differently.
"This ruling will not be binding on judge in that case, but because there are so few court cases applying this area of law, every decision is very important," Mr. Von Lohmann said. "A judge in New York will have to think twice to come out a different way with the same set of facts."
People close to Viacom cautioned that the cases are not the same and that Veoh was much more responsible about handling the removal of copyrighted content than YouTube in its early days. The fact that YouTube and others have deployed filters shows they have wider responsibility to screen copyrighted material.
The ruling could also embolden YouTube, Break.com and other sites with user-uploaded material to be more aggressive in placing ads next to copyrighted content. As it is, sites such as YouTube are very cautious about monetizing videos that might be construed as infringement. YouTube only places ads next to videos produced by those with whom it has established business relationships.