Second Circuit Deepens Red Flag Knowledge Circuit Split in Vimeo

Cross-posted from the Center for the Protection of Intellectual Property (CPIP) blog.

The Second Circuit’s recent opinion in Capitol Records v. Vimeo is, to put it mildly, pretty bad. From its convoluted reasoning that copyrights under state law for pre-1972 sound recordings are limited by the DMCA safe harbors, despite the explicit statement in Section 301(c) that “rights or remedies” under state law “shall not be annulled or limited” by the Copyright Act, to its gutting of red flag knowledge by limiting it to the nearly-impossible situation where a service provider actually knows that a specific use of an entire copyrighted work is neither fair nor licensed yet somehow doesn’t also surmise that it’s infringing, it’s hard to see how either result is compelled by the statutes, much less how it was intended by Congress. On the latter point, the Second Circuit in essence has written red flag knowledge out of the statute, reducing the DMCA to a mere notice-and-takedown regime. The reality is that Congress expected red flag knowledge to do far more work, incentivizing service providers to take action in the face of a red flag—even without a notice.

If there’s any good to come from Vimeo, it might only be that the Second Circuit has now deepened the circuit split with the Ninth Circuit in Columbia Pictures v. Fung on two issues related to red flag knowledge. Under the statute, red flag knowledge exists when a service provider is “aware of facts or circumstances from which infringing activity is apparent.” The two circuits are already split on the issue of whether red flag knowledge must pertain to the particular works that are being sued over in the suit. And now with Vimeo, the circuits are split on the issue of whether a service provider can gain red flag knowledge just by looking at an infringing work. The deeper the circuit split, the greater the chance an appeal will make it to the Supreme Court, which would hopefully clean up the current red flag knowledge mess.

In Fung, the defendant, Gary Fung, operated several piracy havens, including isoHunt, TorrentBox, Podtropolis, and eDonkey. The district court found Fung liable for inducement under MGM v. Grokster and denied him safe harbor protection under the DMCA. The district court’s decision came in 2009, two years before the Ninth Circuit first held in UMG v. Shelter Capital that red flag knowledge requires “specific knowledge of particular infringing activity.” It also came two-and-a-half years before the Second Circuit held in Viacom v. YouTube that red flag knowledge is only relevant if it pertains to the works-in-suit. Regardless, since the vast majority of content available on Fung’s sites was copyrighted, including specific content that he himself had downloaded, the district court held that Fung hadn’t even raised a triable issue of fact as to whether he had red flag knowledge. The fact that none of the works he had been sued over were the same as the ones he had been found to have red flag knowledge of was irrelevant.

On appeal, the Ninth Circuit affirmed the district court’s holding that Fung had red flag knowledge as a matter of law. The opinion came out just one week after the same panel of judges issued a superseding opinion in UMG v. Shelter Capital reiterating that red flag knowledge requires “specific knowledge of particular infringing activity.” Importantly, in applying that standard to Fung, the Ninth Circuit did not say that the specific knowledge had to be of the particular works-in-suit. For whatever reason, Fung had failed to argue otherwise. Google even filed an amicus brief supporting the plaintiffs but nonetheless arguing that “the DMCA’s knowledge standards are specific and focus on the particular material that the plaintiff is suing about.” Apparently unaware that this actually helped his case, Fung filed a supplemental brief calling Google’s argument “fallacious.”

In the Ninth Circuit’s opinion, even though red flag knowledge had to relate to particular infringing activity, that activity did not have to involve the particular works-in-suit. Moreover, the Ninth Circuit held that the “material in question was sufficiently current and well-known that it would have been objectively obvious to a reasonable person” that it was “both copyrighted and not licensed to random members of the public.” Since Fung failed to expeditiously remove the particular material of which he had red flag knowledge, he lost his safe harbor protection across the board. Thus, the Ninth Circuit in Fung held that: (1) red flag knowledge that strips a service provider of its entire safe harbor protection does not have to pertain to the particular works-in-suit, and (2) material can be so “current and well-known” that its infringing nature would be “objectively obvious to a reasonable person.”

The Second Circuit in Vimeo parted ways with the Ninth Circuit on these two holdings. Since the “evidence was not shown to relate to any of the videos at issue in this suit,” the Second Circuit held that it was “insufficient to justify a finding of red flag knowledge . . . as to those specific videos.” The Second Circuit thus applied the red flag knowledge standard on a work-by-work basis, in direct contrast to the Ninth Circuit in Fung. Also, the Second Circuit held that “the mere fact that a video contains all or substantially all of a piece of recognizable, or even famous, copyrighted music” and was “viewed in its entirety” by an “employee of a service provider” was not enough “to sustain the copyright owner’s burden of showing red flag knowledge.” The court added that even “an employee who was a copyright expert cannot be expected to know when use of a copyrighted song has been licensed.” So while the Ninth Circuit said it would have been objectively obvious to Fung that particular works were infringing, the Second Circuit in Vimeo set the bar far higher.

Curiously, the Second Circuit in Vimeo didn’t even mention Fung, despite the fact that it was deepening the circuit split with the Ninth Circuit. One wonders whether the omission was intentional. Either way, the circuit split has only gotten deeper. While in the Ninth Circuit an infringement can be so obvious that a court can find that a service provider had red flag knowledge without even sending it to a jury, the Second Circuit says that courts can’t let a jury decide whether a service provider had red flag knowledge even with the most obvious of infringements. And while in the Ninth Circuit a service provider loses its entire safe harbor for failing to remove an obvious infringement that it hasn’t been sued over, the Second Circuit says that red flag knowledge has to be determined on a work-by-work basis for only the works-in-suit. Given this growing divide between the Second and Ninth Circuits, it seems like only a matter of time before the Supreme Court will weigh in on the red flag knowledge standard. And if the Court does finally weigh in, one hopes it will put common sense back into the DMCA.

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