Throwing the Baby Out with the Bathwater: Lenz v. Universal and the Future of DMCA Safe Harbor Takedown Notifications

The DMCA safe harbor provisions were conceived so that copyright owners could protect their copyrights without liability being imposed on Internet service providers. The Lenz decision, however, means that before demanding takedown of infringing material, a copyright owner must weigh the risk of liability for misrepresentation if the larger legal landscape has not been considered. This latest statutory interpretation in the Lenz ruling heightens the debate on whether the existing law effectively maintains the balance of interests between copyright owners and service providers. The increasing complexity of the case law interpreting these provisions, joined with influences from external economic, technological, and legal doctrinal developments over the past few decades signals that this imperfect compromise solution must be revisited.

History of DMCA Section 512 Takedown Provisions

The genesis of the DMCA provisions provides some context for the prospective impact of the Lenz decision. In 1998, Congress passed the DMCA in an effort to address new legal challenges for copyright protection brought about by the Internet and online use of content. It grappled with the task of adopting legislation to implement World Intellectual Property Organization (WIPO) treaties,⁴ which required signatory countries to provide greater copyright protection through anticircumvention and preventing tampering with copyright management information.⁵ Contemporaneously, at the national level, stakeholder industries raised concerns that court outcomes demonstrated existing laws inadequately addressed online infringement and risked paralyzing technological progress. The evolving doctrines of contributory and vicarious liability in copyright infringement generated a considerable dilemma over balancing the interests between copyright owners and service providers.

Congress understood the challenge presented by these converging problems. As explained in the Senate report for the DMCA:

Although the copyright infringement liability of on-line and Internet service providers (OSPs and ISPs) is not expressly addressed in the actual provisions of the WIPO treaties, the Committee is sympathetic to the desire of such service providers to see the law clarified in this area. There have been several cases relevant to service provider liability for copyright infringement. Most have approached the issue from the standpoint of contributory and vicarious liability. Rather than embarking upon a wholesale clarification of these doctrines, the Committee decided to leave current law in its evolving state and, instead, to create a series of “safe harbors,” for certain common activities of service providers. A service provider which qualifies for a safe harbor, receives the benefit of limited liability.⁶

After extensive negotiations among stakeholders, Congress adopted intricate language providing a safe harbor under the Online Copyright Infringement Liability Limitation Act (title II of the DMCA). In addition to addressing limitations on liability for automated functions such as transitory communications, system caching, and search engines (“information location tools”), the law establishes a service provider safe harbor for content posted by users when certain conditions are met.⁷ To limit its liability for infringing user content, the service provider first must establish either that it had no knowledge of infringement or that, if it did have knowledge, it acted expeditiously to remove or disable access to the material. Also, a service provider must not receive a direct financial benefit from the infringing activity where the service provider has the right and ability to control it. Finally, the service provider must remove, or disable access to, infringing content or the subject of infringing content upon receiving notice.

For notice of infringing user content, Congress set a precise, mandated procedural roadmap. Service providers must publicly register a designated agent to receive takedown notices. When a copyright owner identifies infringing content, the owner must deliver the takedown notice to the designated agent. Upon receipt, a service provider must remove or disable access to the content and notify the content user. If the user disputes the claim and serves a counternotice, pursuant to the “put-back notification” provisions, the service provider is obligated to repost the material within 10 to 14 days unless the content owner provides notice that a lawsuit has been filed. To keep everyone honest, if the copyright owner, the service provider, or the content user misrepresents his or her positions, the statute provides for an award of damages, including attorneys’ fees and costs.

At first blush, Congress achieved its goal to balance the interests and to “provide certainty for copyright owners and Internet service providers with respect to copyright infringement liability online.”⁸ Yet, from inception, the safe harbor provisions had inherent problems. As David Nimmer observes:

One of the most curious features of the Online Copyright Infringement Liability Limitation Act is that it mandates standards that have not yet been adopted. It achieves that goal by enacting into law various features, and having the law itself direct the affected industries to develop those features. As a result, it is impossible as of enactment to know many aspects of what the law itself requires, given that the statute itself includes “blank pages” to be filled in only later.⁹

The latent challenges would not take long to appear.

The Path to Lenz

Not surprisingly, shortly after the DMCA was enacted, litigation ensued pressing for interpretation of the statutory provisions. Content owners have initiated most of the lawsuits. As a result, much of the litigation is focused on challenging the statutory standards for knowledge of service providers in an effort to reduce the scope of the safe harbor provisions.¹⁰ Although courts have tended to find in favor of a broad application of safe harbor immunity, the prominence of these cases has prompted criticism that copyright owners have abused the system and indiscriminately demanded takedowns of content regardless of whether the uses actually were infringing.¹¹

Lenz signifies a momentous pushback from content users and service providers. While other cases have invoked the misrepresentation provisions under § 512(f), Lenz uniquely focuses on the question of what is an “authorized” use.¹² Determining that fair use is authorized by law, the case shifts the burden to the content owner to ensure that in addition to correctly identifying the infringing content the copyright owner has weighed legal considerations that would authorize use before issuing a takedown notification. The safe harbor provisions now present liability exposure for copyright owners with real economic teeth.

According to the case record, Universal submitted a takedown notice of Lenz’s video to YouTube asserting that it was unauthorized.¹³ YouTube removed the video. Lenz attempted a counternotification, but Universal protested the video’s reinstatement “because Lenz failed to properly acknowledge that her statement was made under penalty of perjury.”¹⁴ While Universal claimed neither Lenz nor YouTube had licensed the music, it never made mention of fair use. Lenz filed suit claiming that Universal did not act in good faith because it knowingly misrepresented the Lenz video was not authorized by law. Lenz asserted that Universal misrepresented its claim because it submitted a statement, required by the statute, that it had a good faith belief that use of the material was “not authorized by the copyright owner, its agent, or the law.”¹⁵ If Universal had not considered fair use before requesting the takedown, its statement was not true. Fair use, Lenz argued, is authorized by law.

The Ninth Circuit agreed. In evaluating Lenz’s claim it considered whether “not authorized by the copyright owner, its agent, or the law” meant that the content holder must consider fair use before sending a takedown notification. The Ninth Circuit first considered whether the term “authorized by law” included fair use and whether fair use was “authorized” by law. Writing the opinion of the court, Judge Richard C. Tallman reasoned that “[e]ven if, as Universal urges, fair use is classified as an ‘affirmative defense,’ we hold—for the purposes of the DMCA—fair use is uniquely situated in copyright law so as to be treated differently than traditional affirmative defenses.”¹⁶ Finding that the Copyright Act created fair use as a type of noninfringing use, the court concluded that fair use is “authorized by the law.” Therefore, a copyright holder must consider fair use before sending a takedown notification.

Then the Ninth Circuit considered whether a genuine issue of material fact existed about whether Universal violated § 512(f) by knowingly misrepresenting that it had formed a good faith belief that the video did not constitute a fair use.¹⁷ The court determined that Universal only needed to have a subjective good faith belief that the use was not authorized before sending a notice for a takedown notification. Further, the copyright holder would only be liable if it was a knowing misrepresentation. Based on the claims on record, the court determined that an issue of fact existed as to whether Universal’s actions were sufficient to establish a good faith belief. The court then remanded the case to the district court for consideration.

The particularly intriguing impact of the Lenz holding is that it essentially draws a counterweight to the legal scrutiny on service providers’ actual or red flag knowledge. In effect, the case has achieved a legal checkmate. The entrenchment of these legal positions begets troublesome effects on the larger Internet marketplace.

The Downfall of the Takedown

While court challenges have impacted the efficacy of the safe harbor provisions and create ripple effects in the larger Internet economy, other influences also reduce the effectiveness of the takedown provisions. Economic, technological, and legal developments have dramatically changed the online environment since the passage of the DMCA. These influences have complicated interpretations of takedown procedures because the realities of the online environment are dramatically different from the assumptions made at the point of drafting legislation.

On an economic level, business models have evolved with exponential growth of online markets. When the safe harbor provisions were adopted in 1998, Congress drafted the statutory language with a discrete understanding of what a company providing Internet connectivity services did. Under the DMCA, a “service provider” is defined as “a provider of online services or network access, or the operator of facilities therefor,” and includes an entity “offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.”¹⁸ “Online services” included “services such as providing Internet access, e-mail, chat room and web page hosting services.”¹⁹ Therefore, the original legislative intent reflects that safe harbor protection would have a limited scope.

Despite the limited scope of the term “service provider,” the definition has been interpreted broadly in practice to accommodate a changing online environment. Over the past few decades, the functions of service providers have expanded. A whole range of online businesses define themselves as service providers, including online forums such as YouTube, iTunes, and several social media sites. Innovative business models for delivery of online services also involve a range of pricing structures, including subscriptions, sales commission, and advertising. The challenge with these developments is that many of these activities do not fit within the originally intended scope of the safe harbor protection (largely because they did not exist). Further, § 512(c) requires that service providers have no direct financial benefit. The incongruence between the statutory language and market realities calls into question the viability of applying the safe harbor provisions to many of the online services currently available. This ambiguity surrounding what activities qualify for safe harbor protection coupled with the unwieldy knowledge standards means that resolving matters through DMCA safe harbor becomes more difficult.

From a copyright owner perspective, the range of business models complicates an adequate weighing of fair use considerations as now required by Lenz. Because a fair use analysis is a largely fact-specific exploration of a four-factor test,²⁰ the outcome of a good faith consideration is largely dependent on the revenue structures and how the material is used. These various business models also frustrate enforcement efforts because of the penchant for some users to engage in a “whack-a-mole” game of reposting content that was previously removed pursuant to takedown notification procedures.

In addition to economic transformations of the online markets, the technology landscape is far more sophisticated from when the DMCA legislation was first enacted. Wireless and mobile technology has vastly expanded the reach of online services. Software innovations have also resulted in increased automation of a range of activities, including monitoring for infringement. Technological innovation has fostered a dramatic expansion of platforms and technologies for the delivery of a broad range of services: in short, technology has far outpaced the law.

As technology developments continue to provide new methods for sharing content, courts will be confronted with novel issues challenging the application of DMCA safe harbor provisions. Questions regarding whether a service provider had knowledge of infringing activity or whether a copyright holder engaged in a good faith consideration of fair use become more complex when viewed through the prism of new technology. For instance, apps that offer content, such as Instagram, Snapchat, Vine, and Zedge, present popular platforms for users to share content and rely on algorithms to track user preferences to push content, and in some instances, advertising. These apps all contain language in their terms of service that indicates that they are service providers. However, whether these statements or the algorithms used by these programs would affect the applicability of the safe harbor is still untested.

Legal doctrines, like contributory and vicarious liability and fair use, also have a great influence on the efficacy of the safe harbor provisions. These influences are keenly demonstrated by the ruling in Lenz. Since the implementation of the DMCA, there has been an expansion of the contributory and vicarious liability doctrine, making it clear that engaging in activities that induce others to infringe copyrights will result in liability for third-party infringement.²¹ This development increases the stakes for service providers to avail themselves of the safe harbor protection. In addition, the Lenz test is rendered more challenging by an evolving fair use doctrine, which has seen a more liberal treatment in court decisions over recent years.²²

The expansion of the fair use doctrine, in particular, complicates the application of Lenz in future cases. The Ninth Circuit clearly articulated that a “copyright holder’s consideration of fair use need not be searching or intensive.”²³ Still, it leaves open the question of what evidence will be enough to establish that a copyright owner paid more than mere “lip service.”²⁴ Given the highly fact-specific nature of fair use analysis, there are legitimate questions about exactly how far a copyright owner must delve into a fair use analysis to ensure a good faith consideration. While investigation of the allegedly infringing content is not required, it is less clear if the content owner must do a review of outcomes in similar cases or whether it is simply enough to have weighed the issue and not have any evidence to the contrary that would refute the position. The challenge of navigating an open-ended “good faith analysis” in the context of the fair use doctrine to achieve a clearly articulated and defensible approach is difficult. The ambiguity with the intersection of the fair use doctrine and safe harbor provisions creates a disincentive to engaging in the removal of content that might have a scintilla of fair use about it. The mere statement that the content is a parody or commentary eradicates any hope of its removal without protracted litigation and pits the user’s word against a copyright owner’s good faith fair use analysis.

Solutions on the Horizon

The current entrenchment on safe harbor is bad for business—everyone’s business. Not only has it created uncertain liability risks that affect corporate business decisions to take on more innovative and high-return activities, but it also side rails solutions to the core problem that the DMCA was to solve—online infringement. This problem is particularly concerning with the increase in online piracy, which by some estimates may be accountable for use of nearly one-quarter of the world’s bandwidth.²⁵ Piracy affects the interests of both copyright owners and service providers. It puts a drain on economies and intersects with matters of national security.²⁶ While there is largely consensus that the intentional infringement of copyrighted material to generate a profit is undesirable, the entrenchment over safe harbor is allowing piracy to run rampant. One Internet business owner has said that the current stalemate over takedown procedures has “created a looting culture. If you keep seeing your neighbor stealing TV sets and getting away with it, you ask yourself, ‘Why shouldn’t I get one too?’”²⁷ It is impossible to fight the big economic battles if the stakeholders are focused on the skirmishes.

A question inevitably arises about whether market solutions can mitigate the problems of a convoluted safe harbor doctrine or whether it is time for statutory reform. Several voluntary efforts have been initiated to address the shortcomings of the safe harbor takedown procedures. Some efforts have involved stakeholders working together to develop voluntary protocols and best practices to avoid litigation, improve online enforcement, and protect free speech and innovation.²⁸ Other initiatives have been directed at efforts to curb piracy.²⁹ The Register of Copyrights identified the problems with the takedown notification provisions and noted that they “warrant a granular review.”³⁰ Subsequent to the Register’s testimony, the Copyright Office announced that it is undertaking a public study to evaluate the impact and effectiveness of the DMCA safe harbor provisions.³¹ Certainly, a productive way forward is the reasoned discussion of legitimate business interests identifying viable alternatives.

Technology solutions also provide opportunities to resolve the safe harbor challenges. Filtering software facilitates the efforts of copyright owners to identify infringing content. As noted by the court in Lenz, “We note, without passing judgment, that the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use.”³² If technology companies collaborate with copyright owners to implement effective software solutions to identify infringing content with greater accuracy, with adequate safeguards for fair use and other uses authorized by the Copyright Act, it is possible to filter and remove infringing content before the protections of safe harbor provisions need to be exercised.

Alternative approaches to dispute resolution would also take the strain off of the DMCA takedown measures. An introduction of informal mediation or a simplified dispute resolution process, similar to the Uniform Domain-Name Dispute-Resolution Policy (UDRP) provisions for domain name registrations³³ would be a viable alternative to the current takedown procedures. These dispute resolution mechanisms could be implemented through consent or private agreement (for example, through terms of service agreements) or by statutory reform. An alternative dispute vehicle might alleviate the high-stakes prospects of federal litigation if it is bolstered by an informal dispute resolution mechanism creating a tier of cost-effective solutions.

Conclusion

While Lenz has set an important precedent to check overbearing or abusive content takedown practices, it has also added a new facet to the complex safe harbor calculus. The DMCA takedown notification procedures once offered a simple extrajudicial procedure to resolve infringement claims without implicating liability for service providers. Over time, litigation and external influences have reduced the efficacy of this legislative compromise solution. Navigation of safe harbor claims has proven expensive, complex, and challenging, and the ambiguous statutory compromise language has brought about a legal impasse. Opportunists profit in the wake of these entrenched positions, and piracy has reached unprecedented levels.

Despite the challenges, Lenz may be the catalyst needed to prompt reconsideration of the safe harbor provisions. Earnest reform discussions would provide the opportunity to develop a more effective process. Discussion about the current regime that has produced the legal stalemate should be left behind. Instead, government, legitimate business interests, and content users should embark on a concerted effort to create a system that provides incentives to collaborate with the shared economic interests of addressing piracy and online infringement. After all, there is much to gain by finding a workable solution to online infringement and ensure that the baby does not go out with the bathwater.

Endnotes

1. Chris Francescani, The Home Video Prince Doesn’t Want You to See, ABC News (Oct. 28, 2007), http://abcnews.go.com/TheLaw/home-video-prince/story?id=3777651.

2. Stephanie Lenz, “Let’s Go Crazy” #1, YouTube (Feb. 7, 2007), https://www.youtube.com/watch?v=N1KfJHFWlhQ.

3. 801 F.3d 1126 (9th Cir. 2015).

4. The two treaties are the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

5. U.S. Copyright Office, The Digital Millennium Copyright Act of 1998: U.S. Copyright Office Summary 2 (1998), available at http://www.copyright.gov/legislation/dmca.pdf; see also 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 12B.01[C][1] (Matthew Bender rev. ed. 2013).

6. S. Rep. No. 105-190, at 19 & n.20 (1998) (citing Marobie-FL, Inc. v. Nat’l Ass’n of Fire Equip. Distribs., 983 F. Supp. 1167 (N.D. Ill. 1997); Religious Tech. Ctr. v. Netcom On-Line Commc’ns Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995); Playboy Enters., Inc. v. Frena, 839 F. Supp. 1552 (M.D. Fla. 1993)); see also 4 Nimmer & Nimmer, supra note 5, § 12B.01[B][3].

7. 17 U.S.C. § 512.

8. See S. Rep. No. 105-190, at 2; 4 Nimmer & Nimmer, supra note 5, § 12B.01[C][2].

9. 4 Nimmer & Nimmer, supra note 5, § 12B.01[C][2] (noting that in Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146, 1176 (C.D. Cal. 2002), “the Court shares the concerns expressed by Nimmer”).

10. See, e.g., Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19, 31 (2d Cir. 2012) (finding that YouTube’s liability depended on whether it was subjectively aware of facts that would have made the specific infringement “objectively” obvious to a reasonable person); UMG Recordings, Inc. v. Shelter Capital Partners, LLC, 667 F.3d 1022 (9th Cir. 2011) (finding the video sharing service Veoh Networks not liable for unauthorized video postings because it did not have specific knowledge of particular infringing activities).

11. See Section 512 Study: Notice and Request for Public Comment, 80 Fed. Reg. 81,862 (Dec. 31, 2015).

12. Lenz v. Universal Music Corp., 801 F.3d 1126 (9th Cir. 2015); see, e.g., Disney Enters., Inc. v. Hotfile Corp., No. 11-20427-CIV, 2013 U.S. Dist. LEXIS 172339 (S.D. Fla. Sept. 20, 2013) (finding that copyright holder intentionally targeted files it knew it had no right to remove); Smith v. Summit Entm’t LLC, No. 3:11CV348, 2011 U.S. Dist. LEXIS 60246 (N.D. Ohio June 6, 2011) (finding takedown notification for trademark infringement claim improper); Rosen v. Hosting Servs., Inc., 771 F. Supp. 2d 1219 (C.D. Cal. 2010) (finding that takedown notification listed four URL links that did not contain content matching the description of the infringed material).

13. Lenz, 801 F.3d at 1129–30.

14. Id. at 1130.

15. Id. Under 17 U.S.C. § 512(c)(3)(A), notification must be in writing and signed; identify the copyrighted work; identify the infringing material; provide contact information for the owner; state that the use is not authorized by the copyright owner, its agent, or the law; and state that the information is accurate and the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

16. Lenz, 801 F.3d at 1133.

17. Id. at 1134.

18. 17 U.S.C. § 512(k)(1).

19. S. Rep. No. 105-190, at 54 (1998). The Senate report expressly noted that the term would include broadcasters, cable or satellite television, universities, and schools to the extent they perform the functions identified. Id. at 54–55.

20. The fair use test involves weighing the purpose and character of the use, the nature of the copyrighted work, the substantiality of the portion used, and the potential economic impact on the original work. 17 U.S.C. § 107.

21. See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

22. See, e.g., Kienitz v. Sconnie Nation LLC, 766 F.3d 756 (7th Cir. 2014) (finding unauthorized use of a photographer’s image of a political figure on clothing and merchandise constituted a fair use); Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013) (finding that an artist’s appropriation art series using the plaintiff’s entire photographic works were transformative and could be a fair use).

23. Lenz v. Universal Music Corp., 801 F.3d 1126, 1135 (9th Cir. 2015).

24. Id.

25. See David Price, NetNames, Sizing the Piracy Universe (2013), Article no longer available

26. See U.S. Gov’t Accountability Office, GAO-13-762T, Intellectual Property: Insights Gained from Efforts to Quantify the Effects of Counterfeit and Pirated Goods in the U.S. Economy (2013) (testimony of Susan Offutt, Chief Economist, GAO, Before the Subcomm. on Oversight and Investigations of the H. Comm. on Energy and Commerce).

27. Telephone Interview with Joel Haas, CEO, Hahaas Comedy, LLC (Jan. 11, 2016).

28. Section 512 Study: Notice and Request for Public Comment, 80 Fed. Reg. 81,862, 81,867 (Dec. 31, 2015); see, e.g., Copyright Alert System, Center for Copyright Info., Article no longer available. (last visited Mar. 14, 2016); DMCA Notice-and-Takedown Processes: List of Good, Bad, and Situational Practices, Nat’l Telecomm. & Info. Admin. (Apr. 7, 2015), https://www.ntia.doc.gov/other-publication/2015/dmca-notice-and-takedown-processes-list-good-bad-and-situational-practices.

29. See Anti-Piracy Program Application, Trustworthy Accountability Group (last visited Mar. 14, 2016); Principles for User Generated Content Services, http://ugcprinciples.com/ (last visited Mar. 14, 2016).

30. The Register’s Perspective on Copyright Review: Hearing Before the H. Comm. on the Judiciary, 114th Cong. 6 (2015) (statement of Maria A. Pallante, Register of Copyrights & Dir., U.S. Copyright Office).

31. See 80 Fed. Reg. 81,862.

32. Lenz v. Universal Music Corp., 801 F.3d 1126, 1135 (9th Cir. 2015).

33. See Uniform Domain-Name Dispute-Resolution Policy, ICANN,  (Article is deleted).