UMG Recordings, Inc. v. Shelter Capital Partners LLC

• Citation: 2012 Copr.L.Dec. P 30175,2011 Daily Journal D.A.R. 18112,101 U.S.P.Q.2d 1001,11 Cal. Daily Op. Serv. 15174,667 F.3d 1022
• Decision Date: 20 December 2011
• Docket Number: 10–55732.,09–56777,Nos. 09–55902,s. 09–55902
• Parties: UMG RECORDINGS, INC., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability Company; Universal Music–Z Tunes LLC, a New York Limited Liability Company; Universal Music–MBG Music Publishing Ltd., a UK Company, Plaintiffs–Appellants, v. SHELTER CAPITAL PARTNERS LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants–Appellees,andVeoh Networks, Inc., a California corporation, Defendant.UMG Recordings, Inc., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability Company; Universal Music–Z Tunes LLC, a New York Limited Liability Company; Universal Music–MBG Music Publishing Ltd., a UK Company, Plaintiffs–Appellants, v. Veoh Networks, Inc., a California corporation, Defendant–Appellee,andShelter Capital Partners LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants.UMG Recordings, Inc., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability company; Universal Music–Z Tunes LLC, a New York Limited Liability company; Universal Music–MBG Music Publishing Ltd., a UK company, Plaintiffs–Appellees, v. Veoh Networks, Inc., a California corporation, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

101 U.S.P.Q.2d 1001

11 Cal. Daily Op. Serv. 15,174

2011 Daily Journal D.A.R. 18,112

2012 Copr.L.Dec. P 30,175

667 F.3d 1022

UMG RECORDINGS, INC., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability Company; Universal Music–Z Tunes LLC, a New York Limited Liability Company; Universal Music–MBG Music Publishing Ltd., a UK Company, Plaintiffs–Appellants,

v.SHELTER CAPITAL PARTNERS LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants–Appellees,andVeoh Networks, Inc., a California corporation, Defendant.UMG Recordings, Inc., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability Company; Universal Music–Z Tunes LLC, a New York Limited Liability Company; Universal Music–MBG Music Publishing Ltd., a UK Company, Plaintiffs–Appellants,

v.Veoh Networks, Inc., a California corporation, Defendant–Appellee,andShelter Capital Partners LLC, a Delaware Limited Liability Company; Shelter Venture Fund LP, a Delaware Limited Partnership; Spark Capital LLC, a Delaware Limited Liability Company; Spark Capital, L.P., a Delaware Limited Partnership; Tornante Company, LLC, a Delaware Limited Liability Company, Defendants.UMG Recordings, Inc., a Delaware corporation; Universal Music Corp., a New York corporation; Songs of Universal, Inc., a California corporation; Universal–Polygram International Publishing, Inc., a Delaware corporation; Rondor Music International, Inc., a California corporation; Universal Music–MGB NA LLC, a California Limited Liability company; Universal Music–Z Tunes LLC, a New York Limited Liability company; Universal Music–MBG Music Publishing Ltd., a UK company, Plaintiffs–Appellees,

v.Veoh Networks, Inc., a California corporation, Defendant–Appellant.

Nos. 09–55902

09–56777

10–55732.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 6, 2011.Filed Dec. 20, 2011.

Steven A. Marenberg (argued), Brian D. Ledahl and Carter Batsell, Irell & Manella LLP, Los Angeles, CA, for the plaintiffs-appellants-cross-appellees.

Michael S. Elkin (argued), Thomas P. Lane (argued), Jennifer A. Golinveaux and Erin R. Ranahan, Winston & Strawn LLP, Los Angeles, CA, for the defendant-appellee-cross-appellant.

Robert G. Badal (argued), Joel S. Cavanaugh and Emily S. Churg, Wilmer Cutler Pickering Hale and Dorr LLP, Los Angeles, CA; Glen L. Kulik (argued) and Alisa S. Edelson, Kulik, Gottesman, Mouton & Siegel, LLP, Sherman Oaks, CA, for the defendants-appellees.Jeffrey G. Knowles and Julia D. Greer, Coblentz, Patch, Duffy & Bass LLP, San Francisco, CA; Eric J. Schwartz, Mitchell Silberberg & Knupp LLP, Washington, D.C., for amici curiae Broadcast Music, Inc., and American Society of Composers, Authors and Publishers.Ronald L. Johnston, Sean Morris and Emilia P.E. Morris, Arnold & Porter LLP, Los Angeles, CA; Robert Garrett, Arnold & Porter LLP, Washington, D.C., for amici curiae Recording Industry Association of America, National Music Publishers' Association, NBC Universal Inc., and American Federation of Musicians.Daniel J. Popeo and Cory L. Andrews, Washington Legal Foundation, Washington, D.C.; Clifford M. Sloan, Mary E. Rasenberger and Christopher G. Clark, Skadden, Arps, Slate, Meager & Flom LLP, Washington, D.C., for amicus curiae Washington Legal Foundation.Corynne McSherry and Michael Barclay, Electronic Frontier Foundation & Internet Archive, San Francisco, CA, for amici curiae Electronic Frontier Foundation, Internet Archive, American Library Association, Association of College and Research Libraries, Association of College and Research Libraries, Computer and Communications Industry Association, Public Knowledge, Center for Democracy and Technology and Netcoalition.Matthew M. Werdegar, Michael S. Kwun and Benjamin Berkowitz, Keker & Van Nest LLP, San Francisco, CA, for amici curiae eBay Inc., Facebook, Inc., Google Inc., IAC/InterActiveCorp., and Yahoo! Inc.Appeals from the United States District Court for the Central District of California, A. Howard Matz, District Judge, Presiding. D.C. No. 2:07–cv–05744–AHM–AJW.Before: HARRY PREGERSON, RAYMOND C. FISHER and MARSHA S. BERZON, Circuit Judges.

OPINION

FISHER, Circuit Judge:

Veoh Networks (Veoh) operates a publicly accessible website that enables users to share videos with other users. Universal Music Group (UMG) is one of the world's largest recorded music and music publishing companies, and includes record labels such as Motown, Def Jam and Geffen. In addition to producing and distributing recorded music, UMG produces music videos. Although Veoh has implemented various procedures to prevent copyright infringement through its system, users of Veoh's service have in the past been able, without UMG's authorization, to download videos containing songs for which UMG owns the copyright. UMG responded by filing suit against Veoh for direct and secondary copyright infringement. The district court granted summary judgment to Veoh after determining that it was protected by the Digital Millennium Copyright Act (DMCA) “safe harbor” limiting service providers' liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c). We agree, and accordingly affirm.

Background¹

Veoh allows people to share video content over the Internet. Users can view videos uploaded by other users as well as authorized “partner content” made available by major copyright holders such as SonyBMG, ABC and ESPN. There are two ways to use Veoh's service: through a standalone software client application launched in late 2005, or through the veoh.com website launched in early 2006 that users access via a standard web browser. Both services are provided free of charge. Veoh generates revenue from advertising displayed along with the videos. “As of April 2009, Veoh had well over a million videos available for viewing, and users had uploaded more than four million videos to Veoh.”

Before a user may share a video through Veoh, he must register at veoh.com by providing an email address, user name and password. He must then state that he has read and agreed to Veoh's “Publisher Terms and Conditions” (PTC). The PTC instructs users that they “may not submit[material] ... that contains any ... infringing ... or illegal content” and directs that they “may only upload and publish[material] on the Veoh Service to which [they] have sufficient rights and licenses to permit the distribution of [their] [material] via the Veoh Services.” The PTC agreement also gives Veoh a license to “publicly display, publicly perform, transmit, distribute, copy, store, reproduce and/or provide” the uploaded video “through the Veoh Service, either in its original form, copy or in the form of an encoded work.”

A user who wants to share a video must also agree to Veoh's “Terms of Use,” which give Veoh a license “to use, reproduce, modify, distribute, prepare derivative works of, display, publish, perform and transmit” the video. The Terms of Use provide that “you expressly represent and warrant that you own or have the necessary licenses, rights, consents, and permissions to use and authorize Veoh to use all ... copyright or other proprietary rights in and to any and all[material shared on Veoh].” Users must agree “not to (a) take any action or (b) upload, download, post, submit or otherwise distribute or facilitate distribution of any [material] ... through the Veoh Service, that ... infringes any ... copyright.” Once a user agrees to the PTC and Terms of Use, he may upload a video. Each time a user begins to upload a video to Veoh's website, a message appears stating, “Do not upload videos that infringe copyright, are pornographic, obscene, violent, or any other videos that violate Veoh's Terms of Use.”

When a video is uploaded, various automated processes take place. Veoh's software automatically breaks down the video file into smaller 256–kilobyte “chunks,” which facilitate making the video accessible to others. Veoh's software also automatically converts, or “transcodes,” the video file into Flash 7 format. This is done because “the vast majority of internet users have software that can play videos” in this format. Veoh presets the requisite settings for the Flash conversion. If the user is a “Pro” user, Veoh's software also converts the uploaded video into Flash 8 and MPEG–4 formats, which are playable on some portable devices. Accordingly, when a Pro user uploads a video, Veoh automatically creates and retains four copies: the chunked file, the Flash 7 file, the Flash 8 file and the MPEG–4 file. None of these automated conversions affects the content of the video.

Veoh's computers also automatically extract metadata from information users provide to help others locate the video for viewing. Users can provide a title, as well as tags or keywords that describe the video, and can also select pre-set categories describing the video, such as “music,” “faith” or “politics.” The Veoh system then automatically assigns every uploaded video a “permalink,” or web address, that uniquely identifies the video and makes it available to users. Veoh employees do not review the user-submitted video, title or tags before the video is...