Cyberlitigation Update – Looking for a Chinese Safe Harbor

January 7, 2009

This is a follow up to several posts last year on IP litigation involving online service providers. You can read background here and here.

As a refresher, current litigation in the U.S., China and other countries involves the following:

A huge ongoing issue in cyber-litigation is liability for platform operators. Litigation has hit Google, Yahoo, Baidu and others over various intellectual property infringement issues, such as linking to MP3 files, providing search platforms for copyright infringing video files, etc.

What’s going on in the rest of the world? Here’s a recent case from the U.S. that gives us a good snapshot:

A New York federal judge ruled Monday in a lawsuit brought by Tiffany that the online auction site, eBay, is not required to police its site for counterfeited goods.

If you ask people to come up with a reasonable standard, I think most folks would say that a site like eBay cannot review each customer’s goods to determine authenticity – the volume of transactions makes this impossible. Most folks would also say, I believe, that there also must be some duty of care whereby these platform operators have to respond when they become aware that infringing products are being sold by using that platform.

Two updates, one from the U.S. and one from China. Neither is wholly determinative as to where things are going in this area of the law, but it is interesting to keep up with this activity.

First the U.S. case, which is the most important as there was an actual judgment. Here’s some background on the dispute:

The case was brought by Universal Music Group, which claimed that San Diego-based Veoh — financially backed by Time Warner and Michael Eisner – engaged in wanton copyright infringement because it allowed users to upload and store the music concern’s copyrighted videos. U.S. District Judge Howard Matz agreed with Veoh that its business model complied with the 1998 Digital Millennium Copyright Act’s so-called safe harbor provisions.

So we have an IP owner suing a video sharing site over infringing third-party uploads. Huge issue. If litigation goes a certain way, it could mean the end of these types of sites. Note that Google/Youtube and others are involved in pending litigation over this same issue in multiple jurisdictions.

Under U.S. law, there is certainly potential liability for operators of these sites. Therefore, under certain conditions, a Youtube or Veoh could be held to be jointly liable under the DMCA as a copyright infringer for allowing infringing material to be uploaded, hosted, and made available to third parties on their respective sites.

However, a series of cases in the U.S., of which the Veoh case is the latest, involves the DMCA’s "Safe Harbor" provision, which carves out certain exceptions for operators, whereby no liability will be found:

These safe harbor provisions are designed to shelter service providers from the infringing activities of their customers. If a service provider qualifies for the safe harbor exemption, only the individual infringing customer [is] liable for monetary damages; the service provider’s network through which they engaged in the alleged activities is not liable.

The crucial bit, therefore, is exactly what does an operator need to do to stay within the Safe Harbor? As I have written about in the past, it all comes down to proper notice and takedown procedures. If these are deemed sufficient, with respect to timeliness, responsiveness, etc., then the Safe Harbor provisions are met.

To sum up on the Veoh case, it was found that the operator did indeed meet Safe Harbor requirements:

U.S. District Judge Howard Matz, citing the DMCA’s language, ruled (.pdf) that copyright law precludes monetary liability on a service provider "for infringement of copyright by reason of the storage at the discretion of a user of material that resides on a system or network controlled or operated by or for the service provider."

Matz noted that in order to win immunity under the DMCA, the service provider, in this case Veoh, must not have "actual knowledge" of the infringing material and, among other things, "must expeditiously remove or disable access to material if it is notified that the material is infringing or is the subject of infringing activity."

This is good news for operators, at least those that maintain good procedures for dealing with infringing content.

OK, let’s take a look at China. Here’s the latest:

About 80 Chinese copyright owners, including Joy.cn, Beijing Polybona Film Distribution, Beijing Orange Sky Entertainment Group and SFS Emperor, are planning a massive legal assault against Chinese Internet video website Tudou.com for various copyright infringements.

I would rather have an actual judgment here to talk about, but that’s life. The fact that these kinds of cases are becoming quite common here says something, although whether it means that the law is still unsettled or that more copyright owners feel emboldened by tougher penalties, I’m not sure (although I suspect the latter). Note that there is legislation over here that deals with this sort of thing (e.g. the Measures for the Administrative Protection of Copyright on the Internet from 2005). However, as those of you who deal with Chinese law on a regular basis understand, the specificity of these rules leaves much to be desired. Therefore provisions such as the following offer some guidance, but not nearly enough:

Where a copyright holder discovers that any content disseminating on the Internet infringes his copyright and thus issue a notice to the Internet information service provider or its entrusted institutions (hereinafter referred to as the Internet Information Service Providers), the Internet information service provider shall forthwith take appropriate measures to remove the corresponding content and retain the Notice of the copyright holder for 6 months. (Measures, Article 5.)

This certainly tells us that a notice and takedown procedure is mandated, and of course some of this language sounds a lot like the DMCA. However, even in the U.S., a great deal of very complex litigation has been necessary for any sort of clarity. Keep in mind also that the Veoh case was adjudicated in a federal district court — this is not an appellate or Supreme Court decision. We still might have a long way to go in the U.S. before these issues are firmly resolved.

I suspect that for the foreseeable future, China cases will be adjudicated according to specific facts as interpreted by judges. Unless we see a very specific additional judicial interpretation on this issue, this will continue to be an ad hoc excercise. Note that my use of the word "additional" was on purpose; there was such an interpretation in 2006, which did provide additional guidance on this topic (Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Laws in Hearing Cases Involving Computer Networks Copyright Disputes (Amended in 2006)) with respect to jurisdiction, notice and takedown requirements, injunctive relief and enterprise liability. However, it is still an open question as to what sort of procedures are sufficient and what may be found lacking.

More on this issue as time allows.