MANHATTAN from www.courthousenews.com – YouTube may be liable for letting users post copyrighted material on its website, the 2nd Circuit ruled, reviving a suit by heavy-hitting media companies.

Under the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA), liability hinges on a party’s knowledge or awareness of specific infringing activity.

The federal appeals court ruled last week that “a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website.”

Viacom International and several other various film studios, television networks, music publishers and sports leagues had sued YouTube and its parent, Google, in 2007 for copyright infringement.

In August 2010, U.S. District Judge Louis Stanton granted summary judgment to YouTube and Google, finding that insufficient notice of the particular infringements entitled them to DMCA safe harbor protection.

Stanton also held that copyright holders must give item-specific notice of infringing activity. A final portion of the decision specified that three activities – replication, transmittal and display of videos on YouTube – that qualify for safe harbor because users stored the videos there.

The federal appeals court took issue with two aspects of the ruling.

Viacom cited evidence that YouTube employees conducted website surveys and estimated that 75 to 80 percent of all YouTube streams contained copyrighted material. Google’s financial adviser Credit Suisse also allegedly estimated that more than 60 percent of YouTube’s content was “premium” copyrighted content, and that only 10% of the premium content was authorized.

The class also provided the court with emails that show YouTube officials questioning, but ultimately deciding against, whether to buy the rights to certain copyrighted content, like English Premier League soccer matches.

“Upon a review of the record, we are persuaded that the plaintiffs may have raised a material issue of fact regarding YouTube’s knowledge or awareness of specific instances of infringement,” Judge Jose Cabranes wrote for the court. “The foregoing Premier League e-mails request the identification and removal of ‘clearly infringing, official broadcast footage.’ On these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent.”

In addition to saying that YouTube may have known about infringing activity, the three-judge panel said Stanton misinterpreted the “right and ability to control” provision to require “item-specific” knowledge.

The court agreed that three activities fall within the safe harbor for infringement that occurs because of user storage. On remand, however, the parties must brief the court with respect to a fourth software function.

“For the reasons that follow, we affirm that holding with respect to three of the challenged software functions – the conversion (or ‘transcoding’) of videos into a standard display format, the playback of videos on ‘watch’ pages, and the ‘related videos’ function,” Cabranes wrote.

“We remand for further fact-finding with respect to a fourth software function, involving the third-party syndication of videos uploaded to YouTube.”

“In or around March 2007, YouTube transcoded a select number of videos into a format compatible with mobile devices and ‘syndicated’ ” or licensed the videos to Verizon Wireless and other companies,” he added.

“The plaintiffs argue – with some force – that business transactions do not occur at the ‘direction of a user’ within the meaning of § 512(c)(1) when they involve the manual selection of copyrighted material for licensing to a third party. The parties do not dispute, however, that none of the clips-in-suit were among the approximately 2,000 videos provided to Verizon Wireless.

“In order to avoid rendering an advisory opinion on the outer boundaries of the storage provision, we remand for fact-finding on the question of whether any of the clips-in-suit were in fact syndicated to any other third party.”