Umg Recordings, Inc. v. Shelter Capital Partners Llc.

718 F.3d 1006 (9th Cir. 2013)

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Nature of the Case

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Facts

D 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. D generates revenue from advertising displayed along with the videos. 'As of April 2009, D had well over a million videos available for viewing, and users had uploaded more than four million videos to D.' Users register at veoh.com by providing an email address, user name, and password. They then indicate that they have read and agreed to D'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 D to which [they] have sufficient rights and licenses to permit the distribution of [their] [material] via the D Services.' A user who wants to share a video must also agree to D's 'Terms of Use,' which give D a license 'to use, reproduce, modify, distribute, prepare derivative works of, display, publish, perform and transmit' the video. D employs various technologies to automatically prevent copyright infringement on its system. In 2006, D adopted 'hash filtering' software. Whenever Veoh disables access to an infringing video, the hash filter also automatically disables access to any identical videos and blocks any subsequently submitted duplicates. D also uses Audible Magic's audio 'fingerprints' from video files and compares them to a database of copyrighted content provided by copyright holders. If a user attempts to upload a video that matches a fingerprint from Audible Magic's database of forbidden material, the video never becomes available for viewing. D applied the filter to its backlog of previously uploaded videos. This resulted in the removal of more than 60,000 videos, including some incorporating P's works. D has also implemented a policy for terminating users who repeatedly upload infringing material, and has terminated thousands of user accounts. Despite the screening being used some of D's users were able to download unauthorized videos containing songs for which P owns the copyright. P sued D for direct, vicarious, and contributory copyright infringement, and for inducement of infringement. P also added three of D's investors as defendants on theories of secondary liability. The Investor Defendants sought dismissal for failure to state a claim against them under Federal Rule of Civil Procedure 12(b)(6). Eventually, the court dismissed them with prejudice. D made an offer pursuant to the procedures in Federal Rule of Civil Procedure 68 for the amount of $100,000. P declined. D asserted as an affirmative defense that it is protected by the DMCA safe harbor provisions. Eventually, the court agreed and granted D’s motion to dismiss. D moved for an award of costs and attorney's fees under Federal Rule of Civil Procedure 68 and the Copyright Act, 17 U.S.C. § 505. The court declined to exercise its discretion to award D fees under § 505 because D 'failed to demonstrate that P's legal challenge was improper, in bad faith, or contrary to the purposes of the Copyright Act.' It also denied D fees and costs under Rule 68. D appealed the denial of Rule 68 costs and fees. P appealed the entry of summary judgment in D's favor and the dismissal of its complaint against the Investor Defendants.