Stay on Top of Emerging Technology Trends Get updates impacting your industry from our GigaOm Research Community

The long-running court battles between content owners and websites like YouTube often resembles the trench warfare of World War I: two sides engage in years of fighting at incalculable cost, and barely gain any ground. In recent months, however, one side — the movie and music studios — appears to have moved forward a few inches thanks to courts’ newfound willingness to invoke a “red flag” rule that makes websites accountable for copyright infringement committed by their users.

The rule, known as “red flag knowledge” is helping studios chip away at a so-called safe harbor law that is intended to prevent copyright law from squelching emerging technology. The result has been a spate of court victories for copyright holders, one that could even tilt the current balance of power between websites and content owners. Here’s a look at the recent developments and how they could make an interminable legal war even longer.

Vimeo, red flags and aggressive enforcement

The studios’ latest success in moving the trench lines came last week when a federal judge in New York refused for the second time to dismiss a case against Vimeo, a YouTube competitor that allegedly knew about or turned a blind eye when users uploaded songs by artists like Daft Punk, Usher and Christina Aguilera. As the Hollywood Reporter noted, the decision is significant in part because U.S. District Judge Ronnie Abrams rejected Vimeo’s claim that videos involving user “lip-dubs” — mouthing the words to celebrity songs — were an obvious case of fair use under copyright law.

In the decision, which revisited her earlier ruling from September, Judge Abrams once again called attention to Vimeo and “red flag knowledge” — a situation where websites lose safe-harbor protection because they should have known that their users were uploading copyrighted material. In a significant passage, the judge suggests that her interpretation of red flags in the Vimeo case could increase the copyright burden for other websites in the future (emphasis is mine):

“Although nothing in the Court’s orders requires providers affirmatively to police their sites for copyright infringement … the Court’s interpretation of “red flag” knowledge may lead service providers to be more aggressive in further investigating or even removing copyrighted content that they encounter.”

Those lines come as part of the judge’s decision to let Vimeo ask an appeals court for clarification on the “red flag” issue, and are just one part of a complicated decision. But, for present purposes, it’s important point to note is that the studios succeeded — again — in knocking down Vimeo’s safe harbor shield in situations where the studios could show that Vimeo employees had viewed and interacted with content uploaded by users. The judge found this “interaction,” such as an employee watching a clip and “liking” it, occurred with more than a dozen different videos; she also gave the studios permission to amend the lawsuit and add more such videos.

For Vimeo, the ruling means it must face the expensive prospect of a jury trial. For the studios, the ruling is a tactical victory that comes as part of a greater game against safe harbors.

Safe harbors not so safe

Until early last year, the legal safe harbors that have permitted popular sites like YouTube to flourish have been mostly impregnable. Indeed, the safe harbors appeared stronger than ever following two recent appeal court decisions that took the side of websites over copyright owners.

In the first ruling, in late 2011, California’s 9th Circuit Court emphatically rejected Universal Music’s claim that defunct music site Veoh’s general knowledge of copyright infringement was a “red flag.” Months later, a New York appeals court echoed that language when it (mostly) snuffed out Viacom’s effort to make Google pay $1 billion over infringing clips of popular TV shows that appeared in the early days of YouTube. In the YouTube case, the court also provided a new explanation of the “red flag” rule that seemed to provide a high bar to content owners. Viacom, for instance, has been unable to clear that bar and show YouTube had red flag knowledge in a follow-up case.

These rulings suggested that studios’ hope of using the “red flag” language (set out in the DMCA) as a way to poke holes in the safe harbors was bound to fail. Until recently, that is. Starting last year, the copyright tide has turned, as content owners have persuaded courts to begin finding examples of red flag knowledge.

In May of 2013, for instance, EMI Records persuaded a New York judge to revive a case against MP3 Tunes, a so-called file-locker where users could store their music in the cloud. The judge had earlier thrown out the case on safe harbor grounds, but then decided it should go in front of a jury after all in light of the new red flag definition set out in the YouTube case.

Then, in September, another court seized on the red flag rule to hold that the owner of another file-locker site, Hotfile, had forfeited his right to safe harbors. The site has since shut down, and its owner agreed in to pay the movie industry $80 million in a legal settlement this December.

In another example, an appeals court invoked red flags to put a file nail in the coffin of IsoHunt, a site that indexed various bit torrent links to music and movies. While other courts had already cooked IsoHunt’s goose (the site and its founder had long blatantly abetted copyright infringement), the appeals court judges appear to have gone out of their way to add “red flag” language to the final ruling.

Spending millions for a few inches of ground

For most people, and even most lawyers, the question of “actual knowledge” versus “red flag knowledge” is almost meaningless. For content owners, however, the distinction has proved to be a legal gift that has given new life to their interminable court battles against sites that rely on user-contributed content.

Eric Goldman, a law professor at the University of Santa Clara, warned of this possibility in a blog post nearly two years ago, noting that the safe harbor laws are too easy for content owners to exploit: “[the law is] simply too long and detailed, and if a defendant fails to satisfy each and every element, the safe harbor is lost completely.”

While content owners have legitimate complaints about websites that make a business of infringing copyright, the existing law already provides tools to fight them: courts found operators of sites like IsoHunt, as with Grokster before it, liable for inducement (even if this doctrine is itself controversial). There appears to be no need to give content owners a whole new legal weapon based on “red flags,” especially as many of the old copyright battles — including over YouTube — have led to business solutions like ContentID that make money for everyone.

Unfortunately, the rise of the red flag rule is likely to prove too tempting some studios, who will use it as a tool to intimidate or bankrupt smaller websites no matter if they’re right or wrong — just ask Veoh, which won its appeals court ruling but ultimately drowned in legal fees.

Vimeo Ruling, Dec 31

[protected-iframe id=”4d26478b358e650443c949f23e021acf-14960843-34118173″ info=”//www.scribd.com/embeds/196807979/content?start_page=1&view_mode=scroll&show_recommendations=true” width=”100%” height=”600″ frameborder=”0″ scrolling=”no”]

(Image by Matej Kastelic via Shutterstock)