The Second Circuit Court of Appeals has partially reversed a lower court ruling that YouTube is exempt from copyright liability under the Digital Millennium Copyright Act for the infringing activities of its users.

"A reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website," wrote Judge José Cabranes in a Thursday decision. The Second Circuit sent the decision back to the lower court for further fact-finding on whether YouTube's founders knew about specific infringing content and failed to delete it promptly.

While the decision is a blow for YouTube and its corporate parent Google, it represented a victory for a robust interpretation of the DMCA's safe-harbor provisions. The Second Circuit upheld the lower court's ruling that only "actual knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement" can prevent a service provider from claiming the safe harbor. General knowledge that some infringing material likely exists on a site does not prevent a site operator from claiming the safe harbor.

Sherwin Siy, a lawyer at Public Knowledge, hailed this aspect of the Second Circuit's decision. "The court rejected Viacom's attempt to create a new duty of those hosting content to monitor actively for infringement in order to qualify for the law's safe-harbor provisions," he said in an emailed statement.

But that victory on the law may not be enough to save YouTube. The Second Circuit notes that internal emails suggest that YouTube employees may have known about—and turned a blind eye to—specific cases of infringement on YouTube.

For example, in a March 2006 e-mail, YouTube founder Jawed Karim wrote that “as of today, episodes and clips of the following well-known shows can still be found: Family Guy, South Park, MTV Cribs, Daily Show, Reno 911, Dave Chapelle.” Karim wrote that the DMCA didn't require YouTube to preemptively filter such content, but suggested it might want to do so anyway to avoid criticism. The appeals court suggested that a jury might find that because Karim did not remove these videos immediately, choosing instead to wait for a "more thorough analysis," it opened itself up to liability under the DMCA.

The Second Circuit left it to the lower court to decide whether these and similar incidents meet the "actual knowledge" standard required by the DMCA's safe harbor. But it ruled it was a close enough case that Viacom is entitled to make its argument to a jury.

The decision means that YouTube's already-epic battle with Viacom, which began in 2007, could stretch on for several more years.