The US Court of Appeals for the 9th Circuit today issued a ruling that could change the contours of fair use and copyright takedown notices.

In an opinion (PDF) published this morning, the three-judge panel found that Universal Music Group's view of fair use is flawed. The record label must face a trial over whether it wrongfully sent a copyright takedown notice over a 2007 YouTube video of a toddler dancing to a Prince song. That toddler's mother, Stephanie Lenz, acquired pro bono counsel from the Electronic Frontier Foundation. The EFF in turn sued Universal in 2007, saying that its takedown practices violated the Digital Millennium Copyright Act.

The judges ruled today that copyright holders "must consider the existence of fair use before sending a takedown notification." Universal's view that fair use is essentially an excuse to be brought up after the fact is wrong, they held. UMG's view of fair use solely as an "affirmative defense" is a misnomer.

"Fair use is uniquely situated in copyright law so as to be treated differently than traditional affirmative defenses," wrote US Circuit Judge Richard Tallman for the majority.

The long-running copyright case began when Lenz uploaded a video of her son Holden dancing to Prince's "Let's Go Crazy." At that time, Universal had an employee scouring YouTube each day in order to issue takedowns on videos that used Prince music. EFF, looking for a test case over bad DMCA takedowns, found a sympathetic client in Lenz, a mom seeking to simply share a video of her son with his grandmother.

Today's ruling isn't an all-out win for EFF, which wanted Universal to be held liable immediately under 512(f). That section of the DMCA allows for damages over bad-faith takedown notices. But Universal will now have to face a trial over whether it "knowingly misrepresented" its "good faith belief the video was not authorized by law." The judges have made clear that copyright owners "must consider fair use before sending a takedown notification" before forming that "good faith belief."

To be successful at trial, Universal doesn't have to prove that the video wasn't fair use. It just has to show that it considered fair use before sending the notice. Otherwise, it could be liable for "nominal" damages to Lenz—which wouldn't be much, since her video went back up after a short period and has been available since.

The fair use consideration doesn't have to be "searching or intensive," Tallman clarified. But it can't be trivial, either. "A copyright holder who pays lip service to the consideration of fair use by claiming it formed a good faith belief when there is evidence to the contrary is still subject to 512(f) liability," the opinion states.

In a partial dissent, Circuit Judge Milan Smith agreed with most of the majority's findings but would have found Universal liable for the bad takedown without a jury trial. "I disagree that there is any material dispute about whether Universal considered fair use," Smith wrote. "Universal knew it had not considered fair use, and therefore knew it lacked a basis to conclude that the video was infringing."

Toward a “Fair Use Algorithm?”

The opinion could strengthen fair use in other cases. The DMCA takedown landscape today is very different from 2007, when Universal and other big copyright holders were essentially doing takedowns manually. Today, DMCA notices are automated, and large copyright holders demand that thousands of links be removed at a time. Internet sites like Google remove millions of URLs each year in response to these massive DMCA notices.

The judges are optimistic that computer-driven copyright policing could strike the right balance. "We note, without passing judgment, that the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA's requirements to somehow consider fair use," Tallman writes. In situations where a video and audio track matches "nearly the entirety" of a sample submitted by copyright owners, a computer program could still be thought to have taken fair use into account. Copyright owners could use human employees "to review the minimal remaining content a computer program does not cull," he suggests.

The majority's near-endorsement of mass takedown routines is telling. While today's ruling undoubtedly strengthens EFF's view of fair use, it's unlikely to change much about the millions of takedown notices now being sent each year to Internet intermediaries. It's still a system that won't leave much room for those rare situations where a complete copy can still be fair use. If YouTube lawyers think their filter already takes fair use into account, and they likely do, then this ruling won't make them change anything.

And unless a jury finds that Universal ignored fair use and a judge finds the record company must pay legal fees, it's hard to imagine the DMCA itself as being a good tool to fight wrongful takedowns. Very few makers of home video will be able to muster the legal resources that have ushered the Lenz case through eight years of litigation.

In Smith's partial dissent, he pours some cold water on the majority's view that "fair use via algorithms" could be a good route. Unless such a program could analyze all four fair-use factors—not just the amount of the work used—a copyright holder shouldn't legally be allowed to "rely solely on a computer algorithm," he writes in a footnote.

"We are still reviewing the opinion, but we’re very pleased that the court affirmed that copyright holders must consider whether a use is fair before sending a takedown notice," said EFF Legal Director Corynne McSherry in an e-mailed statement. "Today's ruling sends a strong message that copyright law does not authorize thoughtless censorship of lawful speech."

A spokesperson for the Recording Industry Association of America responded on behalf of Universal Music Group, saying: "We respectfully disagree with the court’s conclusion about the DMCA and the burden the court places upon copyright holders before sending takedown notices. But we are pleased that the Ninth Circuit made it clear that a court may not second guess a copyright owner’s good faith belief that the fair use does not excuse infringing conduct."