In what is nothing short of a major win for the Safe Harbor provision of the Digital Millennium Copyright Act, a federal judge has hamstrung Universal Music Group's copyright infringement lawsuit against Veoh Networks. The judge's ruling that Veoh fully qualifies for Safe Harbor protection comes in the wake of his rejection of UMG's attempts to undermine Veoh's Safe Harbor defense late last year. The ruling is likely to have major ramifications in a billion-dollar lawsuit filed by Viacom against YouTube.

Veoh is a user-generated video site that operates in the long shadow of YouTube. UMG sued the site back in 2007 over the presence of infringing videos on the site. Accusing Veoh of "engaging of high-tech theft in the name of 'sharing,'" UMG argued that Veoh's transcoding of uploaded videos disqualified it from any sort of protection under the DMCA. The music giant then asked the judge to bar Veoh from using the Safe Harbor as part of its defense, to no avail.

In the civil minutes from a meeting held in his chambers between the attorneys for both sides earlier this month, Judge A. Howard Matz noted that Veoh "expeditiously" took down infringing material once it was notified of its existence and that the site also employed filtering and fingerprinting software to prevent repeat uploading of infringing clips. "Veoh has provided substantial evidence that it fulfilled the requirements of section 512(c)(1)(A)," wrote Judge Matz. "UMG has provided no material evidence to the contrary."

Judge Matz also has some strong words for UMG's argument that Veoh is ineligible for the Safe Harbor because it realized that its users tend to upload a significant amount of infringing material. "No doubt it is common knowledge that most websites that allow users to contribute material contain infringing items. If such general awareness were enough to raise a 'red flag,' the DMCA safe harbor would not serve its purpose of 'facilitat[ing] the robust development and world-wide expansion of electronic commerce, communications, research, development, and education in the digital age,' and 'balanc[ing] the interests of content owners, on-line and other service providers, and information users in a way that will foster the continued development of electronic commerce and the growth of the Internet,'" read the Civil Minutes.

Veoh calls the case an "important step" for the online video industry. "From an industry perspective, this decision is a big deal as well, as we now have a second clear victory showing that companies who work diligently to respect property owners and the DMCA will be able to run their businesses and be successful without the fear of those select content owners who may be uncomfortable with emerging technology," said Veoh CEO Dmitry Shapiro in a statement.

UMG calls the decision erroneous and one that upsets the balance between rightsholders and technology that Congress set, promising a swift appeal. "The ruling today is wrong because it runs counter to established precedent and legislative intent, and to the express language of the DMCA," the company said in a statement.

With the court issuing a summary judgment in Veoh's favor over the Safe Harbor, there's not really much left for UMG to litigate. Although the case hasn't been dismissed yet, lawyers from the two sides will meet later this month to determine if there's anything left to litigate over.

In the meantime, Viacom can't find much comfort with the ruling as it continues to press ahead with its copyright infringement lawsuit against YouTube. When a judge first ruled that Veoh would qualify for Safe Harbor in August 2008, Viacom said it was irrelevant, since YouTube "is a business built on infringement" that didn't do enough to protect copyright holders. Provided YouTube is taking all of the same steps as Veoh to identify infringing content, taking it down when asked to by rights holders, and preventing repeat uploading of identical clips, then the it may find itself in the same situation as Veoh does today. It should be noted, however, that Viacom v. YouTube is being heard in a different district—but judges pay attention to and often cite other related rulings from other federal courts, as was the case during the RIAA's legal campaign against P2P users.

The EFF's Fred von Lohmann believes the Viacom-YouTube judge may very well be influenced by the decision. "[T]his ruling could prove to be influential on the judge in the YouTube case, since Veoh's policies are very similar to YouTube's," von Lohmann told Ars. "The ruling further cements a number of earlier rulings that have insisted that the burden of policing user-generated content for copyright infringements falls to the copyright owner, not to the video hosting provider."

Viacom general counsel Mike Fricklas begs to differ. "Our case is in a different forum, not bound by the Veoh case, and we remain confident that we will prevail on the law and the facts," he told Ars. "Today's decision contradicts the consensus that sites and copyright owners share the responsibility to use readily available tools to minimize copyright infringements."

One additional result of the ruling may be more advertising surrounding user-uploaded videos, according to von Lohmann, as Judge Matz said the question of whether a site like Veoh is benefiting financially from user-generated content shouldn't factor into whether the Safe Harbor is applicable. "Merely having the ability to delete material from your site does not count as 'control' sufficient to strip you of the safe harbor, even when you stand to get a financial benefit from infringing content," he said.

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