With Veoh shopping itself as it builds a search business, surviving online video sites can be grateful for its Pyrrhic victory over UMG
Veoh had a good day in court on Monday, with U.S. District Judge A. Howard Matz saying the online video site's copyright policies are in the clear with regards to a two-year-old lawsuit brought by Universal Music Group against it.
While fighting UMG, Veoh saw its standing in the video portal market disintegrate. The company now focuses on an alternate product, the Veoh Compass search plug-in. Founder and CEO Dmitry Shapiro said the company spent "many millions of dollars" on legal fees with the lawsuit impacting employee morale, preventing the raising of additional capital, and hindering the closing of strategic partnerships. (UMG's claim was not the only suit Veoh was fighting.)
So if Veoh took a bullet for the rest of the video industry, what does Matz's judgment mean for everybody else?
First, UMG has already said that it intends to appeal immediately, so the case isn't over yet. Moreover, Viacom and YouTube are still engulfed in litigation and there's a gap in the legal precedent for the application of the Digital Millennium Copyright Act "safe harbor"—which video sites use to protect themselves from users uploading disputed content as long as they remove videos immediately after copyright holders have alerted them.
But here's what Matz said Veoh is doing right:
site filters and account terminations
Veoh started using "hash filtering" in 2006 to prevent repeat uploads. It implemented Audible Magic filtering in October 2007 and in the summer of '08 filtered its back catalog. Matz said he doesn't think it's feasible for Veoh to verify Audible Magic's database of songs.
Veoh has terminated thousands of accounts for repeat copyright violations.
Matz takes issue with the way both UMG and the RIAA handled copyright infringement claims against Veoh, saying they did not adequately complete the takedown-notice process. UMG hadn't sent Veoh takedown notices and the RIAA merely provided the site with a list of artists whose work was not authorized to be posted. Matz said the statute actually requires the complainant to provide a list of infringing works, identifying each instance with "information reasonably sufficient to permit the service provider to locate the material."
Matz also said the financial benefit Veoh derives from advertising on its service does not make the company liable for infringement because it makes good efforts to curtail users' infringing activity.
"big win for online video providers"
Because this decision was made at the federal district court level, it isn't binding in other jurisdictions, although future cases could follow its reasoning if they think Matz did a good job laying out the issues, said Jonathan Steinsapir, a Santa Monica (Calif.)-based attorney with Kinsella Weitzman Iser Kump & Aldisert.
Steinsapir said he considers the way Matz laid things out "well-reasoned," and thinks it could have broader implications. In an e-mail he said: "Judge Matz's decision in UMG v. Veoh is definitely a big win for online video providers. The Court emphatically rejected UMG's attempts to get around the DMCA's immunity by arguing, among other things, that Veoh should be stripped of immunity because it knows, at a very general level, that there is content on its site that infringes others' copyrights…It was not enough for UMG to prove that Veoh generally knew that some users inevitably upload content to its site that infringes someone else's copyrights."
The highly litigious UMG has faced weaker video-site opponents in the past—at least ones that were driven out of business by its lawsuits, such as Bolt and Stage6. Another, Grouper, sold itself to Sony in part to get help fighting UMG. Veoh, which is known to be shopping itself as an acquisition target, lasted at least long enough to take this case to a court decision. That's largely because Veoh used to be incredibly well funded, with $69.5 million invested by Intel Capital, Adobe, Gordon Crawford, Shelter Capital, Spark Capital, Goldman Sachs, Michael Eisner's Tornante Company, Time Warner Investments, and Jonathan Dolgen.