The Court of Madrid Confirms YouTube is a Hosting Provider Exempted from Copyright Liability

Legal context On 20 September 2010 the Court of Madrid ruled on an interesting case involving the provision of video-sharing services by the well-know platform YouTube (Gestevision Telecinco S.A. – Telecinco Cinema S.A.U. v YouTube). The court of Madrid interpreted Article 16 of the Ley 34/2002, de 11 de julio de Servicios de la Sociedad de Información y Comercio Electrónico (LSSI). Said provision had implemented in Spain Article 14 Directive 200/31/EC (E-Commerce Directive), which offers hosting providers a shield from liability for copyright infringement with regards to contents hosted if they (i) do not have “actual knowledge” of illegal activity or information and are not aware of facts or circumstances from which the illegal activity or information is apparent, or (ii) upon obtaining such knowledge or awareness, act expeditiously to remove or to disable access to the information. Facts YouTube is the famous video-sharing platform which allows users to upload and share videos. Yet these videos often consist of, or contain, material protected by third parties’ copyright, such as television shows, movies and musical videos. The claimants belong to the Gestevisión Telecinco group and produce TV programs and shows in Spain and own the copyright on certain videos posted to YouTube platform. They contended that YouTube actively controls and modifies the information and contents posted by its users and should thus be considered as a publisher and content provider. Accordingly, to the claimants’ eyes, YouTube is liable for directly infringing their copyright as it reproduces, distributes, publicly performs and displays Telecinco’s audiovisual works. First, the claimants maintain that it is the use policy adopted by YouTube (and accepted by its users) which shows that its activity is not limited to mere intermediation services. Moreover, the argument goes on, the sharing platform provider actively selects videos: this is especially true of to the so-called “suggestions”, which are videos stored in a special section of YouTube platform and are selected by its staff, to the exclusion of other videos. On the other hand, YouTube counter-argued that the videos in question are exclusively uploaded by its users and are automatically inserted in its web platform: just users therefore should be deemed as content providers and, depending on the circumstances, copyright infringers. The defendant also claimed that it has implemented a security policy called Video Identification Beta, which aims to cut down on the number of infringing videos posted to its platform and requires right holders’ to cooperate with YouTube by informing the latter about specific infringing videos. Once an infringing video is identified, the right owner can choose between three options: to block the video, not to request the withdrawal of the same or to try to obtain a royalty from the user by proposing to associate an ad message to the video in question. Analysis The Court of Madrid analyzed the following issues: (i) is YouTube a content provider or a hosting provider which offers just intermediation services? (ii) How to interpret the concept of “actual knowledge” of illegal activity referred to in Article 16 LSSI, which implemented in Spain Article 14 E-Commerce Directive? Publisher or hosting provider? The distinction between the two categories is relevant. While in the case of a publisher the copyright owner has just to bring evidence that the former was at fault (in order to be successful in a copyright dispute), when it comes to hosting providers right owners should prove that said providers were aware of the unlawful activities carried out by their users and failed to act expeditiously to stop the infringement. The Spanish judge has been clear. YouTube does not carry out any publishing activities and no evidence in this regard can be inferred by the terms of use accepted by users. Thus the video platform provider cannot be considered as a hosting provider. This also holds true when it comes to the videos named “suggestions” which – the court stressed – are automatically identified and selected through objective criteria, such as their popularity amid users. It is the user – the judge’s argument goes on – that takes the decision of using a video and bears the liability regarding its contents. YouTube just uses software which converts videos into a format known as “Flash” and stores them into its servers. This process aims at allowing other users to access the shared videos, as most web users have software that can play video in Flash Format. Yet this is a completely automatic process, without any involvement of the video platform provider (see also UMG Recordings v Veoh Networks, United States District Court, C.D. California, 2008). According to the court, moreover, YouTube does not facilitate users in downloading videos, nor gives them specific tools useful for said downloading. Another circumstance led the Spanish judge to consider YouTube as a mere hosting provider: i.e. the fact that thus far more than five hundred million videos have been stored on its platform, and therefore it would be technically impossible for YouTube to control all these videos. The meaning of “actual knowledge” After concluding that YouTube is effectively a hosting provider, the Court of Madrid had to verify whether it can be exempted from liability for the copyright infringement committed by its users pursuant to Article 14 E-Commerce Directive and Article 16 LSSI. As shown above, said provisions exempt hosting providers if they do not have “actual knowledge” of illegal activity. The Court of Madrid clarified when knowledge is considered imputable to video platform providers such as YouTube. As no general obligation to monitor data stored or to seek facts indicating illegal activity can be placed on hosting providers (Article 15 E-Commerce Directive), it is the copyright owner who should inform said providers about the availability of infringing videos within their platform (see also Google v ViviDown, Milano Penal Court, February 24 2010; FAPAV v YouTube, Roma Civil Court, IP division, April 14 2010). And the right holder should not do so by merely informing service providers about a generic massive infringement of copyright (indeed, many videos uploaded on the platform might contain contents not protected by copyright such as parody works). Rather, they should carefully identify, and report the platform provider on, the specific videos which they deem as infringing (see also Perfect 10, Inc. v CCBill, C. D. California, 2007). That is why Youtube has implemented a policy which allows right holders to detect and report on infringing videos: a policy which the service provider has adopted pursuant to Articles 14 E-Commerce Directive and 16 LSSI and has turned out to be very efficient. This finding echoes a similar decision taken by the Court of Appeal of Paris in Dailymotion v Carion, Nord-Ouest Production et al. (4th Chamber, Section A, 6th May 2009). Dailymotion, a YouTube-like video-sharing website, was held not liable for copyright infringement, as it did not have the required knowledge of the existence of illegal contents. Here the court of Paris pointed out that the hosting exemption provision requires that notifications should be sent to service providers by copyright holders, indicating precisely which content is alleged to be unlawful, its precise location on the website and the reasons why it is unlawful (in US case law see Viacom v. YouTube, US District Court, Southern District of New York, June 23, 2010). Finally, coming back to Telecinco v YouTube, the Court of Madrid stressed that the fact that the hosting service in question is remunerated does not make YouTube liable. Indeed, the E-Commerce Directive was enacted to encourage and boost the development of commercial activities on the Internet, and therefore it would be paradoxical not to exempt from liability an Internet service provider just because it charges for its activities (see also Google AdWords v Louis Vuitton, ECJ, C-236/08 to C-238/08, 23 March 2010). Practical significance This ruling appears consistent with previous decisions of European and US courts on liability of hosting providers. It represents once again a big win for video platform providers and will further boost their business activity. Also cultural diffusion will be boosted, as the Court of Madrid impliedly recognized: “the challenge of companies in the new economy is not to protect acquired rights, but to create value in spreading contents, as the course of time highlights the sterility of artificial barriers”. This confirms that these platform providers – by hosting videos and other files with the purpose of making available and sharing them – actively contribute to disseminate ideas and information and favour cultural diffusion: these are the so-called Web 2.0 applications, which facilitate information sharing and offer their users the opportunity to interact or cooperate with other peers. This point echoes what was stressed by another Spanish court in SGAE v Jesus Guerra (Case N. 261/09, Barcelona Commercial Court N. 7, Sentencia N. 67/10, March 2010): in that case the judge stressed that peer-to-peer technologies are mere conduits for the transmission of data between Internet users and may contribute to cultural diffusion worldwide (see also EGEA & Columbia Tristar v CDCDGO.com, Case N. 879/09, Madrid District Court of Appeal N. 23, Sentencia N. 554/10, May 11 2010).