On Aug. 27, 2008, in the case Io Group, Inc. v. Veoh Networks  (Veoh), U.S. Magistrate Judge Howard R. Lloyd granted Veoh’s motion for summary judgment, that it qualified for “safe harbor” protection under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. § 512. The Veoh decision has been hailed by some as a major victory for Internet service providers and proponents of the sufficiency of the DMCA in addressing copyright infringement issues over the Internet. Does this decision supplant Grokster as the current precedent of U.S. courts with respect to an analysis of the legality of websites featuring user-generated content (UGC)? The Supreme Court’s decision in Grokster established that a service provider that has provided a platform and has promoted its use to infringe copyright or foster infringement could be found liable for the resulting acts of infringement by third parties.  In other words, if the service provider’s website has been used, to a significant degree, as a hub of infringing content, then such service provider may not be able to raise the safe harbor provisions of the DMCA as a defense to secondary copyright infringement. Precedential considerations aside, a closer look at the facts of Veoh reveals that the court’s holding is actually quite limited in scope.
Io, in its attempt to keep Veoh out of the DMCA safe harbor, asserted that Veoh did not implement a “repeat infringer policy” in a reasonable manner. The DMCA requires a service provider to implement a “reasonable” policy to remove “repeat infringers”—individuals who repeatedly upload infringing content to the website. The only evidence that Io presented in support of its assertion that Veoh did not implement a reasonable repeat infringer policy was that its vice president was able to open up a new Veoh account using the pseudonym, “Faux User99” with the e-mail address “FauxUser01@yahoo.com.” A reasonable repeat infringer policy is not a foolproof one. Citing Corbis, the court explained that a service provider reasonably implements a repeat infringer policy when it terminates users when appropriate. A service provider is not required to track users in a particular manner or police its users for evidence of infringement. Veoh utilized a “two strike” repeat infringer policy where a user would receive a warning the first time he/she was found to have submitted infringing content, and would have his/her account terminated upon the second offense. Veoh had also terminated more than 1,100 users since its inception. In sum, while the court did not go so far as to determine that Veoh’s repeated infringer policy was reasonable, it indicated that Io had not presented sufficient evidence to the contrary. Strike two.
As a last attack on Veoh’s safe harbor qualifications, Io drew the court’s attention to Veoh’s process of creating Flash clips and still-images of user-submitted videos, and claimed that these files are not stored on Veoh’s system “at the direction of the user,” as required under the DMCA and explained in the CoStar case, where the 4th Circuit held that excluded from the DMCA safe harbor is material that resides on the system through a service provider’s own acts or decisions and not at the direction of a user. Veoh responded that the Flash clips and still-images are created through an automated process to enable navigation on the website. The Veoh court held that Veoh did not lose safe harbor protection because Veoh did not actively participate or supervise the uploading of files, but simply utilized an automated process to facilitate user access to material on its website. Strike three.
While the Veoh decision is clearly a positive for proponents of the sufficiency of DMCA and OCILLA in providing adequate mechanisms for balancing the interests of copyright owners with Internet service providers, the case, when you take a closer look at the facts, actually presents more of a lesson in how to be an unsuccessful copyright infringement plaintiff. If you plan on filing suit against an Internet service provider for copyright infringement, be sure that you have followed the steps in the DMCA before moving forward in court. Clearly, there is still potential exposure for websites that function essentially as a conduit for infringing content (e.g., file-sharing websites like Grokster) and businesses that utilize UGC in their commercial advertising campaigns without regard to traditional advertising law and regulation. Given the myriad permutations of use and distribution of UGC, these disputes are always going to be fact-specific and likely subject to multiple interpretations, depending on the court hearing the case.
 Io Group, Inc. v. Veoh Networks, Inc., U.S. District Court N.D. Cal., Case No. C06-03926 HRL (8/27/08).
 See, MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913(2005).
 See, generally, the Online Copyright Infringement Liability Limitation Act (OCILLA).
 Corbis v. Amazon.com, Inc., 351, F.Supp.2d 1090, 1104 (W.D. Wash. 2004).
 See, Veoh Decision at pg. 16.
 CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 701 (4th Cir. 2004).
 See, Veoh, at pg. 20.