By Scott Graham, From The Recorder

Copyright holders must take into account fair use defenses before demanding that services such as YouTube take down unauthorized content, the Ninth Circuit ruled Monday.

But in a break for the recording and motion picture industries, the court further ruled that copyright owners will not be subject to damages, if they acted in good faith. Meeting that standard will not typically require a “searching or intensive” review of fair use law, Judge Richard Tallman wrote for a 2-1 majority in Lenz v. Universal Music.

The decision leaves open the possibility that content creators and service providers such as Google Inc. and YouTube can use computer analytics to identify unauthorized material on the Web, Tallman wrote. That’s true only if the computer analytics can somehow account for fair use, Judge Milan Smith Jr. argued in dissent.

The decision means Stephanie Lenz may pursue damages against Universal Music Corp. for instructing YouTube to take down her now famous 29-second video of her then-13-month-old son dancing to Prince’s “Let’s Go Crazy.” Lenz and the Electronic Frontier Foundation got the video reinstated, then sued Universal for sending out a takedown notice without considering that the snippet of song constituted fair use.

EFF attorney Corynne McSherry, who argued the case to the Ninth Circuit last spring, said on EFF’s blog Monday that the decision “sends a strong message that copyright law does not authorize thoughtless censorship of lawful speech.” She said the decision will help discourage takedown abuse during election season, when political campaigns sometimes aggressively demand that clips of their candidates be removed from the Internet and broadcast networks.

Dorsey & Whitney IP partner J. Michael Keys, who was not involved in Lenz, called it a “path-marking case in the world of copyright law” that will require content holders to “engage in a bit of copyright soothsaying before enforcing their rights.”

Lenz’s video had been viewed fewer than 300 times at the time of the 2007 takedown. Universal, acting under pressure from Prince, believed that because the song was a “significant focus” of the video, and the video used the same title as the song, the work was infringing. But Universal admitted that it did not formally consider whether the video was a fair use, because it regarded fair use as an affirmative defense to be asserted in litigation.

The takedown provisions spelled out in the Digital Millennium Copyright Act are meant to provide the recording industry with a “rapid response mechanism” to infringement on the Web, Klaus argued. With the Recording Industry Association of America issuing two million takedown notices a month to Google, the takedown framework “simply can’t function,” if someone has to evaluate each unauthorized reproduction for fair use, he told the court.

But, Tallman wrote for the Ninth Circuit, “Fair use is not just excused by the law, it is wholly authorized by the law.” The four-part test for determining its application is spelled out in the 1976 Copyright Act.

Therefore, “we hold that the statute requires copyright holders to consider fair use before sending a takedown notification,” Tallman wrote, “and that failure to do so raises a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law.”

Further, Lenz can recover nominal damages—opening up the possibility of an attorney fee recovery—even if the takedown did not cause her economic harm, the court concluded.

But Lenz and other video posters will have to show some actual knowledge of misrepresentation on the part of a copyright owner to recover damages. “We are in no position to dispute the copyright holder’s belief [in fair use] even if we would have reached the opposite conclusion,” Tallman wrote. It will be up to a jury to determine if Lenz can meet that standard.

Tallman further noted “without passing judgment” that the use 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.”

Judge Mary Murguia, who suggested at the argument that Universal’s conduct in the Lenz case probably wasn’t far from what’s required to meet good faith, concurred.

Judge Smith dissented from the good faith portion of the ruling, noting that Universal had admitted it didn’t consider fair use. If the video can be proven at trial to constitute fair use, Universal would necessarily be liable, he wrote.

As for using computer analytics, Smith—like Tallman a technophile who brings a portable computer to the bench for arguments—had a caveat: “For a copyright holder to rely solely on a computer algorithm to form a good faith belief that a work is infringing, that algorithm must be capable of applying the [fair use] factors.”

IMAGE: Judge Richard Tallman, United States Court of Appeals for the Ninth Circuit

For more on this story go to: http://www.therecorder.com/id=1202737184148/Panel-Says-Fair-Use-Must-Be-Considered-in-DMCA-Takedowns#ixzz3lojWcCTn