Viacom International, Inc. et al v. Youtube, Inc. et al

Filing 367

REPLY MEMORANDUM OF LAW in Support re: 176 MOTION for Partial Summary Judgment /Viacom's Notice of Motion for Partial Summary Judgment on Liability and Inapplicability of the Digital Millennium Copyright Act Safe Harbor Defense. / Viacom's Reply Memorandum of Law in Support of Viacom's Motion for Partial Summary Judgment. Document filed by Country Music Television, Inc., Paramount Pictures Corporation, Viacom International, Inc., Black Entertainment Television, LLC, Comedy Partners. (Kohlmann, Susan)

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Subject to Protective Order HIGHLY CONFIDENTIAL UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK __________________________________________ ) VIACOM INTERNATIONAL INC., ) COMEDY PARTNERS, ) COUNTRY MUSIC TELEVISION, INC., ) PARAMOUNT PICTURES CORPORATION, ) and BLACK ENTERTAINMENT TELEVISION ) LLC, ) ) Plaintiffs, ) v. ) ) YOUTUBE INC., YOUTUBE, LLC, and ) GOOGLE, INC., ) ) Defendants. ) ) __________________________________________) Case No. 1:07-cv-02103 (LLS) (Related Case No. 1:07-cv-03582 (LLS) VIACOM'S REPLY MEMORANDUM OF LAW IN SUPPORT OF VIACOM'S MOTION FOR PARTIAL SUMMARY JUDGMENT Stuart J. Baskin (No. SB-9936) John Gueli (No. JG-8427) Kirsten Nelson Cunha (No. KN-0283) SHEARMAN & STERLING LLP 599 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4000 Facsimile: (212) 848-7179 Paul M. Smith (No. PS-2362) William M. Hohengarten (No. WH-5233) Scott B. Wilkens (pro hac vice) Matthew S. Hellman (pro hac vice) JENNER & BLOCK LLP 1099 New York Avenue, NW Washington, DC 20001 Telephone: (202) 639-6000 Facsimile: (202) 639-6066 Susan J. Kohlmann (No. SK-1855) JENNER & BLOCK LLP 919 Third Avenue New York, NY 10022 Telephone: (212) 891-1690 Facsimile: (212) 891-1699 Attorneys for Plaintiffs June 4, 2010 Subject to Protective Order HIGHLY CONFIDENTIAL TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES ....................................................................................................... ii GLOSSARY....................................................................................................................................v PRELIMINARY STATEMENT ..................................................................................................1 ARGUMENT..................................................................................................................................2 I. DEFENDANTS ARE LIABLE UNDER GROKSTER. .......................................................2 A. Grokster Liability Arose From Operating YouTube With The Intent and Effect of Fostering Massive Infringement. ......................................................................2 B. There Is No Genuine Dispute as to Defendants' Grokster Liability. .............................6 1. Expression and Conduct Demonstrating Defendants' Grokster Intent Are Not Materially and Genuinely Disputed. ...................................................................7 2. Defendants' Intent Is Also Shown by Their Conduct in Selectively Deploying Audible Magic Only in Connection with Content Deals. .....................13 II. DEFENDANTS ARE VICARIOUSLY LIABLE. ..............................................................19 A. Defendants Received a Direct Financial Benefit. ..........................................................19 B. Defendants Had the Right and Ability to Control. .......................................................20 III. DEFENDANTS ARE DIRECTLY LIABLE.......................................................................22 IV. DEFENDANTS ARE NOT PROTECTED BY THE DMCA. ...........................................23 A. Defendants Had Knowledge and Awareness of Infringement Within the Meaning of the DMCA. ...................................................................................................23 B. Defendants Derived a Direct Financial Benefit from and Had the Right and Ability to Control Infringement Within the Meaning of the DMCA..........................28 C. Defendants' Direct and Secondary Liability Is Not by Reason of Storage at the Direction of Users Within the Meaning of the DMCA...........................................31 V. VIACOM'S OWNERSHIP OF THE WORKS IN SUIT AND THEIR INFRINGEMENT ON YOUTUBE REMAINS UNDISPUTED.......................................32 CONCLUSION ............................................................................................................................35 i Subject to Protective Order HIGHLY CONFIDENTIAL TABLE OF AUTHORITIES CASES A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)...........................20, 21, 22, 29 In re Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003) ......................................4, 24, 25 Air Safety, Inc. v. Roman Catholic Archbishop of Boston, 94 F.3d 1 (1st Cir. 1996) .............33, 34 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ....................................................................7 Arista Records, Inc. v. Mp3Board, Inc., No. 00 CIV. 4660 (SHS), 2002 WL 1997918 (S.D.N.Y. Aug. 29, 2002) ..................................................................................................19, 21 Arista Records LLC v. Lime Group LLC, No. 06 CV 5936 (KMW), --- F. Supp. 2d ----, 2010 WL 1914816 (S.D.N.Y. May 11, 2010) .............................................................4, 5, 6, 19 Arista Records LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124 (S.D.N.Y. 2009)........19, 21, 23, 29 Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), cert. denied, 129 S. Ct. 2890 (2009).............................................................................................................22 Columbia Pictures Industries, Inc. v. Fung, No. CV 06-5578, 2009 WL 6355911 (C.D. Cal. Dec. 21, 2009) ....................................................................................................................5 Corbis Corp. v. Amazon.com Inc., 351 F. Supp. 2d 1090 (W.D. Wash. 2004) .............................26 Fonar Corp. v. Domenick, 105 F.3d 99 (2d Cir. 1997) .................................................................33 Granite Partners, L.P. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 96 Civ. 7874, 2002 WL 826956 (S.D.N.Y. Sept. 20, 2002)...........................................................................34 Hendricksen v. eBay, Inc., 165 F. Supp. 2d 1082 (C.D. Cal. 2001) ..............................................26 IO Group Inc. v. Veoh Networks, Inc., 586 F. Supp. 2d 1132 (N.D. Cal. 2008) .....................26, 30 John Paul Mitchell Systems v. Quality King Distributors, Inc., 106 F. Supp. 2d 462 (S.D.N.Y. 2000) .......................................................................................................................12 Liz Claiborne, Inc. v. Mademoiselle Knitwear, Inc., 13 F. Supp. 2d 430 (S.D.N.Y. 1998) ..........35 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966 (C.D. Cal. 2006) ................................................................................................................................5, 6, 12 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)......................................................................1, 2, 3, 4, 6, 7, 13, 21, 24, 35. Neder v. United States, 527 U.S. 1 (1999)...............................................................................28, 29 ii Subject to Protective Order HIGHLY CONFIDENTIAL Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) ...........................................21 Perma Research & Development Co. v. Singer Co., 410 F.2d 572 (2d Cir. 1969) .......................13 Scott v. Harris, 550 U.S. 372 (2007) ...............................................................................................7 Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963) ........................1, 19, 30 Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010) ......................................................25, 32 UMG Recordings, Inc. v. Veoh Networks Inc., 665 F. Supp. 2d 1099 (C.D. Cal. 2009)...............27 United States v. Bakker, 925 F.2d 728 (4th Cir. 1991)..................................................................34 W.S.A., Inc. v. ACA Corp., No. 94 Civ. 1493, 1998 WL 635536 (S.D.N.Y. Sept. 15, 1998) .........7 STATUTES 17 U.S.C. 106..............................................................................................................................33 17 U.S.C. 410(c) .........................................................................................................................33 17 U.S.C. 501(a) .........................................................................................................................33 17 U.S.C. 512(c) .............................................................................................................23, 31, 32 17 U.S.C. 512(c)(1)(A) .............................................................................................23, 24, 27, 28 17 U.S.C. 512(c)(1)(A)(ii) ..........................................................................................................26 17 U.S.C. 512(c)(1)(A)(iii) .............................................................................................25, 26, 27 17 U.S.C. 512(c)(1)(B) ...............................................................................................................28 17 U.S.C. 512(m) ......................................................................................................26, 27, 28, 30 LEGISLATIVE MATERIALS H.R. Rep. No. 105-551(I) (1998).............................................................................................29, 30 H.R. Rep. No. 105-551(II) (1998) .................................................................................................31 S. Rep. No. 105-190 (1998) ...........................................................................................................27 OTHER AUTHORITIES Fed. R. Evid. 801(d)(2) ..................................................................................................................12 Fed. R. Evid. 1006 .............................................................................................................32, 33, 34 iii Subject to Protective Order HIGHLY CONFIDENTIAL Gary N. Frischling & Miriam Bitton, Grokking Grokster: Has the Supreme Court Changed Inducement Under Patent Law?, 34 AIPLA Q.J. 265 (2006) ....................................6 Jane C. Ginsburg, Separating the Sony Sheep from the Grokster Goats, 50 Ariz. L. Rev. 577 (2008)............................................................................................................................6, 28 2 Paul Goldstein, Goldstein on Copyright (3d ed. 2009).........................................................26, 28 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright (2009) ......................................28 6 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence (Joseph M. McLaughlin ed., 2d ed. 2010)..................................................................................................33 Alfred C. Yen, Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability, and the First Amendment, 88 Geo. L.J. 1833 (2000) .................28, 29, 31 iv Subject to Protective Order HIGHLY CONFIDENTIAL GLOSSARY Viacom Opening Mem. Memoranda of Law Plaintiffs' Memorandum of Law in Support of Viacom's Motion for Partial Summary Judgment on Liability and Inapplicability of the Digital Millennium Copyright Act Safe Harbor Defense; filed March 5, 2010. Viacom's Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment; filed April 30, 2010 Defendants' Opposition to Plaintiffs' Motions for Partial Summary Judgment, April 30, 2010. Viacom's Counter-Statement in Response to Defendants' Local Rule 56.1 Statement in Support of Defendants' Motion for Summary Judgment; filed April 30, 2010. Defendants' Counterstatement to Viacom's Statement of Undisputed Facts in Support of its Motion for Partial Summary Judgment; filed April 30, 2010. Viacom's Reply to Defendants' Counterstatement to Viacom's Statement of Undisputed Facts in Support of its Motion for Partial Summary Judgment; filed June 4, 2010. Declarations Declaration of William M. Hohengarten in Support of Viacom's Motion for Partial Summary Judgment; filed March 5, 2010. Declaration of Warren Solow in Support of Plaintiffs' Motion for Partial Summary Judgment; filed March 5, 2010 (Exhibit 2 to Hohengarten Decl.). Declaration of David King in Support of Defendants' Motion for Summary Judgment; filed March 5, 2010. Declaration of Susan J. Kohlmann in Support of Viacom's Opposition to Defendants' Motion for Summary Judgment; filed April 30, 2010. Declaration of Christoper Maxcy in Support of Defendants' Opposition to Plaintiffs' Motions for Partial Summary Judgment; filed April 30, 2010. Declaration of Scott B. Wilkens in Support of Plaintiffs' Reply in Support of Viacom's Motion for Partial Summary Judgment; filed June 4, 2010. Viacom Opp. Mem. Defs. Opp. Mem. Viacom CSUF Defs. CVSUF RSUF Hohengarten Decl. Solow Decl. King Decl. Kohlmann Decl. Maxcy Opp. Decl. Wilkens Reply Decl. v Subject to Protective Order HIGHLY CONFIDENTIAL PRELIMINARY STATEMENT Viacom's copyrighted works were infringed on YouTube on a massive scale. The immense commercial value of those works is evidenced by Defendants' proposal to pay Viacom at least $592 million for a license. Yet, lacking a license, YouTube simply expropriated this intellectual property using it as involuntary start-up capital that fueled the explosive growth of its user base. The issue before the Court is who bears responsibility for this "infringement on a gigantic scale," Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 940-41 (2005) the victim, or the party who intentionally caused and benefitted from it? Defendants are liable under Grokster for intentionally facilitating this rampant infringement. Grokster's legal standard is clear, as are the key undisputed facts. The same is true with regard to vicarious and direct liability. Those liability doctrines, which "plac[e] responsibility where it can and should be effectively exercised," Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 308 (2d Cir. 1963), are no less applicable to Internet business enterprises than they are to traditional media. Nor does the DMCA exonerate Defendants' intentional, profit-driven facilitation of infringement. For Defendants to prevail, the Court would have to rule that the DMCA trumps both Grokster and the long-established doctrine of vicarious copyright liability. Defendants' untenable theory is that the DMCA replaced the entire edifice of copyright law with a pure takedown notice mechanism, permitting Defendants to intentionally build their business on a flood of infringing clips that could never be stopped by after-the-fact takedown notices. Defendants try in vain to manufacture disputes of fact concerning their intent and their conduct. But as numerous post-Grokster decisions have recognized, a voluminous record and professions of innocent intent do not preclude summary judgment where the evidence demonstrates that defendants intentionally built a business based on copyright infringement. 1 Subject to Protective Order HIGHLY CONFIDENTIAL ARGUMENT I. DEFENDANTS ARE LIABLE UNDER GROKSTER. A. Grokster Liability Arose From Operating YouTube With The Intent and Effect of Fostering Massive Infringement. Because Defendants indisputably operated YouTube with the intent to facilitate the massive infringement that in fact resulted, Defendants are forced to argue that Grokster liability requires something more some additional conduct or encouraging message above and beyond intentionally operating YouTube with the object and result of fostering widespread infringement. That is an incorrect reading of Grokster. But even if Defendants' reading were correct, it would not matter. Their unlawful intent manifested itself in numerous additional actions calculated to increase the infringing use of YouTube while attempting to avoid responsibility for it. As Defendants note, Grokster's holding is "that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." Grokster, 545 U.S. at 919. The elements of a Grokster claim are thus (1) "distribut[ion of] a device" (or operation of a service) (2) with the "object" or intent that it be used to infringe an intent that can be "shown by clear expression or other affirmative steps" and (3) "resulting acts of infringement by third parties." As if further to emphasize the point, the Supreme Court restated these elements of a claim near the end of the decision, id. at 940: In addition to [1] intent to bring about infringement and [2] distribution of a device suitable for infringing use, the inducement theory of course requires [3] evidence of actual infringement by recipients of the device, the software in this case. Thus, the elements of a Grokster claim do not include additional conduct encouraging infringement, beyond operating YouTube itself with the intent to cause infringement and actually causing infringement. That does not mean, however, that Grokster imposes liability for 2 Subject to Protective Order HIGHLY CONFIDENTIAL "`passive' inducement" or "some amorphous bad purpose," a straw man raised by Defendants. Defs. Opp. Mem. 83. There is nothing "passive" or "amorphous" about running a website like YouTube with wrongful intent that results in actual rampant infringement, any more than a warehouse that fences stolen goods is engaged in passive activity. Like the Internet services that have been found liable in other cases under Grokster (including recent decisions of this Court by Judges Baer and Wood), Defendants intentionally caused widespread infringement through the powerful engine of the YouTube website, which made it possible instantaneously to copy, perform, and distribute audio-visual works on a global scale unimaginable before the digital era massive infringement that Defendants intended to foster. Grokster recognized that under basic legal principles, one who operates an infringement-facilitating business with the intent of causing infringement must be held liable for the infringement that actually results. See Grokster, 545 U.S. at 929 ("The argument for imposing indirect liability in this case is, however, a powerful one, given the number of infringing downloads that occur every day"). Moreover here, Defendants' wrongful intent manifested itself in numerous specific actions calculated to increase the number of infringing videos on YouTube. An online service provider can readily operate a user-generated video website without fostering infringement by taking simple measures to limit piracy on the site as the stark contrast between YouTube and Google Video illustrates. However, as the undisputed evidence demonstrates, at every turn in operating YouTube, Defendants made affirmative decisions to blind themselves to infringement and to disable, refuse to implement, or selectively deploy readily available means of curtailing infringement. Those were concrete acts for the very purpose of making YouTube (unlike Google Video) into a haven for infringement and they succeeded. Similarly, Defendants set up their system to highlight "favorite" videos, knowing they were at least 70% infringing, to attract users 3 Subject to Protective Order HIGHLY CONFIDENTIAL inclined to infringe to the site. Infra at 9; see In re Aimster Copyright Litig., 334 F.3d 643, 651 (7th Cir. 2003) (featuring copyrighted works on website is "invitation to infringement"); Arista Records LLC v. Lime Group LLC, __ F. Supp. 2d __, 2010 WL 1914816, at *18 (S.D.N.Y. 2010) (search function induced by "facilitat[ing] searches for copyrighted digital recordings"). YouTube's founders and employees also uploaded infringing videos, shared infringing videos, and encouraged users to leave infringing videos on YouTube. Viacom Opp. Mem. 12-13. Thus, even if Grokster required some conduct beyond operating a website with intent to facilitate infringement, that requirement would be met here. But in fact, Grokster rejected any such requirement. Instead, Defendants' additional infringement-inducing conduct functions here as proof of their unlawful intent, which may be "shown" either by "clear expression" or by "affirmative steps taken to foster infringement." Grokster, 545 U.S. at 919; see also id. at 938 ("unequivocal indications of unlawful purpose"). Defendants' argument confuses what must be proved (Grokster intent and the resulting infringement) with the forms that proof may take. Defendants go even further astray when they contend that "clear expressions" of intent must consist of an overt "inducing message" encouraging infringement. Grokster rejects that squarely: "Whether the messages were communicated is not to the point on this record. The function of the message in the theory of inducement is to prove by a defendant's own statement that his unlawful purpose disqualifies him from claiming protection." Id. at 938. Similarly, Grokster explained that the alternative way of proving intent through "affirmative steps taken to foster infringement" includes acts of commission or omission present here: (1) providing a device or service that caters to a marketplace "demand for copyright infringement"; (2) using infringement to attract traffic and thereby generate advertising revenues; or (3) failing to deploy (and even disabling) "filtering tools or other mechanisms to diminish 4 Subject to Protective Order HIGHLY CONFIDENTIAL infringing activity." Id. at 939-40. The Supreme Court did not choose these examples casually. They reflect the fact that a website can induce copyright infringement by intentionally offering an engine of infringement (whether peer-to-peer software or the YouTube service) to tap into an existing demand for infringement from which it will profit and which it refuses to do anything to stop. In such circumstances, an overt "inducement" in the sense of an additional message inviting users to commit piracy is completely superfluous, as the Supreme Court expressly held. Cases applying Grokster have uniformly adhered to this analysis. Consider Grokster itself on remand. The court recognized that "[s]ince there is no dispute that StreamCast did distribute an infringement-enabling technology, the inquiry focuses on the defendant's intent, which can be shown by evidence of the defendant's expression or conduct," and "Plaintiffs need not prove that StreamCast undertook specific actions, beyond product distribution, that caused specific acts of infringement." Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966, 985 (C.D. Cal. 2006). Similarly, Fung stated: "Importantly, liability may attach even if the defendant does not induce specific acts of infringement. Instead, the court may `infer[] a patently illegal objective from statements and actions showing what [the defendant's] objective was.'" Columbia Pictures Indus., Inc. v. Fung, No. CV 06-5578, 2009 WL 6355911, at *10 (C.D. Cal. Dec. 21, 2009). Both cases found liability on summary judgment. Just three weeks ago, Judge Wood followed this exact template in also finding Grokster liability on summary judgment against the LimeWire ("LW") service. Judge Wood first found "overwhelming evidence that LW engaged in purposeful conduct that fostered infringement: LW created and distributes LimeWire, which users employ to commit a substantial amount of infringement." Lime Group, 2010 WL 1914816, at *16. Thus, distribution of the product and the resulting infringement satisfied two of Grokster's elements. The court therefore turned to the 5 Subject to Protective Order HIGHLY CONFIDENTIAL third element intent so that Grokster liability hinged on whether "LW intended to encourage infringement by distributing LimeWire." Id. Once again, Judge Wood held, consistent with Grokster, that direct evidence of solicitation or a separate inducing message need not be shown to prove the requisite intent. Id. at *15-*16. Academic literature also recognizes Grokster's clear holding. As Columbia Law Professor Ginsburg observed, "if it can be shown that the distributor intended users to employ the device in order to infringe copyright, then the distributor will be liable as a matter of basic tort principles," and thus Grokster "ruled that bad intent, if proved, sufficed to establish liability for infringements thus induced." Jane C. Ginsburg, Separating the Sony Sheep from the Grokster Goats, 50 Ariz. L. Rev. 577, 583, 584 (2008); see also, e.g., G. Frischling & M. Bitton, Grokking Grokster, 34 AIPLA Q.J. 265, 266 (2006) (Grokster adopted "the view that sale of a product that enables infringement, coupled with culpable subjective intent, can give rise to inducement liability" for the resulting large-scale infringement).1 B. There Is No Genuine Dispute as to Defendants' Grokster Liability. It is uncontested that (1) Defendants actively operated the YouTube website that enables infringement on a hitherto unimaginable scale, and (2) massive infringement actually resulted, establishing two of the Grokster elements, 545 U.S. at 940. Thus, as in Lime Group, 2010 WL 1914816, at *16, and Grokster, 454 F. Supp. 2d at 985, the only conceivable question concerns the third element: whether Defendants operated YouTube with the intent to foster infringement. Faced with a mountain of incriminating "clear expressions" and "other affirmative steps" showing their intent, Defendants raise a barrage of evidentiary objections and strain to create 1 The existence of noninfringing uses is also no defense under Grokster. Viacom Opp. Mem. 1617. Hence, the extended discussion by Defendants (and the aptly named "Sideshow" amici) of legitimate uses of YouTube is irrelevant. The focus must be on the massive infringing use. 6 Subject to Protective Order HIGHLY CONFIDENTIAL triable issues of fact by impeaching their own documents and challenging (or usually disregarding) the words their founders and senior executives actually used. Of course, the defendants in Grokster, Fung, Usenet, and Lime Group all tried the same tactic to no avail. As shown by those cases which all found Grokster liability on summary judgment based on voluminous records comparable to that here it is not enough for Defendants to deny their intent or to contest some of the facts in the overall evidentiary record. A "summary judgment motion is intended to `smoke out' the facts so that the judge can decide if anything remains to be tried." W.S.A., Inc. v. ACA Corp., No. 94 Civ. 1493, 1998 WL 635536, at *3 (S.D.N.Y. Sept. 15, 1998). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Thus, "[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott v. Harris, 550 U.S. 372, 380 (2007) (disregarding, at summary judgment stage, party's sworn account about how he drove a vehicle because it was contradicted by a videotape of events). 1. Expression and Conduct Demonstrating Defendants' Grokster Intent Are Not Materially and Genuinely Disputed. Viacom's Reply SUF (RSUF), filed herewith, explains why there is no genuine dispute of material fact about Defendants' Grokster intent. To highlight the point, we will focus here on a sample of ten key documents from Defendants' own files that show their intent both through "clear expression" and "other affirmative steps." Grokster, 545 U.S. at 919. In some cases, Defendants do not even offer an explanation for the damaging texts as written. When they try to do so, they do little more than nibble around the edges of the compelling admissions in the 7 Subject to Protective Order HIGHLY CONFIDENTIAL documents. They ask the Court to overlook inconvenient words (such as "copyright infringement" or "copyrighted material"), to disregard highly inculpatory statements as not meaning what they plainly say, or to ignore things like a formal fairness opinion rendered by the third-party investment bank Google hired to advise it on a potential $1.8 billion acquisition as "back of the envelope" estimates. Those stratagems do not create genuine, material factual disputes about the intent of Defendants' founders and management. Document 1: A September 3, 2005, email chain between YouTube's founders unambiguously documents their decision not to remove "obviously copyright infringing stuff" because they believed doing so would reduce site traffic by 80%. RSUF 54. Defendants now claim that this email chain was not about copyright infringement at all, but rather about prank videos. Defs. Opp. Mem. 13-14.2 We urge the Court to read the entire email chain (Hohengarten Ex. 215). Its subject line is "copyrighted material!!!," it launches with Hurley telling the other founders "aaahhhhh, the site is starting to get out of control with copyrighted material," and it refers to "copyright," "infringement," and the DMCA multiple additional times. Chen twice says site traffic would drop by 80% if copyrighted material were removed. The second time is in direct response to Karim's proposal that they "just remove the obviously copyright infringing stuff," to which Chen replies, "ya, i know that if remove all that content. we go from 100,000 views a day down to about 20,000 views or maybe even lower." Id. (emphasis added). The document says what it says, and no reasonable jury could accept that it is not discussing infringement. See Scott, 550 U.S. at 380. Nor does it matter whether Chen's 80% 2 Defendants assert "stupid videos" refers to prank videos, not infringement. Defs. Opp. Mem. 13-14. But Defendants have admitted the founders expressly referred to "StupidVideos" as a site "that did not respect copyright" and thus as synonymous with infringement. RSUF 29. In any event, the September 3 email with repeated references to "copyright" speaks for itself. 8 Subject to Protective Order HIGHLY CONFIDENTIAL was a mere estimate. The issue is the founders' intent, and they decided to leave infringing material on the site precisely because they believed it drew most of their traffic. Document 2: Defendants claim Chen's statement to investor and board member Roelof Botha that the founders would operate YouTube so users could search for and find "truckloads of adult and copyrighted content" was really referring to the Flickr website, not YouTube. RSUF 60. In their opposition brief, Defendants place the quotation of this email in Viacom's opening brief and Chen's full statement side by side and assert that Viacom's edits changed the meaning. Defs. Opp. Mem. 11. But Defendants' side-by-side comparison just proves Viacom's point. The email plainly shows that the plan was for YouTube, "similar to flickr," to have "truckloads of . . . copyrighted content." No reasonable factfinder could conclude that Chen and Botha were engaging in some abstract discussion about another website as Defendants now intimate. Document 3: Defendants do not contest that in an instant message between Chen and YouTube Product Manager Maryrose Dunton, Dunton reported the results of a "little exercise" in which she "went through all the most viewed/most discussed/top favorites/top rated to try and figure out what percentage is or has copyrighted material. it was over 70%., . . . [and] after I found that 70%, I went and flagged it all for review." RSUF 95. Later she amplified that "the truth of the matter is, probably 75-80% of our views come from copyrighted material." RSUF 104. Defendants also do not contest that Dunton was being sarcastic when she said she flagged the copyrighted videos; in fact, she did nothing. RSUF 96. Although Defendants fill their CVSUF with other quotes from Dunton's deposition, that material does nothing to alter the uncontested facts and her quantification of the vast extent of piracy on the site. Id. Document 4: Defendants do not contest that in another exchange, YouTube engineer Matt Rizzo told Dunton that implementing a new email alert tool to protect copyright owners 9 Subject to Protective Order HIGHLY CONFIDENTIAL "isn't hard" and would only "take another day or w/e [weekend] . . . but I still don't understand why we have to cater to these guys," to which Dunton said "[I] hate this feature. I hate making it easier for these a-holes," "ok, forget about the email alerts stuff," and "we're just trying to cover our asses so we don't get sued." RSUF 114.3 Document 5: Defendants do not contest that Hurley emailed Chen and Karim on September 23, 2005, saying: "can we remove the flagging link for `copyrighted' today? we are starting to see some complaints for this and basically if we don't remove them we could be held liable for being served a notice. it's actually better if we don't have the link there at all because then the copyright holder is responsible for serving us notice of the material and not the users. anyways, it would be good if we could remove this asap." RSUF 64. Defendants now offer post-litigation statements asserting that community flagging for copyright did not work very well. But they cannot point to one contemporaneous document suggesting that that was why it was terminated. Hurley's email says otherwise and again squarely exhibits Grokster intent: he directed the disabling of community flagging "asap" so that the site would not be put on notice of infringement and could instead keep the burden on copyright owners.4 Document 6: Defendants do not contest that Karim distributed a memorandum to the YouTube board of directors in March 2006 stating "As of today episodes and clips of the following well-known [Viacom] shows can still be found: . . . South Park, MTV Cribs, Daily Show, Reno 911, Dave Chapelle"; describing this content as "blatantly illegal"; and noting that Defendants now claim YouTube had already implemented the feature discussed in Document 4 at the time of the IM exchange. But the IM unambiguously speaks about and rejects a feature to be implemented in the future, not something that already existed. RSUF 112, 115. In any event, the recognition and intentional disregard of copyright violations again speaks for itself. 4 3 Defendants' further claim that they decided to remove community flagging as part of a decision to become a "DMCA compliant" site is nonsensical. Nothing in the DMCA even arguably requires stripping the site of protections against piracy. 10 Subject to Protective Order HIGHLY CONFIDENTIAL users still uploaded entire TV shows in segments or uploaded "the `juiciest' bits." RSUF 109111. YouTube's board was thus put on clear notice of pervasive infringement on the site.5 Document 7: Defendants do not contest that in July 2005, Chen emailed Hurley and Karim saying, "jawed [i.e. Karim], please stop putting stolen videos on the site. We're going to have a tough time defending the fact that we're not liable for the copyrighted material on the site because we didn't put it up when one of the co-founders is blatantly stealing content from another site and trying to get everyone to see it." RSUF 40. Defendants now say the videos were taken from aviation websites, but the source of the unauthorized copyrighted material is irrelevant to the founders' state of mind as expressed by Chen: "We're going to have a tough time defending the fact that we're not liable for the copyrighted material on the site." Id. Document 8: Defendants do not contest that in June 2005, Chen emailed the other founders that "we got a complaint from [YouTube's own service provider] that we were violating their user agreement. i *think* it may be because we're hosting copyrighted content. instead of taking it down i'm not about to take down content because our ISP is giving us shit we should just investigate moving www.youtube.com." RSUF 33. Defendants say that it turned out Chen was wrong and the ISP was concerned about something other than copyright. But that just underlines Chen's state of mind and intent that the site maintain infringing content knowing what was on the site, he immediately assumed infringement had to be the problem, and then vowed not to do anything about it. Id. Defendants claim they took proactive measures after this, including on advice of counsel, and scanned for and removed South Park clips. Def. Opp. Mem. 18-19. The references to advice of counsel should be disregarded because Defendants expressly waived an advice of counsel defense in open court (and subsequent written confirmation) thereby blocking discovery into such legal advice. Viacom Opp. Mem. 12. And even if their claim that they took specific steps to scan and remove South Park programs were credited, it only hurts Defendants, because (1) it demonstrates their ability to take steps to control the site when they chose to do so, and (2) highlights their failure to do so for Viacom's intellectual property generally. 11 5 Subject to Protective Order HIGHLY CONFIDENTIAL Document 9: With respect to Google's own intent, Defendants cannot genuinely dispute the repeated, consistent warnings by Google Video's senior executive team in a memorandum prepared for the May GPS meeting that "YouTube's business model is completely sustained by pirated content" and that it was a "`rogue enabler' of content theft," "80% illegal pirated content," "`a video Grokster,'" and the like. RSUF 151-159. The directness and power of these party admissions by Google executives is overwhelming, so Defendants try to exclude them based on hearsay and foundation objections, which are entirely frivolous.6 Document 10: It is undisputed that: Credit Suisse performed a valuation of YouTube and provided a fairness opinion as part of Google's due diligence for the acquisition; this information was provided in a formal board book to Google's Board to support the acquisition and purchase price; the board book included a statistical sample and analysis of YouTube views provided by Google to Credit Suisse for this purpose; and it showed that fully 60% of YouTube views were of "premium" copyrighted content, only 10% of which was licensed. RSUF 173, 176. Recognizing how damaging the Credit Suisse analysis is, Defendants again respond with a mass of baseless objections to a plainly admissible document prepared by Google's financial advisor and agent and concededly presented to its most senior executives and board members. Most importantly, nothing argued by Defendants responds to the facts set forth in Credit Suisse's 6 See Fed. R. Evid. 801(d)(2) (admissions of party opponent); Grokster, 454 F. Supp. 2d at 972 (documents are authenticated by act of production by opposing party); John Paul Mitchell Sys. v. Quality King Distribs., Inc., 106 F. Supp. 2d 462, 472 (S.D.N.Y. 2000) (same). Defendants assert that sometimes the Google Video executives were quoting views of content owners. That does not change the power of the warnings. And other admissions in that same document are the Google Video executives' own words. Defendants further argue there is no proof that this memorandum ever was shown to Eric Schmidt or Sergey Brin, who attended the GPS. Although all Google executives during their depositions uniformly asserted a lack of memory about the meeting, use at the GPS was the very purpose for which Google Video executives prepared the document. RSUF 147. Its warnings are compelling party admissions by senior Google executives, irrespective of whether the document was read by Schmidt or Brin. 12 Subject to Protective Order HIGHLY CONFIDENTIAL analysis. It is undisputed. And Defendants cannot be serious in disparaging their financial advisor's analysis as "back of the envelope" when it was the heart of the valuation and fairness opinion presented to the board of a public company in support of its $1.8 billion acquisition. These documents are but a representative sample of the written evidence of Defendants' expression and other affirmative conduct showing their intent, all prepared contemporaneously and not for purposes of litigation. Based on these documents alone (or any combination of them), Defendants' "unlawful objective is unmistakable." Grokster, 545 U.S. at 940.7 2. Defendants' Intent Is Also Shown by Their Conduct in Selectively Deploying Audible Magic Only in Connection with Content Deals. The foregoing undisputed facts include "affirmative steps taken to foster infringement" such as keeping "obviously copyright infringing stuff" on YouTube, aborting a planned keyword filter, disabling community flagging for copyright, and highlighting "favorite" videos they knew were overwhelmingly infringing which establish both that Defendants had Grokster intent and that they acted on that intent to make YouTube a haven for infringement. Similarly, Defendants' selective deployment of Audible Magic fingerprinting is further and particularly egregious affirmative conduct evidencing and effectuating their unlawful intent (as well as their right and ability to control infringement). Our earlier briefs have shown: (1) that filtering technology including Audible Magic was available and widely deployed well before YouTube's launch in 2005; (2) that YouTube actually had in hand an Audible Magic license since the fall of 2006; (3) 7 As ineffectual as the declarations of co-founders Hurley and Chen are, the Court should also disregard them outright. Hurley was deposed and claimed lack of memory 206 times over the course of 140 pages, covering the very documents cited above. See Hohengarten Ex. 312. His declaration is entitled to no weight. Perma Res. & Dev. Co. v. Singer Co., 410 F.2d 572 (2d Cir. 1969). see Wilkens Reply Ex. 14, so the statements in his declaration could never be admitted at a trial and are thus not admissible for summary judgment either. Such manipulations of the legal process by the founders should not be allowed, however fruitless they are. 13 Subject to Protective Order HIGHLY CONFIDENTIAL that the cost of using Audible Magic was $200-$300 thousand a year, a pittance for Defendants; (4) yet Defendants deliberately wielded Audible Magic fingerprinting as a carrot and a stick in 2006-2007, offering it as an inducement (or cudgel) to copyright owners to enter into license deals, and withholding it from companies like Viacom and other MPAA studios who declined to license their content. Viacom Opening Mem. 18-20, 34-37. Recognizing that this conduct cannot be squared with their claims of innocent intent, Defendants now assert they actually offered to use Audible Magic to protect content owners without a license deal all along.8 This effort to avoid summary judgment is absurd on its face. Were it true that Defendants were prepared to use Audible Magic filtering technology to block infringement in 2006 and 2007, then not only Viacom, but also the MPAA and the world's other most sophisticated content owners such as NBC Universal, Fox, Disney, Warner, Sony and Columbia Pictures would have taken them up on the "offer." See also infra note 11. In reality, numerous written offers and terms sheets in the record document the fact that Defendants offered to use Audible Magic for Viacom and many other major content companies in connection with content license deals in late 2006 and early 2007 which Defendants do not dispute. RSUF 298-310.9 Conversely, Defendants cannot point to a single written offer to Viacom or any other company to use Audible Magic without a content deal in that time frame. 8 Defendants also try to shift attention away from their aggressive misuse of Audible Magic by describing their creation of a homegrown filtering technology that they deployed for Viacom in 2008. As Viacom has acknowledged from the outset, that was a positive development but it cannot undo the effects of years of intentional facilitation of infringement before 2008. Defendants' prior offer to use Audible Magic for Viacom as part of a content deal refutes their suggestion that they could not use Audible Magic for Viacom because Viacom had not yet loaded its fingerprints into Audible Magic. As the earlier offer in connection with the content deal shows, Defendants understood that Viacom would rapidly prepare the needed fingerprints as soon as YouTube (or any other video website) agreed to use them to protect Viacom's content. Likewise, Defendants' offer in connection with a content deal also refutes their suggestion now that Audible Magic was not suitable for audio-visual content like Viacom's. 14 9 Subject to Protective Order HIGHLY CONFIDENTIAL Attempting to create a dispute of fact, Defendants point to their discussions in 2006 and January 2007 with the MPAA about possible joint testing of Audible Magic technology; submit a declaration from their employee Chris Maxcy saying that he never told Viacom's representative Adam Cahan that Defendants were withdrawing their offer to use Audible Magic on February 5, 2007, but instead merely "postponed" (and never rescheduled) the phone call in which they were supposed to discuss that subject;10 and submit another declaration from their employee David King, which asserts in conclusory terms that "YouTube's policy was to make CYC (including Audible Magic) open to all rights-holders" even without revenue monetization but without providing any specifics as to timeframe and no documentation or information about how the alleged "policy" was implemented or communicated.11 None of this succeeds in creating a genuine and material factual dispute. First, as to the MPAA negotiations, Viacom does not dispute that Defendants led the MPAA to believe they were considering joint Audible Magic testing during 2006 and January 2007 as evidenced by a January 31, 2007, email from Dean Garfield of the MPAA to Viacom that Defendants tout. But Defendants simply ignore the key point: Mr. Garfield testified under oath that Defendants later told the MPAA explicitly that they would not filter, absent revenue sharing agreements. RSUF 10 Cahan's contemporaneous record of the conversation stated that Maxcy cancelled the call because "they are claiming use of the tool requires a deal." Hohengarten Ex. 383. 11 King's declaration actually backfires on Defendants, for it shows that Viacom and other major content owners were not granted access to Audible Magic in 2005-2008. King identifies four companies that purportedly "used Audible Magic solely to block videos." King Decl. 10. But he is conspicuously vague as to the dates those four companies were given access to the blocking technology, "between February 2007 and December 2009," id. 8, and does not set forth the financial arrangements with the four companies in exchange for access, see Viacom CSUF 95. Conspicuously absent from the list of companies in paragraph 10 are In short, the most important and sophisticated content owners are missing virtually all of whom in 2006-2007 were insisting on Audible Magic or filtering technology before licensing their content to YouTube. 15 Subject to Protective Order HIGHLY CONFIDENTIAL 226. Defendants have not offered any evidence to rebut that testimony.12 The proposed Audible Magic agreements with the MPAA went unsigned by Google, the proposed tests never occurred, and an Audible Magic agreement was never reached with any of the major studios. RSUF 227-229. Thus, it is undisputed that though Defendants negotiated with the MPAA about Audible Magic through January 2007, they later broke those negotiations off. As to the Maxcy and King declarations, they create no genuine dispute about the real issue. Maxcy's declaration seeks to create a question about what transpired during a specific phone call on February 5. See Maxcy Opp. Dec. 10-12. But such a narrow and contrived factual dispute is not material, because the undisputed evidence shows that after February 5, Defendants told Viacom through communication in writing at the highest levels that Audible Magic was available only with a content license. And that communication is confirmed by numerous contemporaneous internal statements of Defendants' policy including one by Mr. King that directly contradicts his declaration. In the face of this documentation, Mr. Maxcy's hairsplitting about what was said on February 5, and Mr. King's conclusory, nonspecific, and undocumented assertions about YouTube's "policy," do not create genuine factual disputes. Specifically, on February 2, 2007, Viacom General Counsel Mike Fricklas wrote to Google General Counsel Kent Walker and point-blank requested deployment of Audible Magic to protect Viacom content. Hohengarten Ex. 244. NBC's General Counsel wrote the same request. Kohlmann Ex. 29. On February 17, Google's Walker responded to both by email. Hohengarten Ex. 382. His response did not say that Audible Magic was available to Viacom and NBC even absent a license, as both general counsel had specifically requested. Just the opposite. Walker asserted that Defendants had no obligation 12 Because they cannot rebut Mr. Garfield's sworn testimony, Defendants moved to strike his entire deposition on frivolous grounds. See RSUF 223. 16 Subject to Protective Order HIGHLY CONFIDENTIAL to invest substantial resources to develop, deploy and distribute to every copyright owner in the world complex audio fingerprinting services. Nor has YouTube promised to do so. YouTube announced its commitment to work collaboratively with a handful of partners to develop, test, and launch audio fingerprinting optimized for the context of those specific business partnerships. Id. at 08050274 (emphasis added). He then attacked Audible Magic technology as prone to false positives and false negatives, never explaining why YouTube had offered the same technology to both Viacom and NBC if they would sign revenue deals. Walker even testified that he could not recall offering to use Audible Magic with Viacom. Wilkens Reply Ex. 12, at. 65:18-72:16.13 This repudiation by Google's General Counsel is confirmed by all of Defendants' contemporaneous internal documentation, which uniformly sets forth their policy of offering the "Claim Your Content" or "CYC" tool that included Audible Magic only as part of content deals: On February 15, 2007, Google's executive in charge of content partnerships, David Eun, wrote that YouTube's "CYC tools," including the "Audio fingerprinting system whereby the content partner can send `reference fingerprints' to Audible Magic's database," "are only offered to partners who enter into a revenue deal with us." Hohengarten Ex. 144 (emphasis added). On March 6, 2007, David King wrote an email that directly contradicts the declaration he submitted to the Court. Responding to an email among several employees stating that the CYC tool that included Audible Magic was available only if "a partner signs a commercial contract," King stated his agreement: "bottom line is CYC only for non-music partners, and CVP [which In an attempt to counter these unambiguous statements, Defendants point to the final paragraph of Walker's February 17 email and suggest it constitutes an offer of the Audible Magic technology, in direct contradiction to the unambiguous refusal earlier in the same communication. In fact, the last paragraph of the email, which refers to possible future tests of unspecified "tools," merely provides vague blandishments that Google was "open to discussing your possible participation in these tests." That is plainly not an open offer to use the future "tools" much less Audible Magic, which was already actually deployed for content partners for Viacom. Indeed, as we show, Defendants' firm policy was to make Audible Magic available only with a content and revenue deal exactly as stated by Walker earlier in the same email. 13 17 Subject to Protective Order HIGHLY CONFIDENTIAL did not include Audible Magic or other fingerprinting or automated technology] for everyone else." Wilkens Reply Ex. 4, at 06519634 (emphasis added). On March 7, 2007, Google Sales Engineer Sathya Smith relayed that policy in an email to other Google employees with the Subject line "Please Read: guidelines for deploying YT tools" describing "the final verdict" about the "distribution of these tools." Concerning the CYC tool that included Audible Magic, Smith wrote: "CYC: should only be given to signed, nonmusic partners. This is what legal has authorized." Wilkens Reply Ex. 1 (emphasis added). On March 30, 2007, Matthew Liu, YouTube's Product Manager for CYC, wrote re "fingerprinting that can do automatic takedowns": "Right now we have not been giving the tool to partners without a revenue share contract in place." Kohlmann Ex. 21 (emphasis added).14 Statements by Defendants' then-lead counsel at the first status conference in this case in July 2007 also show that Audible Magic filtering was not being made available to Viacom. Defendants' counsel did not tell the Court this entire lawsuit was a gigantic mistake because Defendants had always been amenable to using existing filtering technology for Viacom. To the contrary, he stated that Google was "working hard on" its own proprietary fingerprinting system it hoped to have in place "in the fall," and emphasized that this future system would stem infringement of Viacom's works. Hohengarten Ex. 362, at 15:15-17:15. That lawyer soon was gone from the case and the promised filtering did not arrive for Viacom until 2008. No reasonable factfinder could conclude that Defendants offered to use Audible Magic for Viacom without a content deal from 2005 until 2008, even when YouTube was using the technology for business partners in 2007. Such protection was always conditioned on an extortionate revenue deal, which both shows Defendants' Grokster intent and their refusal to 14 The New York Times even reported Hurley as saying YouTube would discuss using filtering technology for "Viacom as part of a broader deal." Wilkens Reply Ex. 15. 18 Subject to Protective Order HIGHLY CONFIDENTIAL exercise their control over the site until it served their business interests to do so in 2008. The problem was not that Defendants could do nothing to curtail infringement. It was that they did not want to. They intentionally operated YouTube to foster infringement in order to attract users, and they succeeded. They are liable under Grokster. II. DEFENDANTS ARE VICARIOUSLY LIABLE. Defendants are also vicariously liable for the infringement on YouTube unless the site is entitled to an exemption from the settled legal principles rooted in the Second Circuit's seminal decision in Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963).15 A. Defendants Received a Direct Financial Benefit. It cannot seriously be disputed that Defendants received a direct financial benefit from infringement under the well-established "draw" standard. Viacom Opening Mem. 29-31, 37-39. Although Defendants question whether the "draw" standard applies in this Circuit, it is derived from Shapiro, 316 F.2d at 307, and multiple judges in this District have applied this standard as the test of a direct financial benefit. Lime Group, 2010 WL 1914816, at *24-*25; Arista Records LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124, 156-57 (S.D.N.Y. 2009); Arista Records, Inc. v. Mp3Board, Inc., No. 00 CIV. 4660 (SHS), 2002 WL 1997918, at *11 (S.D.N.Y. Aug. 29, 2002). Defendants cannot point to a single decision to the contrary. The courts have also flatly rejected Defendants' claim that the "draw" standard applies only to "a service devoted nearly entirely to infringement," Defs. Opp. Mem. 81. As Judge Baer explained, "the law is clear that to constitute a direct financial benefit, the `draw' of infringement need not be the primary, or even a significant, draw rather, it need only be `a' draw." Usenet, 633 F. Supp. 2d at 157; accord, e.g., Lime Group, 2010 WL 1914816, at *24 (Judge Wood). Shapiro expressly rejects Defendants' suggestion (Def. Opp. Mem. 62) that vicarious liability requires an agency relationship. Shapiro, 316 F.2d at 307. 19 15 Subject to Protective Order HIGHLY CONFIDENTIAL Defendants' suggestion that there is no evidence that the infringement on YouTube was a draw for users is conclusively answered by Defendants' own contemporaneous statements that infringement accounted for 54% to 80% of the views or traffic on the site. Viacom Opening Mem. 8, 10. 15-16. Defendants' own data also show that the specific infringing clips in suit here accounted for hundreds of millions of views, and thus were plainly a "draw" for users. RSUF 8. Defendants themselves repeatedly recognized that Viacom content is particularly attractive to users. RSUF 31-32. And Defendants' response to an interrogatory admits that they derived income from ads shown on the watch pages of Viacom's clips in suit. Hohengarten Ex. 361. A more direct financial benefit from infringement is impossible to imagine, as Defendants recognized when they stopped placing ads on watch pages of infringing clips in early 2007 "for legal reasons," RSUF 250, leaving them exposed legally for 2005-2006. And even after removing ads from specific infringing watch pages, Defendants retained ads elsewhere throughout the YouTube site, such as on home, search, and browse pages, and derived revenue from users who were drawn by infringing clips and found those clips via those pages, as well as from additional monetizable search traffic on Google's own site. Viacom Opening Mem. 30-31. Even leaving aside current ad revenue, Defendants derived a direct financial benefit from infringement because it attracted the enormous YouTube user base for future monetization. As the Google board book showed, it was that user base largely attracted by infringing material that made YouTube worth at least $1.8 billion to Google. RSUF 180. That constitutes a direct financial benefit. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1023 (9th Cir. 2001). B. Defendants Had the Right and Ability to Control. Defendants Defendants also had the right and ability to control infringement. indisputably reserved and exercised the right to remove videos and block users from YouTube for any reason at their sole discretion. RSUF 267. That constitutes the right and ability to 20 Subject to Protective Order HIGHLY CONFIDENTIAL control under the test repeatedly followed in this District. Usenet, 633 F. Supp. 2d at 157; Mp3Board, 2002 WL 1997918, at *11; accord Napster, 239 F.3d 1023. Defendants can cite no contrary case from this Circuit. Under that standard, summary judgment is appropriate. Defendants assert the Ninth Circuit applied a different standard in Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007), requiring a "practical ability" to "stop or limit the directly infringing conduct." But no court in this Circuit has followed suit, and even the Ninth Circuit would apply the standard from its decision in Napster, not Perfect 10, here. Perfect 10 concerned Google's right and ability "to stop or limit the direct infringement of thirdparty websites" not to police its own website. 508 F.3d at 1173 (emphasis added). Unlike Perfect 10, and like Shapiro, Napster, and the dancehall cases, this case is about Defendants' right and ability to exclude infringing activity from their own site, not third-party sites. In any event, applying the Perfect 10 test would not help Defendants. They have always had the practical ability to "stop or limit the directly infringing conduct" on YouTube, through such means as manual review, community flagging, keyword filters, Audible Magic fingerprinting, and the like. Adhering to the strategy of "plausible deniability," Defendants say that each of these techniques had limitations, particularly as YouTube got larger and more saturated with infringement.16 But these tools, individually and collectively, have been successfully used by both Google Video and YouTube when they wanted to in order to "limit" (even if not entirely eliminate) illegal uploads, as called for in Perfect 10, 508 F.3d at 1173; see also Grokster, 545 U.S. at 939 (looking to "mechanism to diminish the infringing activity") (emphasis added). A defendant cannot financially benefit from piracy and then selectively refuse 16 "Plausible deniability" is the legal strategy counseled by Defendants' amicus Electronic Frontier Foundation (which was also Grokster's counsel). See Kohlmann Decl. 101 & Ex. 92 ("buil[d] a level of `plausible deniability' into your product architecture and business model" in order to be able to "convince a judge that . . . monitoring and control is impossible"). 21 Subject to Protective Order HIGHLY CONFIDENTIAL to deploy anti-piracy tools in its arsenal just because they are not perfect. To avoid vicarious liability, the site operator must deploy its "reserved right to police . . . to its fullest extent." Napster, 239 F.3d at 1023. Thus, Google's General Counsel effectively conceded Defendants' vicarious liability when he stated Defendants' position in writing that they would not "invest substantial resources" to deploy existing Audible Magic technology to protect copyright owners (yet another straw man since the cost, particularly to Google, was trivial). Hohengarten Ex. 382. III. DEFENDANTS ARE DIRECTLY LIABLE. Defendants are also direct infringers. Defendants do not dispute that all the infringing conduct at issue takes place on their own systems (unlike, say, the peer-to-peer infringement at issue in Grokster). See Viacom Opening Mem. 44. Therefore, as Defendants seem to concede, their direct liability turns on whether they had the minimal level of "volition" required for direct infringement. See Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121, 130-31 (2d Cir. 2008). Defendants are forced to the extreme position that under Cartoon Network, direct liability can never arise when a defendant causes infringement by programming a computer to make copies through "automated processes," regardless of the defendant's volition in setting up the infringement system in the first place. Defs. Opp. Mem. 56. Defendants simply ignore Viacom's showing in its opening brief (at 44-46) that Cartoon Network held no such thing. That case did not erect a sweeping robot exception to direct liability as Defendants claim. It held that volitional conduct was absent "only . . . on the facts of this case," 536 F.3d at 133, where the defendant's system was like a remote VCR or DVR that let a home viewer make a single copy of a television show which only that user could watch, id. at 130-31. The Second Circuit expressly relied on the analogy to home VCR or DVR copying in determining that the home viewer made the copies, not the system operator. Id. at 131. But Defendants here operate the Internet equivalent of broadcast TV, and like any broadcaster, 22 Subject to Protective Order HIGHLY CONFIDENTIAL Defendants, not their viewers, performed, indexed, promoted, sold advertising against, and profited from videos which the Defendants made available to the world at large. Before and after Cartoon Network, courts have found "volitional conduct" outside the context of a remote-DVR where automated processes are involved, if the defendants' conduct in setting up a system transformed them "`from passive providers of a space in which infringing activities happened to occur to active participants in the process of copyright infringement.'" Usenet, 633 F. Supp. 2d at 148; see Viacom Opening Mem. 45 (citing cases). Defendants' infringement was anything but passive or incidental; it was intended. They are directly liable.17 IV. DEFENDANTS ARE NOT PROTECTED BY THE DMCA. Because Defendants are liable for infringement three ways, they put most of their effort into arguing that 512(c) of the DMCA immunizes their conduct. But as shown in our earlier briefs and the amicus brief of other content owners, there is no merit to the contention that the DMCA overrides Grokster or decades-old principles of vicarious liability. Opening Mem. 47, 50, 55. E.g., Viacom The DMCA was enacted to provide balanced protection for intellectual property over the Internet, not to create loopholes for intentional, profit-driven facilitation of infringement. To qualify for the DMCA, Defendants must prove they meet all its requirements. See id. at 48. They indisputably fail at least three. A. Defendants Had Knowledge and Awareness of Infringement Within the Meaning of the DMCA. The Court has before it two diametrically contrasting legal positions as to the meaning of 512(c)(1)(A) concerning knowledge or awareness and the obligations flowing from it. 17 Conduct that is not itself directly infringing remains relevant to Defendants liability for direct infringement (contra Defs. Opp. Mem. 60-62) because it shows Defendants' conduct was volitional, not passive. See Usenet, 633 F. Supp. 2d at 148-49. 23 Subject to Protective Order HIGHLY CONFIDENTIAL As we have shown, the record includes a startling series of admissions by Defendants' founders and most senior executives not o

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