UMG v. Shelter Capital: A Cautionary Tale of Rightsowner Overzealousness

10 01 2012

By Eric Goldman

UMG Recordings, Inc. v. Shelter Capital Partners LLC, 2011 WL 6357788 (9th Cir. Dec. 20, 2011). My prior blog posts on district court rulings on Veoh’s 512(c) safe harbor and attorneys’ fees/Rule 68.

Make no mistake, web hosts and their investors got a major 512(c) victory in this ruling. The Ninth Circuit, building on its favorable but convoluted ruling in Perfect 10 v. ccBill, wrote a decisive and clear (well, as clear as the 9th Circuit gets…) opinion interpreting the crucial 512(c) safe harbor. This opinion is so comparatively lucid that I plan to substitute it into my Internet Law reader next Fall as a replacement for the Io v. Veoh and Viacom v. YouTube district court rulings.

But also make no mistake: this case reminds us why we need to strike a fair balance between rightsowners and technology providers, or else our system will break down. This case’s real result is that Veoh is legal, but Veoh is dead—killed by rightsowner lawfare that bled it dry. Meanwhile, rightsowners wrongly assessed the legality of Veoh, but the worst consequence they suffered was overpaying their lawyers. Indeed, UMG isn’t liable under 17 USC 512(f) for sending bogus takedown notices because they never sent any notices at all., nor is UMG liable for Veoh’s attorneys’ fees. UMG’s decision-makers walk away from this car crash, muttering under their breath that the Ninth Circuit misunderstood their brilliant legal arguments, but they still get to go to their cushy jobs tomorrow. The same can’t be said for Veoh, even though it “won.” Veoh’s employees? On the street. Veoh’s investors? SOL. Veoh’s community? Kicked to the curb.


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