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No. 09-55902, No. 09-56777 Opinion Filed December 20, 2011 Before: Harry Pregerson, Raymond C. Fisher and Marsha S. Berzon, Circuit Judges ____________ IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ___________________ UMG RECORDINGS, INC.; UNIVERSAL MUSIC CORP.; SONGS OF UNIVERSAL, INC.; UNIVERSAL-POLYGRAM INTERNATIONAL PUBLISHING, INC.; RONDOR MUSIC INTERNATIONAL, INC.; UNIVERSAL MUSICMGB NA LLC; UNIVERSAL MUSICZ TUNES LLC; UNIVERSAL MUSICMBG MUSIC PUBLISHING LTD., Plaintiffs-Appellants v. SHELTER CAPITAL PARTNERS LLC, SHELTER VENTURE FUND LP, SPARK CAPITAL LLC, SPARK CAPITAL, L.P., TORNANTE COMPANY, LLC, AND VEOH NETWORKS, INC., Defendants-Appellees. _______ On Appeal from the United States District Court for the Central District of California, Western DivisionLos Angeles Honorable A. Howard Matz, District Judge __________________________________ PETITION FOR REHEARING AND REHEARING EN BANC _____________________________________ Steven A. Marenberg, Esq. State Bar No. 101033 Brian D. Ledahl, Esq. State Bar No. 186579 IRELL & MANELLA, LLP 1800 Avenue of the Stars Suite 900 Los Angeles, California 90067 Telephone: (310) 277-1010 Facsimile: (310) 203-7199 ATTORNEYS FOR APPELLANTS

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TABLE OF CONTENTS Page BACKGROUND .............................................................................................. 3 ARGUMENT .................................................................................................... 5 A. The Issues Presented Are Exceptionally Important Because Of Their Sweeping Impact On Internet Commerce. .................... 5 B. The Panel's Decision Undermines Copyright Protection On The Internet Contrary To Prior Precedents. ................................. 8 1. The panel decision renders the language "infringement of copyright by reason of the storage at the direction of a user , . ." superfluous void or insignificant. ...................................................................... 8 2. The panel decision all but eviscerates Section 512(c)(1)(A)(ii) and its "red flag" knowledge standard. ........................................................................... 12 3. The panel decision also renders Section 512(c)(1)(B) meaningless. ..................................................................... 15 4. The panel decision improperly rewrites Section 512(c). .............................................................................. 17 C. The Panel Decision Conflicts With Precedent Regarding Secondary Liability. ................................................................... 18

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TABLE OF AUTHORITIES Page(s) Cases A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ............................................................ 2, 19 Buck v. Jewell-La Salle Realty Co., 283 U.S. 191 (1931) ..................................................................................9 Duncan v. Walker, 533 U.S. 167, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) .........................11 Fair Housing Council of San Fernando Valley v. Roomates.com, LLC, 521 F.3d 1157 (9th Cir. 2008) ...................................................................6 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ................................................................................11 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) ..................................................................... 2, 16, 19 Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) .................................................... 16, 18, 19 Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995) ..................................9 TRW, Inc. v. Andrews, 534 U.S. 19 (2001) ........................................................................... 11, 17 United States v. Daas, 198 F.3d 1167 (9th Cir. 1999). ................................................................17 United States v. Wenner, 351 F.3d 969 (9th Cir. 2003) ...................................................................11 Statutes 17 U.S.C. 504(c)(2)...........................................................................................9 17 U.S.C. 512 .......................................................................................... passim - ii -

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Page(s) Other Authorities http://en.wikipedia.org/wiki/World_Wide_Web .................................................8 Kozinski and Goldfoot, A Declaration of the Dependence of Cyberspace, 32 Colum. J.L. & Arts 365 (2009) ................................ 7, 16 Menell, Indirect Copyright Liability and Technological Innovation, 32 Colum. J. L. & Arts 375 (2009) ................................................................7 William F. Patry, Patry on Copyright, 9.5 (2011)............................................8 Rules Fed. R. Civ. P. 12(b)(6) .......................................................................................5

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Appellants UMG Recordings, Inc.; Universal Music Corp.; Songs Of Universal, Inc.; Universal-Polygram International Publishing, Inc.; Rondor Music International, Inc.; Universal MusicMGB NA LLC; Universal MusicZ Tunes LLC; and Universal MusicMBG Music Publishing Ltd. (collectively "UMG") respectfully seek rehearing and suggest rehearing en banc of the panel decision in UMG Recordings, Inc., et al. v. Veoh Networks, Inc. ("Veoh"), et al., Nos. 09-55902 and 09-56777.1 This case is one of the most closely watched and anticipated copyright decisions in years. It presents critical issues concerning the enforcement of copyrights on the internet. The panel's decision creates different principles of copyright liability for the internet than those applicable in the brick and mortar world. In the latter, copyright liability is indisputably a strict liability offense. After the panel's decision, even a website like Appellee Veoh's, that hosts, distributes and provides free downloads of tens of thousands of copyrighted works, without a license for any of them, is only financially responsible for infringement if it ignores a statutorily compliant "take down notice" from the copyright owner.

The panel decision also addressed Docket No. 10-55732, but UMG does not seek rehearing of that portion. -1-

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As a legal matter, the panel's decision conferring such broad immunity seriously upends the carefully-crafted balance between the interests of copyright owners and internet service providers embodied in Section 512 of the Copyright Act, which was enacted as part of the Digital Millennium Copyright Act ("DMCA"). Rather than adhering to the balance struck by Congress, the panel created its own balance and thereby rendered multiple provisions of Section 512 a nullity. The end result was a decision that finds no support in the language of Section 512 and which conflicts with important precedents of this Court (such as A&M Records v. Napster) and the United States Supreme Court's landmark decision in MGM v. Grokster. As a practical matter, the decision shifts burdens to content owners, while shifting benefits to internet providers. It places an impossible burden on copyright owners such as UMG whose businesses depend on payment for the use of their copyrighted works, but who receive no payment from unauthorized distributors like Veoh and who must now incur the expense of constantly scouring the tens of thousands (or indeed millions) of internet sites for each copy of their works. Under the panel's regime, content owners bear this burden while the internet sites reap the financial benefits of displaying and distributing pirated copyrighted works (by, among other things, deriving advertising revenues when the copyrighted works are displayed). This regime eviscerates

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any incentives to undertake precautions to prevent infringement in the first instance or obtain licenses for copyrighted works because the panel holds that their only obligation is to respond to take down notices regardless of their own knowledge of infringement. BACKGROUND Veoh operated an internet service designed to derive advertising revenue from video content. Veoh encouraged millions of users to uploaded videos, and then distributed those videos to the entire world for free. Veoh (not its users) did this by copying the videos into different formats and then making them available for unlimited, on-demand viewing through Veoh's internet site, and also by the inclusion of a "download button" which allowed anyone to make a perfect, permanent, digital copy in much the same way one could purchase a legal copy of a copyrighted video through Apple's iTunes online store. Veoh used these videos to make money for itself, not for content owners. Veoh sold advertising to accompany the videos. The more viewers the content attracted, the more money Veoh made. And Veoh knew that professionally-produced copyrighted videos, like UMG's, attracted viewers. Veoh did not pay for the content it distributed, and made no effort to obtain permission from the creators of that content. Veoh also eschewed readilyavailable technology to limit its widespread copyright infringement. Veoh

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could have used Audible Magic filtering technology to identify and remove copyrighted material. Instead, Veoh avoided such filters for as long as possible so that tens of thousands of popular copyrighted videos would remain on its site, knowing that removing them would hurt its business. Veoh not only understood that its system could be used to infringe, it knew to a certainty that its system was being used to infringe. A Veoh employee wrote, "isn't [infringing content] a majority of Veoh content? . . . And what should i do, for example, with music videos which are all copyrighted?" A Veoh executive responded, "You are correct, we have many unauthorized content" and encouraged him to avoid referring to copyrighted materials in email or text messages (to conceal evidence of Veoh's extensive knowledge of infringement).2 The panel held this knowledge irrelevant because it did not come from a take-down notice elevating form over substance. Veoh's knowledge of its infringement was so extensive that it purchased search terms from Google containing the names of UMG's copyrighted songs advertising Veoh's unauthorized exploitation of this material. UMG is in the content creation business. UMG produces and sells recorded music and musical compositions. UMG sued Veoh because Veoh was using thousands of UMG's copyrighted works to reap advertising revenue
2

RE 1233-34. -4-

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without permission. Veoh copied these works, held them on its own computers, displayed them works along with its advertising, and distributed additional copies of them as downloads. These actions constitute infringement of UMG's exclusive rights under copyright. UMG also brought suit against several owner-operators of Veoh who actively facilitated and directed Veoh's infringement. In two separate decisions, the District Court dismissed UMG's claims. First, it granted a Rule 12(b)(6) motion to dismiss UMG's secondary liability claims against Veoh's owner-operators, creating an entirely new requirement of complete control over the direct infringer. Second, it granted Veoh's motion for summary judgment, finding that, as a matter of law, Veoh established every element of its affirmative defense under Section 512(c). UMG appealed these decisions, identifying multiple errors. The panel, however, affirmed. ARGUMENT A. The Issues Presented Are Exceptionally Important Because Of Their Sweeping Impact On Internet Commerce. This case presents serious issues addressing the balance between copyright holders and internet providers. Many of these issues are also presented in a case pending before the Second Circuit - Viacom v. YouTube. There, as here, the panel is weighing the proper interpretation of the DMCA

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standards for knowledge. After hearing, the Second Circuit requested supplemental briefing explaining what the "red-flag" knowledge requirement actually meant, and how YouTube's syndication of videos to third parties could fall within a "safe harbor" for "storage at the direction of a user." Because of their importance, these are two of the most closely-watched copyright cases in many years. The interest of numerous Amici that submitted briefs, both in this case and in the YouTube case, also highlights their importance. The panel decision undermines this Court's caution that courts must take care not to give internet businesses an unfair advantage by exempting them from laws of general application that apply to their "real-world counterparts."3 The panel decision notes that Section 512 was intended to provide "strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements."4 Yet, the result conflicts with that acknowledgement. The panel decision overwhelmingly shifts the balance to internet business, holding that they need only respond to specific take down notices (on a url by url basis) received from the copyright owner and have no obligation to make any effort to avoid infringing the copyrights of others. This is not a model for cooperation. It is a model for massive, widespread

Fair Housing Council of San Fernando Valley v. Roomates.com, LLC, 521 F.3d 1157, 1164, n. 15 (9th Cir. 2008). -6-

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infringement. If service providers need only wait to be told of infringement, why would they ever undertake more? What possible incentive would they have to obtain a license to copyrighted material, or implement technology to limit infringement? This is not the "balance" Congress intended. The panel decision will facilitate the very behavior society has prohibited.5 Moreover, it will dramatically handicap copyright holders in their efforts to deter infringement. The panel decision renders the "notice-andtakedown" process as the sole recourse for copyright holders, regardless of the knowledge of the internet provider, regardless of the intent of the internet provider, and regardless of the internet provider's financial benefit from the infringement. The panel's holding imposing all of the burdens on copyright holders ignores what Congress did and why it did it. Such "policing" of the entire internet would be a Sisyphean task for copyright holders, and Congress knew it. When the DMCA was enacted in 1998, Congress noted that the Yahoo!

4 5

Opinion at 21082.

See Kozinski and Goldfoot, A Declaration of the Dependence of Cyberspace, 32 Colum. J.L. & Arts 365, 370-71 (2009); see also Menell, Indirect Copyright Liability and Technological Innovation, 32 Colum. J. L. & Arts 375, 399 (2009) (discussing the fallacy that enforcing the law stifles innovation and noting that broad immunity "fosters deployment of parasitic technologies that tend to drive out balanced technologies [those that tend to
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directory of the internet at that time categorized more than 800,000 online locations.6 By the end of 2005, studies indicated that the internet contained more than 11.5 billion publicly accessible web pages.7 By March 2009, less than four years later, that number had more than doubled to more than 25 billion.8 B. The Panel's Decision Undermines Copyright Protection On The Internet Contrary To Prior Precedents.

1.

The panel decision renders the language "infringement of copyright by reason of the storage at the direction of a user , . ." superfluous void or insignificant.

"Copyright is a strict liability tort; as such, intent to infringe is not an element of plaintiff's prima facie case for most allegations of direct infringement. Thus, a publisher who is unaware that its author has incorporated infringing material is liable, as is the printer . . . ."9 This principle

balance incentives to create copyrighted works with advances in information dissemination]."

6 7 8 9

S. REP 105-190, *49. See http://en.wikipedia.org/wiki/World_Wide_Web Id. William F. Patry, Patry on Copyright, 9.5 (2011) -8-

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features in Supreme Court precedent for decades.10 Copyright infringers may be liable for statutory damages even if they prove they were unaware their conduct was infringing.11 Congress enacted Section 512 in 1998, partly in reaction to the Netcom case in the Northern District of California.12 Section 512 created four "safe harbors" for discrete activities. Section 512(a) created protections for transitory digital network communications, Section 512(b) for system caching (temporary storage of information), and Section 512(d) for information location tools. Section 512(c) at issue here created protections for storage of material at the direction of a user. These separate activities must be understood as separate protection for one does not extend to others.13 And the four certainly were not intended to cover all activities on the internet. These provisions were designed to protect the internet highway itself, not the trucks that use that highway. The panel misconstrues this structure and allows Veoh one of the trucks to invoke the protections of Section 512(c) to

10 11 12

See Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 198 (1931). 17 U.S.C. 504(c)(2).

Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995).
13

17 U.S.C. 512(n). -9-

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immunize all of its activities, including knowing unauthorized distribution of copyrighted content. Section 512(c) limits liability for "infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider." While Veoh did store material, it did not stop there. Veoh went on to make multiple copies, display the copies, and distribute copies to others. The panel decision overstates the 512(c) defense as an automatic protection for all activity associated with stored material. To reach this incorrect result, the panel critically changes the statutory language when it asks whether "infringing conduct" was by reason of storage.14 The panel incorrectly conflated whether the infringement was by reason of storage (i.e. the storage was the infringement), with the idea that some separate infringing conduct was undertaken due to the storage of material. This ruling conflicts with Supreme Court precedent that "by reason of" must be construed narrowly in federal statutes.15 The panel decision also incorrectly focuses on an entirely separate provision of Section 512. Section 512 broadly defines "internet service

14

Opinion at 21072. - 10 -

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provider" in Section 512(k), but sets forth specific so-called "safe harbors" that might apply to certain activities of such service providers in Sections 512(a)(d). The panel reasons that if Congress intended to limit these "safe harbors" in Sections 512(a)-(d), it would not have broadly defined "service providers" and thus the activities of all service providers must be included. The panel misses the point. Veoh fits this broad definition because it is potentially immunized such immunity only applies to the specifically enumerated activities, not other, additional activities. The panel's reasoning renders the statutory language defining the contours of the "safe harbors" a nullity a result contrary to established Supreme Court precedent regarding statutory interpretation.16 Congress used broad language to define the entities potentially qualifying for the "safe harbors," but used narrow language to define when each "safe harbor" actually applied. If Congress intended all "service providers" to be protected for their

See Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 267-68 (1992). "It is 'a cardinal principle of statutory construction' that 'a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.'" TRW, Inc. v. Andrews, 534 U.S. 19, 31 (2001), quoting Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) (internal quotation marks omitted); see also United States v. Wenner, 351 F.3d 969, 975 (9th Cir. 2003) ("[A] statute should not be construed so as to render any of its provisions mere surplusage."). - 11 16

15

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activities, it would have had no need for the specific requirements of each "safe harbor" in Sections 512(a)-(d). Nothing in the statute suggests that every "internet service provider" must be protected, or that all of the activities of a provider qualifying for some protection are thereby protected. The panel misapplies these principles when, for example, it examines the activities involved in operating a website in order to determine what is protected.17 Congress spelled out what activities are to be protected. The panel opinion substitutes its own judgment by making the unsupported assumption that all activities involved in operating a website should be within the storage "safe harbor." For example, it considers the transmission of information as within Section 512(c), even though transmission is separately addressed in Section 512(a).18 This approach is contrary to that required by Section 512, particularly Section 512(n). 2. The panel decision all but eviscerates Section 512(c)(1)(A)(ii) and its "red flag" knowledge standard. Even if infringement was by reason of storage, protection by the "safe harbor" is not assured. Congress set out additional requirements in Section 512(c)(1)(A). Under Section 512(c)(1)(A)(i), the service provider must "not

17 18

See Opinion at 21077. Id. - 12 -

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have actual knowledge that the material or an activity using the material on the system or network is infringing." Section 512(c)(1)(A)(ii) further requires that "in the absence of such actual knowledge, [the service provider] is not aware of facts or circumstances from which infringing activity is apparent." This is often referred to as "red flag" knowledge. These two different provisions must mean two different things. The second standard must apply even where actual knowledge is lacking (given its use of the phrase "in the absence of such actual knowledge"). The panel decision never states what kind of knowledge less than actual knowledge could satisfy this requirement the precise question on which the Second Circuit requested supplemental briefing in YouTube. Instead, the panel decision renders this second requirement meaningless by equating it with the actual knowledge standard, leaving no daylight between the two. The panel decision concludes that the burden is on a copyright holder to place a service provider on notice of a specific act of infringement to create either actual or "red-flag" knowledge.19 Thus, if the actual knowledge standard were not satisfied, the lesser, "red flag" standard could never be satisfied. This interpretation renders Section 512(c)(1)(A)(ii) mere surplusage, violating clear

19

Opinion at 21082-21085. - 13 -

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precedent and leading the panel to ignore significant evidence of Veoh's knowledge.20 The panel decision draws heavily from the separate, notice-and-takedown provisions of Section 512(c)(3) essentially importing those requirements as the sole basis by which any relevant knowledge may be acquired. This effectively renders all of Section 512(c)(1) redundant and meaningless.21 Had Congress meant to enact a regime where internet service providers could only be liable for infringement if they refused to remove

The panel decision also failed to apply the appropriate standard of review. Though the decision below granted summary judgment for Veoh, the panel failed to construe the evidence in the light most favorable to UMG and draw inferences in UMG's favor. For example, UMG presented evidence that Veoh purchased Google search terms that specifically identified UMG's copyrighted works (Excerpts of Record, NO. 09-56777, 389-90, 393, 395, 399, 407, 414, 587, 596, 604-605, 613-614, 665, 1537). The panel hypothesized an explanation of why Veoh might have done this even if it did not have the content referenced in the search terms on its service in order to conclude that it did not support a finding of knowledge. (Opinion at 21085). The panel ignored record evidence in which a Veoh executive testified they would not buy such terms if they did not know they had the content. (RE 374-376). The panel decision relies heavily on Section 512(m) in an effort to justify its evisceration of other provisions of Section 512 by holding that Section 512(m) would somehow prohibit any requirement that an internet provider undertake any efforts to avoid infringement. The fact that this interpretation would render so many other provisions of Section 512 a nullity confirms that it is incorrect. Section 512(m) merely provides that absent some kind of knowledge or financial benefit, a service provider need not seek out the possibility of infringement. Knowledge, even "red flag" knowledge, creates an obligation to do more. Section 512(m) does not simply eliminate this obligation as the panel holds. - 14 21

20

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specific material identified to them by the copyright holder, it could have done so with a far simpler structure than Section 512. 3. The panel decision also renders Section 512(c)(1)(B) meaningless. In addition to the actual knowledge and "red flag" knowledge provisions, Congress enacted another eligibility requirement for the "safe harbor". Congress literally copied the common law standard for vicarious liability. Under Section 512(c)(1)(B), a service provider must "not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity." The panel excises this provision wholesale by substituting in the actual knowledge standard: "we conclude that a service provider must be aware of specific infringing material to have the ability to control that infringing activity within the meaning of 512(c)(1)(B)."22 If a service provider lacked actual knowledge under Section 512(c)(1)(A)(i), then Section 512(c)(1)(B) would never apply. The Court must presume Congress intended this provision to have meaning. The panel decision eliminates that meaning. The panel decision also renders Section 512(c)(1)(B) a nullity in another way. It holds that to have the "right and ability to control" infringing activity, a
22

Opinion at 21091. - 15 -

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service provider must be able to "ensure that no infringing material is ever uploaded to its site."23 This standard of perfection could never be met. Reason dictates that Congress did not intend to enact such a meaningless provision. The panel decision conflicts with governing precedents that businesses must police their activities to the extent reasonably possible in order to avoid infringement. For example, this Court held that internet service providers must take the steps reasonably available to them to avoid infringement.24 Chief Judge Kozinski summarized this principle: "if people are using your stuff to infringe copyrights, and you know about it, and you can easily stop them, but you do not, then you are on the hook."25 The Supreme Court applied the same principle. It held that Grokster's failure to implement tools to reduce infringement showed Grokster's culpability and reversed this Court's holding that such evidence was irrelevant.26 Record evidence showed that Veoh delayed implementation of available filtering technology to continue its infringement. As acknowledged by the panel, Veoh began operations in 2005,

23 24

Opinion at 21090. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1172 (9th Cir.

2007). Kozinski and Goldfoot, A Declaration of the Dependence of Cyberspace, 32 Colum. J.L. & Arts 365, 367 (2009). Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 939 (2005). - 16 26 25

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but did not implement filtering technology until 2007 and further delayed applying the filter to videos already on its service.27 Summary judgment evidence showed that Veoh continued to exploit more than 60,000 infringing videos due to this delay.28 The panel held such evidence irrelevant, contrary to established precedent. 4. The panel decision improperly rewrites Section 512(c).

The rules governing statutory interpretation are clear. Statutory language should be accorded its plain meaning.29 All provisions of the statute must be given meaning.30 Instead, the panel displaced Congress's considered judgment with its own views regarding what laws should apply to businesses on the internet. Far from deferring to Congress, the panel essentially rewrote Section 512(c). As a consequence of the panel's decision Section 512(c) is effectively rewritten as follows: (c) Information residing on systems or networks at the direction of users. (1) In general. A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the
27 28 29 30

Opinion at 21065-21066. Opinion at 21066-21067. United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999). TRW, Inc. v. Andrews, 534 U.S. 19, 31 (2001). - 17 -

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service provider or subsequent copying, display, or distribution of such material, if the service provider (A)(i) does not have actual knowledge that the specific material or an activity using the specific material on the system or network is infringing; (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent that the specific material or an activity using the specific material on the system or network is infringing; or (iii) upon obtaining such specific knowledge or awareness, acts expeditiously to remove, or disable access to, the specific material; (B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has actual knowledge that the specific material or an activity using the specific material on the system or network is infringinghas the right and ability to control such activity; and (C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the specific material that is claimed to be infringing or to be the subject of infringing activity. Congress could have drafted Section 512(c) this way. It did not, nor did it intend to. C. The Panel Decision Conflicts With Precedent Regarding Secondary Liability. UMG also appealed the District Court's ruling that several owneroperators of Veoh ("Shelter Defendants") were not subject to secondary liability. In this Court's Perfect 10 decision, the Court held that "an actor may be contributorily liable for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct

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infringement."31 The panel decision rejects this precedent and instead requires that to be liable, an entity must actually have full control of the direct infringer.32 The prior decisions of this Court in Napster,33 and of the Supreme Court in Grokster,34 hold that the knowing facilitation of infringement is sufficient without imposing a complete control requirement. If one were fully in control of Veoh, as the panel requires, he would be a direct infringer. The panel decision would eliminate contributory liability by requiring complete control over the direct infringer rather than applying clear precedent.35

31

Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1171 (9th Cir. Opinion at 21099. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913

2007).
32 33 34

(2005). As with its consideration of summary judgment, the panel decision also misapplies the standard of review regarding this motion to dismiss issue. The panel failed to credit UMG's allegations that each of the Shelter defendants had the ability to supervise Veoh's infringing activity, including as shown by the fact that when any one of them demanded removal of content, it was removed, and that each individually had the power to require Veoh to implement filtering technology. (Excerpts of Record, No. 09-55902, at 68-69). - 19 35

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Dated: January 24, 2012

IRELL & MANELLA LLP Steven A. Marenberg Brian D. Ledahl

By: /s Brian D. Ledahl Brian D. Ledahl Attorneys for Appellants

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CERTIFICATE OF COMPLIANCE Pursuant to Fed. R. App. P. 32(a) and Circuit Rule 40-1, I certify that the attached petition complies with the type-volume limitations because it contains 4160 words . This petition complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2011 in 14-point font size and Times New Roman font style. Dated: January 24, 2012 IRELL & MANELLA LLP Steven A. Marenberg Brian D. Ledahl

By: /s/ Brian D. Ledahl Brian D. Ledahl Attorneys for Appellants

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Case: 09-56777

01/24/2012

ID: 8043246

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CERTIFICATE OF SERVICE I hereby certify that on January 24, 2012, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the appellate CM/ECF system. I further certify that some of the participants in the case are not registered CM/ECF users. I have mailed the foregoing document by FirstClass Mail, postage prepaid, or have dispatched it to a third party commercial carrier for delivery within three calendar days, to the following non-CM/ECF participants: Alisa Shu Edelson Kulik Gottesman Mouton & Siegel, LLP Suite 1400 15303 Ventura Blvd. Sherman Oaks, California 91403 Maria K. Vento Wilmer Cutler Pickering Hale and Dorr LLP 950 Page Mill Road Palo Alto, California 94304 Mark G. Matuschak Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109-1803

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Case: 09-56777

01/24/2012

ID: 8043246

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Rebecca L. Calkins Winston & Strawn, LLP 38th Floor 333 South Grand Avenue Los Angeles, California 90071

By: /s/ Brian D. Ledahl Brian D. Ledahl

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