YouTube only becomes liable for copyright infringement once a copyright owner tells it of specific illegal files, the court said, giving summary judgement in YouTube's favour.
Viacom filed the lawsuit in 2007, claiming that Google-owned YouTube's business was based on copyright infringement and that, knowing that the site was full of copyright violations, it profited from the unauthorised use of its copyrighted material.
The US District Court for the Southern District of New York has ruled, though, that YouTube only becomes liable for infringement once it has been told of specific videos that infringe specific copyrights and fails to act to remove them from its site.
Like European Union law, US law the Digital Millennium Copyright Act (DMCA) allows online service providers to avoid liability for their users' law-breaking actions and absolves them of any burden to monitor their service for infringements of the law.
Once companies are told of law-breaking, though, they must act quickly to disable, remove or block the content or become liable, the safe harbour provisions of the DMCA say.
Viacom argued that Google did not deserve safe harbour protection because it knew that, in a general sense, infringement was taking place on a massive scale.
"[Google is liable] for the intentional infringement of thousands of Viacom's copyrighted works, … for the vicarious infringement of those works, and for the direct infringement of those works," said the Court's ruling, quoting from Viacom's case. "[Google] had 'actual knowledge' and were 'aware of facts and circumstances from which infringing activity [was] apparent' but failed to 'act expeditiously' to stop it."
Viacom said that Google profited from YouTube's carrying of copyrighted material and had it in its power to stop infringement but did not do so, and was therefore liable for the infringement.
The Court said that what it had to decide was whether Google had to have notice of specific infringements before it was forced to remove videos or whether a "general awareness" of infringing activity was enough to make it liable if it failed to remove material from its service.
The Court outlined the thoughts of committees from the US's two parliamentary chambers and said that they indicated that specific knowledge of individual infringements was what a company needed to have before it became liable for those infringements.
"The tenor of the foregoing provisions is that the phrases 'actual knowledge that the material or an activity' is infringing, and 'facts or circumstances' indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items," said the ruling. "Mere knowledge of prevalence of such activity in general is not enough. That is consistent with an area of the law devoted to protection of distinctive individual works, not of libraries."
The Court said that Viacom can have no quibble with how YouTube's current system operates.
"The present case shows that the DMCA notification regime works efficiently," the ruling said.
"When Viacom over a period of months accumulated some 100,000 videos and then sent on mass take-down notice on February 2, 2007, by the next business day YouTube had removed virtually all of them."
The Court said that previous cases made it clear that the responsibility to find and identity infringing material was the copyright holder's, not the online service provider's. "If a service provider knows (from notice from the owner, or a 'red flag') of specific instances of infringement, the provider must promptly remove the infringing material," it said.
"If not, the burden is on the owner to identify the infringement. General knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements," the ruling said.
Judge Louis Stanton rejected Viacom's claims that YouTube was like file sharing software publishers such as Grokster or Lime Wire and that the same legal principles should apply in this case as did in successful actions against those companies.
Those companies distributed software "with the expressed intent of succeeding to the business of the notoriously infringing Napster", Stanton said in his ruling. YouTube, on the other hand, provided a platform for content and removed infringing material when informed about it.
The Court gave a summary judgment in Google's favour on all the points it considered, and told the companies to consult with each other on whether any disputes had been left unresolved by the ruling.