A controversial ruling by the Ninth Circuit Court of Appeals was issued last week, which has the potential to discourage websites from relying on moderators for user-generated content going forward.
In the case of Mavrix Photographs LLC v. LiveJournal, Inc., No. 14-56596 (9th Cir. filed April 7, 2017), the Court ruled that agency law applied to the analysis of whether website content was posted at the direction of users, and that the DMCA safe harbor under Section 512(c) would only apply if the website could prove that it lacked both actual and "red-flag" knowledge of the infringements. The Court defined "red-flag" knowledge as being whether a reasonable person would objectively know of the infringements, and said that if the DMCA safe harbor did in fact apply, the website would have to show that it did not financially benefit for the infringements that it had the right to control. The Court remanded the case back to the lower court to make findings consistent with its ruling.
The Ninth Circuit's ruling is controversial because the Court deemed that the availability of the DMCA safe harbor could be affected merely by the use of moderators on the platform. (See this blogpost by the Electronic Frontier Foundation "EFF"). The EFF argued that the test the Court established would put the analysis in front of a jury making a website's reliance on the safe harbor significantly more expensive.
Also, the ruling is controversial due to its interpretation of precedent. According to one commentator, Annemarie Bridy at The Center for Internet and Society at Stanford Law School, the Court confused two separate sections of the DMCA: the part applying to network providers and the part applying to online service providers, which resulted in a misapplication of the Court's own precedent.
The overall consensus opinion appears to be that this ruling will encourage online websites going forward to do less moderation of user-generated content, since the act of moderating the content could cause an online website to lose its safe harbor protections. According to a commentary published by Fenwick & West, this ruling also changes the best practice advice in the context of litigation so that an online website may be best advised not to invoke the safe harbor at all. Techdirt argues that this ruling is going to "backfire" on Hollywood, which generally is pro-moderation but takes a stance against the safe harbors, since the undermining of the safe harbor ironically is anticipated to discourage moderation altogether.
The bottom line is that this ruling seems to change the existing analysis for the availability of the DCMA safe harbor, and this change to existing precedent is noteworthy for any online platform which permits the posting of user content that could be infringing.