A three judge panel from the 7th Circuit, which included the influential Judge Richard Posner, recently handed down a significant decision regarding the copyright implications of video streaming over social networks.

Plaintiff Flava Works produces pornographic movies which are only viewable behind a pay wall. As the court noted, “Flava specializes in the production and distribution of videos of black men engaged in homosexual acts.” The defendant Marques Gunter runs a “social video bookmarking” website called myVidster.com in which users can bookmark and playback videos from across the web. Posted videos are tagged for categorization, and can be viewed by any visitors to the site.

By default, myVidster has a “family” filter turned on, which results in content that is standard YouTube fare. However, if the filter is turned off, the court noted that “your visit will reveal a mixture of pornographic and nonpornographic videos, with the former predominating, and of those the majority are homosexual and many of the actors in the homosexual videos are black.” Thus, it would appear that myVidster was known as a source for such content.

Flava sued Gunter because myVidster users were bookmarking and streaming Flava videos that had been illegally uploaded to third party servers. The district court had previously granted a preliminary injunction to Flava, on the grounds that Flava had demonstrated a likelihood of success on its claim for contributory copyright infringement (a doctrine providing copyright liability for those who may not directly infringe, but nevertheless facilitate infringement by others). The district court emphasized the fact that myVidster users viewed bookmarked videos on the myVidster site, and when viewing videos were not taken to the third party sites that hosted the videos.

On appeal, the 7th Circuit reversed the preliminary injunction, adopting the standard that contributory infringement requires “personal conduct that encourages or assists the infringement.” The appeals court reasoned that the infringers here were those who actually copied Flava’s copyrighted videos by uploading them to third party servers on the Internet, and that there was no evidence that these infringers were users of myVidster, or that myVidster was encouraging these infringers to upload Flava’s content.

The appeals court compared myVidster’s actions to that of a publication providing movie showtimes, as myVidster was providing the addresses to third party locations where videos can be viewed, and letting users stream such videos directly from those locations. The court reasoned that “[s]omeone who uses one of those addresses to bypass Flava’s pay wall and watch a copyrighted video for free is no more a copyright infringer than if he had snuck into a movie theater and watched a copyrighted movie without buying a ticket. The facilitator of conduct that doesn’t infringe copyright is not a contributory infringer.” Moreover, the appeals court found that a DMCA safe-harbor analysis (often relied upon by ISPs whose networks include copyrighted content) was unnecessary, because “a noninfringer doesn’t need a safe harbor.”

This ruling will surely be welcomed by social networks such as Facebook, where sharing, embedding and playing back videos are indispensable features. Although social networks can already rely on the DMCA safe harbors for protection when their users post copyrighted content without authorization, this holding is nevertheless favorable to both social networks and their users. Cases like this highlight the balancing act that courts must perform as they try to strike a balance between social networks, where content sharing is encouraged, and content providers who seek to protect their assets – especially when technology moves faster than the law.