One copyright case that owners and licensors of digital content should be following closely in the coming months is the one brought against Universal Music Group by Stephanie Lenz, a Pennsylvania mom who posted a video on YouTube of her young son on a tricycle with Prince’s “Let’s Go Crazy” playing in the background. Universal submitted a DMCA takedown notice claiming that the video infringed its copyright in the Prince song. YouTube immediately removed Lenz’s video.  Lenz was able to get it restored seven weeks after filing a DMCA counter-notification asserting that her video constituted fair use of the song. Lenz then sued Universal for interfering with her legal right to post the video online.

As we discussed in a previous post, Lenz, in her suit against Universal, is asserting a claim of “misrepresentation” under Section 512(f) of the DMCA, which states that

“Any person who knowingly materially misrepresents under this section that material or activity is infringing…shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer… who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material or activity claimed to be infringing…”

Lenz’s misrepresentation claim, therefore, could be sustained only if Universal failed to comply with the takedown requirements under Section 512(c)(3)(A)(v) which states that any copyright holder filing a takedown notice must have “a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.”

In response to Lenz’s suit, Universal filed a motion to dismiss claiming that copyright owners cannot be required to evaluate the question of fair use prior to sending a takedown notice because fair use is merely an excused infringement of copyright rather than a use authorized by the copyright holder or by law. In other words, the “good faith” requirement under Section 512(c)(3)(A)(v) does not apply because fair use is not a use authorized by law. Lenz (supported by lawyers from the Electronic Frontier Foundation), countered that fair use is, in fact, an authorized use of copyrighted material and that copyright holders cannot represent in good faith under the DMCA that content infringes copyright as required without considering all authorized uses of such content, including fair use.

In August, the U.S. District Court for the Northern District of California, rejected Universal’s motion to dismiss and held that the Copyright Act provides explicitly that “the fair use of a copyrighted work…is not an infringement of copyright” and that fair use is lawful use of copyright. Accordingly, the court held that Section 512(c)(3)(A)(v) applies to fair use of a copyright and therefore Universal could be held liable on a claim of misrepresentation if Lenz can prove the requisite standard of subjective bad faith necessary to prevail.

While the impact of this decision is not yet clear (as it is merely a dismissal of a motion that allows the case to proceed), copyright holders need to proceed with caution in their approach to issuing takedown notices. If the district court’s initial ruling is upheld, it is possible that copyright holders may be required to consider the potential fair use applications of a copyrighted work before issuing takedown notices and the failure to do so may constitute a violation of the DMCA. In other words, corporations and their intellectual property enforcement regimes will now be tasked with making value judgments on the applicability of the fair use doctrine—one of the most amorphous and continually evolving legal concepts in existence.