By Jonathan Stempel
(Reuters) - Copyright holders must consider "fair use" before demanding that people remove videos they post online, such as on Google Inc's YouTube, a U.S. appeals court ruled on Monday.
In a closely followed case over the home video of a toddler dancing to the Prince hit "Let's Go Crazy," the 9th U.S. Circuit Court of Appeals in San Francisco ruled against Vivendi SA's Universal Music Group in saying damages are available if copyright holders demand unauthorized takedowns of videos.
"Copyright holders cannot shirk their duty to consider - in good faith and prior to sending a takedown notification - whether allegedly infringing material constitutes fair use," Circuit Judge Richard Tallman wrote for a 3-0 panel.
The decision could make it harder for copyright holders to invoke the federal Digital Millennium Copyright Act when seeking to remove alleged infringing content from the Internet. Critics say abusive takedown notices can suppress free speech.
Stephanie Lenz of Gallitzin, Pennsylvania had in February 2007 uploaded to YouTube a blurry 29-second clip of her 13-month-old son Holden happily bobbing up and down to "Let's Go Crazy," a 1984 song by Prince and The Revolution that played in the background.
Lenz said she thought her family and friends would enjoy seeing the toddler, who had just learned to walk, dance as well.
But Universal, which enforced Prince's copyrights, persuaded YouTube to remove Lenz's video, citing a good faith belief that the video was unauthorized.
Lenz had the video restored and, with the help of the Electronic Frontier Foundation, sued Universal over the takedown notice, saying the company knew her use was fair.
In January 2013, U.S. District Judge Jeremy Fogel in San Francisco said copyright holders must consider fair use, but denied Lenz's misrepresentation claim.
Upholding that ruling, Tallman said there can be liability if a copyright holder "knowingly misrepresented" in a takedown notice that it had a good faith belief that a video "did not constitute fair use."
But he said courts should defer to a copyright holder who has a "subjective good faith belief" to the contrary.
The 9th Circuit said Lenz failed to overcome this hurdle, and instead may seek nominal damages for the "unquantifiable harm" she suffered.
Universal and Lenz's lawyers had no immediate comment.
The case is Lenz v Universal Music Corp et al, 9th U.S. Circuit Court of Appeals, Nos. 13-16106, 13-16107.
(Reporting by Jonathan Stempel in New York; Additional reporting by Andrew Chung in New York)