• by Wendy Davis , Staff Writer @wendyndavis, December 9, 2013

A lengthy battle stemming from a YouTube clip of a baby dancing to a Prince song could lead some entertainment companies to rethink the way they police the Web for copyright infringement.

The dispute dates to 2007, when Stephanie Lenz posted a 29-second clip of her toddler dancing while Prince's “Let's Go Crazy” played in the background. Universal Music sent YouTube a takedown notice that asserted the clip infringed copyright. Lenz said the video was protected by fair use principles. After around six weeks, Google agreed and restored the clip.

Lenz later sued Universal, arguing that the Digital Millennium Copyright Act imposes liability on companies that knowingly send improper takedown notices. Lenz and Universal both contended that they were entitled to win the case without a trial.

Earlier this year in San Jose, Calif., U.S. District Court Judge Jeremy Fogel rejected both sides' arguments and ruled that the dispute presented factual issues that can only be decided by a trial.

Now, both Universal and Lenz have appealed to the 9th Circuit. Each side says it was entitled to win without a trial.

Universal argues that it can't be found liable because it didn't knowingly send a wrongful takedown notice. “A copyright owner ... has not knowingly misrepresented that a use is infringing by failing to consider fair use,” the company argues. “The most that can be said is that a copyright owner acted negligently in sending the notice without considering fair use.”

For her part, Lenz says that Universal acted in bad faith because it sent a takedown notice without considering whether the clip was protected by fair use. “Universal had all the facts it needed to determine that that Ms. Lenz’s use was lawful, if only it had bothered to consider the issue,” Lenz's lawyers from the digital rights group Electronic Frontier Foundation argue in court papers filed on Friday.

If Lenz prevails on appeal, the ruling could spur entertainment companies to proceed with caution before sending takedown notices. After all, figuring out whether a clip includes copyrighted music or film doesn't require a great deal of judgment. But determining whether the clip makes fair use of the material often takes more thought.

Fogel's ruling earlier this year also limited the damages that Lenz can potentially recover: Even if she wins, she can only be reimbursed for legal bills related to fighting the original takedown notice -- which don't amount to very much. Fogel rejected Lenz's theory that she was entitled to damages because her "freedom to express herself through video had been restricted." He ruled that people can only recover damages when the government -- not a private company -- acts in a way that chills free speech.

Some legal experts said that ruling makes it extremely unlikely that other people will sue over wrongful takedown notices; doing so simply won't be worth anyone's time.

Lenz is now asking the 9th Circuit to also reverse that portion of Fogel's ruling. The EFF argues that Lenz is entitled to compensation for Universal's alleged infringement of her ability to express herself online. “Ms. Lenz is not arguing that Universal 'violated' the First Amendment, because the First Amendment by its terms applies only to state action,” her lawyers argue in their appellate papers. “Ms. Lenz simply notes that the right to speak unquestionably has value -- that is precisely why the Constitution prohibits Congress from making any law abridging freedom of speech.”