It was seen as a test of the Digital Millennium Copyright Act, a 1998 federal law making it illegal to produce technology to circumvent anti-piracy measures, and limiting liability of online service providers for copyright infringement by users.
In his June 2010 ruling, U.S. District Judge Louis Stanton in Manhattan said YouTube could not be liable simply for having a "general awareness" that videos might be posted illegally, and that it need not monitor for such activity.
But writing for a two-judge panel of the 2nd Circuit, Judge Jose Cabranes concluded that "a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website."
The plaintiffs had accused YouTube of broadcasting about 79,000 copyrighted videos on its website between 2005 and 2008.
ADVERSARIES, AND PARTNERS
A YouTube spokeswoman said in an e-mailed statement: "All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube. Nothing in this decision impacts the way YouTube is operating."
Viacom, in a statement, said the appeals court "delivered a definitive, common sense message to YouTube: intentionally ignoring theft is not protected by the law."
Other plaintiffs also welcomed the decision.
"Needless to say, my clients are delighted," said Charles Sims, a lawyer for the Premier League, the English soccer league, and several other plaintiffs. "YouTube willfully blinded itself to specific infringement and had ample ability to control infringing activity within the meaning of the copyright law."