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The platforms would be liable only if they did not act quickly to block access once they had learned of illegal uploads, the court said in its ruling on Thursday.
The case comes amid a long-running battle between Europe’s $1 trillion creative industry and online platforms, with the former seeking redress for unauthorised uploads.
It is also part of the wider debate on how much online platforms and social media should do to police the posting of unauthorised, illegal or hateful content.
Operators of upload platforms could in principle also be obliged to disclose the identify of users who commit the infringements and their email addresses, according to the ruling.
The court based its ruling on one issued by the EU Court of Justice last year.
Thursday’s decision involves a lawsuit filed by a music producer after video and audio recordings of an artist he owned the rights to were still available on YouTube even after the producer’s lawyer had sent a letter asking them to be removed.
No final decision was taken by the court over whether YouTube was liable, which means the case will return to the lower courts for re-examination based on the new guidelines.
YouTube said it was confident in the systems it had built to fight copyright infringement and ensure rights holders would receive their fair share.
