The UGC Principles spell out "rules of the road" for using content identification technology, such as fingerprinting and watermarking, to determine when users try to upload copyrighted material to UGC sites and what to do about it.  The gist of the Principles is as follows:

• UGC sites agree to use effective content identification technology on user uploads, and to upgrade to improved technology as it becomes available.
• Content owners agree to provide information to UGC sites that enables them to use the technology -- such as watermarks, or copies of content for fingerprinting purposes.
• Content owners can provide rules for what action to take if a UGC site finds infringing content.  The default rule is to block the content from being uploaded.  (Other rules could be to serve an ad against the content and have the content owner share the revenue, substitute a free low-resolution version of the content, substitute a brief sample, etc.)
• The parties will work together on balanced conflict resolution processes, including allowing for fair use of copyrighted material in uploads.
• And the kicker: if a UGC site implements these principles in good faith, content owners agree not to sue for infringement.

The Principles make reference to notice-and-takedown procedures that are enshrined into law and map out how those processes should interact with content identification and filtering.  They also contain a number of items that reflect the types of special cases, compromises, and tradeoffs typical in negotiated multiparty treaties. 

For that is what the legally non-binding UGC Principles document is: a peace treaty; an attempt at détente.  It is intended to forestall what could otherwise be a never-ending series of arguments between content owners and UCG network operators over the effectiveness of technology for determining when users upload copyrighted material to those sites -- as well as to acknowledge that such technologies can never be 100% effective with no false positives. 

Without such principles in place, such arguments would take place in court -- a much more time-consuming, expensive, and ultimately unpredictable path for all parties. The content industry would like to establish a legal precedent that not filtering is tantamount to secondary infringement liability -- in effect, building on the Supreme Court's 2005 Grokster opinion and extending theories of liability from other court cases such as Napster (9th Circuit) and Aimster (7th Circuit).  The fact that major content owners are participating in these UGC Principles suggests that they find this not only a faster but also a more likely route to mandatory filtering than litigation.

Of course, some of these arguments are already taking place in court, including various lawsuits against Google/YouTube.  As of last week, Google is already implementing what it claims is a filtering scheme, and various parties -- including Philippe Dauman, Viacom's CEO -- have already expressed the opinion in public that the scheme is inadequate. 

The pending litigation is one reason why Google isn't participating in the UGC Principles.  Leaving that aside, Google's lack of participation is analogous to the situation with search engines and book content: Microsoft and Yahoo support the publisher-endorsed Open Content Alliance initiative for "opt-in" scanning and indexing of book content, while Google's "opt-out" book scanning policy has incurred the publishing industry's wrath.  More generally, this reminds us of the myriad "everyone but Microsoft" standards initiatives that were instigated -- typically by Sun Microsystems and Oracle -- several years ago. 

It's also worth noting that not all content providers are signatories to the UGC Principles.  Time Warner and Sony Pictures aren't participating, and the music industry isn't involved at all, even though content identification technology for music is conceptually similar to its video counterpart.  These companies' lack of participation could indicate to UGC sites that they aren't immune from litigation even if they implement the Principles, which in turn could undermine their chances for success.

Nevertheless, the UGC Principles are a worthwhile attempt to work out this looming dispute in the market rather than in the courts.  The participating UGC site operators are effectively agreeing to shoulder the cost of implementing content identification technologies as insurance against litigation.  As usual, there is no talk of content owners subsidizing all or part of the cost of the technology.

As with the anticircumvention provisions of the DMCA, the UGC Principles are careful to avoid any suggestions of specific technologies that should or should not be used.  But to their credit, the drafters did not repeat a key mistake in the DMCA. The DMCA avoids any characterization of how effective a content protection technology must be to qualify for protection under the law, thereby weakening vendors' incentives to build strong protection technologies. Instead, the UGC Principles contain clever language about the required effectiveness of content identification technologies: they state the effectiveness criterion as relative to other technologies, not relative to any absolute measure or standard.

As a result, if the UGC Principles flourish, they will encourage the development of a robust, competitive market for cost-effective content identification technologies such as fingerprinting and watermarking.  These technologies can be used to implement content business models that are far more interesting than merely blocking content from UGC sites.  The Principles acknowledge this as well, leaving the door open to many potentially interesting applications in the years to come.

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