I'm confused, if "knowledge of infringing material and do nothing about it" cause you have no safe harbor. Any big content site like YouTube must know some of it's users are abusing the service, but they're more likely to handle it after there's complain.
Or how can you tell whether a file is copyright infringement or not? censoring all uploads, non sense.
Huge difference between knowing there's some infringing content somewhere versus reviewing, rewarding, and noting an uploader because of "10+ Full popular DVD rips (split files), a few small porn movies, some software with keygenerators (warez)." Censoring all uploads is hyperbole.
YouTube is probably not the best example, because they built their userbase on allowing copyright-infringement until they were big enough to negotiate directly with the content owners. If Megaupload had sold out to Google or some other legit business with deep pockets, they would not have been busted.
