Warning: I'm not a lawyer; all of the following is my interpretation and attempt at summary, and could be wrong. You can download an 18-page PDF file containing the full decision if you want to read it for yourself.
Harlan Ellison's appeal regarding the AOL copyright-infringement lawsuit has been resolved: the upshot is that one part of Ellison's lawsuit (the contributory infringement part) can now continue, because the appeals court says that it's possible that AOL doesn't qualify for safe-harbor status under the DMCA.
Somewhat simplified version of background: Ellison sued AOL for direct, contributory, and vicarious copyright infringement, on the grounds that a Usenet newsgroup that AOL carried contained a pirated copy of one of Ellison's works, and AOL didn't take down the infringing material when notified.
It turned out that AOL didn't receive the notification, because they had changed their email address for reporting piracy, and they didn't publicize the change, and they stopped reading mail to the old address, and they didn't bounce or forward mail addressed to the old address. If they'd handled the email address stuff correctly, this case would be over now; let this be a lesson to y'all sysadmins.
In the original district-court case, AOL asked for summary judgment in its favor, claiming protection from liability in accordance with the safe-harbor clause of the DMCA; in other words, they're a service provider, so they don't control what's on their servers, so (they claim) they're immune from liability. The district court agreed that AOL met the criteria for safe-harbor status, so the district court granted the summary judgment.
Ellison appealed the contributory and vicarious infringement parts (he dropped the direct-infringement part). "Contributory" infringement happens when someone who either knows about or ought to know about the infringement assists another party in infringing; "vicarious" infringement happens when someone receives direct financial benefit from another party's infringement (and has supervisory control over the infringing activity).
The appeals court now says the summary judgment shouldn't have been granted; instead, they say, it's up to a jury to decide whether AOL met the eligibility threshold for safe-harbor status. Specifically: to qualify for safe-harbor status, you have to "reasonably implement [an anti-piracy] policy," and the appeals court says that a jury could find that AOL's handling of the email address stuff indicates that AOL failed to reasonably implement such a policy.
If a jury decides that AOL failed in that regard, then AOL doesn't qualify for safe-harbor status, and AOL could be found guilty of contributory infringement. Note that the appeals court didn't say AOL isn't eligible for safe-harbor status; they just said that it's a matter for a jury to decide rather than for the district court to rule on without a trial. If the jury decides that AOL did reasonably implement the policy, then AOL does qualify for safe-harbor status, and the case is over.
So the contributory copyright infringement case can proceed to trial. However, the appeals court did uphold a couple of the district court's findings: specifically, it agrees with the lower court that "Ellison's claim of vicarious copyright infringement fails." (In other words, AOL didn't receive direct financial benefit from the infringement.) So the only part of the case remaining to be resolved is the contributory infringement part.
One nice thing from my point of view about this result is that (I think) it doesn't poke any holes in the idea of safe-harbor status in general; ISPs are still safe in general. It just says that AOL may not have fulfilled its responsibilities to be eligible for that status. It's still a little scary for ISPs, though, I would guess; even those who want to comply with the DMCA may make tiny technical mistakes that will open them up to later liability.