MP3tunes Scores A Victory For Cloud Locker Services

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This is a guest post by Angus MacDonald, General Counsel at Live365, Inc. regarding a recent court ruling that could have significant impact on the streaming audio industry.

Cloud-based music services can heave a sigh of relief. MP3tunes, the cloud locker service founded by Michael Robertson, scored a partial victory in the copyright litigation brought by EMI. In his August 22nd decision, Judge William H. Pauley III agreed with MP3tunes that the safe harbor provision of the Digital Millennium Copyright Act (DMCA) protected it against many of EMI’s infringement claims. The decision represents a significant victory for other cloud-based music services – such as Google, Amazon and Dropbox – who should have renewed confidence in operating their cloud services without a license. Though the decision sets a beneficial precedent for cloud-based music services generally, it is a mixed result for MP3tunes as the court also found both the company and Robertson liable for copyright infringement on some of EMI’s claims.

MP3tunes allows its users to store music files in personal online storage lockers and then to play those stored files from Internet-connected devices. MP3tunes also operates a second website, Sideload.com, that permits users to search for free song files on third-party websites and then “sideload” those songs, which would be saved to users’ lockers. EMI, along with fourteen record labels and music publishers, filed this lawsuit in November 2007, claiming a laundry list of violations of copyright and unfair competition laws.

Yesterday’s decision turned largely on whether MP3tunes is eligible for the DMCA’s “safe harbor” protection, which shields qualifying online service providers from copyright infringement for content uploaded (or “sideloaded”) by their users. To qualify, online services must follow the rules set forth in the DMCA, including expeditiously responding to takedown notices from copyright holders. The court found that MP3tunes – for the most part – complied with all of the DMCA rules and, therefore, was largely immunized from liability.

However, MP3tunes and Robertson did not completely avoid liability. Shortly before filing this lawsuit, EMI sent MP3tunes three takedown notices that identified specific song titles and URLs to be removed. Although MP3tunes disabled the links to those songs, thereby preventing more users from downloading them, it did not actually delete the songs from the lockers of its users who sideloaded the songs from those links. (MP3tunes claimed that it would be subject to lawsuits by its users if it removed property from users’ lockers.) The court held that MP3tunes did not do enough when it failed to remove the sideloaded songs from users’ lockers.

As for Robertson, the court ruled that Robertson was “directly liable for the songs he personally sideloaded from unauthorized sites.” This finding is somewhat confusing based on the court’s earlier statements that “there is no evidence that MP3tunes executives or employees had firsthand knowledge that websites linked on Sideload.com were unauthorized.”

There are several key-takeaways from this important decision. First, this decision provides significant legal cover for cloud-based music locker services to continue providing their storage and play-back services without obtaining a license. (When Amazon and Google launched their respective cloud services earlier this year, the record labels were “upset” and clamored that licenses were necessary.) While the decision does not specifically address the legality of MP3tunes’ music locker business model or other similar cloud-based services, it is clear that MP3tunes would have completely escaped copyright liability if it had removed the specific songs listed in EMI’s takedown notices from its users’ lockers.

Second, the ruling re-affirms the DMCA as a powerful shield against copyright holders, who claimed that the DMCA did not apply to MP3tunes. As the court observed, “the DMCA does not place the burden of investigation on the Internet service provider.”

Third, the decision appears to let MP3tunes off-the-hook for its storage process, which eliminated duplications of the exact same music files so that only one copy of a particular file would be stored on its servers and then streamed to its users. Google and Amazon took a different approach when they launched their respective services as both companies require every user to upload every song, regardless of whether other users had uploaded identical files, thereby resulting in an enormous consumption of bandwidth and storage space.

Finally, the ruling indicated that playing back songs stored in a user’s digital locker was not a “public performance” requiring a license, contrary to EMI’s contentions. This holding was a natural extension of an earlier decision – commonly referred to as the Cablevision case, which determined that a public performance license was not required for the play-back of television shows that were stored on a remote DVR at the direction of Cablevision’s subscribers.

The EMI v. MP3tunes case, however, is not over. While the decision disposes of some claims, several issues (such as damages) still will need to be tried – unless there is a settlement. The range of damages is $750 is $30,000 per work infringed, and can increase to $150,000 per infringed work if there is a finding of “willful” infringement. Because there are at least 350 works at issue, the damages could exceed $50 million dollars, though that result is highly unlikely. And, barring a settlement, one can certainly expect an appeal of this decision. But, in the meantime, the decision provides some important clarity and leverage for cloud-based storage services that may have been considering the daunting process of negotiating with labels (and other copyright holders) for the right to store and play-back their users’ lawfully-obtained digital files.

A copy of the decision is available here:

http://www.nysd.uscourts.gov/cases/show.php?db=special&id=125

Your comments are welcome below. You can reach Angus MacDonald at amacdonald@live365.com. 

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One response

  1. Thanks for the in detail write up and companies like Pandora and Spotify can breathe a little easier which I’m glad of as they have added so much to the music scene.

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