Tag Archives: Illegal File Sharing

Shiver me timbers! Cox Has No Safe Harbor by Failing to Terminate Pirates

Judge Liam O’Grady of the Eastern District of Virginia has issued his full opinion and order granting partial summary judgment to plaintiff music publisher BMG against cable / ISP-provider Cox Communications. Judge O’Grady found that Cox’s “repeat offender” policy against customers accused of committing copyright infringement by downloading content without authorization using Cox network was insufficient as a matter of law. Cox could not, therefore, take advantage of the “safe harbor” provisions of Sec. 512 to escape secondary liability to BMG.

When Congress passed the Digital Millennium Copyright Act in 1998, it created four safe harbors that protect ISPs such as Cox from direct and indirect liability for copyright infringement when their involvement is limited to certain activities—transitory digital networking communications, system caching, information residing on systems or networks at the direction of users, and information location tools. See 17 U.S.C. §§ 512(a)–(d). As an Internet Service Provider, Cox sought protection as a “mere conduit for transmission” to protect against claims of secondary copyright infringement liability for the unauthorized exploitation of BMG’s copyrights by Cox’ subscribers.

In order for Cox to qualify for this “safe harbor,” however, it must demonstrate that it has “adopted and reasonably implemented, and informed subscribers and account holders of the service provider’s system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.” 17 U.S.C. § 512(i)(1)(A). Court’s have interpreted this requirement to obligate an ISP such as Cox has to “adopt” a policy that is “reasonable.” As the Copyright Act makes clear, for a policy to be “reasonable,” it must provide “for the termination in appropriate circumstances of subscribers … who are repeat infringers.” See Capital Records, LLC v. Escape Media Grp., Inc., No. 12-cv-6646, 2015 WL 1402049, at *9 (S.D.N.Y. March 25, 2015).

Although Cox sought the Court to find that an “infringer” could only be someone adjudicated as such by a court of competent jurisdiction, Judge O’Grady held that an ISP only requires “knowledge” of infringement by a particular user. While this might seem problematic–since the ISP only gains “knowledge” by receiving take-down notices from copyright owners and, as demonstrated by the “Dancing Baby” case (Lenz v. UMG), the copyright owner might be wrong–in practice, as described below, an ISP only takes actions against a subscriber after receiving multiple take-down notices over short periods of time.

Judge O’Grady details Cox’ Abuse Tracking System (“CATS”), which includes graduated responses to complaints about its customers unauthorized access to copyrighted content. In summary, here is CATS

1st Complaint – Cox does nothing
2nd Complaint – Cox sends an email to the customer
3rd Complaint – Cox sends the same email again
4th Complaint – Cox sends the same email again
5th Complaint – Cox sends the same email again
6th Complaint – Cox sends the same email again
7th Complaint – Cox sends the same email again
8th Complaint – Cox suspends the customers account, placing the customer in a “soft-walled garden,” which means the customer’s landing page is a warning message and link to reactive the account
9th Complaint – Cox sends customer back into “soft-walled garden”
10th Complaint – Cox sends customer to a “hard-walled garden,” a landing page that directs the customer to call Cox, during which call the customer can request reactivation
11th Complaint – Cox sends customer back to “hard-walled garden”
12th Complaint – Cox sends customer back to “hard-walled garden,” but now a higher-level Cox customer service rep must be involved for reactivation
13th Complaint – same as #12
14th Complaint – the customer’s account is considered for termination

Mind you, these 14 complaints against a single account-holder had to occur with a 6 month time period! That’s more than one complaint against a single account-holder every 2 weeks!! But it was not the volume of complaints that Cox had to receive before considering termination that caused it to lose the Sec. 512(a) safe harbor. It was the fact even after receiving 14 complaints, Cox never actually ever terminated anyone.

Initially, Cox “pretended” to terminate subscribers, only to reactive them immediately. As described in an email from Cox’ Manager of Customer Abuse Operations,

if a customer is terminated for DMCA, you are able to reactivate them after you give them a stern warning about violating our AUP and the DMCA. We must still terminate in order for us to be in compliance  with safe harbor but once termination is complete, we have fulfilled our obligation. After you reactivate them the DMCA ‘counter’ restarts; The procedure restarts with the sending of warning letters, just like a first offense. This is to be an unwritten semi-policy..

There were numerous other emails imparting similar instructions.

Cox was more lenient with subscribers illegally downloading copyrighted material because it had little impact on the network; “It does not cause a big problem on the network. Not like spam, Dos attacks, hacking, etc. do.”

In late 2012, Cox abandoned even this illusory termination and simply stopped terminating anyone. BMG introduced evidence that from January 2010 until August 2012, Cox terminated an average of 15.5 account holders a month. Between September 2012 and November 2014, Cox terminated an average of 0.8 accounts per month, notwithstanding the fact that Cox issued 711,000 email warnings and suspensions in response to alleged infringements during this same period. “Cox also admits that of the 22 terminated accounts, 17 of those had also either failed to pay their bills on time or were excessive bandwidth users.”

Again, Judge O’Grady cites to numerous emails in which Cox’ customer service team dismiss knowledge that a subscriber is using the network to access copyrighted content, often because the subscriber is paying Cox a lot of money: “So, the BitTorrent client is running on one of their computers (their child’s, etc.) and they need to uninstall it. This customer pays us over $400/month and if we terminate their service, they will likely cancel the rest of their services. Every terminated Customer becomes lost revenue and a potential Detractor to our Net Promoter Score;” and “This customer will likely fail again, but let’s give him one more change [sic]. [H]e pays 317.63 a month.”

The decision is below:

BMG v Cox Comm. (12!2!15)

Mega-Hot – Megaupload Case Sparks Disney’s Summary Judgment Against Hotfile

The ripple effects of the federal government’s criminal copyright infringement case against piratical website Megaupload and its larger-than-life founder Kim Dotcom continue.  First, Disney used the indictment in its motion for summary judgment against Hotfile and its owner

Disney’s MSJ is below:
[scribd id=87490557 key=key-258pkczg9bdr88e9zvkk mode=list]

Then Carpathia, the hosting company that leased Megaupload more than 1,100 servers on which 25 petabytes of Megaupload files are hosted, filed a motion in the government’s suit alleging it is paying $9,000 per day to maintain Megaupload’s files. According to its motion,

The parties who have so far claimed some interest in the data on the Mega Servers include: (1) Mega, which claims to need the data preserved for its defense and so that it may be returned to its customers; (2) the United States government, which has disclaimed a need for the data but objects to the transfer of ownership of the Mega Servers from Carpathia to Mega; (3) the Electronic Frontier Foundation (the “EFF”), which claims to represent the interests of end users who have non-infringing content stored on the Mega Servers and has requested that the data be preserved in order to facilitate its return to Mega users who have not engaged in copyright infringement; and (4) the Motion Picture Association of America (the “MPAA”), which, on behalf of its member studios, asserts a copyright interest in certain data purportedly located on the Mega Servers, has requested that Carpathia preserve the data in order to facilitate potential civil claims against Mega and the other Defendants in this action, and has indicated that it objects to any transfer of the data to third-parties

Carpathia is asking the court to use its discretion “under Fed. R. Crim. P. 16 and enter a protective order either: (1) allowing Carpathia to reprovision the Mega Servers after a brief period of access has elapsed; (2) requiring one or more of the parties to this action to take possession of the Mega Servers in exchange for reasonable compensation to Carpathia; or (3) requiring any and all interested parties to compensate Carpathia for the substantial costs of transporting and continuing to maintain the Mega Servers until the conclusion of this action.”

Carpathia’s motion is below:
[scribd id=87492411 key=key-x882ywzfnvomesfvg24 mode=list]

Now a civil action has been filed by Microhits, which claims to own “federally registered copyrights on sound recordings featuring the musical performances of the legendary Billie Holiday, Nat King Cole, Marvin Gaye, Frank Sinatra, AI Martino, Donny Hathaway, Rod Stewart, Muddy Waters, Howlin’ Wolf, Lightnin’ Hopkins, Junior Wells, Nina Simone, Louis Armstrong, Jerry Lee Lewis, Herbie Mann, and Bob James as well as such well-known modern artists as Missy Elliott, Christina Aguilera, Vanessa Hudgens” and Valcom, which claims to own “federally registered copyrights which includes feature films and television programs starring Denzel Washington, Bill Murray, Jackie Chan, Charlton Heston, Ronald Reagan, George C. Scott, Martin Sheen, Judy Garland, Bela Lugosi, John Carradine, Roy Rogers, Richard Chamberlain, Martin Landau, January Jones, Ryan Seacrest and many others.”  The plaintiffs are represented by the law firm Dunlap, Grubb and Weaver, the infamous plaintiff’s firm that brought mass John Doe lawsuits against BitTorrent users.

The Complaint is below:
[scribd id=87492040 key=key-zvcnxdz2lnwf4ekq6bq mode=list]

Mega Uploaded! Feds Shutter Site and Arrest Dot Com!

Regular readers will recall my recent post about Megaupload Ltd. v. Universal Music Group, Inc., 11-cv-6216-CW (N.D. Cal. Dec. 16, 2011), in which the alleged piratical website operator Megaupload moved ex parte for a temporary restraining order against record label UMG for “sabotaging [Megaupload’s promotional video] campaign through abuse of the notice and takedown procedures of the” DMCA.

Apparently, the Depart. of Justice has already made up its mind about Megaupload, filing a five-count indictment–including allegations of copyright infringement, conspiracy to commit money laundering and racketeering–and having four employees arrested in New Zealand, including Kim Dotcom, Megaupload’s outspoken leader.  Although Megaupload is headquartered in Hong Kong, some of the alleged pirated content was hosted on leased servers in Ashburn, Va., which the Feds used to claim jurisdiction in the Eastern District of VA.  The website, which claimed to have 50 million daily users and ranked in the top 20 most visited websites, was shuttered as well.  Visitors to the site were greeted with the following:

The Indictment is here
[scribd id=78786408 key=key-1vi8vrpo0xzwjtneaij1 mode=list]

Does the DMCA Work?

If you are a copyright owner, two recent cases involving the Digital Millennium Copyright Act (“DMCA”) must have you feeling like Mugato (Will Ferrell) in Zoolander:

[youtube http://www.youtube.com/watch?v=4DVAsmrwdtQ&w=560&h=315]

In UMG Recordings, Inc. v. Veoh Networks, Inc., No. 09-56777 (9th Cir. Dec. 20, 2011), the Ninth Circuit affirmed a Central District of California court’s order granting summary judgment to Veoh after determining that it was protected by the DMCA “safe harbor” limiting service providers’ liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c).

In Megaupload Ltd. v. Universal Music Group, Inc., 11-cv-6216-CW (N.D. Cal. Dec. 16, 2011), alleged piratical website operator Megaupload moved ex parte for a temporary restraining order against record label UMG for “sabotaging [Megaupload’s promotional video] campaign through abuse of the notice and takedown procedures of the” DMCA.  Although the TRO motion was denied as moot, the underlying suit remains.

These two cases exemplify the Bizarro World the DMCA has become, in which the business models of service providers require copyright infringement on a massive scale (e.g., Sina Simantob, a principal at Highlander Wealth Services and Chairman of Grooveshark, in an email to Drew Lipsher, a partner at media VC firm Greycroft, stated “we bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission. … I think [Grooveshark has] a real chance to settle with UMG within a year and by that time [Grooveshark will] be up to 35m uniques and a force to be dealt with.”  UMG Recordings, Inc. v. Escape Media Group, Inc., 11-civ-8407 (Nov. 18, 2011, S.D.N.Y)), but labels get sued over takedown notices.

Megaupload v UMG

The Megaupload case involves a promotional video it made available on YouTube that included many famous celebrities and artists endorsing the Internet locker service.  In its complaint and application for a temporary restraining order Megaupload alleged that UMG filed a takedown notice with YouTube knowing that it did not own any copyright in the Megaupload video.  Before turning to the merits of Megaupload’s case, a word about the promotional video at issue…

If you thought the Rebecca Black video was annoying, wait until you see the Megaupload video:

[youtube http://www.youtube.com/watch?v=K9caPFPQUNs&w=560&h=315]

With lyrics such as the following, it rivals the lyrics to “Friday” (e.g., “Kickin’ in the front seat; Sittin’ in the back seat; Gotta make my mind up; Which seat can I take?”)

Users 1 billion
Per day 50 million
4 percent
of the Internet
Get the Mega Manager
Its 10 times faster
Bit by bit
It’s a hit
It’s a hit
Upload to me today
Send me a file

The Megaupload video features endorsements by several “famous” “celebrities” and artists, including Kasseem Dean (Swizz Beatz), Kanye West, Mary Jane Blige, Estelle Swaray (Estelle), Ciara Harris (Ciara), Jayceon Taylor (Game), Carmelo Anthony, Will Adams (Will.i.am), Kim Kardashian, Sean Combs (Diddy), Alicia Keys, Chris Brown, Floyd Mayweather, Jamie Foxx, Jonathan Smith (Lil Jon), Brett Ratner, Serena Williams, and Russell Simmons.  Megaupload claims that it obtained very broad releases from every artist who appears in its promotional video, including consents to record the artist’s “performance and interview (called the “Appearance”), editing it, and publishing it on the Internet through streaming media, precisely as [Megaupload] has done.”  Megaupload also claims that its releases grant it the right to

“copyright, record, reproduce, broadcast, distribute, edit, publish, exhibit, disseminate, couple and use in any way throughout the universe and in perpetuity the audio and/or visual portions of any videotape, film, pictures, negatives, prints, photographs, stills or other recordings of the Appearance, and any reproduction thereof.”  These celebrities also relinquished any right to inspect or approve any finished product or “derivatives thereof, or any subsequent uses made of the Appearance.”

Three things come to mind:

(1) Did Their Lawyers Review the Release?  I can’t imagine a lawyer from a white shoe entertainment firm such as Greenberg Traurig, Mitchell Silberberg & Knupp, or Fenwick & West, which represents Megaupload, letting a client sign a release that didn’t provide the artist—particularly an artist of the prominence appearing in the Megaupload video—with the right to inspect or approve the final product.

(2) Did Megaupload Pay These Artists?  Megaupload doesn’t say whether it paid for the celebrities to appear in the video, other than to note that it “invested heavily [in the video] to ensure that the music, number and selection of celebrities, and video design would appeal to a large audience that would then continue virally to spread the word.”  I find it hard to believe that Megaupload didn’t pay these artists a lot of money.  And this certainly wouldn’t be the first time artists took money and later regretted it.  Remember when Nelly Furtado, Mariah Carey, and Beyonce “discovered” that Saif al-Islam Gaddafi, who had paid each of them million dollar fees to perform at his parties in 2007, 2008 and 2009, respectively, was the son of ruthless Libyan dictator Muammar Gaddafi.  While appearing in a Megaupload video isn’t equivalent to performing for the son of the “mad dog of the Middle East,” it does suggest that artists are sometimes willing to be “naive and unaware,” as Mariah claimed she was, when a contract comes with a check for a million dollars.

(3) Do These Artists Even Know What Megaupload Is or Actually Use It?  Do we really believe that Lil’ Jon or Kim Kardashian personally spend any time uploading videos to the Internet?  (ok, maybe Kim used to, but those were the naughty kind)

The Problem with the DMCA

While this suit will probably unfold like the kerfuffle that ensued after Prince issued a DMCA takedown notice to YouTube over a home video Stephanie Lenz posted of her children dancing to Prince’s song “Let’s Go Crazy,” the suit signifies a broader problem with the DMCA.  The DMCA was intended to facilitate the legal distribution of digital copyrighted works and encourage investment in the Internet.  As the Senate Report explains

Due to the ease with which digital works can be copied and distributed worldwide virtually instantaneously, copyright owners will hesitate to make their works readily available on the Internet without reasonable assurance that they will be protected against massive piracy. Legislation implementing the treaties provides this protection and creates the legal platform for launching the global digital on-line marketplace for copyrighted works. It will facilitate making available quickly and conveniently via the Internet the movies, music, software, and literary works that are the fruit of American creative genius. It will also encourage the continued growth of the existing off-line global marketplace for copyrighted works in digital format by setting strong international copyright standards.

At the same time, without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet. In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand. (emphasis added)

When the Senate writes about “making available quickly … via the Internet” it clearly assumed that the copyright owners would be authorizing the “making available.” As the Senate Report emphasizes, the goal of the DMCA is to encourage (1) the Internet to become a “legal platform” for digital distribution of copyright works and (2) investments in the “speed and capacity” of the Internet.  From the perspective of the copyright owner, however, the recent jurisprudence regarding the obligations of the copyright owners and the service providers under DMCA is creating a frustrating situation where service providers appear to build their websites in response to the latest legal interpretation of the DMCA.  This is eerily reminiscent of the evolution of the audio file sharing services; i.e., as the result of lawsuits, Napster and its centralized server model gave way to Grokster and its distributed content model, which gave way to BitTorrent and its use of “swarms” to download a “bits” of a single file from many users simultaneously.

In a blog post, Megaupload’s Dotcom described the situation thusly:

“When one of the top artists endorsing Mega received a letter from the CEO of the RIAA with some active download links on Megaupload containing that artist’s music it was shocking at first. But in the same letter it was described how those links were found with a Google search. Giving Mega a hard time when we don’t even provide a search feature on Megaupload? It’s bizarre. And at the same time you find the world’s largest piracy index on Google and most other search engines. But hey, these guys are not rogue. They are just rich.” (emphasis added)  Dotcom’s comment describes exactly what is so frustrating about the DMCA.

How Does Megaupload Work?

In her recent order regarding Megaupload’s motion to dismiss a lawsuit brought by Internet pornographer Perfect 10, Inc., (Perfect 10, Inc. v. Megaupload Limited, 11-cv-191-IEG (SD. Cal. July 27, 2011) Chief Judge Irma Gonzalez of the federal District Court for the Southern District of California described Megaupload thusly (internal citations omitted)

After a file is uploaded to megaupload.com, Megaupload creates a unique Uniform Resource Locator (“URL”). The URL is the address of the file on the internet. Anyone with the URL can download the file from Megaupload’s servers. Megaupload and its users disseminate URLs for various files throughout the internet. In order to view, copy, or download such files from the Megaupload websites without waiting, users must pay a membership fee. … This much is clear: Megaupload allegedly stores billions of dollars of “pirated” full-length movies, songs, software, and images on its servers. Megaupload apparently depends on, and provides substantial payouts to, affiliate websites who catalogue the URLs providing access to the mass of “pirated” content on Megaupload’s servers. For example, at the affiliate search engine megaupload.net, users who perform a search are directed to Megaupload’s website and offered the opportunity to purchase a membership. Megaupload also encourages its users to upload materials through its “Rewards Programs.” Megavideo.com and megaporn.com have a rewards program called “Megaporn Rewards.” Megaupload.com also has a rewards program, which it runs in a similar fashion, stating:

The more downloads your files get, the more you can earn through our Megaupload Rewards program. Every qualifying download of one of your files will earn you a reward point. When you have reached a certain number of points, you can redeem them for premium status or even cash. There is no limit! And even better: The more downloads your files get, the more you can earn through our Megaupload Rewards program.

Megaupload offers $10,000 for 5,000,000 reward points.  So, while Megaupload doesn’t offer a search function as part of the Megaupload site itself, it has created a complex (and effective) means of cataloging all the content stored in its digital lockers.  Why would Megauload go to the trouble and expense of offering $10,000 bonuses in a rewards program rather than simply include a search function that would accomplish the same outcome?  I can’t believe that the one-time cost of incorporating search functionality is more expensive than the on-going expense of maintaining its rewards program.  The answer must lie in Megaupload’s lawyers reading of the safe harbor provisions of § 512, especially § 512(c), which as we will see in the next case the Ninth Circuit views as quite broad.

UMG v Veoh

Like YouTube and other Internet video aggregators, Veoh’s business model involved building a large user base by offering as much content as possible and later generate profits from paid advertising.  Just like its competitors, in order to aggregate the content necessary to build a user base large enough to monetize, Veoh allowed users to upload to the Veoh website without Veoh reviewing such videos[i], wherein the user would provide identifying information about the video, including its title, a description of its contents, a descriptive category (e.g., music), and keyword “tags” for the video.  The information and “tags” entered by the user became the video’s “metadata” and were used by Veoh to return search results initiated by other users of its service.  In addition, Veoh used recommendation software to return additional videos that might be of interest to a particular user based on that user’s past viewing history.

UMG objected to Veoh’s site because thousands of UMG’s music videos were uploaded without authorization.  Before the district court and on appeal, UMG argued that Veoh was not entitled to the safe harbor protection of § 512 because it engaged in activities beyond “storage at the direction of a user;” e.g., “Veoh’s infringement … arises by reason of its decision to copy, publicly perform, and distribute UMG’s protected works.”  As UMG argued in its appeal brief, “The District Court’s opinion absolves Veoh of responsibility for conduct as or more egregious than that which led to Napster’s, Grokster’s, or Kazaa’s liability.  Napster, Grokster, and Kazaa offered indices that helped their users find infringing content and obtain it from other users. But they neither stored the infringing files nor directly distributed those files, as Veoh did.”

In affirming the district court’s grant of summary judgment in favor of Veoh, the Ninth Circuit first considered what “by reason of the storage at the direction of a user” means under § 512(c)(1).  While UMG argued that “nothing in the ordinary definition of ‘storage’ encompasses” the automatic processes undertaken to facilitate public access to user uploaded videos,” the Ninth Circuit concluded that the notice and takedown provisions of § 512 would be meaningless if public access to uploaded videos weren’t contemplated by the DMCA safe harbor provisions.  As the Ninth Circuit explained,

Section 512(c) codifies a detailed notice and takedown procedure by which copyright holders inform service providers of infringing material accessible through their sites, and service providers then “disable access to” such materials. 17 U.S.C. § 512(c)(1)(A)(iii), (c)(1)(C) & (c)(3)(A)(iii). This carefully considered protocol, and the statute’s attendant references to “disabl[ing] access” to infringing materials … would be superfluous if we accepted UMG’s constrained reading of the statute. … Indeed, it is not clear how copyright holders could even discover infringing materials on service providers’ sites to notify them as the protocol dictates if § 512(c) did not contemplate that there would be access to the materials.

The legislative history does not seem to me, however, to support such a wide read of § 512(c).  In the Senate Report on the DMCA, the examples used to illustrate the types of behaviors in which a service provider might engage that could expose such service provider to liability is much narrower in scope than the actions of Veoh.  As the Senate Report states

In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites.

When discussing § 512(c) in particular, the Senate Report notes “Examples of such storage include providing server space for a user’s web site, for a chatroom, or other forum in which material may be posted at the direction of users.”  The “chatroom or other forum” examples make sense, as the House Report on the DMCA indicated that “the [DMCA] essentially codifies the result in the leading and most thoughtful judicial decision to date: Religious Technology Center v. Netcom On-line Communications Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995),” which held that a web-hosting service provider (as distinct from a website operator like Veoh) was not liable for direct copyright infringement where users posted materials to a Usenet site whose protocols automatically transmitted those materials.

By way of background, as explained in Arista Records LLC v. Usenet.com, Inc., 07-cv-8822 (S.D.N.Y. June 30, 2009),

The USENET network, created over twenty years ago, is a global system of online bulletin boards on which users (or “subscribers”) may post their own messages or read messages posted by others.  To obtain access to the USENET, a user must gain access through a commercial USENET provider … or an internet service provider.  Messages posted to the USENET are commonly known as “articles.”  Articles, in turn, are posted to bulletin boards called “newsgroups.”  Newsgroups often are organized according to a specific topic or subject matter, and are oftentimes named according to the subject matter to which the articles posted to the newsgroup relate.  The USENET is divided into nine major subject headings known as “hierarchies,” one of which is the alt.* hierarchy.  Content files known as “binaries,” which represent computer files such as images, videos, sounds, computer programs and text, are found in the alt.* hierarchy.  These binary files are encoded in text form for storage and processing, and require a software program to convert the text into a content file such as an image or music file.

It should be noted that Judge Baer granted Arista’s motion for summary judgment on both direct and secondary copyright infringement against Usenet.com.

The point of the above is that when Congress passed the DMCA, it envisioned a world in which users posted content in chatrooms and forums.  That is vastly different than the aggregation of content onto searchable websites the very purpose of which is to make it easy for people who did not upload content to view content uploaded by others, the copyright for which content is often owned by someone other than the user doing the uploading.

Compare § 512(d), which “provides a safe harbor that would limit the liability of a service provider that refers or links users to an online location containing infringing material or activity by using ‘information location tools,’ such as hyperlink directories and indexes.”  So, for example, Google enjoys a safe harbor when it returns search results that point to websites that contain infringing materials, just as Megaupload’s Dotcom notes in his blog post.  Would Veoh likewise qualify for a safe harbor if the search results that it returned were URLs on its website?  I think this juxtaposition explains, in part, why Megaupload decided not to include a search function as part of its locker service.

[i] It is true that Veoh’s terms of service included a provision whereby users represented that they owned all of the copyright in the uploaded content and affirmed that they would not upload copyrighted content without permission.

How UMG Got Its Groove[shark] Back…

In another installment of the “We Saw This Coming,” UMG Recordings (“UMG”) has sued Escape Media Group, Inc. (a/k/a “Grooveshark”), along with several of Grooveshark’s executives personally. (UMG Recordings, Inc. v. Escape Media Group, Inc., 11-civ-8407 (Nov. 18, 2011, S.D.N.Y.).

The Grooveshark website is very slick, with an easy to navigate UI.  A search for the artist Jay Z, whose sound recordings are owned and distributed by UMG, results in a list of songs by that artist.  A user can click on any song in the list to start it playing (i.e., on-demand).  Users can create a playlist, “share” the song through Facebook or Twitter, and even buy the song on Amazon or iTunes.  UMG alleges in its complaint that Grooveshark has “no license for the overwhelming majority of the sound recordings available through the Grooveshark website, and [has] no license from UMG for any of its sound recordings.”

More damaging than its general allegations of infringement, UMG alleges that Grooveshark’s executives personally uploaded infringing works and/or directed Grooveshark employees to do the same.  For example, UMG alleges that Samuel Tarantino, Grooveshark’s CEO, personally uploaded 1,791 songs, Paul Geller, SVP, uploaded 3,453 songs, John Ashenden, VP, uploaded 9,195 songs, Chanel Munezero, Software Engineer, uploaded 20,756 songs, and Nikola Arababjiev, Quality Assurance, uploaded 40,243 songs.

UMG attaches several emails to its complaint that it alleges support its case that Grooveshark made the business decision to engage in unauthorized use in an effort to quickly build its following.  For example, Sina Simantob, a principal at Highlander Wealth Services and Chairman of Grooveshark, in an email to Drew Lipsher, a partner at media VC firm Greycroft, stated “we bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission. … I think [Grooveshark has] a real chance to settle with UMG within a year and by that time [Grooveshark will] be up to 35m uniques and a force to be dealt with.”  In an email to Dr. Jia Gottlieb, who runs the oldest holistic medical clinic in Colorado, Simantob writes “… we are achieving all this growth without paying a dime to any of the labels.”

UMG also attaches what it purports to be a comment left by a Grooveshark employee in response to a story about Grooveshark on the website Digital Music News.  The alleged employee writes

“We are assigned a predetermined about of weekly uploads to the system and get a small extra bonus if we manage to get above that (not easy). The assignments are assumed as direct orders from the top to the bottom, we don’t just volunteer to ‘enhance’ the Grooveshark database.”

Grooveshark’s EULA has some interesting language, especially if UMG’s allegations that Grooveshark executives personally uploaded unlicensed content.  For example, the site’s policy states

Unless we indicate otherwise, you grant EMG and its affiliates a nonexclusive, royalty-free, perpetual, irrevocable, and fully sublicensable right to use, display, perform, reproduce, publish, and distribute such User Content throughout the world via the Service. You grant EMG and it affiliates the right to use the name that you submit in connection with such User Content. You are solely responsible for any necessary payments that may become due to any third parties as the result of your posting of or linking to the User Content and EMG’s use thereof. (emphasis added)

The EULA goes on to define what types of User Content should not be uploaded to the Service

The following is a partial list of the kind of User Content that is illegal or prohibited on the Service. Prohibited User Content includes but is not limited to content that: … (v) consists of an illegal or unauthorized copy of a copyrighted work, such as sound recordings, musical compositions and videos in which you do not personally own the copyright (including CDs and tracks you may have purchased), or otherwise do not have the necessary authority from the copyright owner(s); …. EMG reserves the right to investigate and take appropriate legal action in its sole discretion against anyone who violates this provision, including without limitation, removing the offending User Content from the Service and terminating the membership of such violators.

Its never good when your executives are alleged to be knowingly violating their own terms of service.  Grooveshark settled with EMI and its internal documents indicate it wants to settle with UMG.  However, my guess is UMG is in no mood to reward Grooveshark for its past business decision to launch without a license.  However, as I said, the UI is pretty slick (I personally think its much cleaner and easier to navigate than Spotify) and I can see this site becoming quite popular.  Look for UMG to own most of Grooveshark before this is all over.

The complaint is below:
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The Risk of Having Unprotected Porn…

Who knew?  Apparently, some circuits do not recognize copyright infringement claims involving pornography.  District Judge William Young (D. Mass.) recently denied motions to quash John Doe IP address subpoenas involving alleged unauthorized reproduction and  distribution of Liberty Media’s adult film “Corbin Fisher AmateurCollege Men Down on the Farm.”  In a footnote, Judge Young noted,

It is undisputed that Liberty Media is a distributor of lawful, albeit hardcore, pornography, and the Motion Picture is itself hardcore pornography. Notably, it is a matter of first impression in the First Circuit, and indeed is unsettled in many circuits, whether pornography is in fact entitled to protection against copyright infringement. Copyright protection in the United States was “effectively unavailable for pornography” until the landmark decision by the Fifth Circuit in Mitchell Brothers Film Group v. Cinema Adult Theater, 604 F.2d 852, 854-55, 858 (5th Cir. 1979) (holding that the Copyright Act neither explicitly nor implicitly prohibits protection of “obscene materials,” such as the films at issue there, and rejecting the defendant’s affirmative defense of “unclean hands”). See also Jartech, Inc. v. Clancy, 666 F.2d 403, 406 (9th Cir. 1982) (stating, in the context of copyright infringement of a pornographic film, that “[p]ragmatism further compels a rejection of an obscenity defense” because “obscenity is a community standard which may vary to the extent that controls thereof maybe dropped by a state altogether”). Compare Devils Films, Inc.v. Nectar Video, 29 F. Supp. 2d 174, 175-77 (S.D.N.Y. 1998) (refusing to exercise its equitable powers to issue a preliminary injunction against infringement of pornographic films and “commit the resources of the United States Marshal’s Service to support the operation of plaintiff’s pornography business,” holding that the films were “obscene” and illegally distributed through interstate commerce), with Nova Prods., Inc. v. Kisma Video,Inc., Nos. 02 Civ. 3850(HB), 02 Civ. 6277(HB), 03 Civ. 3379(HB), 2004 WL 2754685, at *3 (S.D.N.Y. Dec. 1, 2004) (holding that the question of whether particular pornographic films are “obscene” is one of fact for the jury, and that, even were the films deemed to be obscene, it would not prevent their protection under a valid copyright) (citing Jartech, Inc., 666 F.2d 403; Mitchell Bros., 604 F.2d 852). Congress has never addressed the issue by amendment to the Copyright Act. See Ann Bartow, Pornography,Coercion, and Copyright Law 2.0, 10 Vand. J. Ent. & Tech. L 799,833 (2008). This issue, however, is not presently before the Court and the Court expresses no opinion on it here.

Of course, there is nothing in the Copyright Act that exempts porn from its protections.  Specifically, § 102 of the Act defines the “subject matter” that may qualify for protection:

(a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of
authorship include the following categories:
(1) literary works;
(2) musical works, including any accompanying words;
(3) dramatic works, including any accompanying music;
(4) pantomimes and choreographic works;
(5) pictorial, graphic, and sculptural works;
(6) motion pictures and other audiovisual works;
(7) sound recordings; and
(8) architectural works.
(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work.

Pornographic movies would appear to qualify under § 102(a)(6).  As the Mitchell Bros. court noted,

The legislative history of the 1976 Act reveals that Congress intends to continue the policy of the 1909 Act of avoiding content restrictions on copyrightability. In recommending passage of the 1976 Act, the House Judiciary Committee stated:

The phrase “original works of authorship,” (§ 102) which is purposely left undefined, is intended to incorporate without change the standard of originality established by the courts under the present copyright statute. This standard does not include requirements of novelty, ingenuity, or Esthetic merit, and there is no intention to enlarge the standard of copyright protection to require them.

H.R.Rep.No. 1476, 94th Cong., 2d Sess. 51, Reprinted in (1976) U.S.Code Cong. & Admin.News pp. 5659, 5664 (emphasis added).

It will be interesting to see how this plays out in the First Circuit.

Judge Young’s decision is below:
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File Sharing Smack Down: First Circuit Rules Against Tenenbaum

In a victory for the record labels, the First Circuit has issued its decision in Sony v. Tenenbaum, finding meritless all of Tenebaum’s arguments against the constitutionality of statutory damage awards in file sharing cases.  The long-awaited decision, released Friday, restores the original jury award of $675,000 and remands back to District Judge Gertner to consider remittitur.

A key argument raised by Tenenbaum (and inherently adopted by the District Court in its opinion) is that the Copyright Act’s statutory damages provisions do not apply to “consumer-copiers” or non-commercial infringement.  The First Circuit quickly and authoritatively rejects that argument.

Tenenbaum is not a “consumer-copier,” a term he never clearly defines. He is not a consumer whose infringement was merely that he failed to pay for copies of music recordings which he downloaded for his own personal use. Rather, he widely and repeatedly copied works belonging to Sony and then illegally distributed those works to others, who also did not pay Sony. Further, he received, in turn, other copyrighted works for which he did not pay. Nor can Tenenbaum assert that his was merely a “non-commercial” use and distribution of copyrighted works as those terms are used elsewhere in the Act.  His use and distribution was for private gain and involved repeated and exploitative copying.

Had Congress intended to limit copyright actions against so-called “consumer infringers” as Tenenbaum hypothesizes, it easily could have done so. … Instead, subject to exceptions not relevant here, it extended liability to “anyone” who violates a copyright owner’s exclusive rights and allowed those owners to pursue actions against “any infringement.”

Where Congress intended to create other exceptions for solely personal or non-commercial use, it did so expressly. In two amendments which do not apply here, it drew such distinctions: (1) the Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391, which fully extended federal copyright protections to sound recordings but exempted certain reproductions of sound recordings made for personal use, and (2) the Audio Home Recording Act of 1992 (AHRA), Pub. L. No. 102-563, 106 Stat. 4237, codified at 17 U.S.C. § 1001 et seq., which provided some exemptions in other situations from copyright liability for infringements “based on the noncommercial use by a consumer.”  17 U.S.C. § 1008.  These statutes refute Tenenbaum’s argument [that statutory damages do not apply to “consumer copiers”].

The First Circuit, in remanding back to the district court to consider remittitur, briefly discusses the district court’s reliance on the Gore factors instead of Williams in determining that the jury award was unconstitutional.  Without directly holding that Gore does not apply, the First Circuit makes clear its belief that it is inapplicable here.

We note that in Gore, the Supreme Court did not overrule Williams. See Rivers v. Roadway Express, Inc., 511 U.S. 298, 312 (1994) (hierarchical relationship of Supreme Court to lower courts mandates that where “the Court has spoken, it is the duty of other courts to respect that understanding of the governing rule of law”). Nor has the Supreme Court to date suggested that the Gore guideposts should extend to constitutional review of statutory damage awards. The concerns regarding fair notice to the parties of the range of possible punitive damage awards present in Gore are simply not present in a statutory damages case where the statute itself provides notice of the scope of the potential award.

In the long-running District of Minnesota Elektra v. Thomas case, Judge Davis followed Judge Gertner’s district court decision in Tenenbaum, finding that the jury award of statutory damages was unconstitutional, but used the Williams factors instead of Gore in reaching his decision.  Judge Davis also tried remittitur once before reaching the constitutional question, so it will be interesting to see how the Eighth Circuit treats the inevitable appeal on the Thomas case.

The First Circuit’s Opinion is below:
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Capital Punishment? EMI Wins the Battle, but May Lose War

Federal district judge William Pauley found online music locker service MP3tunes and its founder Michael Robertson liable for copyright infringement.  For those of us old enough to remember Robertson’s first company MP3.com, which was shut down by the labels a decade ago, these results aren’t too surprising.  Robertson’s latest venture MP3tunes has a number of innovative features, including a search engine called sideload.com that allows users to find music on the Web and transfer it directly to their lockers.  The record labels sued MP3tunes and Robertson personally and won several of their claims on summary judgment.  As explained below, however, this may prove to be a pyrrhic victory.

Judge Pauley found that music locker services such as MP3tunes are eligible for the safe harbor provisions of the DMCA.  Under the DMCA, websites are immune from copyright liability if they promptly take down infringing material when notified by copyright holders.  Capital Records argued that MP3tunes could not take advantage of the DMCA’s safe harbor provisions because it should have known that many of the songs users “sideloaded” from websites such as rapidshare were infringing.  Judge Pauley disagreed, finding that the DMCA imposes no obligation to investigate potentially infringing activity, except where links are to sites with URLs containing “red flag” words like “pirate” or “bootleg.”  As Judge Pauley explained, “For instance, the websites rapidshare.com, fileden.com, and filefactory.com, as well as the other sites used by MP3tunes executives to sideload songs do not use the words ‘pirate’ or ‘bootleg’ or other slang to indicate their illegal purpose and they are not otherwise clearly infringing.”  This strikes me as a fairly ridiculous standard to meet; it cannot possibly be the case that a site called “piratedmusic.com” is a redflag site one day but when it changes its URL to “nopiratedmusichere.com” it is ok.

There is also a curious section where the court discusses the “intent” of the users of MP3tunes.  Judge Pauley finds “The record reveals that MP3tunes’ users do not upload content to the internet, but copy songs from third-party sites for their personal entertainment.  There is a difference between users who know they lack authorization and nevertheless upload content to the internet for the world to experience or copy, and users who download content for their personal use and are otherwise oblivious to the copyrights of others.  The former are blatant infringers that internet service providers are obligated to ban from their websites.  The latter, like MP3tunes users who sideload content to their lockers for personal use, do not know for certain whether the material they are downloading violates the copyrights of others.”  Judge Pauley provides no record cites for this finding.  I recall scant–if any–evidence in the parties summary judgment briefs regarding how knowledgeable of copyright the users of MP3tunes or Sideload are.  It strikes me as odd that Judge Pauley would conclude that those sharing music files on the Internet through Sideload.com and MP3tunes are all oblivious to the fact that those shared files are unauthorized copies.

Judge Pauley did find that MP3tunes could not enjoy the DMCA’s safe harbor provision, however, because it failed to delete unauthorized copies of songs from user’s personal lockers that they had “sideloaded” from infringing sites.  Judge Pauley found that “Where service providers such as MP3tunes allow users to search for copyrighted works posted to the internet and to store those works in private accounts, to qualify for DMCA protection, those service providers must (1) keep track of the source and web address of stored copyrighted material, and (2) take content down when copyright  owners identify the infringing sources in otherwise compliant notices.”  Because MP3tunes did not remove such unauthorized songs from user’s lockers, “MP3tunes does not qualify for safe harbor protection for songs stored in users lockers that were sideloaded from the unauthorized websites identified in the [record label] takedown notices.”  If this decision is upheld on appeal, music locker services will have little trouble qualifying for the DMCA’s safe harbor by simply removing unauthorized copies from individual user’s lockers.

Judge Pauley also found MP3tunes founder Michael Robertson personally liable for “sideloading” some of Capital Records’ copyrighted music to his own music locker from infringing websites.

An interesting portion of Judge Pauley’s decision regards his conclusion that MP3tunes use of a single copy to serve multiple users.  The Second Circuit’s decision in Cartoon Network, LP v. CSC Holdings, Inc., 536 F.3d 121, 138 (2d Cir. 2008) seemed to suggest that the use of a single copy by multiple users gave rise to a public performance of the underlying copyrighted musical composition.  In that case, Cablevision made individual copies of television shows for each customer, such that a customer could only watch the particular copy made by him or her and stored on Cablevision’s “locker” service.  Here, MP3tunes used deduplication technology to save hard drive space.  Judge Pauley declined to follow the reasoning in Cartoon Network and found that “MP3tunes does not use a ‘master copy’ to store or play back songs stored in its lockers.  Instead, MP3tunes uses a standard data compression algorithm that eliminates redundant digital data.”

The final chapter in this story is far from written.  Both sides will appeal.  Other cloud-based services, such as Google and Amazon, may be wise not to read too much into this district court opinion and wait for more guidance from the Second CircuitJudge Pauley makes a curious finding when he states

The Memorandum and Order is here
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Capital’s Motion for Summary Judgment is here
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MP3tunes Motion for Summary Judgment is here
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Capital’s Response to Mp3tunes MSJ is here
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MP3tunes Response to Capital’s MSJ is here
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