Barely Legally

Confessions of a Moot Court Bailiff

Sharky Legal Ground

Grooveshark’s being sued for $17 billion dollars by Vivendi/Universal/Sheinhardt Wig company for copyright infringement:

In a copyright lawsuit filed today, Universal Music Group says it has obtained e-mails and other records that show Grooveshark’s leaders led an effort to post more than 100,000 pirated songs onto the music service.

“[The business records of Escape Media Group, Grooveshark’s parent company,] establish unequivocally,” Universal’s lawyers wrote in the complaint filed in U.S. District Court in Manhattan, “that the sound recordings illegally copied by Escape’s executives and employees, include thousands of well known sound recordings owned by UMG.”

This is far from a Napster moment for streaming music services of the 21st century. If the allegations about the executives uploading songs to Grooveshark are true, the company is in a lot of trouble, but this doesn’t spell disaster for Spotify and Pandora.

Meet Grooveshark

Briefly, Grooveshark is a digital radio service. You go to Grooveshark.com, type the name of a song or musician you want to listen to, and start listening for free right away. They boast a music library of millions of songs, much larger than many competing services, and with a notably deep selection of notorious digital holdouts. For instance, you can listen to lots of Led Zeppelin and Metallica on Grooveshark, but you won’t find either on sites like Spotify or Rdio.

It’s not that the Grooveshark executives are really good at bargaining with the ghost of Jimmy Page; Zeptallica didn’t ever sign a contract to end up on Grooveshark. Rather, Grooveshark built its library by allowing users to upload songs themselves. No muss, no fuss, no expensive licensing contracts with record labels, and no lawyers (at first).

Thus, no matter what happens with this litigation, other streaming music sites like Spotify and Pandora are going to be fine. Grooveshark is a different beast because it doesn’t generally license its music: users upload music on their own, and Grooveshark lets you listen to everyone else’s music.

That’s not, strictly speaking, legal.

But let’s start from the top. Making a copy of an MP3 to put on your phone or ipod would be copyright infringement, but federal copyright law protects Fair Uses, such as educational uses or personal uses. Teachers can show movies in class, professors can hand out copies of articles to their students, and you can make an MP3 out of your new CD. You can also make a copy of that MP3 to back up your music, whether you want to back it up to another hard drive or back it up to the internet.

Putting your music on the internet in these “music locker” services, where a user uploads MP3s and streams them later (say, from work or from your mobile phone), have been around for a while. In fact, in MP3Tunes vs EMI earlier this year, a federal judge ruled in favor of one service’s right to let users stream songs from its servers, regardless of whether the copyright holder approved.

There’ll be appeals for years, but for now, it looks like letting users upload and listen to music legal as long as there’s no “master copy” of any given song. In his decision, Judge Pauley ruled (PDF) that if ten users want to listen to a song, all ten of them must have uploaded their own copy of the song. That’s important.

Enter the DMCA

The Digital Millennium Copyright Act (DMCA) is a modification of federal copyright law that was passed at the turn of the century. The DMCA deserves the criticism it gets for failing to protect Fair Use rights in a digital age where any idiot can implement an “encryption scheme” and keep people from making Fair Use of his work. I’m not the only one who sees unintended consequences with that system.

But one thing the DMCA got right was the Safe Harbor provision. This section protects web sites whose users upload copyrighted content; while the users can be prosecuted, the web site itself is immune to copyright liability. This is the only reason YouTube hasn’t been wiped off the face of the planet so far. No matter what copyrighted content my users post on Barely Legally, I’m safe as long as I have a way for content owners to send me DMCA takedown notices. (Which of course I don’t; but I also don’t offer the ability to upload videos, so I feel it’s moot.)

Grooveshark does a better job than I do: it has a DMCA Takedown section of its site, where aggrieved copyright owners like Led Zepptallica can easily have their songs removed from Grooveshark’s servers. Some folks might decry how easily The Man can have your YouTube video taken down, but that’s a pretty small price to pay for YouTube’s safe harbor. Without that immunity, YouTube would be less a Profitable Thing and more an Experiment In Death By Copyright Litigation.

Two Problems

I’ve talked a little about why music locker services are legal, and how the DMCA protects web sites when their users upload copyrighted materials. It could seem at first that Grooveshark is perfectly safe, because they’re a big music locker, and they have a safe harbor from their users’ uploading of copyrighted content.

However:

  1. Grooveshark allows millions of people to listen to a song that I uploaded. This is less “music locker” than “web site with pirated music.”
  2. If Grooveshark’s employees uploaded music themselves, Grooveshark can’t claim safe harbor protection for those songs.

Not a Music Locker

The legality of music lockers is a logical extension of the fair use doctrine: it’s a personal use of something I have a right to listen to.

No one thinks you should have to buy two of the same CD, one for work and one for home. So, why should you buy two MP3s, one for work and one for home? You shouldn’t, because that’s stupid. Just make a copy for your work computer, or put a copy on a web server and stream it to yourself. And like web hosting or email hosting, if you don’t want to set up your own web server, just pay someone else to host it for you. Amazon does this at a reasonable price.

So Grooveshark, like Spotify, Rdio, and MOG, encourages users to share playlists and discover new music. Grooveshark, unlike those other guys, had its users upload the millions of songs on the site. These songs get passed around, with goodness-knows how many folks listening to any single file.

Unfortunately, Judge Pauley was pretty specific about the number of users that can listen to a given song file on a music locker site: one. Exactly one. Grooveshark can’t let its users listen to songs other folks uploaded and win like MP3Tunes did.

Not a Safe Harbor

Universal claims they have email records demonstrating that Grooveshark employees personally uploaded hundreds of thousands of songs to the site. The DMCA safe harbor provision only applies when the users of a site are the ones posting copyrighted content. It’s meant to shield sites like YouTube from shutting down because some jerk uploaded a full episode of Law and Order.

However, that protection doesn’t apply if YouTube uploads the episodes itself. And really, why should it? The DMCA wasn’t designed to free web sites from worrying about copyrighted material. It was designed (in part) to make sure that folks can set up a site without having to spend huge amounts of resources policing uploaded content.

While Viacom might feel like this places an undue burden on them to police other peoples’ sites, Congress made that decision. They didn’t want to stifle sites like YouTube by placing that burden on them. I’d suggest Viacom lobby their local congressman, but they do tons of that already. This is the law that they got after spending millions of dollars trying to buy as draconian a regime as possible.

If those allegations about the Grooveshark employees uploading files themselves are true (and if they’re users of the site, they would have had to upload their own files), the DMCA safe harbor provision wouldn’t apply. That wouldn’t end the case right there, though; Universal would still have to actually demonstrate copyright infringement in court.

The Consequences

If the allegations are true and Grooveshark really did have its employees upload hundreds of thousands of songs, that’s catastrophic. The penalty for willful copyright infringement on that scale is staggering – $17 billion, apparently. They’ve got about a tenth of a percent of that in angel investments so far; so if they liquidated all their assets and most of their internal organs, they might be able to pay the fine.

Do recall that when EMI sued Grooveshark a couple years back, Grooveshark didn’t go out of business. The two sides struck a deal, and Grooveshark agreed to start paying EMI for its music. No one’s really sure how much Grooveshark paid, or whether they can afford to do it again, or whether EMI just took like a 40% share of the company. But Grooveshark has stared down Death By Copyright before.

This is different from the EMI case, though; there’s that whole “no safe harbor” thing that the emails allegedly prove. Also, because of the emails, the Grooveshark executives have also been named as defendants. If Universal wins, the Grooveshark guys will be personally liable along with their company. This kind of backs the Grooveshark guys into a corner with their negotiations.

What’s Next

Who knows? Maybe Universal will force Grooveshark to take down all the Universal songs from the site, or just filter users’ search results for Universal stuff. If you recall, Napster took those kinds of steps to try to stay afloat during the RIAA’s successful campaign to kill it. Unfortunately, the settlement ultimately involved shutting the network down.

But I’m getting kind of ahead of the game here. The lawsuit just started. The defense hasn’t even filed an answer yet. I don’t really know if Grooveshark’s employees uploaded songs illegally, but I’m inclined to believe they did, since uploading your music library is kind of how the site’s supposed to work.

We’ll see pretty soon if either side moves for summary judgment; while that’s usually the first step in hilariously giant lawsuits, I think these guys are going to have to fight it out over the emails and their admissibility first. Summary judgment is for when everyone agrees what the facts are, but disagrees on how the law comes out.

Either way, there are interesting times in store for Grooveshark.