Articles

Copyright Law: New Rulings Protect Music on the Web

By Robert Clarida

May 19, 2000

On May 4 and 5, back-to-back decisions from the Southern District of New York and the Northern District of California delivered bad news for MP3.com and Napster, Inc., respectively, two of the biggest names in the burgeoning field of on-line music delivery. Both services allow Internet users to download specific sound recordings on request, either directly from the defendant's site (MP3.com) or from other users with the help of the defendant's site (Napster), and both permit the transmission of music without first obtaining the authorization of the copyright holder. Both were sued by aggrieved copyright owners from the record industry, and both lost on motions for summary adjudication. In MP3.com, the court granted plaintiff's motion for summary judgment of infringement. In Napster, the court denied defendant's motion for summary judgment based on its argument that it qualified for an exemption provided in the Digital Millennium Copyright Act ('DMCA'). The mechanics of the two services differ greatly, however, and raise very different issues as to whether, and how, their unauthorized transmissions may violate the Copyright Act.

MP3.COM

UMG Recordings, Inc. v. MP3.com, Inc., No. 00 Civ. 472, 2000 U.S. Dist. LEXIS 5761, was decided by Judge Jed Rakoff of the Southern District of New York on May 4. The technology at issue in the case is relatively simple, at least in principle: using legitimate copies of tens of thousands of popular CDs that it purchased, MP3.com recorded the CDs into a database of sound recordings, converted into the MP3 file format. The MP3 technology, which is not proprietary to MP3.com but is widely used in the computer audio industry, permits the data on sound recordings to be compressed into small digital files which may be transmitted and downloaded quickly through the Internet. Once converted and duplicated, the recordings were stored on MP3.com's file server, for access by subscribers to a service called 'My MP3.com.' Subscribers could download these files upon making a showing, to MP3.com's satisfaction, that they had purchased a legitimate hard copy of the requested CD. They could make this showing in one of two ways: using the 'Beam-It' service, they could insert their own hard copy of the CD into the CD-ROM drive of their computer for verification by MP3.com,¹ or using the 'Instant Listening' service, they could simply purchase the hard copy CD from a cooperating online retailer, who would notify MP3.com of the purchase. In either case, once a user had demonstrated to MP3.com that he or she was a legitimate purchaser of a hard copy of the CD, that user could access that recording from the MP3.com site using any computer.

Granting summary judgment for the plaintiff recording companies, Judge Rakoff found that such unauthorized duplication and transmission by MP3.com was presumptively infringing, notwithstanding the defendant's argument that it merely provided the 'functional equivalent' of storing its subscriber's hard copy CDs: 'In actuality, defendant is re-playing for the subscribers converted versions of the recordings it copied, without authorization, from plaintiffs' copyrighted CDs.' Slip op. at 2-3. As the court summarized, '[t]he complex marvels of cyberspatial communication may create difficult legal issues; but not in this case.' Slip op. at 1.

MP3.com raised a technical challenge to the plaintiff's prima facie case of infringement by contending that its compressed files were not actually 'reproductions' of the plaintiffs' sound recordings, but conceded that the differences were technically unavoidable and undetectable by the human ear. Accordingly, the court refused to draw the distinction urged by defendant, noting that 'in such circumstances, some slight, humanly undetectable difference between the original and the copy does not qualify for exclusion of coverage of the [Copyright] Act.' Slip op. at 3.

With a prima facie case of infringement thus established, MP3.com's defense centered on fair use. Defendant argued that under the four statutory factors enumerated in 17 U.S.C. § 107, its use was 'transformative' and did not harm the market for plaintiffs' recordings. Thus, even the commercial use of plaintiffs' works in their entirety should be permitted. The court was not persuaded by these arguments.

Judge Rakoff found that the use by MP3.com was not 'transformative,' as that term was defined in Campbell v. Acuff-Rose Music Inc.,² because it did not 'infus[e] [[plaintiffs' works] with new meaning, new understandings, or the like' but merely retransmitted them in another medium. Drawing on dicta in RIAA v. Diamond Multimedia Systems, Inc.,³ MP3.com countered that the use should be considered transformative because it allows record buyers to 'space shift,' playing back their recordings in places far removed from the physical location of their CDs. The court cited extensive precedent rejecting such arguments, however, concluding that defendant 'simply repackages [plaintiff's] recordings to facilitate their transmission through another medium. While such services may be innovative, they are not transformative.' Slip op. at 5. Moreover, unlike the so-called 'reverse engineering' at issue in Sony Computer Entertainment, Inc. v. Connectix Corp.,⁴ MP3.com did not copy plaintiff's work as an arguably necessary step in creating a new, compatible product, but merely reproduced the work in its original form for its original purpose.

MP3.com also argued that the fourth fair use factor, the effect of the use on the market for or value of the plaintiff's work, should weigh in favor of fair use for two main reasons. First, MP3.com argued that the derivative market for MP3 versions of plaintiffs' recordings was not a market which was 'traditional, reasonable, or likely to be developed,' as required under Amercian Geophysical Union v. Texaco Inc.,⁵ thus any potentially lost licensing revenues should not be counted as harm to the plaintiffs' 'actual or potential' market under § 107(4). Second, it asserted that because subscribers to the MP3.com service must first buy legitimate copies of plaintiffs' recordings, defendant argued that the net effect on plaintiffs' market could only be positive.

The court disposed of both arguments in short order. The plaintiff recording companies had in fact taken steps to license their works for Internet transmission, noted the court, but 'even if the copyright holder had not yet entered the new market at issue' the Copyright Act confers upon authors the exclusive right, 'within broad limits, to curb the development of such a derivative market by refusing to license a copyrighted work or by doing so only on terms the copyright owner finds acceptable.' Slip op. at 7-8. Accordingly, even an allegedly positive impact on CD sales does not permit a defendant to 'usurp a further market that directly derives from reproduction of the plaintiff's copyrighted works.'

The final argument pursued by MP3.com under its fair use defense was that it provided a useful service to consumers, thus the public benefit from the service should be considered as a non-statutory 'equitable' factor in the fair use analysis. The court, however, pointedly observed that copyright 'is not designed to afford consumer protection or convenience but, rather, to protect the copyright holders' property interests. . . . Stripped to its essence, defendant's 'consumer protection' argument amounts to nothing more than a bald claim that defendant should be able to misappropriate plaintiffs' property simply because there is a consumer demand for it. This hardly appeals to the conscience of equity.' Slip op. at 8-9. 'In sum, on any view, defendant's 'fair use' defense is indefensible and must be denied as a matter of law.'

Other defenses offered by MP3.com, including copyright misuse, abandonment, estoppel, and unclean hands, were so devoid of evidentiary support that court dismissed them as 'essentially frivolous.' In the final analysis, MP3.com was simply unable to persuade the court that it should be able to build a business around the reproduction and transmission of copyrighted works without the consent of their owners, and a summary judgment of liability for the plaintiffs was granted.

NAPSTER

In the Napster case, A&M Records, Inc. v. Napster, Inc., No. C 99-05183 MHP, 2000 U.S. Dist. LEXIS 6243 (N.D. Cal. May 5, 2000), the technology at issue and the theory of infringement liability pursued by the plaintiffs were very different than in MP3.com. Unlike MP3.com, Napster does not maintain an unauthorized database of other peoples' music, but merely allows its users to exchange unauthorized music files between and among themselves, with Napster's help. The exact technical details of Napster's service were sharply disputed by the parties, precluding an award of summary judgment, but in essence Napster facilitates communications between 'host' computers (which contain unauthorized MP3-format copies of particular sound recordings) and users seeking the music stored on those host computers. When a Napster user selects a particular sound recording from the index of titles on the Napster site, Napster provides the requesting user's computer with the address of the host computer on which a copy of that song resides, and the music is transmitted from the host to the requesting user without any further action by either party. As the court summarized the process, 'the MP3 file is actually transmitted over the Internet, but the steps necessary to make that connection could not take place without the Napster server.' Slip op. at 3.

The recording industry plaintiffs brought an action against Napster for contributory and vicarious copyright infringement, alleging that Napster has knowledge of, and substantial participation in, the infringing acts of its users, has a financial interest in those infringing acts, and is in position to control or supervise the transmissions which it facilitates.

Napster moved for summary judgment, arguing that even if its users were committing infringing acts, the service was entitled to a 'safe harbor' from monetary liability under §512(a) of the DMCA. The DMCA provides at § 512(a) that where an on-line 'service provider' merely provides an 'automatic technical process' for the 'transmission, routing, provision of connections or storage' of copyrighted material, does not itself initiate the transmission of such material or select the recipients, maintains no publicly-accessible copy of the transmission, and does not modify the content of the transmission, such a service provider can be shielded against monetary liability for the infringing acts of its users.

Napster claimed that it was a 'service provider' as defined by the statute, and that it complied with the requirements of § 512(a), but Judge Marilyn Hall Patel of the Northern District of California agreed with the plaintiffs that the various functions of Napster did not qualify for the §512(a) safe harbor. Under §512(a), the court noted, liability can only be avoided where, in addition to the five enumerated requirements, the service provider facilitates or engages in the transmission or routing of copyrighted material 'through a system or network controlled or operated by or for the service provider.' That is not what happens in the Napster system. As Napster itself conceded, the transmission of MP3 files from user to user occurs through the Internet, not through Napster, and 'the Internet cannot be considered a system or network controlled or operated by the service provider.' Slip op. at 10.

Napster sought to overcome this threshold issue by arguing that its 'system' included the Napster browser on each user's computer, but even accepting the point as true the court concluded that the users' transmissions would not, in any case, be 'through' the Napster system but merely from one part of the system to another, 'through' the Internet. Slip op. at 11. Thus Napster did not transmit material 'through' a system which it controlled, and §512(a) did not provide a safe harbor for the transmissions at issue.

The court noted, however, that § 512(a) covers not only transmissions, but also 'routing' and 'providing connections' through a system, and each of these functions must be analyzed separately. As to the meaning of the term 'routing,' '[i]t is clear from both parties' submissions that the route of the allegedly infringing material goes through the Internet from the host to the receiving server, not through the Napster server.' Slip op. at 12.

Similarly, Napster does not 'provide connections' through its system, found the court: 'Although the Napster server conveys address information to establish a connection between the requesting and host users, the connection itself occurs through the Internet. . . . Drawing inferences in the light most favorable to the non-moving party, this court cannot say that Napster serves as a conduit for the connection itself, as opposed to the address information that makes the connection possible. Napster enables or facilitates the initiation of connections, but these connections do not pass through the system within the meaning of 512(a).' In sum, the court denied Napster's motion for summary judgment, reasoning that '[b]ecause Napster does not transmit, route or provide connections through its system, it has failed to demonstrate that it qualifies for the 512(a) safe harbor.' Slip op. at 12.

The court went on to observe that even if Napster had qualified for the safe harbor of §512(a), it could only take advantage of the liability shield if it also complied with the requirements of § 512(i), which mandates that an eligible service provider 'has adopted and reasonably implemented, and informs subscribers and account holders of. . . , a policy that provides for the termination. . . of subscribers and account holders . . . who are repeat infringers.' Napster failed to meet this requirement for two reasons. First, Napster did not adopt a written policy advising its users of possible termination until two months after the filing of the plaintiffs' complaint. Although the court acknowledged that the statute does not specify when such a policy must be implemented, Napster's after-the-fact posting 'defies the logic of making formal notification to users or subscribers a prerequisite to exemption form monetary liability. The fact that Napster developed and notified its users of a formal policy after the onset of this action should not moot plaintiffs' claim to monetary relief for past harms.' Slip op. at 13.

Further, Napster failed to persuade the court that it had made reasonable efforts to terminate repeat infringers. Under the Napster policy, a repeat infringer may have his or her password blocked so that no further access will be possible under that password. Napster does not block the IP address of the user's computer, however, so that a terminated user may reapply under a different password, as plaintiffs' expert demonstrated to the court. Accordingly, there were genuine issues of fact precluding summary judgment for Napster as to the reasonableness of its termination procedure, even if it could otherwise arguably qualify for the safe harbor of §512(a).

CONCLUSION

The MP3.com and Napster cases constitute serious inroads into the unauthorized reproduction and transmission of copyrighted works on the Internet. However, at a galloping pace, new methods of unauthorized use are being developed which pose even greater threats to copyright-based industries. Individuals, so-called 'free information' groups and business entities are developing new software which makes it difficult to enforce copyrights efficiently, and which uses encryption to mask the identities of unauthorized users. No doubt, the battles to curtail, contain or control web-based unauthorized uses of copyrighted works are just beginning.

Copyright© 2000 Cowan, Liebowitz & Latman, P.C.
This article was previously published in the New York Law Journal.

Robert J. Bernstein is a member of the New York law firm of Cowan, Liebowitz & Latman, P.C. and a frequent author and lecturer on copyright law and litigation. He is President-Elect of the Copyright Society of the U.S.A., and formerly served as Chairman of the Copyright Law Committee of the American Intellectual Property Law Association and as a member of its Board of directors.

Robert W. Clarida is an associate at the New York law firm of Cowan, Liebowitz & Latman, P.C. , and speaks and writes frequently on copyright law. He is the co-author, with David Goldberg, of 'Recent Developments in Copyright,' a review of copyright decisions delivered each year at the annual meeting of the Copyright Society of the U.S.A.

David Goldberg, the regular co-author of this column, is on vacation.

NOTES

¹ There is no indication in the record of any way for MP3.com to prevent multiple users from 'beaming', at different times, the same copy of a CD into the CD-ROM drives of their respective computers.

² 510 U.S. 569, 579 (1994).

³ 180 F.3d 1072 (9th Cir. 1999).

⁴ 203 F.3d 596 (9th Cir. 2000).

⁵ 60 F.3d 913 (2d Cir.), cert. dismissed, 516 U.S. 1005 (1995).

Back to top