2d Cir. Addresses DMCA "Repeat Infringer" Policy In MP3Tunes Appeal; Finds Only A Single Statutory Damages Award For Infringed Composition & Sound Recording; Addresses Many Other Copyright Law Issues

EMI Christian Music et al. v. MP3Tunes, No. 14-4369 (2d Cir. Oct. 25, 2016).

In the MP3Tunes appeal, the Second Circuit vacated the District Court’s grant of partial summary judgment to the defendants based on its conclusion that MP3tunes qualified for safe harbor protection under the DMCA because the District Court applied too narrow a definition of “repeat infringer”; (2) reversed the District Court’s grant of judgment as a matter of law to the defendants on claims that MP3tunes permitted infringement of plaintiffs’ copyrights in pre‐2007 MP3s and Beatles songs because there was sufficient evidence to allow a reasonable jury to conclude that MP3tunes had red‐flag knowledge of, or was willfully blind to, infringing activity involving those categories of protected material; (3) remanded for further proceedings related to claims arising out of the District Court’s grant of partial summary judgment; and (4) affirmed the judgment in all other respects (relating to statutory damages for sound recordings and compositions, cover art liability, respondeat superior liability for MP3Tunes executives, personal jurisdiction, vicarious and contributory liability, statutory damages for singles & compilations, and punitive damages).

The plaintiff record labels and music publishers argued that MP3tunes never reasonably implemented a repeat‐infringer policy.  In addressing this argument, the Second Circuit answered two questions: first, whether certain MP3tunes users qualified as “repeat infringers”; and second, if so, whether MP3tunes reasonably implemented a policy directed at them.  As to the first question, the Second Circuit held "all it takes to be a 'repeat infringer' is to  repeatedly upload or download copyrighted material for personal use."  (Emphasis in original)  Having answered that question, the Court then found that MP3tunes did not "even try to connect known infringing activity of which it became aware 2through takedown notices to users who repeatedly created links to that infringing content in the sideload.com index or who copied files from those links...A jury could reasonably infer from that evidence that MP3tunes actually knew of specific repeat infringers and failed to take  action "

The Court also, notably, addressed statutory damages and whether it was improper to make only a single award where there are different owners of the copyright in the sound recording and in the composition.

 In our view, then, Congress did not intend for separate statutory damages awards for derivative works such as sound recordings, even when the copyright owner of the sound recording differs from the copyright owner of the musical composition.    In sum, the District Court’s decision to permit only one award of statutory damages for the musical composition and corresponding sound recording comports with both the plain text and the legislative history of the Copyright Act.  We therefore affirm that part of the judgment.

In addition to attacking the District Court’s exercise of personal jurisdiction over him, the individual defendant (MP3Tune's CEO) argued that there was insufficient evidence to support the jury’s finding that he was vicariously or contributorily liable for MP3tunes’s infringements.  The Second Circuit disagreed,

EMI Awarded $3 million + in legal fees in MP3 Tunes Case

Capitol Records, Inc. v. MP3Tunes, No. 07-cv-9931 (SDNY 11/12/2015) [Doc. 724].

In the MP3Tunes case, the Court awarded the plaintiff record labels and music publishers attorney's fees under the Copyright Act.  Although slightly reduced (e.g., because of block billing), plaintiff were awarded just over $3 million in fees and costs.

Partial Attorney's Fees Awarded In MP3Tunes

Capitol Records, Inc. v. MP3Tunes, No. 1:07-cv-09931-WHP-FM (SDNY filed 04/03/15) [Doc. 689]

Record company and music publisher plaintiffs, who succeeded at trial, moved for an award of partial attorneys' fees and costs under the Copyright Act, and pre-judgment and post-judgment interest under Fed. R. Civ. P. 59 against defendant MP3tunes.  The Court granted the motion for partial attorneys' fees, in part, denied the motion for pre-judgment interest, and granted the motion for post-judgment interest.

Punitive Damages Verdict Significantly Reduced; Defendant Granted Judgment Notwithstanding Verdict On Cover Art And DMCA "Red Flag" Theories

Capitol Records, Inc. v. MP3Tunes, No. 07-cv-9931 (S.D.N.Y. filed Sep. 29, 2014) [Doc. 629].

Defendant moved for judgment as a matter of law, or alternatively a new trial, and for remittur following a $48,061,073 jury verdict in favor of plaintiffs, who consisted of record labels and publishers who had filed copyright and unfair competition claims alleging that defendant and MP3Tunes made infringing copies of copyright songs and cover art.  The motion was denied in part, and granted in part.  Specifically, defendant's motion for judgment as a matter of law was granted as to plaintiffs' claims of (1) public display rights in cover art, and (2) copyright infringement under "red flag" knowledge and willful blindness theories (except for certain works sideloaded and which the source domain's URL was obviously infringing and viewed by a company executive).  Further, defendant's motion for a new trial on punitive damages was granted unless plaintiffs elected to remit the jury's punitive damage award to $750,000.

Reconsideration in MP3Tunes Case

Capitol Records, Inc. v. MP3Tunes, LLC, No. 07-cv-9931 (S.D.N.Y. filed May 14, 2013) [Doc. 368].

All parties moved for reconsideration of the Court's October 25, 2011 order (821 F. Supp. 2d 627), springing from the 2nd Circuit's decision in Viacom Int'l v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012).  Plaintiff's motion was granted in part and denied in part: plaintiff's motion was granted as to the issue of willful blindness and "red flag" knowledge, and denied as to the inducement of copyright claim.  Defendant's motion regarding direct copyright infringement was granted in part and denied in part.  Defendant's motion for reconsideration regarding infringement of cover art, regarding personal jurisdiction and summary judgment as to his vicarious liability was denied.

There is an interesting discussion of "red flag" knowledge of infringement, under which service providers can lose the protection of the DMCA safe harbors if they have actual or apparent (i.e., "red flag") knowledge of infringing conduct.

DMCA Safe Harbor Does Not Apply To Pre-1972 Recordings, N.Y. Appellate Court

UMG Recordings, Inc. v. Escape Media Group, Inc., 2013 NY Slip Op 02702 (1st Dep't Apr. 23, 2013).  Decision here.  

Plaintiff is UMG, and defendant is the service "Grooveshark"  As described by the Court, "Users of Grooveshark can upload audio files (typically songs) to an archive maintained on defendant's computer servers, and other users can search those servers and stream recordings to their own computers or other electronic devices. "

In its answer, Grooveshark asserted as its fourteenth affirmative defense that pre-1972 recordings sat within the safe harbor of section 512(c) of the DMCA. UMG moved, inter alia, to dismiss that defense pursuant to CPLR 3211(b). The motion court denied plaintiff's motion, relying heavily on Capitol Records, Inc. v MP3tunes, LLC (821 F Supp 2d 627 [SDNY 2011]), in which the United States district court tackled precisely the same issue and found that the DMCA embraced sound recordings fixed before February 15, 1972.  The Appellate Court reversed.

First, the Court found that applying the DMCA to pre-1972 recordings would violate Section 301(c) of the Copyright Act.  "Had the DMCA never been enacted, there would be no question that UMG could sue defendant in New York state courts to enforce its copyright in the pre-1972 recordings, as soon as it learned that one of the recordings had been posted on Grooveshark. However, were the DMCA to apply as defendant believes, that right to immediately commence an action would be eliminated. Indeed, the only remedy available to UMG would be service of a takedown notice on defendant. This is, at best, a limitation on UMG's rights, and an implicit modification of the plain language of section 301(c). The word "limit" in 301(c) is unqualified, so defendant's argument that the DMCA does not contradict that section because UMG still retains the right to exploit its copyrights, to license them and to create derivative works, is without merit. Any material limitation, especially the elimination of the right to assert a common-law infringement claim, is violative of section 301(c) of the Copyright Act."  Continuing, the Court found "there is no reason to conclude that Congress recognized a limitation on common-law copyrights posed by the DMCA but intended to implicitly dilute section 301(c) nonetheless. ... Congress explicitly, and very clearly, separated the universe of sound recordings into two categories, one for works "fixed" after February 15, 1972, to which it granted federal copyright protection, and one for those fixed before that date, to which it did not. Defendant has pointed to nothing in the Copyright Act or its legislative history which prevents us from concluding that Congress meant to apply the DMCA to the former category, but not the latter."

Second, the Court rejected Grooveshark's argument that the very purpose of the DMCA will be thwarted if it is deemed not to apply to the pre-1972 recordings. "The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation. As stated above, it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress intended for the DMCA only to apply to post-1972 works."

Labels Denied Interlocutory Appeal In MP3Tunes Case

Capitol Records, Inc. et al. v. MP3Tunes, LLC et al., No. 07-9931 (S.D.N.Y. filed Jan. 9, 2012) [Doc. 277].

Plaintiffs (record companies and music publishers) asked the Court to certify an interlocutory appeal of the Amended Memorandum & Order dated October 25, 2011 ("October 25,2011 Memorandum & Order") pursuant to 28 U.S.C. § 1292(b). Plaintiffs sought interlocutory appeal on whether, (i) the DMCA safe harbors apply to sound recordings fixed before February 15, 1972, (ii) a repeat infringer policy can be reasonably implemented by terminating only "blatant" infringers, and (iii) red flag knowledge of infringement can be established through sources other than takedown notices. The Court denied Plaintiffs' request.

Summary Judgments In MP3Tunes Case

Capitol Records, Inc. v. MP3Tunes, LLC, 1:07-cv-09931-WHP (S.D.N.Y. filed 8/22/2011) [Doc. 267].

"This case turns in large part on whether MP3tunes is eligible for protection under the safe harbors created by the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. 512."

The Court addressed Plaintiff's argument that MP3tunes failed to reasonably implement a repeat infringer policy. The court distinguished between "blatant infringers" and users who merely consume the content and found "this applies to MP3tunes executives." There was no evidence that executives or employees had firsthand knowledge that websites linked on the sideload.com website were unauthorized. Additionally, MP3tunes did nor purposefully blind itself to its users' identities and activities, and had a procedure for responding to DMCA takedown notices.

The Court next addressed MP3tune's compliance with Plaintiff's take-down notices. The court found that MP3tunes was obligated to remove specifice works traceable to users' "lockers" and that MP3tunes interpreted the reach of Plaintiff's notices too narrowly. However, MP3tunes was not obligated to take down all of Plaintiff's cotnent because the notices provided a representative list. Plaintiff had to provide sufficient information --additional web addresses -- for MP3tunes to locate other infringing material. "Absent adequate notice, MP3tunes would need to conduct a burdensome investigation in order to determine whether songs in its users' accounts were unauthorized copies. As discussed, the DMCA does not place this burden on service providers."

The Court next addressed actual or "red flag" knowledge of infringement. The Court found that MP3tunes "undoubtedly...is aware that some level of infringement occurs. But there is no genuine dispute that MP3tunes did not have specific 'red flag' knowledge with respect to any particular link...other than the URLs noticed [in the DMCA takedowns]."

The Court next addressed defendant's benefit and control of infringing activity, finding "at worst, MP3tunes set up a fully automated system where users can choose to download infringing content."

In sum, MP3tunes could claim safe harbor protection for plaintiff's works stored on and linked to on the websites. However, MP3tunes did not qualify for safe harbor protection for songs identified in takedown notices which it failed to remove.

The Court then turned to whether MP3tunes is secondarily liable for storing material at the direction if its users. The court found that MP3tunes knowledge of the unauthorized use of infringing material "is manifest." "Accordingly, [Plaintiff's] motion for summary judgment on its claim for contributory infringement with respect to the songs listed in [Plaintiff's] takedown notices and which MP3tunes failed to removed from users' lockers is granted."

The Court next turned to direct infringment. Plaintiff motion with respect to songs downloaded by employees was denied because there was a dispute as to whether the songs were downloaded by employees in the course of their employment. On the other hand, an individual named defendant was directly liable for the songs personally "sideloaded" from unauthorized sites.

MP3Tunes Decision on Counterclaims

Defendant's counterclaims Dismissed:

DMCA claim
New York's GBL 349 (re: consumer protection)
Common law unfair competition
California Business and Professional Code 17200

Defendant's counterclaims NOT dismissed:

Declaratory judgment claim that it is a service provider protected by the safe-harbor provision of 17 USC 512 (of the DMCA)

[No. 1:07-cv-09931-WHP-FM (Doc. 73 filed Mar. 4, 2009).]

MP3 Tunes - Answer and Counterclaim

Blurb and link to answer/counterclaims at Recording Industry vs. The People

MP3Tunes Answer & Counterclaim

MP3Tunes Answer and Counterclaim - Upload a Document to Scribd

Jurisdiction and Transfer Decision in MP3tunes

The District Court, Southern District of New York, has found that personal jurisdiction exists over MP3tunes but not over its CEO, Michael Robertson. (Background here.) Further, venue and forum were proper, such that the suit will not be transferred to the Southern District of California.

Capitol Records Inc. v. MP3tunes LLC, No. 07-cv-9931, 10/3/08 N.Y.L.J. "Decision of Interest" (S.D.N.Y. decided Sept. 29, 2008).

PERSONAL JURISDICTION

The case analyzed personal jurisdiction over both MP3tunes and Robertson under New York's long-arm statute (CPLR 302). Because MP3tunes is an interactive website, provides users with software, transfers of music files, and allows for the exchange of e-mails/postings, the court held that MP3tuns "transacts business in New York" under the long-arm statute. Further, the website's minimum contacts with New York meant that the assertion of personal jurisdiction would not offend "traditional notions of fair play and substantial justice."

Robertson, however, was not subject to the court's personal jurisdiction. There was no competent evidence that the CEO's only activities in New York (a single meeting and a speaking engagement at an industry forum) related to plaintiffs' claims. Nor was there competent evidence to show that Robertson exercised control over the corporations allegedly infringing activities in New York (important, because an individual defendant may also be subject to jurisdiction under New York's long-arm statute if a corporate defendant is acting as his agent).

VENUE
A defendant "may be found", pursuant to 28 U.S.C. 1400(a), in any district where the defendant is subject to personal jurisdiction. Therefore, the motion to dismiss for improper venue was denied.

TRANSFER
The Court examined nine transfer-factors and denied defendants' motion to transfer the action.

MP3Tunes Update

Back in November, 2007, OTCS did a posting on a copyright infringement claim filed against MP3Tunes. (Posting here.) At the time, our hypothetical questions were ignored. (OTCS takes absolutely no position on the merits of the case or defense.)

So, we hadn't heard anything until a Tipster dropped us a line today:

"...just completed oral arguments on jurisdiction for the company and [MP3Tunes CEO Michael Robertson personally]."

CEO Michael Robertson's take on the issue of his personal liability is available on his website. ("The Record Label Wants My Minivan"; June 11, 2008).

Thanks Tipster. Please let us know what the court finds (e.g., send us a copy of the decision).

[Capitol Records Inc.; Caroline Records Inc.; EMI Christian Music Group Inc.; Priority Records LLC; Virgin Records America Inc.; Beechwood Music Corp.; Colgems-EMI Music Inc.; EMI April Music Inc.; EMI Blackwood Music; EMI Full Keel Music; EMI Golden Torch Music Corp.; EMI Longitude Music; EMI Virgin Music Inc.; EMI Virgin Songs Inc. v. MP3Tunes LLC; Michael Robertson. Filed S.D.N.Y. 11/9/2007; 07 CV-9931]

Online Storage/Locker

This looks interesting: MP3tunes, a company that appears to store your already PURCHASED music on-line, sued by the recording industry. The company offers users a "locker" with unlimited storage and streaming of music, enabling users to listen to their music on any computer, anywhere.

If the user has already purchased the music, what's the problem here? OTCS, regrettably, has not yet read the complaint. However, OTCS assumes this is a section 106 copying claim. Is this what the Copyright Act should protect? How is this any different than a purchaser taking their Case Logic book of CDs from their home-stereo, to their car, to their friend's home, to the office etc.? Music is mobile, and once purchased in one-format (e.g., MP3, 8-track) users should be able to enjoy the music on the corresponding playing -- no matter where. Aren't the labels trying to double-dip?

[Capitol Records Inc.; Caroline Records Inc.; EMI Christian Music Group Inc.; Priority Records LLC; Virgin Records America Inc.; Beechwood Music Corp.; Colgems-EMI Music Inc.; EMI April Music Inc.; EMI Blackwood Music; EMI Full Keel Music; EMI Golden Torch Music Corp.; EMI Longitude Music; EMI Virgin Music Inc.; EMI Virgin Songs Inc. v. MP3Tunes LLC; Michael Robertson. Filed S.D.N.Y. 11/9/2007; 07 CV-9931]