Of pirates and safe harbours: UMG, Veoh get their ruling

 

Looking for a safe harbour

Yesterday in the United States the Ninth Circuit Court of Appeals handed down its decision in UMG v Veoh (which can be read in full here; briefly referred to in this blog here), a case addressing copyright liability for ISPs that host infringing works.

Veoh operates a publicly accessible website that enables users to share videos with other users. UMG is one of the world's largest recorded music and music publishing companies. In addition to producing and distributing recorded music, UMG produces music videos.

Although Veoh has implemented various procedures to prevent copyright infringement through its system, users of Veoh's service have in the past been able, without UMG's authorisation, to download videos containing songs for which UMG owns the copyright.

UMG responded by filing suit against Veoh for direct and secondary copyright infringement back in 2007. Two years later, the US District Court for the Central District of California granted 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).

UMG appealed the decision and made several arguments before the Ninth Circuit, including that the district court too broadly construed the scope of §512(c).

UMG never disputed that, when Veoh became aware of allegedly infringing material as a result of the RIAA's DMCA notices, it removed the files. It claimed, however, that Veoh had knowledge or awareness of other infringing videos that it did not remove. In particular, argued UMG, the district court erred by improperly construing the knowledge requirement to unduly restrict the circumstances in which a service provider has "actual knowledge" under subsection (1) and setting too stringent a standard for "red flag" awareness based on facts or circumstances from which infringing activity is apparent.

Judge Raymond Fisher, in an unanimous decision, referred to Congress' express intention that the DMCA "facilitate making available quickly and conveniently via the Internet ... movies, music, software and literary works". Being this the service Veoh provides, the Court did not find UMG's narrow interpretation of §512(c) be plausible. In fact, if merely hosting material which falls within a category of content capable of copyright protection, with the general knowledge that one's services could be used to share unauthorised copies of copyright-protected material, was sufficient to impute knowledge to service providers, the §512(c) safe harbor would be rendered a dead letter.

The onus to first identify infringing materials is on rights owners. Indeed, said the Court, copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is protected by copyright and what is not. These considerations are reflected in Congress' decision that DMCA notification procedures place the burden of policing copyright infringement on copyright holders, as well as in the "exclusionary rule" which prohibits consideration of substantially deficient §512(c)(3)(A) notices for purposes of "determining whether a service provider has actual knowledge or is aware of facts and circumstances from which infringing activity is apparent."

In the light of these and other considerations, the Court affirmed the district court's determination on summary judgment that Veoh is entitled to §512(c) safe harbor protection.

As our readers will know, many of these issues are at the centre of another case currently pending before the Second Circuit, this being Viacom v YouTube. We'll see what happens there, as well as how the debate around the SOPA develops in parallel with case law.

More on UMG v Veoh on The Hollywood Reporter here.

Universal goes shark hunting

Wikipedia describes the US based Grooveshark as the “international online music search engine, music streaming service and and music recommendation web software application, allowing users to search for, stream, and upload music that can be played immediately or added to a playlist”. But is it legal? Well, the World’s biggest record company thinks not. Universal Music Group has reportedly filed a lawsuit against music service Grooveshark over alleged copyright violations saying that records show that senior management at Escape Media Group, the company which operates Grooveshark, had led an effort to upload more than 100,000 songs to the music service and claims to have supporting emails and documents, including evidence showing that staff members Sam Tarantino, Paul Geller and Ben Westermann-Clark uploaded 1791, 3452 and 4600 unlicensed songs respectively. Many of those tacks would be presumed to be Universal tracks given the major's market share in the recorded music sector.

Universal is reported to be seeking the maximum in damages of $150,000 per infringing act. Whilst Grooveshark has negotiated direct licenses with EMI and numerous independent labels and aggregators, it has no deal with Universal - but as the service allows user to upload music so UMG tracks will appear – although Grooveshark says that, like YouTube, it will remove unlicensed tracks when notified.

Grooveshark relies on the ‘safe harbour’ provisions in the US’s DMCA which protects an online service from the infringing activities of its users in some specific situations. Grooveshark does not use filters to (theoretically) screen out unlicensed material, although filters are seemingly not as yet required by law in the USA to fall under safe harbour abut insists it has a valid "takedown" system. YouTube does use filters. But in the USA if a service has any direct knowledge of infringing content on its network, it must remove or disable access to that content before being contacted by the copyright owners. If Grooveshark’s management led an effort to upload copyrighted material, as the lawsuit alleges, that would certainly be considered direct knowledge! Universal says that whilst it is committed to "supporting legitimate and innovative" digital business models, it claims "Grooveshark did not build its business legitimately; its business is built on wilful infringement."

The UMG lawsuit also reportedly notes a recent article from Digital Music News about the problems King Crimson guitarist Robert Fripp had in trying to get his music removed from Grooveshark, including an anonymous post in the comments section of that article purporting to come from someone working for Grooveshark, who claims staff there were routinely instructed to upload music to the streaming service's platform. The comment adds that Escape Media senior management were aware of Fripp's takedown requests, but ignored them because they believe Fripp hadn't the resources to sue.

Last year Universal filed a lawsuit in the New York County Court claiming Grooveshark violates copyright by providing free access to its pre-1972 recordings. This is now provably an irrelevance as the court in the recent EMI v MP3tunes.com case said that differentiating between pre and post-1972 works was not necessary, and that DMCA safe harbour applied irrespective of the year of copyright protection.

Grooveshark also faced a copyright infringement lawsuit brought by EMI in 2009. That lawsuit ended with a licensing deal that added EMI's roster to Grooveshark's catalogue.


http://www.billboard.biz/bbbiz/industry/legal-and-management/universal-music-group-sues-grooveshark-report-1005545152.story

Artist’s digital royalty beef will go to court

A class action between a number of recording artistes and Universal Music over how digital royalties are calculated will go to court. A federal judge in California has given the green light for a class action lawsuit against Universal Music by a number of long established artists, led by White Zombie, Whitesnake, and the estate of Rick James. The music major had requested the case be dismissed. The case will be a major test of how artiste digital royalties are calculated by record labels in the absence of specific contract wording: The label would like to calculate the royalty based on the same accounting process as a normal (physical) sale – whilst artistes want a share of the income which will almost certainly be a substantially greater share of the revenues. Almost all pre-internet contracts make no mention of digital releases beyond CD (and many predate CDs) let alone downloads and streaming and artistes have argued that because digital removes label's manufacturing and distribution costs, the risks of sales are almost non-existent, and when a label makes its catalogue available to a service such as iTunes, it is actually a licensing deal and therefore the higher artist royalty should be paid.

There is a precedent here – the so called ‘Eminen’ case that actually involved FBT Productions, the production house involved in some early Eminem recordings, who took Universal to court over digital royalties and succeeded in achieving the higher royalty rate: FBT argued they had a right to a 50/50 split of profits with Universal on sales of digital music and ring tones through online retailers such as iTunes and Sprint as these 'Master Licensing' deals attracting the higher royalty. The contract did not specifically mention income from download stores like iTunes, or what share the artist (and therefore FBT) should get from such sales but Universal have been treating download sales as being equivalent to CD sales paying a lower rate of 12-20%% as if these were physical sales. Whilst a district court refused summary judgment saying the agreement was ambiguous, The U.S. Ninth Circuit Court of Appeals in San Francisco agreed with FBT saying that the higher royalty should apply.

The major insists that the FBT case related to the specific wording of the production company's contract, and the precedent in that case did not apply to every other pre-download record contract. That said, the new litigation means that all artists signed to Universal with pre-internet contracts could benefit from any positive outcome, with lawyers for the claimants saying that they believed Universal "engaged in a broad scheme to underpay numerous royalty participants, including formulating an opaque and artificial method for accounting for and paying its royalty participants for income derived from such licenses and engaging in a sustained public relations effort designed to convince the public that it had employed 'groundbreaking' and 'enlightened' accounting practices that actually benefited (rather than cheated) the Class".

In a separate case, Sony have also been taken to court by a group of artistes including the Allman Brothers and Cheap Trick over how royalties should be calculated. The action, stated in 2006 in the United States District Court Southern District of New York, shows how the different parties calculate how the artist’s royalty should be paid. On the sale of 1000 downloads at 0.70c per unit (total income of $700) Sony BMG thought the appropriate payment would be a royalty payment based on 85% of all downloads sold after deducting mechanical royalties to the songwriters, a container charge of 20% and an audiophile reducer for new technology of a further 50%. This gave a total royalty payment of $45.05. The Allman brothers felt they should be paid one half of the income from 100% of all units sold, less just the mechanical royalty payable to songwriters. This gave a royalty due of by Sony BMG to the Allman Brothers of $315.50 with attorney Brian Caplan saying at the time "Sony Music is presently engaged in a widespread attempt to underpay its recording artists".

In the new Universal case the court said that the allegations were enough to justify the matter being treated as a class action.

Thank you Amanda for reminding me to post this blog!

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=31498&terms=%40ReutersTopicCodes+CONTAINS+'ANV'