In the music and tech industry, the front line in the war over the future of cloud-based music storage services has taken shape in the form of a copyright lawsuit EMI Group filed against MP3tunes.com. For more than three years, EMI's lawyers at Jenner & Block have claimed that widespread copyright infringement is taking place on that Web site, which since 2005 has allowed users to store music in private accounts and stream it on any device.
A highly anticipated summary judgement ruling Monday by Manhattan federal district court judge William Pauley III left reporters and commentators reaching different conclusions about who exactly won. Bloomberg and The New York Times declared EMI the victor, while Reuters and paidContent.org concluded that MP3tunes and its lawyers at Duane Morris came out of the ring in the best shape.
Where do we stand? We're siding with MP3tunes.
The confusion flows from the mixed nature of the 29-page ruling. Judge Pauley did grant EMI summary judgment on its claims of contributory infringement for 472 songs that EMI flagged as infringed in a so-called "takedown notice" to MP3tunes, but which the music site never removed from users' accounts. The judge also granted summary judgment to EMI on its claim of direct infringement by MP3tunes founder Michael Robertson.
But, more importantly, Judge Pauley concluded that the Digital Millennium Copyright Act's safe harbor provisions protect MP3tunes from liability with the exception of those 472 songs. MP3tunes, through a sister Web site, allowed users to search and download free MP3s from third-party sites. At the same time it enforced policies against users who repeatedly downloaded illegal music and uploaded it to their accounts, the judge found. "While a reasonable person might conclude after some investigation that the Web sites used by MP3tunes executives were not authorized to distribute EMI's copyrighted works, the DMCA does not place the burden of investigation on the Internet service provider," Judge Pauley wrote.
The decision follows earlier federal court rulings that have extended the safe harbor protection to online services that followed the rules of the DMCA. A federal judge in Los Angeles granted Veoh Networks summary judgment in 2009 in a copyright tussle with UMG Recordings, while Google Inc.'s YouTube last year fended off Viacom's $1 billion lawsuit over unauthorized videos on the Web site. Both are on appeal.
"It's a big victory for cloud computing services," said Vanessa Hew, one of the Duane Morris partners representing MP3tunes. As Jan Wolfe recently reported for The American Lawyer, the recording industry is taking a close look at similar cloud music services launched by Google and Amazon. Google's lawyers at Keker & Van Nest submitted an amicus brief in support of MP3tunes, arguing that EMI's arguments "would create disruption and uncertainty of precisely the sort that Congress meant to mitigate by enacting the DMCA safe harbors."
Gregory Gulia of Duane Morris, the lead partner for MP3tunes, told the Litigation Daily: "We're not happy with every part of [the decision] but for the most part it upholds the fundamental business model of MP3tunes." Gulia said his client had not yet decided if it would appeal the unfavorable parts of the ruling.
As a result of this ruling, MP3tunes faces much smaller potential damages. Gulia said his client at one time could have been on the hook for billions of dollars for the infringement of thousands of songs. Under Monday's ruling, statutory damages would entitle EMI to $750 to $150,000 for infringement of those 472 songs, placing the upper limit of damages at about $70 million. . . .