Mbu 2520 spring 2018 chapter 15

MBU 2520 Spring 2018 - Eric M. Griffin
CHAPTER 15:
ONLINE MUSIC WAR
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ONLINE MUSIC WAR MBU 2520 Spring 2018 - Eric M. Griffin
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MP3.com
The year 2000 case concerned MP3.com's unauthorized duplication of essentially
every music CD ever made for the purposes of launching a service entitled
My.MP3.com or "Beam-it", which allowed users to access their private music
collections online from anywhere in the world. (“MUSIC LOCKER”)
Before accessing a song from MP3.com’s servers, a subscriber first had to “prove”
that he already owned the CD by placing his copy of the commercial CD into his
computer’s CD-ROM drive for several seconds or by purchasing the CD from one
of defendant’s cooperating online retailers. Id. However, it was MP3.com doing
the copying from the CDs onto their servers, and the court found this copying
not a fair use and awarded $53Million to UMG.

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MP3.com
UMG argued, in part, that the copying was not covered by fair use because entire
CDs were copied (instead of excerpts) and that the use was a commercial one
(even though no fee was charged, it was supported by ad revenue).
MP3.com defended, in part, that "consumer protection" concepts supported
MP3.com's unauthorized use of the intellectual property of the major record labels
and music publishers. In ruling, the court indicated that "stripped to its essence,
defendant's 'consumer protection' argument amounts to nothing more than a
bald claim that (the) defendant should be able to misappropriate (the)
plaintiff's property simply because there is a consumer demand for it. This
hardly appeals to the conscience of equity."

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WHAT IS FILESHARING?
• Software programs which allows people to search for and
transfer files from one computer to another without the
use of a server (peer to peer)
• Courts have held that people who use filesharing
software to trade copyrighted works without the
permission of the copyright owners are committing
copyright infringement.

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&M RECORDS v NAPSTER
Dec 7, 1999
• A landmark intellectual property case in which the 9th Circuit US Court of Appeals
affirmed the ruling of the US District Court for Northern CA, holding that defendant,
Napster, could be held liable for contributory infringement and vicarious infringement
of the plaintiffs' copyrights. This was the first major case to address the application of
copyright laws to peer-to-peer file-sharing.

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A&M RECORDS v NAPSTER
Dec 7, 1999
• FACTS:
• RIAA sued on behalf of labels
• Claimed Napster should be held liable for copyright infringement
• District Court issued a preliminary injunction / Napster appealed
• NAPSTER ARGUMENTS:
• No infringement b/c files stored on user’s computers / no knowledge (to be contributory or vicariously
liable, must have actual knowledge and materially contribute)
• Fair use defense (all factors weighed against)
• OUTCOME:
• Court of Appeals upheld injunction
• Napster implemented filtering system / block illegally traded copyrighted works
• Napster ultimately decided risk of trial too great / filed bankruptcy
• Sold its main asset, its name, to another company which used it for legal filesharing

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MGM v GROKSTER
June 27 2005
• A SCOTUS decision in which the Court
unanimously held that peer-to-peer file sharing
companies Grokster and Streamcast could be
sued for inducing copyright infringement for the
marketing of file sharing software. The plaintiffs
were a consortium of 28 of the largest
entertainment companies (led by MGM studios).

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MGM v GROKSTER
• FACTS:
• Same facts as alleged in Napster
• One IMPORTANT difference in how the services differed from Napster: Grokster and Streamcast were decentralized (i.e. the files were
transferred w/o passing through the companies’ computers)
• GROKSTER AND STREAMCAST ARGUMENT:
• Claimed the 1984 SCOTUS "Betamax" case applied to this case. (asserts that a VCR manufacturer is not responsible for a user copying
movies illegally (i.e. b/c it has substantial noninfringing uses)).
• HOLDINGS:
• 2003 Fed Dist Court said the people who used the sites were direct infringers, but Grokster and Streamcast were not contributorily liable
(applied Betamax)
• Ruling upheld in 2004 in appellate court
• RIAA and MPAA appealed to SCOTUS—9-0 vote that vacated the 9th Circuit COA decision that Grokster could not be charged with contributory
infringement because it qualified for a safe harbor established by the Supreme Court in 1984 in its Betamax decision (safe harbor protects
technology developers who know, or have reason to know, that their products are being widely used for infringing purposes, as long as the
technologies have, or are capable of, substantial noninfringing uses)
• SCOTUS held "file-sharing companies can be sued if they actively encourage piracy". In this case, held that StreamCast and Grokster
actively promoted pirating. BUT SCT ALSO HELD that while file sharing tools can be used illegally, the file sharing software itself is not illegal,
nor is the general activity of file sharing. Manufacturers of file sharing tools are not responsible for how users use those products, unless the
manufacturer takes active steps to encourage direct infringement.

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MGM v GROKSTER
• SCOTUS did NOT apply Betamax (Sony) precedent - instead held likely guilty of
CONTRIBUTORY LIABILITY and INDUCEMENT LIABILITY (unanimous decision)
• “One who distributes a device with the object of promotiing its use to infringe copyright
… is liable for the resulting acts of infringement…”
• SCOTUS emphasized THREE items of evidence that Grokster and Streamcast was liable:
• business intended to replace Napster
• No attempt to use filtering tools
• Business based on selling advertising; cost of advertising directly proportionate to number
of users
• Grokster entered into a settlement agreement to pay $50 million and to stop distributing its
software (Streamcast filed bankruptcy in 2008)

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RIAA v “The People”
June 27 2005
Event Date Finding Award
1st civil jury trial, U.S. District Court (MN) October 4, 2007 Liable Statutory damages of $222,000 ($9,250/song).
2nd civil jury trial, U.S. District Court (MN) June 15–18, 2009 Liable Statutory damages of $1,920,000 ($80,000/song).
Remittitur by Chief Judge Michael J. Davis January 22, 2010 n/a
Statutory damages reduced to $54,000
($2,250/song). The plaintiffs rejected this
adjustment.
3rd civil jury trial (damages only), U.S. District
Court (MN)
November 2–4, 2010 n/a Statutory damages of $1,500,000 ($62,500/song).
Damages reduced to "constitutional maximum" July 22, 2011 n/a
Statutory damages reduced to $54,000
($2,250/song).
Appeal, U.S. Circuit Court (8th) Sept. 11, 2012 n/a
Statutory damages reinstated to first judgment,
$222,000 ($9,250/song).
THOMAS / TIMELINE

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THOMAS UPDATE-MAR 18 2013: The Supreme Court has once again declined to
hear a file-sharing case appeal, leaving Jammie Thomas-Rasset facing a $220,000
fine for sharing 24 MP3 files nearly a decade ago.
"There's no way that they can collect," she told the Chicago Sun-Times. "Right now, I
get energy assistance because I have four kids. It's just the one income. My husband
isn't working. It's not possible for them to collect even if they wanted to. I have no
assets."

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RIAA v “The People”
July 31, 2009
TENNEBAUM
Event Date Finding Award
1st civil jury trial, U.S. District Court First Circuit July 31 2009 Liable Statutory damages of $675,000 ($22,500/song).
Remittitur by Chief Judge Michael J. Davis July 2009 Liable Judge reduced fines to $67,500
Oral arguments in the appeal were held April 4, 2011 n/a
Court rejected all arguments in appeal September 16, 2011 n/a
reinstated the original $675,000 award, and remanded to the
District Court for reconsideration of the remittitur question
Appeal, SCOTUS July 22, 2011 n/a
declined to hear the case, leaving no option but for the District
Court to decide whether to reduce the award via remittitur.
Tenenbaum requested a new trial to determine a new
damage award: record companies asked the court to reject
request
June 5, 2012, n/a
Statutory damages reinstated to first judgment, $222,000
($9,250/song).
rejected Tenenbaum's request for a new trial as untimely August 23, 2012 n/a
reduction of the award via remittitur wasn't warranted, since
the jury had ample reason to find that Tenenbaum willfully
infringed

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THE GRADUATED RESPONSE SYSTEM
(THREE STRIKES)
• Under DMCA, ISPs generally protected from INDIRECT liability (so no responsibility
for copyright infringement committed by users and no legal obligation to send
warning notices.
• Lobbying efforts to get governments to implement laws requiring
• Advantages of graduated response:
• Educational approach
• Target larger number of infringers
• Harshest penalty would likely be less than fighting in court
• US has voluntary graduated response (mid 2011)

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MP3.com
The year 2000 case concerned MP3.com's unauthorized duplication
of essentially every music CD ever made for the purposes of
launching a service entitled My.MP3.com or "Beam-it", which allowed
users to access their private music collections online from anywhere
in the world. (“MUSIC LOCKER”)
Before accessing a song from MP3.com’s servers, a subscriber first
had to “prove” that he already owned the CD by placing his copy of
the commercial CD into his computer’s CD-ROM drive for several
seconds or by purchasing the CD from one of defendant’s
cooperating online retailers. Id. However, it was MP3.com doing the
copying from the CDs onto their servers, and the court found this
copying not a fair use and awarded $53Million to UMG.

Mbu 2520 spring 2018 chapter 15

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Mbu 2520 spring 2018 chapter 15