Wednesday 24 April 2013, 11:04 | By

Appeals court overturns Grooveshark’s win in Universal’s pre-1972 technicality lawsuit

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An appeals court in New York has overturned a lower court ruling regards whether or not the safe harbour provisions of the US Digital Millennium Copyright Act apply to works created before 1972.

As previously reported, in early 2010 Universal Music launched its first lawsuit against often controversial streaming music service Grooveshark, though the litigation related specifically to the distribution of sound recordings owned by the major that dated from before 1972.

Many in the record industry have accused Grooveshark of infringing copyright by allowing users to upload content to its libraries, meaning that at any one time plenty of major label content will be available via the streaming platform even though, unlike most of its competitors, it has no licensing arrangements with the big music companies.

Grooveshark insists that because it operates a takedown system, whereby it removes unlicensed copyright content when made aware of it, the company is not liable for infringement, because it’s the uploading user who infringes, and the business is protected by the safe harbour provisions of the DMCA, which aim to absolve internet companies from liability for the infringing actions of their customers.

And while the record companies consider that an abuse of the DMCA, there’s a high chance that Grooveshark’s interpretation of the American copyright act would stand up in court (certainly that’s what precedent in similar cases suggests, although the biggest of those cases, Viacom v YouTube, is still subject to further appeal).

However, the DMCA is a piece of federal law, and prior to 1972 copyright in America was covered by state law, hence Universal’s pre-1972 lawsuit ruse. The mega-major argued that the safe harbour clauses of the DMCA did not apply to works covered by state-level copyright, and therefore it should be able to sue Grooveshark for distributing that content (even though it’s a minority of the music made available via the streaming platform).

But at first instance last July that argument was rejected by the New York courts, where judges echoed an opinion made in the EMI v MP3Tunes case the previous year, where the same issue was raised. That opinion was that the DMCA should apply to all American copyrights, including those technically protected by state rather than federal law, because limiting the safe harbours to just post-1972 works would put an unfair obligation on technology companies utilising the safe harbours to know the date of origin of every piece of content stored on their servers.

But appeal judges considering the Universal v Grooveshark case yesterday reached a different conclusion, stating that the safe harbours of the DMCA were indeed limited to those copyright works protected by federal law. Which means that, technically, Grooveshark et al need to quickly remove any pre-1972 music off their servers, because otherwise they could be sued for infringement in the US, even if they operate effective takedown systems as described in the DMCA.

Unsurprisingly, Grooveshark’s legal rep John Rosenberg quickly announced that his client would appeal the ruling, adding that the company also planned to lobby in Washington on the matter. The legal man told reporters: “The court’s decision, if it stands, will significantly undermine the safe harbour protections of the Digital Millennium Copyright Act and may severely disrupt the operations of all internet service providers who, like Groovehark, permit access to user-generated music content”.

Universal, of course, hasn’t put all its eggs in the pre-1972 basket. It is also suing Grooveshark over allegations that staff of the company routinely uploaded unlicensed music, something that would deprive the firm of safe harbour protection, if it could be proven.

Grooveshark, meanwhile, has admitted that its various legal woes coupled with new competition in the streaming music space have taken their toll on the business, with the company’s co-founder and CEO Sam Tarantino claiming to be “broke” in a new interview with Mashable.

However the various lawsuits turn out in the end, Grooveshark is certainly facing some tough challenges, it now competing head on with some very well funded rivals, while its own ability to raise new finance will be severely hindered by the risk of future liabilities stemming from Universal-led litigation. Which a cynic might argue is part of the mega-major’s strategy – Grooveshark’s legitimacy, or not, is based on various grey areas of American copyright law; but keep up the legal pressure long enough and Grooveshark might give up, even if ultimately it won the argument in court or Congress. These days we call that the Veoh strategy.

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