What's Old Is New Again

The Digital Millennium Copyright Act ("DMCA") immunizes conduct involving works the Copyright Act does not protect.  That is the upshot of a recent ruling by Judge Barbara Kapnick of the New York Supreme Court in UMG Recordings, Inc. v. Escape Media Group, Inc.[1]  Judge Kapnick held that online service provider Escape Media Group, Inc. ("Escape") and its "Grooveshark" site may not be liable for common law copyright infringement of pre-1972 sound recordings, which are not protected by the Copyright Act, if Grooveshark complied with the "safe harbor" provisions of the DMCA.

Judge Kapnick's decision struck a blow to Universal Music Group's ("Universal") multifront effort to shut down Grooveshark, an online music service that provides users with access to free streaming, online radio stations and the ability to create and share personal playlists.  What distinguishes Grooveshark from other streaming sites like Spotify is that, in addition to obtaining streaming rights through licenses, Grooveshark permits users to upload unlicensed recordings to the site with the promise to remove such unlicensed content upon receipt of a takedown notice. 

The New York Supreme Court action concerns thousands of pre-1972 recordings by the likes of Buddy Holly, Chuck Berry, the Jackson Five, and The Who, all of which predate federal copyright protection for sound recordings, and are instead protected only under state and common law.  In response to the lawsuit's allegations of common law copyright infringement and unfair competition, Escape invoked as an affirmative defense § 512(c)(1) of the DMCA, which provides a safe harbor for Internet Service Providers ("ISPs") that (1) lack actual knowledge of the infringing material or activity, are not aware of facts or circumstances from which the infringing activity is apparent; (2) do not receive a financial benefit directly attributable to the infringing activity, where the ISPs have the right and ability to control the activity; and (3) respond expeditiously to remove or disable access to the infringing material upon receiving notice of the infringing activity.[2]  In essence, Escape claimed that Grooveshark's response with regard to works not protected by the Copyright Act should be no different from its response to those works afforded such protection.

In response, Universal moved to dismiss Escape's affirmative defense predicated upon Escape's compliance with the safe harbor provisions of the DMCA, as Universal asserted that another provision of the Copyright Act, § 301(c), expressly exempts sound recordings fixed before February 15, 1972, from protection under the Copyright Act.[3]  Universal argued that the DMCA safe harbor provision does not apply to pre-1972 recordings because such recordings are not protected by the Copyright Act.  However, the court sided with Escape, adopting the Southern District of New York's 2011 ruling in Capitol Records, Inc. v. MP3tunes, and thereby becoming the second court to rule that the DMCA applies to pre-1972 recordings.[4]  The court found "no indication in the text of the DMCA that Congress intended to limit the reach of the safe harbors provided by the statute to just post-1972 recordings."  It further concluded that the terms "copyright owner" and "infringing," as used in the DMCA, apply equally to owners and acts under both federal law and common law.  As for § 301(c) of the Copyright Act, Judge Kapnick agreed with the court in MP3tunes that the provision does not limit or prohibit subsequent federal regulation of pre-1972 recordings, and instead serves as an anti-preemption provision designed to ensure that federal copyright law does not interfere with preexisting common law or state rights. 

While UMG Recordings confirmed the judiciary's enthusiasm for permitting ISPs to rely on the DMCA safe harbor, it also helped reinforce the somewhat incongruous legal precept of permitting ISPs to invoke the protections of the DMCA provision of the Copyright Act to protect their activities with regard to works not covered by the Act.  But the decision avoided an arguably more complicated alternative, posited in MP3tunes, in which the relative burden on an ISP to police its content turns on the arbitrary and sometimes unknown fact of whether a recording is pre- or post-1972.  For its part, the U.S. Copyright Office has taken steps to rectify the situation by recommending in late 2011 that Congress extend federal copyright protection to all pre-1972 recordings—recommendations that are still awaiting a response.

In a separate part of the ruling, Judge Kapnick held that Escape could proceed with counterclaims alleging that Universal tortiously interfered with Escape's contracts with Hewlett-Packard to advertise on the site and with INgrooves to license works streaming on the site.  Escape claims that Universal pressured HP and INgrooves to cancel their agreements with Escape to damage Grooveshark.  Universal, which had preexisting relationships with both HP and INgrooves, argued that it merely alerted those parties to Escape's infringing behavior to protect its own economic interests.  Judge Kapnick held that Escape had raised sufficient factual issues to allow the claims to go forward. 

That Universal must now defend its conduct in notifying third parties about its copyright claims against Escape/Grooveshark should caution content owners against taking overly aggressive steps against alleged infringers outside the courtroom.  For record companies and other copyright owners that want to flex their considerable business muscle, UMG Recordings is a reminder to exercise caution when undertaking policing activities to avoid the land mines of potential liability.