What the MP3Tunes Decision Tells Us About Music-Locker Services

(I know I said that our next posts in our Online Music Service Series would be about Pandora and Turntable.fm, but the recent decision in the MP3Tunes case has inspired me to look at the Amazon, Google and Apple music-locker services, instead.  We’ll use the MP3Tunes decision as a spring-board for discussing music-locker services.  We’ll get to Pandora and Turntable.fm next week.)

You might have heard about the decision handed down earlier this week in Capitol Records, Inc. v. MP3Tunes, LLC.  You might especially have heard that the decision is “good news” for “music-locker” services like Amazon’s and Google’s–and, by extension, that Apple was foolish to obtain licenses.  You might even have heard that “music-locker” services are now definitely 100% legal.

The decision certainly wasn’t bad news for Amazon and Google.  We have additional confirmation that providers of music-locker services are not ineligible for DMCA safe-harbor protection.  Which we all figured was the case.  The most we can say is that Amazon has gone from about 90% certain, to about 92% certain, that the mere fact that its music lockers are likely to be host to infringing content won’t, by itself, deprive Amazon of DMCA safe-harbor protection.

The decision, however, tells us very little about the strength of Amazon’s and Google’s actual legal positions.  This is because the music companies withheld from this particular fight their most frightening weapon–their nuclear option.  They withheld this nuclear option because they didn’t need it against MP3Tunes.  Thanks to MP3Tunes’ nifty “sideloading” feature*, they had enough to defeat MP3Tunes.  There was no point putting a weapon to the test that the music companies would need later in their fight against Amazon and Google.

In addition to a music-locker service, MP3Tunes offered a service that copied music from one website directly to your music locker.  Hence the phrase “sideloading” because the files go from one site to another without being uploaded from or downloaded to your computer.  MP3Tunes’ problem was that (1) not all of the music being sideloaded was authorized, and (2) MP3Tunes completely blew its responses to the music companies’ DMCA takedown notices.

What MP3Tunes Didn’t Tell Us

Isn’t is just a bit strange that, in the entire opinion, there was no mention of “space-shifting”*?  That is, after all, the whole basis for the legality of music-locker services.  Consumers take music that they putatively own (or have the rights to use), upload the music files from their computer to the “cloud,” from which they can access it with any internet-connected device.  That certainly sounds like space-shifting.

Space-shifting the act of copying digital content from one device to another, for purposes of, for example, using that content on the new device or backing up the content.

There’s a pretty widely-held belief that space-shifting is always and everywhere a form of fair use.  You’ll often see the Diamond Rio decision (RIAA v. Diamond Multimedia Sys., 180 F.3d 1072 (9th Cir. 1999)) cited (sometimes blithely) for this proposition.  The problem is that, although it is probably the friendliest case for music-locker services, Diamond didn’t quite hold so.  In that case, the RIAA was suing Diamond because it believed Diamond’s most recent Rio MP3 player didn’t conform with something called “the Digital Home Recording Act of 1992” (codified at 17 U.S.C. § 1001 et seq.).  That Act made it illegal to make a digital recording device unless it conformed to certain standards.*  The court held that the Rio wasn’t such a device and, therefore, Diamond had no liability under the Act.

There weren’t even MP3 players in 1992.  The recording industry was concerned about–believe it or not–digital audio tape.  The provisions were limited to devices whose primary purpose was to make audio recordings.  Thus, a CD-R drive in a computer wasn’t covered because computers’ primary purpose isn’t to make audio recordings.  That probably tells you all you need to know about the continued relevance of the Act.

After parsing the actual language of the statute and delving into the legislative history of the Act, the Diamond court added, as an aside, that its holding was consistent with one of the Act’s main purposes: to facilitate personal use of music files.  It is here that the court is said to have equated space-shifting with fair use:

In fact, the Rio’s operation is entirely consistent with the Act’s main purpose — the facilitation of personal use. As the Senate Report explains, “[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use.” S. Rep. 102-294, at *86 (emphasis added). The Act does so through its home taping exemption, see 17 U.S.C. § 1008, which “protects all noncommercial copying by consumers of digital and analog musical recordings,” H.R. Rep. 102-873(I), at *59. The Rio merely makes copies in order to render portable, or “space-shift,” those files that already reside on a user’s hard drive. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (holding that “time-shifting” of copyrighted television shows with VCR’s constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act.

Again, this is language is very friendly to music-locker services, but it’s a stretch to turn this language into a ruling that space-shifting is always fair use.  The court, by this point, had already made its decision, and its decision was not based on fair use at all.   The court was commenting on Congressional intent about the Act, not fair use per se.  This is, in fact, the only mention of “fair use” or “space-shifting” in the entire opinion, and it’s made in a parenthetical to a “cf”* citation to the notorious “Betamax” decision.  It’s not clear what authority Betamax is supposed to lend here.  I think the most you can say is that it’s serving as an example of the sort of personal use that Congress might have wished to protect with the Act.

For non-lawyers:  the “cf,” before citation indicates that the cited authority is only weakly related to the foregoing proposition.

Even if this particular form of space-shifting is a form of fair use (a very plausible proposition, in my opinion), it doesn’t necessarily follow that music-lockers will enjoy the same level of fair-use protection.  There’s a difference between space-shifting a song from one personal device to another and a commercial service that enables second-degree space-shifting (i.e., from your computer to the “cloud” to the device) across multiple devices.  The former really is a “paradigmatic noncommercial personal use.”  The latter is also a noncommercial personal use* but not a very paradigmatic one.  It’s a lot more valuable to consumers, and it’s not quite as “personal” (in that anyone on the internet with your password can access).  I think if a court stepped back and ran a full fair-use analysis on music-locker services, it’d be a close case.

From the user’s point of view, which is the point of view that matters here because the putative direct infringer is the customer.  From Amazon and Google’s point of view, it’s a commercial service, but that doesn’t make them much different from an MP3-player manufacturer.

What About the DMCA Safe Harbor?

But didn’t we just say that, if there’s anything that we learned from the MP3Tunes decision, it’s that music-locker services protected by the DMCA safe harbor?  Well, yes, but, if space-shifting to a music-locker isn’t a fair use, the DMCA safe-harbor defense takes a serious hit (though not necessarily a mortal wound).

If the music companies are right about space-shifting, then nearly everything in the music lockers would be infringing, regardless of whether the original music files were legitimate or not.  This is a very different situation from MP3Tunes‘ “sideloading” activities, where only some of the files were infringing, and it would take an investigation to figure out which ones.  If nearly everything in the music lockers is infringing, the music lockers might have the same problem with “red flag knowledge”–which invalidates the safe harbor–that Grooveshark now has, maybe even worse.  The music-locker services wouldn’t need to conduct an investigation to see which files were infringing–every file would, almost by definition, be infringing.  As we discussed with Grooveshark, that would make the music-locker services a prime candidate for being the first legitimate business to be found to have red-flag knowledge.

Worse, the music companies could avoid the DMCA safe-harbor altogether by going, or threatening to go, directly after the music-lockers’ customers.  True, this strategy didn’t work very well with the RIAA’s campaign against peer-to-peer file-sharing, but that was because it was difficult to locate the infringers and the build a case against them.  In this case, the music companies would have the customers dead to rights.  And whatever PR hit the music companies would take would be nothing compared to the damage that would be done to the music-lockers themselves:  no one would use them anymore.  If nothing else, this will be an unspoken elephant-in-the-room during any negotiations between the music companies and the music-locker providers:  you might (or might not) be protected by the DMCA safe harbor, but your customers are sitting ducks.

If this dispute actually went to trial, I’d say Amazon and Google would eventually prevail.  The music companies have to prevail over a pretty strong (but not air-tight) fair-use argument, and then they have to be the first ever rights holders to establish red-flag knowledge against someone not named Fung (well, if the plaintiffs in the Grooveshark case don’t do that first).  Even so, the odds are not high enough to base a whole new expensive business service–unless, of course, you’re Amazon or Google and can take a big financial hit.  Apple’s decision to seek licensing doesn’t seem so foolish, after all.

Public Performance and the “Single Master”

According to the MP3Tunes decision, the DMCA safe harbor does protect against direct claims for violation of the public-performance right.  (Our discussion above dealt only with the reproduction right.)  If you stop your analysis there, it’s a pretty easy question, but we won’t stop there!  It turns out the question of whether a music-locker service even is a public performance in the first place is a mind-bending problem (which the MP3Tunes court just sort of hand-waves).  We can’t resist that!  We’ll get into that next time.

Thanks for reading!