Through the Grooveshark’s Jaws

In my last two posts, we took an overview of copyright law as it applies to online music services, and at six of the major new such services.  We’ll now turn our focus to the specific services, starting with the inspiration for this series of posts, Grooveshark (which is currently a defendant in a lawsuit here in Nashville).  Grooveshark’s business model is so interesting, it’ll take three posts to get through it all.  Recall that Grooveshark has two interactive ends:  on one end, users are invited to upload music files; on the other end, those music files are streamed to users on demand.  This means there are two separate opportunities for infringement.  On top of that, Grooveshark relies on a complex defense, the DMCA safe-harbor.

In this post, we’ll analyze the “uploading content” end of Grooveshark’s service.  In the next post, we’ll look at the “streaming” end.  And in the post after that, we’ll examine its DMCA safe-harbor defense.

Uploading Content

Right off the bat, we know that Grooveshark isn’t subject to direct liability for the “uploading content” end of its service.  That’s because Grooveshark isn’t doing the uploading; its users are.  But if you needed an example for why secondary liability exists, here it is.  The users might be doing the copying, but Grooveshark is benefiting from it.  It’s an end-round of direct liability, and the law doesn’t like end-rounds.  Remember that secondary liability is just as “bad” as primary liability; there are just more things to prove.

The first step in any secondary-liability analysis is to ask whether there is direct infringement.  Here, the answer is clearly yes.  The users are making complete copies of each of their music files and placing them on Grooveshark’s servers.  Which of the exclusive rights are implicated?  Most obviously, the duplication right.  Alternatively or additionally, if there is some sort of conversion from one audio file type to another (e.g., from AAC to MP3), the derivative-work right might be implicated.

Either way, at least one of the exclusive rights is implicated, and that’s all you need.  Implicating additional rights has no further effect, perhaps as insurance.  It doesn’t make the infringement somehow “worse” or increase the damages.  It just gives you an alternate way to prove infringement, in case your initial attempt fails.  In this case, there isn’t a lot room for debate.*

*  Although we are focusing on Grooveshark, note that the users who upload songs are potentially in trouble, too.  They are, after all, the direct infringers.  That Grooveshark might be secondarily liable doesn’t protect them from being sued.  Generally speaking, copyright holders don’t like to sue individual users and consumers for logistical reasons (it’s hard to identify and locate the users), for financial reasons (ordinary consumers don’t have enough money to be worth suing over), and for public-relations reasons (self-evident).  With the peer-to-peer file-sharing cases (which I blogged about recently), the RIAA had no choice but to sue the direct infringing consumers because there wasn’t always an intermediary company subject to secondary liability to sue instead.  Even then, most observers I think agree that it was all more trouble than it was worth for the RIAA, which abandoned the strategy a few years ago.

The next step is to see if Grooveshark’s behavior fits into one of the three categories of secondary liability:  vicarious, contributory and inducement.

Vicarious:  To prove vicarious liability, the copyright holders must prove (1) that Grooveshark benefits directly or indirectly (but not too indirectly) from the direct infringement, and (2) that Grooveshark is in a position to stop the infringement.  Somewhat counter-intuitively, it is not necessary for the copyright holders to prove any kind of knowledge on Grooveshark’s part (but proof of actual knowledge might help prove one of the other elements).

Vicarious liability is the oldest form of secondary liability, and most of the caselaw involves defendants like landlords and flea-market operators. The leading decision in the online context is A&M Records, Inc. v. Napster. You may have heard of it. Is suspect most of the debate will focus on the first element–whether Grooveshark benefits directly enough from the infringement.*  The copyright holders will argue that Grooveshark benefits from the uploaded music files because, without them, Grooveshark would have nothing to stream on the other end.  Any profit, therefore, Grooveshark makes is attributable to the infringement.  Grooveshark’s response will be that the benefit isn’t direct enough because it receives payments (through advertising or subscriptions) for its service as a whole, not per song.  It is more like a landlord or flea-market operator that receives a flat rent (which historically have not been held to be vicarious infringers), rather than a cut of profits (which historically have).

* As for the second element, although Napster spends longer on it, I think this isn’t as difficult a question as the Napster court made it out to be. Recall that knowledge of the infringement isn’t a requirement. Even “innocent” vicarious infringers are liable. Thus, all that matters is whether Grooveshark can stop uploading, ban subscribers, and so forth, not whether it can identify on the front-end infringing content.

Napster held that, where the infringing activity serves as a “draw” for the company’s overall business, the company benefits from the infringement.  In Grooveshark’s case, without the uploads, it doesn’t have a business. The key for the plaintiffs will be to prove that subscribers are “drawn” to Grooveshark because of the infringing content. That shouldn’t be too hard.

Contributory:  To prove contributory infringement, the copyright holders must prove that (1) Grooveshark is providing substantial assistance to the direct infringement, and (2) Grooveshark is aware, or should be aware, that direct infringement is resulting from this assistance.  The copyright holders will argue that Grooveshark makes it very easy to upload music files–about as easy as uploading a photograph to your Facebook profile–and that Grooveshark can’t pretend that it doesn’t know about the infringement.  Grooveshark, I suppose, will flip that argument around:  its uploading assistance is just a normal service that any number of services–such as Facebook or electronic case filing–provide. Why should it be singled out? Further, just become uploading content can be used to infringe doesn’t necessarily mean that Grooveshark is aware of the infringement. The copyright holders’ response would be that, while this “normal service” might have legitimate uses, Grooveshark doesn’t avail itself of any of them.

The leading decision here is the “Sony Betamax” decision, and Napster‘s interpretation of it. In Betamax, the Supreme Court refused to stop the sale of video recorders, reasoning that consumers could use them in a number of non-infringing ways, such as “time-shifting” (watching a TV program at a later time).* The difference here is that no one is asking the court to ban the technologies involved in uploading digital content, just Grooveshark’s use of that technology. That makes Grooveshark more like Napster in the Napster case: an upload service with enough knowledge of actual infringement.

* It is difficult to understate the importance of the Betamax opinion, a 5-4 decision that involved several last-minute switches by the justices. The Court signaled a policy that would govern the relationship between technology and copyright to this day: that court (and Congress) will avoid using secondary liability to hinder beneficial technology. This policy bore fruit almost immediately in the case of video recorders. The content providers were afraid their TV shows would be pirated. What happened was an unforeseen new revenue stream–sale and rental of licensed content–arose and made content providers rich. Nobody had even considered sales and rentals of videocassettes to be a possibility in the Betamax case. Before we draw too much of a lesson , though: the videocassette recorder wasn’t nearly as disruptive a technology as digital content combined with the internet and high transfer speeds.

Inducement:  The plaintiffs in the Nashville-based lawsuit did not bring a claim for inducement of copyright infringement.*  But Capitol and Virgin did in their 2009 suit.  Because inducement is still a new type of secondary liability, the precise elements are still being worked out.  The debate will tend to center on the extent to which Grooveshark resembles the music service in the U.S. Supreme Court’s Grokster decision, which established inducement as a separate claim.  In Grokster, the defendant provided peer-to-peer file-sharing software, suggested to its customers that they could use the software to share copyrighted works, and built is business model on the likelihood that copyrighted works would be so shared.  It might turn out that this is more than copyright holders need to prove–all we know is that Grokster went over the line, but we don’t know how far.  In any event, copyright holders have argued that Grooveshark is a lot like Grokster, in that it encourages and facilitates the copying of copyrighted works and its whole business model depends on such copies, or else there would be no good content to stream out the other end.  Grooveshark, I suppose, might argue in response that, unlike Grokster, it has never affirmatively suggested to its users that they infringe copyright, and that it has every right to expect its users to comply with the law.

*  There’s a good reason for this.  Many if not most courts regard inducement to infringe as a species of contributory infringement, so there’s no need to set it out as a separate claim.  Indeed, in the recent MP3Tunes case, the court actually dismissed a separate claim for inducement of infringement for this reason (a purely technical decision).

Prediction is a mug’s game, but, based on what we know about Grooveshark and the current state of the law, I don’t see how the plaintiffs don’t prove at least one of these forms of secondary liability.

Next time, we’ll examine the “streaming” end of Grooveshark’s service.  Thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.