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Copyright Infringement – Forgiveness Proves Inferior to Permission

Forgiveness Proves Inferior to Permission
Universal Music Group v. Grooveshark

On September 29, 2014, the U.S. District Court for the Southern District of New York issued a decision [1] supporting Universal Music Group’s claims of copyright infringement by Escape Media Group, Inc. (“Escape”), the provider of Grooveshark. [2]

Grooveshark is an online music service that allows users to listen to their favorite songs for free. The music is streamed, and not downloaded, to the listener’s device.

The Grooveshark service began in 2006 during the founders’ freshman year at the University of Florida in Gainesville. In order to jumpstart the service, the founders directed their employees to upload all the music to which they had access. The uploaded songs included works protected by copyright. The founders went further and directed employees to download music from other sources on the Internet and uploaded it so the Grooveshark service could include the recordings in its service offering. Also, employees were to upload music from CDs, DVDs, flash drives, and any MP3 music files they personally possessed.

The founders believed getting the service up and running would increase their leverage in licensing negotiations with the owners of the copyrights in the music. In others words, the business game plan was to gamble that forgiveness was superior to permission. Part of the gamble was an assumption by the founders that by proceeding with providing the service they would gain information about end user listening habits and the value of that information would be more valuable to the copyright owners than the value of the founders licensing the use of the copyrighted music. In 2007, Escape began talks with UMG, Sony, and Warner about licensing their content for the Grooveshark services.

In 2009, Escape began receiving numerous DMCA [3] takedown notifications. Escape took the songs down, but later they uploaded them again to the Grooveshark servers. The copyright holders eventually filed a lawsuit claiming copyright infringement.

The court held that Escape’s actions were direct, vicarious, and contributory copyright infringement. When the founders of Escape copied and distributed the plaintiffs’ works, they directly violated the plaintiffs’ copyrights. Vicarious liability exists when subordinates or affiliates, during their course of work for a superior, engage in violations of the rights of a copyright holder. Contributory infringement occurs when a party induces another party to infringe a copyright. Contributory infringement also occurs when a party provides the means necessary for another to infringe a copyright.

To establish vicarious liability, the plaintiff must show that the defendant: (1) had the right and ability to control the infringing activity and (2) has a direct financial interest in the infringing activity. The court found that Escape relied on its employees’ uploads to build a comprehensive music catalog in order to attract users and then monetize the user base by generating advertising revenues. The court went on to find Escape had the ability to control its employees and Escape continues to benefit from the copyright infringements.

In order for the plaintiff to prevail on a claim of inducement of copyright infringement, it must show: (1) the defendant engaged in conduct that encouraged others to infringe copyrights and (2) the defendant’s intent was to encourage such infringement. The plaintiff can establish the defendant’s intent with evidence of the defendant’s clear expression of such intent and the defendant’s affirmative steps to foster infringement.

Contributory infringement occurs when the defendant (1) has knowledge of infringing activity and (2) materially contributes to the infringing conduct of another. The plaintiff must show that the defendant had actual or constructive knowledge of the infringing activity and encouraged or assisted others’ infringement or provided machinery or goods that facilitated infringement.

The court also held that the founders of Esape were liable for the infringements. The law provides that all persons and corporations who participate in, exercise control over, or benefit from an infringement are jointly and severally liable as copyright infringers.

Contact our office with any comments or questions about this post.

Boaldin Law
The Pioneers’ Advocate

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