Record labels take on Vimeo post Viacom v YouTube

Led by EMI, The US recorded music  industry has filed court papers asking for a summary judgement in their favour regarding a long-running copyright dispute with video website Vimeo. The action, which dates back to 2009, what put on hold pending the outcome of Viacom’s lawsuit against YouTube, which tested the ‘safe harbour’ defence available to websites under the US's Digital Millennium Copyright Act.  

Websites like Vimeo and YouTube, which allow users to directly upload content, argue that as they operate takedown systems and remove unlicensed content if made aware of infringement by copyright owners, they have the protection of the 'safe harbour' defence against infringement actions.  As ever, it’s a balancing act, and many content owners argue that safe harbour favours website operators and services such as YouTube, and that many websites don’t do enough – and could do a lot more – to remove infringing material from their sites – or even block it ever being loaded up in the first place – and that a system based on “ takedowns” is not enough in the developing digital age.

At first instance US District Judge Louis L Stanton granted summary judgement to YouTube and held that YouTube would only be obliged to take down clearly defined individual infringing items, rather than undertake any consistent action to remove "clones" of the deleted material as they re-appear.

The Second Circuit Court of Appeals vacated the order granting summary judgement because they held that, a  reasonable jury could find that YouTube did have actual knowledge or awareness of specific infringing activity on its website.  In support of this ruling, the Appeals Court cited various evidence from Viacom that arguably showed that YouTube had reason to know that a fair percentage of the content uploaded on the site contained unauthorized copyright material.  The Court further remanded back to the District Court the task of determining whether any of this evidence may show that YouTube had knowledge of or awareness of infringements which corresponded with the YouTube clips subject to the present action - all of which could be quite the evidential task.  The Court also remanded the question of wilful blindness back to the District Court and indirectly demanded an explicit fact-finding exercise to be undertaken.

Unlike YouTube, Vimeo is primarily a site designed for film makers so they can upload and publicly exhibit their films and has no licensing deals with the major music companies. More recently Vimeo has pointed aspiring film makers towards low cost music licensing operations to source music for their productions, to avoid takedown notices from record labels and music publishers - but this is clearly not sufficient for the record labels. Let battle commence!

EMI v ReDigi: US digital music resale hearing begins

On Friday the district court in Manhattan, New York, heard opening arguments by EMI that ReDigi's resale of second-hand MP3s infringes copyright.

Readers may remember that back in October 2011, US company ReDigi was launched. ReDigi's business model is based on the resale of digital content, and it bills itself as being the first legal online marketplace for second-hand digital material. At the time Ben commented on the legal issues that arise from the concept in the US, and sure enough the music industry decided to question those issues in court: in January of this year Capitol Records (a subset of EMI) sued ReDigi for copyright infringement.

In February EMI failed to get summary judgment, meaning that the case has proceeded to a full court hearing, which began on Friday. ReDigi is relying on the "first sale doctrine" (which is similar to the principle of exhaustion in Europe) which it argues applies to digital files in the same way that it applies to CDs and cassettes.

EMI claims that the first sale doctrine does not apply to digital files as the only way to move those files is to make duplicates, and there is no guarantee that the original file has been deleted on resale. EMI says that it owns the "exclusive rights" to manufacture, reproduce, distribute and sell digital versions of the copyright protected works of its artists, and refers to agreements signed with authorised services such as Apple's iTunes and Amazon's MP3 in support of its argument.

ReDigi says that EMI's distribution rights are limited to material objects, and if digital files are judged to be material objects it can invoke the first sale doctrine which permits resales.

A secondary claim by EMI is that 30 second clips of songs offered by ReDigi and stored on users' hard drives constitute another act of unauthorised copying. It will be interesting to see what (if any) impact the Supreme Court of Canada's ruling in SOCAN v Bell will have. In that case the Canadian Supreme Court held that 30 to 90 second music clips offered by online music stores such as Apple constituted fair dealing, which is a more narrow exception than fair use in the US.

ReDigi also argues that the songs are only loaded into a computer's RAM memory so that they "disappear" after the track has stopped playing. That sounds to this blogger like an argument that the copies are temporary; an argument which would not succeed in the UK following the Court of Appeal's judgment in NLA v Meltwater (although the Supreme Court may yet find otherwise).

EMI says that given the widespread piracy of sound recordings it is questionable whether ReDigi can effectively determine that digital files have been legally obtained in the first place. To this ReDigi responds that the only files eligible for resale are those originally downloaded from iTunes and that it excludes from its service tracks which have been ripped from CDs or taken from other stores. This method, it says, allows it to use software to validate ownership.

Finally EMI notes that ReDigi has acknowledged that there is no way to ensure that users do not retain copies of the files they upload. Even though ReDigi's software is designed to run "continuously" in the background to detect songs on any device attached to the user's computers at a later date, users could presumably back content up on an external hard drive or other device.

It is not clear what the outcome of the case would be in Europe. The CJEU's recently held, in UsedSoft, that an author of software cannot oppose the resale of his "used" licences allowing the use of his programs downloaded from the internet. The exclusive right of distribution of a copy of a computer program covered by such a licence is exhausted on its first sale.

Indeed, one 1709 blog reader commented at the time: "Very interesting, I expect software companies will respond by simply moving some of the functionality server-side, but it does hold out the intriguing possibility of re-selling used MP3 files in the EU."

Prior to the CJEU's ruling in UsedSoft, downloading digital content was seen as a service and therefore the principle of exhaustion did not apply. Whether UsedSoft changes that analysis, given that MP3 files are not the same as computer programs, remains to be seen.

Google has written a letter to the New York judge making public its "specific and vital interest" in the outcome of the EMI v ReDigi case, which will set an important precedent in the music industry.

The thorny issue of competition in the music industry

Sony and UMG - big fishes in a small pond?

Three news items caught my eye this week, all of which made me think about the impending sale of EMI's recorded music division to the Universal Music Group, creating a super music major with a near 50% share of the market in the creation and supply of recorded music in some territories.

The first story concerned reports that a Nielsen survey showed that ownership of smartphones amongst young teenagers (13-17 years old) in the USA had reached nearly 60%, and a whopping 73% of the 25-34 year old sector own smartphones. Overall across all age groups the rise of the smartphone has resulted in a 55% market penetration - and these are users who want content, and they want it now. and they WILL get it, legally or otherwise. Everything is just one click away.

Secondly was a report in the US press that showed that cinema attendance levels in the USA last weekend had reached their lowest level for two decades. The figures have reinforced Hollywood's fears that it is losing its allure to the internet, to competition from video games and of course to internet piracy. Its a situation the music industry faced some time ago and many commentators will just say that the film studios should have seen this coming and should have put in place new business models fit for the broadband era years ago.

Neelie Kroes

Thirdly was a report on the IPKat about comments made by EU Digital Agenda Commissioner Neelie Kroes at the 2012 Intellectual Property and Innovation Summit where Kroes compared the fragmented EU market with the American market - one territory governed by one federal copyright law - asking whether the European system was "consistent and relevant within the real world" adding that in an assessment of whether more changes were necessary to promote growth and stimulate innovation she was open to ideas, saying "Each day we fail to respond, we are missing out. Consumers miss out on easy legal access to their favourite products. The creative sector misses out on new markets, new innovations, new opportunities.  We miss out on new ways to share, recognise and appreciate our cultural heritage. And our economy misses out on the chance of new growth". Kroes had previously said that "too many barriers still block the free flow of online services across national borders" and resolved to rectify that within the EU.

The rhetoric echoes claims from new market entrants that the complexity of licensing for digital start ups is maddening and frustrating, sometime terminally. These are global businesses having to seek content licences on a country by country basis - even within the EU's 'single market'. 

In the EU and elsewhere, the recorded music sector and the allied music publishing sector are interesting examples of the tension between the need to establish business models fit for the 'real world' and the fear that ever ongoing consolidation is a real risk to diversity, and will result in a real lack of competition - to the detriment of consumers, artists and innovative new businesses. The fact remains that for a new digital start up in the European Union wanting to enter the music market, they will usually need to deal with collection societies in all 27 member nations, which are organised on a national basis, and that's just for Europe. The EU have looked long and hard at how collection societies operate and the Commission has brought an action before the European Court of Justice to determine the legality of the collection societies business methods and reciprocal representation mandates, and whether these constitute concerted unlawful practice which would fall foul of EU competition law and are an unlawful partitioning of the single market (the 'CISAC case). A final judgment is still awaited. The architect of the UK's proposed Digital Copyright Exchange, Richard Hooper, noted in his final report that the EU has 30 plus potential music licensors and that the EU should attempt to make the licensing regime multi-territorial, reducing the number of licensing bodies to perhaps 6 -10, each offering different, competitive repertoire. But why not reduce it to just one collection society for music - and one for recorded music? Or just one!  Now that would be an effective 'one stop' shop!

A combined EMI-Universal would have a 37.8% market share (2011 figures) for recorded music - and the already approved Sony-EMI tie up has a 31.1% market share in music publishing. If  UMG and Sony were to work in tandem, they would control 58.7% of the recorded music sector and 53.3% of the music publishing market - and that is starting to look like a 'one stop' licensor one its own - and surely would fit the needs outlined by Neelie Kroes.

The $2.2 billion sale of EMI's music publishing business to a Sony led consortium was approved by both US and EC competition regulators with the latter saying that the fact that Sony music publishing (Sony-ATV) was already run as a partnership with Michael Jackson's estate, and the new investors who came on board as part of a consortium for the purchase, coupled with divestment of EMI's Famous Music and Virgin Music catalogues, allayed competition concerns. But just how relevant those factors are remains to be seen.

Whilst it might make licensing sense, there are real fears of anti competitive behaviour should UMG get permission to buy EMI. Unfortunately the major labels, Sony and UMG included, have a poor track record to, say the least. Back in 2004 the then five major record labels  and the then three leading music retailers in the USA agreed to a $143 million court settlement for fixing the price of CDs in the USA at artificially high levels - which is not good for consumers! And artistes have perhaps fared even worse, and even after repeated success in the UK courts on the grounds of unreasonable restraint of trade, recording industry contracts often remain appallingly one sided and unfair: the recent spate of claims brought by artistes over artificially reduced digital royalties and other long established business practices  have been further witness to this.

But what of the third fear - that working together Sony and UMG could block new entrants to the digital market. well again, there is history, and perhaps history the major labels would like us to forget. Back when the internet was a young thing, between them the majors created two services, PressPlay (Sony and UMG) and MusicNet (Warners, BMG and EMI) which they launched as the solution to the sale of music on the internet. More recently the majors have failed to have an anti-trust case (Starr v Sony) dismissed in the US appellate courts which charges the majors with an attempt to monopolise the distribution of digital music and fix the price and terms on which is was supplied through those two platforms. The case is ongoing. More interestingly one could look at at the ownership of two of the current 'big' players providing new music platforms - the streaming service Spotify and the video platform Vevo. Sony owns 5.8% and UMG 4% of the former, and jointly own the latter along with investment from the Abu Dhabi Media Company. 

The success of Apple's iTunes re-taught the majors the importance of ownership of distribution channels - they lost control to Apple - and now Vevo and Spotify are two of the most important new channels. It also taught the majors the importance music has in creating new value and new business. Until iTunes launched, Apple was a successful but still niche computer company. It's now the second most valuable company in the USA. One of the arguments put forward in support of allowing UMG and EMI to merge is that artistes now have many ways they can independently reach consumers without needing a record label - but that becomes more clouded when those 'independent' pathways are owned by .... the record labels. But there again, UMG and Sony are minnows when compared to Amazon, Google, Facebook and Apple ........ so what's the worry?

What we seem to have are competition regulators applying 'analogue' solutions to a 'digital' issue. I am not sure that requiring UMG to sell off catalogues makes any sense at all (Parlophone, Mute,Virgin and the Chrysalis catalogues have all been suggested) . Nor do I think that issues of ownership (rather than control) has much relevance now. Indeed, one could argue we should allow MORE mergers to proceed to facilitate easier end-use licensing. Is that what Neelie Kroes needs? 

I am giving a talk at the Reeperbahn Festival Campus in Hamburg next week exploring what should and could be done by competition regulators, not least to protect diversity in the music industry, but the underlying issue that remains is that with the internet we have a global market, whether we like it or not, and if new entrants are barred from entering that market because of licensing complexities and there is failure to provide compelling legal services, we will end up with compelling illegal services. Its as simple as that. But conversely, allowing one or two companies to completely dominate the supply chain from the creation of music to the distribution of music to the provision of music to consumers could effectively bar any new entrants from entering the market without their permission, as well as allowing the potential for monopolistic behaviour with both consumers and the creators of music and songs. If licensing copyrights is the key, then it's licensing copyrights that the regulators should focus on, not the divestment of catalogue. The question is how? What would stop the UMG-EMI merger impeding investment, innovation and competition in the future? What would stop UMG and Sony shaping the digital future to suit their own ends? A requirement on UMG and Sony to licence other digital businesses openly, transparently and fairly? Might that protect new market entrants and consumers? An obligation to withdraw from platforms that interface with consumers (eg the sale of shareholdings in Vevo and Spotify) and a bar against future ownership - would that deliver a competitive market open to all? Or would a future requirement that UMG and Sony owe a fiduciary duty to songwriters and recording artistes offer protection to the creators of copyrights, especially if backed with criminal sanctions and a bar on so called 'royalty reducers'? The Murphy case brought into sharp relief the tensions between copyright and competition - and they can be complex, and the solutions even more so.

In the UK, the Copyright Tribunal has been an effective regulator of copyright licensing schemes. In the European Union the EC can fulfil this function. But if we need 'global licensing' then we would need 'global regulation' and no such thing exists - nor do I know of any such  plans on any politician's agenda anywhere. One to ponder, but we will know soon enough about EMI and UMG in Europe at least, with an EU set deadline of September 27th for a decision.

Detail on the Reeperbahn Festival Campus sessions "Diversity at Risk?" here and here 

Image of Neelie Kroes: European Parliament Flickr photostream and more on her address here on this Blog .

MP3 Tunes files for bankruptcy

MP3tunes, the cloud locker music service that has been engaged in a long and costly lawsuit with EMI, has filed for bankruptcy in federal court in San Diego. In court papers, it listed $7,800 in assets and $2.1 million in liabilities. MP3tunes was founded by Michael Robertson, the web entrepreneur who in the 1990s was one of the first to turn digital music into a big business, with MP3.com.

Last year, the Southern District of New York District Court held that the MP3tunes’ model did not violate copyright itself and was protected by the ‘safe harbour’ provisions of the DCMA - but the company, a number of executives and Mr. Robertson personally faced liability for individual songs uploaded without permission and for ‘contributory infringement’. EMI appealed the ruling, and hearings were scheduled to begin next week.

In a statement, an EMI spokesman noted that despite the bankruptcy, Mr. Robertson was still a defendant in the case – a potentially damaging claim as EMI have alleged Robertson personally loaded infringing material onto the service.

http://mediadecoder.blogs.nytimes.com/2012/05/10/digital-notes-dogged-by-lawsuits-mp3tunes-files-for-bankruptcy/

Full house as Grooveshark faces EMI claim

There is more trouble ahead for Grooveshark the popular streaming service that in one way or another has run afoul of every major record label. EMI Music, the only major record label to license its music to Grooveshark, has now sued the company in New York State Supreme Court, saying that the service owes $300,000 plus interest for non-payment on a promissory note having paid $150,000 from the alleged $450,000 due. As a result, EMI says, it has terminated its licensing agreement with Grooveshark.

In a statement, Grooveshark said: “Grooveshark was recently forced to make the difficult decision to part ways with EMI due to EMI’s currently unsustainable streaming rates and EMI’s pending merger with Universal Music Group, which we consider monopolistic and in violation of antitrust laws. To date, Grooveshark has paid over $2.6 million to EMI, but we have yet to find sustainable streaming rates.” Grooveshark has an estimated 35 million users, and argues that its service is legal under the terms of the US Digital Copyright Millennium Act.

The EMI claim completes the 'full house' of claims from all four major record labels. Grooveshark is facing a separate federal action by Universal Music Group, Sony Music Entertainment and the Warner Music Group . EMI's music publishing division had separately brought an action against Grooveshark's parent company Escape Media Group in January this year.

http://mediadecoder.blogs.nytimes.com/2012/04/03/grooveshark-a-music-service-is-sued-again/ and http://news.cnet.com/8301-31001_3-57408868-261/emi-groovesharks-only-major-label-tears-up-contract/

Not a quiet sea for the Grooveshark

With the start of the new year, copyright is already back in courts.

Popular digital music service Grooveshark's parent company, the Escape Media Group, was sued on Wednseday before the New York State Supreme Court in Manhattan for, inter alia, breach of contract and an accounting (the case is EMI Entertainment World Inc v Escape Media Group Inc, New York State SupremeCourt, New York County, No. 650013/2012) . 

EMI claims that, since entering a licensing agreement to stream music in 2009, Escape has "made not a single royalty payment to EMI, nor provided a single accounting statement."

The complaint refers to alleged written and oral estimates by Grooveshark that it owes at least $150,000, but EMI said it believes the actual sum "greatly exceeds" such estimates.

As recalled by Reuters, the filing came less than a month after three other major record companies -- Vivendi SA's Universal Music Group, Sony Corp and Warner Music Group -- filed a lawsuit before the U.S. District Court, Southern District of New York, accusing Grooveshark of pirating thousands of songs (UMG Recording Inc et al v Escape Media Group Inc et al, U.S. District Court, Southern District of New York, No. 11-08407).

Grooveshark allows users upload songs to its servers, which other users can then stream free. It calls itself the world's largest on-demand and music discovery service, with 30 million monthly active users, more than 15 million songs, and 14 billion streams a year. 

A shark operating in a gray zone

According to its DMCA Takedown Policy, Grooveshark is committed "to honor all takedown requests that comply with the requirements of the Digital Millennium Copyright Act (DMCA) and other applicable intellectual property laws" In any case, and "[t]o be clear, as long as your infringement claim complies with the terms of the DMCA we will honor it, however we would much rather pay you than remove your content."

As pointed out by the New York Times, "[w]ith the music industry coming to rely more and more on fully licensed services like Spotify and Rhapsody that stream music by subscription, EMI’s suit highlights the legal gray zone in which Grooveshark operates."

In a statement, Grooveshark said: “This is a contract dispute that we expect to resolve.”

Let's wait and see then.

The cloud is the future - Google joins the EFF in MP3tunes' battle against EMI

Google have reportedly filed a paper with the New York District Court in support of MP3tunes.com in its ongoing legal battle with EMI, joining The Electronic Frontiers Foundation who had previously filed an Amici curiae brief in support of the company and its founder Michael Robertson. MP3tunes provides an online music “locker” service where users can store their music and access it from computers and mobile devices. MP3tunes also operates a music search engine called Sideload where users can find music tracks on other sites and then put them in their locker. EMI says the service makes mass copyright infringement easy by letting users upload music they didn’t buy and providing links to online songs that users can then “sideload” into their library and EMI claims that digital locker service such as MP3tunes infringes copyright unless licensed by rights holders . Robertson unsurprisingly argues that EMI’s position is an incorrect interpretation of copyright law saying that MP3tunes is shielded from liability by the “safe harbor” provisions of the Digital Millennium Copyright Act - because it doesn’t encourage copyright infringement and promptly removes infringing content when notified but EMI. Applying for summary judgment, said that “This case is about defendants’ unlawful exploitation of copyrights they do not own to advance their own business interests,” saying “Defendants’ plan was simple: Steal assets, build up a user base, and sell the company before copyright owners could obtain a judgment and shut the service down.” Robertson is a veteran of digital companies. He first tangled with the music industry a decade ago with his previous company, MP3.com which, whilst it was successfully sued by the major record labels, was brought by Universal Music. Last year Robertson sold his web based calling startup company Gizmo5 to Google for $30 million.

The case may well have an important bearing on the future of similar services and Google’s move is seen by some as confirmation of the web’s leading search engine’s (and owners of YouTube expanding) ambitions in the digital content space with a move to these called digital or “cloud-based” lockers and it is widely believed that when Google launches its long awaited music offer, a cloud based digital MP3 storage facility will be at its core.

EMI, which is one of a number of claimants brining the action, have already asked a New York federal judge to bar the EFF from filing their friend-of-the-court. EMI says the brief, supporting MP3tunes argument that it’s not responsible for what music its users store on its servers should be barred because it is “a pure advocacy piece, not a ‘friend of the court” further arguing that EFF’s brief is too long, thereby “circumventing” the court’s “page restrictions” causing “additional burden” to the court and “prejudice” to the EMI. Because EFF’s brief supports MP3tunes, EMI says, its arguments are “duplicative” and should not be allowed. In addition, EMI says, EFF’s brief “contains unsupported speculation that is not helpful to the Court”. The US Consumer Electronics Association, Home Recording Rights Coalition and IP lobbying group Public Knowledge are also expected to support MP3tunes in the case – EMI is joined as a plaintiff by a number of record labels and music publishers including Capitol Records, EMI Virgin songs and Jobete Music and has the support of the Recording Industry Association of America.

Although Google is thought to be talking to the four majors and big indie labels about licensing its digital music offer, Google must clearly recognise the importance of a win for MP3tunes for the future of cloud computing ansd one which would free them from the legal necessity of dealing with record labels, music publishers and collection societies. When the EFF launched their amicus brief, EFF senior staff attorney Corynne McSherry said ”The DMCA safe harbors were designed to encourage the growth of new internet innovations and expression by helping service providers manage their legal exposure, and they’ve been an extraordinary success,” adding “Without the safe harbor provisions, companies like YouTube, Facebook, and many others could have been shut down before they got off the ground. That’s not what Congress intended.”

Commenting on Google's submission Robertson told P2Pnet last week: "Since Google has bet their entire future on the cloud it's not a surprise to see them supporting MP3tunes. This will be a defining case about the future of cloud services" and told Wired.com “This case will define digital-media ownership in the 21st century” adding “Can companies assist their consumers in storing their possessions on the cloud where they can control them? That’s the issue at stake.”

Capitol Records, LLC. et al v MP3Tunes, LLC., and Michael Robertson
No. 07 Civ 9931 United States District Court Southern District of New York

EFF brief of amici curiae http://www.wired.com/epicenter/tag/eff/

Trading places - a modern fairy story

I remember the early days of the brave new world - when record labels, TV producers, games companies, book publishers and film companies (to name but a few of the myriad of content owners who voiced an opinion) all agreed that in the digital age, CONTENT WOULD BE KING. Now, and with the benefit of hindsight, I noticed two interesting stories in the Sunday papers. The first was an analysis of Apple's business model (the computer company, not The Beatle's vehicle). In 1997 Apple was valued at just $2 billion. But by 2007 it was valued at $72 billion, and Apple's domination of the MP3 market with iTunes and the iPod gave it a near monopoly in some markets over the software of music distribution and the hardware for playing music. Having now launched the iPhone and iPad the company is currently valued at $274 billion. But it was the iPod that launched the revival, technology that uses recorded music at its core.

The second story was a preview of the now commenced litigation between Terra Firma, owners of EMI, and Citigroup, who advised on and financed Terra Firma's acquisition of the recording and music publishing group, one of the four 'major' record labels. Back in 2007 Terra Firma paid £4.2 billion (approximately $6.5 billion) for the music group. But the company is saddled with £3 billion of debt and at every turn analysts lower their valuation of the group. Billboard reported in February this year that EMI had an accounting loss of about 1.56 billion pounds in its fiscal year ended March 2009. The huge loss included a one-time charge of £1.04 billion to reflect a lower value of EMI and a restructuring charge of £412 million and although Billboard opined that the company's trading divisions were doing reasonably well, said the accounts admitted that "EMI is not worth what it thought it was worth". In a letter to a Citigroup executive in March 2010 Terra Firma boss Guy Hands valued the firm at £2.32 billion. Hence the multi-billion claim against Citigroup.

This is a copyright blog and whilst the record labels have in the past undoubtedly made some fairly horrendous mistakes when it came to realising the new opportunities the internet offered and in failing to engage with new business models, the fact remains that a number of other industries have benefitted hugely from the digital explosion – search engines, internet service providers, technology providers and mobile phones operators have all expanded and grown rapidly – and that explosion has been driven by content – often swapped, downloaded and distributed illegally and on a massive and global scale.

Google was valued at $33 Billion in 2004, it had a £33 billion brand value alone in 2007 and by November 2009 had almost the same market capitalisation as Apple ($169.72 billion) with its brand worth $114 billion alone. Google paid $1.65 billion for YouTube in 2006. Guy Hands thinks that EMI is worth (at the most) £2.32 billion. Content is King? Methinks not. And surely as someone in the business of copyright that should be a worry.

http://www.p2pnet.net/story/37358
http://www.billboard.biz/bbbiz/content_display/industry/e3ic0da57b53e8b20f6801c7659e3be1d4b
http://news.bbc.co.uk/1/hi/business/6034577.stm
http://news.bbc.co.uk/1/hi/business/6034577.stm

The curious case of the psychoacoustic Beatles' tracks

At the start of the month the internet was alive with rumours and then reports that a US website had made the Beatles catalogue available online – with tracks selling at the bargain price of 25c each. The news prompted the fab four’s label EMI to issue legal proceedings against BlueBeat.com which in turn prompted the boss of Music Rights Technologies, owners of Bluebeat, to produce a novel argument that his company were not infringing EMI's copyrights - because they were their's. Hank Risan’s argument was this - before making music files available via the BlueBeat.com service, his company made a new recording of each track using what he calls "psychoacoustic simulation". By doing this, Risan says his company creates a new master recording and one in which they, rather than EMI or Apple Corp, own the recording copyright. So Risan’s argument was that providing BlueBeat pay a mechanical royalty to the songwriter or publisher who owns the actual song, they don't need any licence from a record company or recording artist. The matter escalated when EMI realised that other recordings from the EMI catalogue were online including Blondie, Blur, Coldplay, Radiohead and Norah Jones and EMI pressed ahead with an action for a preliminary injunction to remove the tracks from Bluebeat with immediate effect, and were granted a temporary restraining order.

Risan’s failed defence was that the “re-recordings” of the sound recordings produced “entirely new and original sounds” and the claimants’ “copyright protection does not extend to the independent fixation of sounds other than those contained in their copyrighted records”. Specifically, BlueBeat argued that their sound recordings fell within the exception in Section 114(b) of the US Copyright Act which says that “The exclusive rights of the owner of a copyright in a sound recording under clauses (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consist entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording…”. Reports said that EMI are ultimately seeking a permanent injunction and general damages to be determined or statutory damages for each infringed copyright (a maximum of £150,000 per infringement) and are also additionally seeking exemplary/punitive damages.

There was a strange twist in the tail of this case as Risan and Media Rights Technologies were (and are) well known commentators on illegal music downloading, seemingly from a position of support for the record industry over the last ten years, MRT offered consultancy to record labels on digital rights solutions and appears to have run an internet radio station, streaming music legally, without controversy for some time. There were also some rather strange press releases from Risan in the period surrounding the controversy with one statement saying “we worked with EMI directly, and the RIAA [Recording Industry Association of America] in secret agreements to create these works lawfully. We've been doing so for many, many years. We were about to provide the court with such evidence that EMI knew we had in our possession. We worked with these guys. The evidence wasn't presented because we haven't had a hearing, and the judge made a ruling".

And indeed a judge did make a ruling - Judge John F Walker has now indefinitely extended EMI's order based on evidence already submitted by both sides, issuing an preliminary injunction banning Bluebeat.com from selling or streaming EMI recordings (included allegedly reconstructed EMI recordings) without a licence. In his ruling, Judge Walter writes "Mr Risan fails to provide any details or evidence about the 'technological process' that defendants contend was used to create the 'new' recordings or adequately explain how the 'new' recordings differ in any meaningful way from plaintiffs' recordings".

Risan is said to be “shocked” at Judge Walters pre-emptive ruling saying “we went and actually got permission at each step of the way. The first step was to show them the technology, which they tested and found to be unbreakable. The second step was they authorised us to make the protected sound recordings. The third part, they totally approved the BlueBeat site - all the major labels and the RIAA". Risan says he is consulting with his lawyers regarding his options for appeal and also said that BlueBeat.com would return to service "shortly" as soon as a further agreement could be worked out with EMI. The website is currently offline.

You can read the full LA Times interview here: latimesblogs.latimes.com/music_blog/2009/11/music-download-site-bluebeat-hit-with-a-preliminary-injunction-sites-founder-responds.html

More details herehttp://www.myfoxla.com/dpp/entertainment/music/bluebeat-emi-beatles-lawsuit-20091119 and here http://www.pcmag.com/article2/0,2817,2356200,00.asp