Blame It on Rio . . . and Streambox and Napster: MP3 Cases Draw First Boundary Lines for Music Copying on Internet

While the Rio itself has only a playback function — and cannot make digital recordings — the district court focused on the fact that the software provided with the Rio temporarily stores MP3 files on a personal computer hard disk drive before the files are transferred to the Rio. Defendant argued that the computer program carveout of the AHRA [FOOTNOTE 12]extends to all computer hard disk drives. [FOOTNOTE 13]The court found defendant’s arguments unconvincing in light of the legislative history and the “spirit and purpose of the AHRA,” [FOOTNOTE 14]noting that “Defendant’s construction of Section (5)(B)(ii) would effectively eviscerate the AHRA. Any recording device could evade AHRA regulation simply by passing the music through a computer and ensuring that the MP3 file resided momentarily on the hard drive.” [FOOTNOTE 15]

Therefore, the court found that the Rio is subject to regulation under the AHRA as a Digital Audio Recording Device, and, as such, it violates the AHRA for failure to capture and pass along SCMS. However, while the Rio may “technically” violate the AHRA, the court concluded, there is no “practical” violation because MP3 files themselves do not contain SCMS information, [FOOTNOTE 16]and the court denied plaintiff’s motion for a preliminary injunction.

The Ninth Circuit reached the same outcome by following a much more direct route. The court found that the plain language of the exemption for “material object[s] . . . in which one or more computer programs are fixed” [FOOTNOTE 17]does exclude personal computer hard disk drives, and that because computer hard disk drives are not Digital Audio Recording Devices, the Rio does not reproduce files from a Digital Audio Recording Device. [FOOTNOTE 18]

The court also considered whether the Rio itself could be a Digital Audio Recording Device, concluding that without the ability to record digital transmissions (as opposed to copying files stored on a computer hard disk drive), the Rio simply does not fall within the scope of the AHRA. [FOOTNOTE 19]

While the district court was troubled by Diamond’s argument that the exemption of computer hard drives would exclude all devices that used computer hard drives in the download process, [FOOTNOTE 20]the Ninth Circuit found that the AHRA “seems designed to allow files to be ‘laundered’ by passage through a computer, because even a device with SCMS would be able to download MP3 files lacking SCMS codes from a computer hard drive, for the simple reason that there would be no codes to prevent the copying.” [FOOTNOTE 21]

‘REALNETWORKS V. STREAMBOX’

In late 1999 RealNetworks brought an action against Streambox for violation of the Digital Millennium Copyright Act by its distribution of three computer programs which, in different ways, provide access to Internet-based audio and video files, resulting in a preliminary injunction against two of the programs. [FOOTNOTE 22]

The first program, Streambox VCR, allows users to download and save RealMedia files — files created in RealNetworks’ proprietary media format — even though the files are coded to prevent saving. RealMedia files contain a “Copy Switch,” which if switched off prohibits downloading and copying. Streambox VCR impersonates the RealNetworks’ “Secret Handshake” and bypasses the file’s “Copy Switch,” allowing the user to capture and save the file. [FOOTNOTE 23]Streambox’s Ripper converts Internet media files from one format to another-including RealMedia and MP3. [FOOTNOTE 24]The third Streambox program — the Ferret — alters the RealNetworks RealPlayer program to provide interoperability with Streambox’s other programs and services. [FOOTNOTE 25]

RealNetworks obtained a temporary restraining order in December 1999, followed by a preliminary injunction in January 2000, prohibiting the manufacture, import, or sale of Streambox VCR and the Ferret, but not Ripper.

RealNetworks sought relief under the Digital Millennium Copyright Act’s anticircumvention (Section 1201) and false copyright management (Section 1202) [FOOTNOTE 26]provisions. Section 1201 prohibits:

the manufacture, import, offering, provision, or traffic in any technology, product, service, device, component, or part thereof, that (A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under [the Copyright Act,] (B) has only limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected under [the Copyright Act]; or (C) is marketed by that person or another acting in concert with that person with that person’s knowledge for use in circumventing a technological measure that effectively controls access to a work protected under [the Copyright Act]. [FOOTNOTE 27]

The court found that RealNetworks had shown a likelihood of success on the merits regarding Streambox VCR. The “Secret Handshake” and “Copy Switch,” the court explained, constitute “technological measures” that “effectively control access to a work protected” and “effectively protects a right of a copyright owner,” respectively. Streambox VCR, in turn, circumvents these protections and has limited commercial value apart from its features that allow circumvention. [FOOTNOTE 28]

The court found that Ripper, by contrast, has “legitimate purposes and commercially significant uses,” and that there was insufficient evidence to classify the RealMedia format as a “technological measure” that protects works or their owners, thus declining to issue an injunction as to Ripper. [FOOTNOTE 29]

‘UMG RECORDINGS V. MP3.COM’

On May 4, 2000 the U.S. District Court for the Southern District of New York found MP3.com Inc. — which operates a website devoted to proliferation of the MP3 format — liable for copyright infringement for its conversion of tens of thousands of compact disks into MP3 format for its “my.MP3.com” service. [FOOTNOTE 30]Users who sign up for this free service can download MP3.com’s “Beam-It” software, which transmits information about compact disks placed in the computer’s CD-ROM drive to MP3.com via the Internet. If MP3.com recognizes the CD as one in its library, MP3.com grants the user access to the MP3 version of that CD over the Internet from that point forward. [FOOTNOTE 31]

Plaintiffs are a group of ten media companies, including Sony Music Entertainment and Warner Bros. Records, that brought suit on the narrow charge that MP3.com’s conversion of the compact disks into MP3 format in connection with the launch of the my.MP3.com service constituted unlawful copyright infringement. Plaintiffs moved for summary judgment on this claim. MP3.com countered by arguing that its copying constituted “fair use.” The court, however, was unpersuaded, finding that MP3.com’s copying did not satisfy the four factors of the fair use analysis:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. [FOOTNOTE 32]

Regarding the “purpose and character of the work,” the court noted that MP3.com’s motivations were commercial in nature — to draw people to the MP3.com website and charge advertisers based on the website’s popularity — and that the MP3.com service was not transformative of the original works, but rather repackaged them in another format. “While such services may be innovative,” the court wrote, “they are not transformative.” [FOOTNOTE 33]The court found that the “nature of the copyrighted work” — musical recordings — is “close[] to the core of intended copyright protection” and therefore less amenable to a fair use defense. [FOOTNOTE 24]

Because MP3.com had converted entire CDs into MP3 format, the court found that the third factor weighed against fair use. [FOOTNOTE 35]Finally, with regard to “the effect of the use upon the potential market for or value of” the CDs, the court discounted the statements of defendant’s experts on the subject, finding that MP3.com’s activities ran contrary to the purpose of copyright law-to protect the copyrightholders’ property interests, rather than providing services to the public, as MP3.com argued. [FOOTNOTE 36]

‘A&M RECORDS V. NAPSTER’

On May 5, 2000 — one day after release of the opinion in UMG v. MP3.com — the U.S. District Court for the Northern District of California issued a decision against Napster Inc. on its motion for summary judgment under the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”). [FOOTNOTE 37]

Napster provides software that allows users to “post” to the Internet a listing of their MP3-format files, view lists of MP3 files posted by other users, search for MP3 files of specific recordings, and download the MP3 files listed on Napster. This action was brought by members of the RIAA against Napster, alleging contributory and vicarious copyright infringement, as well as unfair competition and violation of the California civil code. [FOOTNOTE 38]

The plaintiffs averred that “there is nothing unlawful about the MP3 format per se,” [FOOTNOTE 39]but that Napster “has chosen to build its business on large-scale piracy [and] created a virtual sanctuary where music piracy can and does flourish on a monumental scale.” [FOOTNOTE 40]According to the RIAAcomplaint, a random sampling of Napster MP3 files by the RIAA revealed that “the overwhelming majority, approximately 90%, infringed the rights of the RIAA’s members.” [FOOTNOTE 41]

Napster moved for summary judgment, on the theory that it was protected by the “transitory digital network communications” safe harbor provision of the Digital Millennium Copyright Act:

A service provider shall not be liable . . . for infringement of copyright by reason of the provider’s transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing, or providing connections, if-

(1) the transmission of the material was initiated by or at the direction of a person other than the service provider;

(2) the transmission, routing, provision of connections, or storage is carried out through an automatic technical process without selection of the material by the service provider;

(3) the service provider does not select the recipients of the material except as an automatic response to the request of another person;

(4) no copy of the material made by the service provider in the course of such intermediate or transient storage is maintained on the system or network in a manner ordinarily accessible to anyone other than anticipated recipients, and no such copy is maintained on the system or network in a manner ordinarily accessible to such anticipated recipients for a longer period than is reasonably necessary for the transmission, routing, or provision of connections; and

(5) the material is transmitted through the system or network without modification of its content. [FOOTNOTE 42]

Napster argued that it qualifies as a “service provider” and fits under this safe harbor because all communications and transfers of files are initiated by users, rather than Napster.

Plaintiffs disagreed that Napster’s activities qualified for this “transitory” safe harbor, arguing instead that the Napster program-which they perceive primarily as a tool to locate MP3 files on the Internet-should be analyzed under the DMCA’s “Information Location Tools” provision:

A service provider shall not be liable . . . for infringement of copyright by reason of the provider referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link, if the service provider-

(1)(A) does not have actual knowledge that the material or activity is infringing; (B) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (C) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

(2) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and

(3) upon notification of claimed infringement as described in subsection (c)(3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity, except that, for purposes of this paragraph, the information described in subsection (c)(3)(A)(iii) shall be identification of the reference or link, to material or activity claimed to be infringing, that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate that reference or link. [FOOTNOTE 43]

Napster, in response, argued that its search functions are incidental to its primary function-of being a transitory conduit for the transmission of files between users-and that Section 512(a) still applies to portions of the Napster service in any event. [FOOTNOTE 44]

The court analyzed Napster’s motion in light of both safe harbor provisions. With regard to the “transitory digital network communications” provisions of Section 512(a), the court found that Napster’s own allegations prevent application of this section. Napster alleged that its “system or network controlled or operated by or for the service provider” — the language in the opening sentence of Section 512(a) — was comprised of “Napster’s servers and Napster’s MusicShare browsers on its users’ computers.” [FOOTNOTE 45]If this were true, wrote the court, then there is no transmission or routing “through” Napster’s system-rather it occurs over the public Internet-and therefore Section 512(a) cannot apply to immunize Napster from contributory or vicarious copyright infringement. [FOOTNOTE 46]

The court was also persuaded by plaintiffs’ secondary argument — that even if the safe harbor were available the evidence did not demonstrate that Napster had properly “adopted and reasonably implemented” a system to police infringement over its system. [FOOTNOTE 47]In conclusion the court found that “Napster does not meet the requirements of subsection 512(a) because it does not transmit, route, or provide connections for allegedly infringing material through its system,” denying summary judgment for this reason and because of the “genuine issues of material fact about Napster’s compliance with subparagraph 512(i)(A), which a service provider must satisfy to enjoy the protection of any section 512 safe harbor.” [FOOTNOTE 48]The court did not return to address application of the Section 512(d) safe harbor.

‘METALLICA V. NAPSTER, DR. DRE V. NAPSTER’

With the denial of Napster’s motion for summary judgment the A&M Recordscase proceeds, along with two additional suits filed against Napster by Metallica and Dr. Dre in April 2000. [FOOTNOTE 49]Styled along the lines of the A&M Recordscomplaint, these complaints add several important elements: (i) they include unnamed defendants corresponding to both universities and students-making the action expressly applicable to users of the Napster service; and (ii) they include a charge for “unlawful use of Digital Audio Interface Device” under Section 1002 of the American Home Recording Act — the same section under which the RIAA tried unsuccessfully to enjoin manufacture and sale of the Rio as a Digital Audio Recording Device in Diamond Multimedia. [FOOTNOTE 50]A Digital Audio Interface Device is defined as “any machine or device that is designed specifically to communicate digital audio information and related interface data to a digital audio recording device through a nonprofessional interface.” [FOOTNOTE 51]

OPEN ISSUES

While these cases have taken major steps to begin to define the boundaries within which those using the MP3 and similar digital media technologies will be allowed to act, they also raise a number of important issues that will doubtless be addressed in the courts in the coming months: [FOOTNOTE 52]

� The Diamond Multimediacase allowed the manufacture and distribution of the Rio to continue because the definitions in the AHRA did not capture the product, which cannot record, but rather downloads MP3 files from a computer. As computers and hand-held devices converge, where will the dividing line be drawn between the device and the computer?

� Will the Metallicaand Dr. Drecases result in decisions finding Napster to be a Digital Audio Interface Device (a device that communicates data to a Digital Audio Recording Device) if Napster only transmits data between personal computers (as the court in A&M Recordsassumed for purposes of its decision) and personal computers cannot be Digital Audio Recording Devices (as the courts in Diamond Multimedia concluded)?

� In RealNetworks, the court only considered whether Ripper — the program that converts digital audio into different formats — violated the anticircumvention provisions. Could Ripper or other products that convert files into MP3 format be seen to violate the AHRA, as Digital Audio Recording Devices that do not capture-and in fact strip away-SCMS information?

� Alternatively, could such programs violate Section 1202 of the DMCA, which creates liability for false, altered or removed “copyright management information”?

� The UMG Recordingscase is built upon a single cause of action — direct copyright infringement when MP3.com converted tens of thousands of CDs into MP3 format, each of which would then reside on MP3.com’s servers until a user demonstrated that they are an owner of their own copy of the CD in question. One of the benefits of the my.MP3.com service is the time savings — users insert their CDs into their CD-ROM drives for a matter of seconds until the computer recognizes the CD, after which the user is immediately given access to MP3.com’s MP3 version of the CD. If, instead, the service maintained the authentication protocol but then allowed the user to convert and upload their CD — so that the user was making his own copy rather than MP3.com doing it for him — presumably there would be no copyright infringement by MP3.com. Similarly, what if the my.MP3.com service provided conversion services for users — e.g. users would mail their CD collections to MP3.com for conversion into MP3 format and posting on the MP3.com for each consumer’s own personal use?

Hillel I. Parness, J.D. Columbia 1995, is an associate in the Intellectual Property Practice Group at Simpson Thacher & Bartlettand recently joined the Internet Committee of the Section of Antitrust Law of the American Bar Association. He is the author of “The Curse of the Pink Panther-The Legacy of the Owens Corning Fiberglas Dissent and its Role in the Qualitex Supreme Court Appeal,” 18 Colum. VLA J. L. & Arts 327 (1995).

::::FOOTNOTES::::

FN1Proceedings and Debates of the 102nd Congress, 2d Sess.: The Audio Home Recording Act of 1992, 138 Cong. Rec. E823-01 (Mar. 25, 1992) at *E823.

FN2See http://webopedia.internet.com/ TERM/M/MP3.html (case sensitive).

FN329 F. Supp. 2d 624 (C.D. Cal. 1998), aff’d, 180 F.3d 1072 (9th Cir. 1999).

FN417 U.S.C. �� 1001 et seq.

FN5 See, e.g., Proceedings and Debates of the 102nd Congress, 2d Sess.: Audio Home Recording Act of 1992, 138 Cong. Rec. H9029-01 (Sept. 22, 1992) at *H9035 (Rep. Collins: “the audio home legislation before us is designed specifically to respond to the threat that the perfect copying capability of the digital audio recorder presents to those engaged in the professions of creating and introducing music into the American stream of commerce”); id. at *H9043 (Technical Reference Document for the AHRA, Introduction: “[c]urrently, the predominant type of DAR device offered for sale in the United States is the DAT recorder”).

FN6See infranote 1.

FN717 U.S.C. � 1002(a).

FN8 Id.� 1008.

FN9 Id.� 1001(5)(B).

FN10 See29 F. Supp. 2d at 628; 180 F.3d at 1075.

FN1117 U.S.C. � 1001(3).

FN12 Id. � 1005(B)(ii).

FN1329 F. Supp. 2d at 628.

FN14 Id.at 629-30.

FN15 Id.at 630.

FN16 Id. at 632.

FN1717 U.S.C. � 1001(5)(B)(ii).

FN18180 F.3d at 1078.

FN19 Id.at 1081.

FN2029 F. Supp. 2d at 630.

FN21180 F.3d at 1079.

FN22 RealNetworks, Inc. v. Streambox, Inc.(W.D. Wash., No. 2:99CV02070, 1/18/00).

FN23 Id.at *4.

FN24 Id.at *5.

FN25 Id.at *6.

FN26Section 1202 prohibits intentional provision, distribution or importation of false copyright management information; removal or alteration of copyright management information and distribution of altered or removed copyright management information; or distribution, importation or public performance of works from which the copyright management information has been improperly removed or altered. 17 U.S.C. �1202. The court did not address Section 1202 in its opinion.

FN2717 U.S.C. �1201(a)(2) (emphasis added). Section 1201(b), similarly, contains the same prohibitions with respect to technologies that circumvent a technology that “effectively protects a right of a copyright owner.” 17 U.S.C. �1201(b).

FN28 Real Networksat *8-9.

FN29 Id.at *10-11. While the court found that with regard to the Ferret-the third program that alters the functions of RealPlayer to allow interoperability with Streambox’s programs and functions — RealNetworks had not made out likelihood of success, RealNetworks had raised serious questions going to the merits of its claim, and the balance of hardships favored RealNetworks, and the court also granted an injunction against the Ferret.

FN30 UMG Recordings, Inc. v. MP3.com, Inc.(S.D.N.Y., No. 00 Civ. 472, 5/4/00). Plaintiffs allege that MP3.com made “unauthorized copies of [] 45,000 audio CDs, loaded the unauthorized copies onto file servers, and is permitting users of its Internet service to listen to and download those unauthorized copies.” Complaint, UMG Recordings, Inc. v. MP3.com, Inc.(S.D.N.Y., No. 00 Civ. 472, 1/21/00) 1 (copy on file with author).

FN31For example, the author has “beamed” 35 of his own CDs, totaling 459 tracks — a total of 33 hours of music — through the my.MP3.com service. He can now access any or all of this music in MP3 format from any Internet-enabled computer. The music is delivered over the Internet in “streaming” — not savable — format. As noted in note 52, however, in the aftermath of the UMG Recordings decision MP3.com has “silenced” all 459 of his tracks.

FN32 UMG Recordingsat *1 (quoting 17 U.S.C. �107).

FN33 Id.at *2.

FN34 Id.(quoting Campbell v. Acuff-Rose Music, Inc.,510 U.S. 569, 586 (1994)).

FN35 Id.

FN36 Id.at *3.

FN37 A&M Records, Inc. v. Napster, Inc.(N.D. Cal., No. C 99-05183, 5/5/00) (available at http://www.courthousenews.com/ napster.pdf).

FN38Complaint, A&M Records, Inc. v. Napster, Inc.,(N.D. Cal., No. C 99-05183, 12/6/99) (copy on file with author).

FN39 Id.42.

FN40 Id.44.

FN41 Id.55.

FN4217 U.S.C. �512(a). See A&M RecordsOpinion at 5.

FN4317 U.S.C. �512(d). See A&M RecordsOpinion at 7.

FN44 A&M RecordsOpinion at 7.

FN45 Id.at 10.

FN46 Id.at 11-12. Plaintiffs argued that Napster’s narrow definition of its system to include browsers on users computers, but not the remainder of those computers is untenable — “either (1) the system does not include the browsers, or (2) it includes not only the browsers, but also the users’ computers themselves” — and thus the alleged copyright infringement was accomplished through the Napster system. Id. at 10.

FN47 Id. at 12-14.

FN48 Id.at 14.

FN49Complaint, Metallica v. Napster, Inc.(C.D. Cal., No. 00-03914, 4/13/00); Complaint, Andre Young, p/k/a Dr. Dre v. Napster, Inc.,(C.D. Cal., No. 00-04356, 4/25/00) (copies on file with the author).

FN50 MetallicaComplaint 58, Dr. DreComplaint 56 (both mistakenly referencing 17 U.S.C. �1001).

FN5117 U.S.C. �1001(2).

FN52Some late-breaking developments in these matters include: (i) MP3.com has “silenced” — or blocked access — to all “beamed” songs in which plaintiffs in the UMG v. MP3 action hold copyrights (see http://silence.mp3.com); (ii) Napster has blocked access to 317,000 users identified by Metallica as transmitting MP3 versions of their songs via Napster (see http://www.napster.com/ metallica-notice.html); (iii) MP3.com has begun to negotiate licensing agreements with the various music publishers (see http://pr.mp3.com/ pr/86.html); and (iv) the House of Representatives’ Committee on Small Business plans to hold a hearing regarding the impact of MP3 format issues on small businesses (see www.cnet.com).