09-09-11

Wider Legal Immunity for "Cloud" Services The legal immunity known as "Safe Harbor" has been confirmed as covering online "cloud locker" services under US law. In Capital Records (EMI) v MP3Tunes [22 August 2011] 07 Civ 9931, a US District Court held that the music downloading and streaming website MP3Tunes.com qualifies for protection from copyright infringement claims under the US' Digital Millennium Copyright Act. MP3Tunes allows users to store music files in online "lockers" and to (repeatedly) download and stream those files through any web-enabled device, whilst its sister website, Sideload.com, allows users to search for and download (free) music files into those lockers. Whilst there can be no doubt that many of those searched/stored files are unlicensed, the Court confirmed that MP3Tunes complies with - and is therefore eligible for protection under - the US "Safe Harbor" law. Requirements for such immunity (mirrored in Europe's "Mere Conduit" laws) include that the service must have "no actual knowledge" of specific infringements, must operate an effective takedown notice policy, and must terminate known repeat infringers. The court accepted that MP3Tunes was "aware that some level of infringement occurs" but found "no evidence that MP3Tunes executives or employees had firsthand knowledge" of unauthorised activity - and noted that terms such as "free", "mp3" and "file-sharing" are ubiquitous on legitimate services and do not create "red flag" knowledge of infringement. Crucially, the court also held that MP3Tunes did not "promote infringement". The court found that MP3Tunes had imposed user terms and conditions prohibiting storage of unauthorised content and had operated a system for dealing with takedown notices which did not "interfere with copyright owners' ability to issue such notices" and had responded to takedown notices by removing from Sideload.com the notified links to unauthorised content. Though the court made clear that only specifically-notified infringements had to be removed (so for example "all songs by a particular artist" would not qualify), EMI's notifications of content from infringing links would qualify because all files stored in lockers on MP3Tunes carry source information and therefore could be specifically identified and taken down by MP3Tunes as infringing content. The court also found that MP3Tunes had reasonably implemented a policy to terminate those repeat infringers of which it had become aware. While MP3Tunes prevailed in most respects, its founder executive was held personally liable for 171 music files he had sideloaded from unauthorised sites for his "personal benefit". The court declined to rule on other MP3Tunes employees who had also personally downloaded unauthorised files, until it could investigate whether or not they had done so "in the course of their employment". This case (though it is not directly precedential in the UK and in any event may be appealed in the US) surely provides a significant boost for technology companies and online service providers and creates opportunities for innovators to exploit the wider "Safe Harbor" protections confirmed in the judgment - notably including a legal approval of "transparent compression", i.e. the common IT practice of not maintaining duplicate copies within a database. For copyright owners, short-term online licensing prospects in general are probably weakened by this judgment. Perhaps the most important immediate effect, however, will be on the new "cloud" services recently launched without licences by Amazon and Google (each having apparently anticipated this verdict). Apple, on the other hand, finds itself in the uncomfortable position of having recently paid reportedly massive licence fees for its new iCloud "locker" service - which (if this judgment withstands appeal) now appears to be largely within the scope of Safe Harbor immunity. Accordingly, if "cloud locker" services are in fact the next big thing online, this judgment is an important milestone likely to trigger developments in both IT design and copyright licensing practices. The full text of the judgment may be accessed via: http://www.scribd.com/doc/21343559/Order-in-Capitol-v-MP3tunes-com.
Article by Tom Frederikse