Following $48 million jury verdict in music companies’ long-running copyright action against online service MP3tunes, Second Circuit vacates district court’s pretrial ruling that MP3tunes was eligible for DMCA safe harbor protection, rejecting district court’s interpretation of DMCA’s “repeat infringer” policy requirement.

Michael Robertson founded MP3tunes LLC, which owned and operated two websites: MP3tunes.com, which allowed users to store music on its server, and sideload.com, a website that allowed users to search for free music on the internet and upload those songs directly to their MP3tunes.com virtual storage “lockers.” Songs uploaded to users’ MP3tunes lockers through sideload.com were then added to sideload.com’s index of searchable songs, which included infringing material, and were made available to other users. Various record labels and music publishers sued Robertson and MP3tunes for copyright infringement, alleging that MP3tunes’ websites infringed their copyrights in thousands of sound recordings and musical compositions.

On a prior motion for summary judgment, the parties contested whether the defendants were eligible for any safe harbor protection under the Digital Millennium Copyright Act, which requires, among other things, that service providers have “adopted and reasonably implemented … a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.” In a 2011 summary judgment decision, the district court held that MP3tunes reasonably implemented a “repeat infringer” policy as a matter of law, equating repeat infringers with blatant infringers and concluding that only users who upload content with knowledge that the content is infringing can be repeat infringers, against whom a service provider’s policy must be directed. Relying on this interpretation, the district court held that the defendants were eligible for safe harbor protection provided they satisfied the other requirements imposed by the DMCA.

Following trial, the jury issued a verdict awarding $48 million to plaintiffs, finding that the defendants had “red flag” knowledge and were willfully blind with respect to infringing activity on their sites, which disqualified them from DMCA safe harbor protection under Second Circuit precedent. On defendants’ post-trial motion for judgment as a matter of law, the district court partially granted the motion and accordingly reduced the judgment, holding that defendants did not have red-flag knowledge and willful blindness with respect to two categories of songs for which the jury had found defendants liable: MP3 files from major labels issued before 2007 and all songs by the Beatles.

On appeal, the Second Circuit vacated the district court’s summary judgment ruling as to the defendants’ repeat infringer policy, rejecting the district court’s determination that only uploaders (and not downloaders) could be repeat infringers, and further rejecting the district court’s reliance on the infringers’ state of mind. In so holding, the Second Circuit explained that “[c]opyright infringement is a strict liability offense in the sense that a plaintiff is not required to prove unlawful intent or culpability, and a user does not have to share copyrighted works in order to infringe a copyright.” Thus, the court held, “all it takes to be a ‘repeat infringer’ is to repeatedly upload or download copyrighted material for personal use.” Relying on this broader definition, the Second Circuit held that a reasonable jury could find that defendants did not implement a reasonable repeat infringer policy, because, among other things, plaintiffs had shown that “MP3tunes did not even try to connect known infringing activity of which it became aware through takedown notices to users who repeatedly created links to that infringing content … or who copied files from those links.” The Second Circuit thus vacated the district court’s summary judgment ruling on this issue and remanded for further proceedings.

The court noted that, on remand, a ruling that defendants did not implement a repeat infringer policy would disqualify defendants from any DMCA safe harbor protection and render the issue of defendants’ red-flag knowledge and willful blindness moot with respect to the DMCA safe harbor. However, the Second Circuit also reversed the district court’s post-trial ruling that defendants did not have red-flag knowledge and willful blindness with respect to pre-2007 songs and Beatles songs. Regarding the pre-2007 songs, the court relied upon defendants’ apparent knowledge that none of the major record labels offered songs in MP3 format before 2007. While noting that a service provider does not bear a continuing, affirmative duty to monitor its servers for infringing activity, the court explained that “[t]he jury was permitted to conclude that a time-limited, targeted duty—even if encompassing a large number of songs—does not give rise to an ‘amorphous’ duty to monitor in contravention of the DMCA.” As to the Beatles songs, the Second Circuit relied upon defendants’ apparent knowledge that the Beatles had never authorized their songs to be available digitally and that certain Beatles songs were nonetheless available on defendants’ sites.

Finally, the Second Circuit affirmed the district court’s ruling that plaintiffs were entitled to only one statutory damages award per song for both the musical composition and the corresponding sound recording, even where the recording and composition were owned by separate plaintiffs. The judgment was affirmed in all other respects.