Over the last few years, we have seen hundreds of new start-up companies set up cloud computing services.  At a very basic level, a cloud computing service enables a person to have convenient and on-demand access to resources online.  These resources could include storage, software and other services.  The idea of cloud computing is that these resources do not need to be located on the person's computer, but can be accessed from any device with Internet access, as the resources are located in the "cloud".  Of course, the "cloud" is not as ephemeral as it sounds, as all of the relevant data will be located on a physical server.  The changes in technology and the way we use the Internet have led to many new questions of law in intellectual property cases. 

In Capital Records Inc et al v. MP3tunes LLC and Michael Robertson, U.S. District Court, Southern District of New York, No. 07-09931, Pauley J considered whether a cloud music service, MP3Tunes was liable for copyright infringement.  MP3Tunes provided a ‘locker’ storage service for users to store music files.  These songs could then be played through any device with Internet access.  MP3Tunes also operated ‘Sideload’, a website that allowed users to search for free song files on the Internet, through searching an index of websites.  In 2007, MP3Tunes received a takedown notice from EMI, which identified a number of song titles and web addresses that contained infringing files.  MP3 tunes removed these websites from Sideload.  EMI sued MP3Tunes for copyright infringements and for not taking further action against infringing files and websites, such as removing all infringing songs on the notified list from users’ lockers and removing any websites linking to these songs from Sideload.

Pauley J held that MP3Tunes was protected by the safe harbour provisions in the Digital Millennium Copyright Act.  In considering the safe harbour criteria the Court found:

  • MP3Tunes had a policy for responding to notices from copyright holders, had removed infringing links to websites and had terminated the accounts of 153 repeat infringing users.  It therefore had a repeat infringement policy.
  • MP3Tunes was required to comply with the takedown notice received from EMI and had done so.  MP3Tunes had removed the websites from Sideload that were specified in the notice from EMI.  However, for MP3Tunes to be required to respond to the takedown notice against the listed song titles, EMI should have provided MP3Tunes with sufficient information to allow MP3Tunes to identify and locate the infringing material, such as a web address.  MP3Tunes was not obliged to investigate whether songs uploaded into users’ lockers or posted on websites were infringing.
  • When EMI’s notice complied with the DMCA requirements, EMI had actual knowledge of infringement.  However, if investigation is required to determine whether material is infringing, then those facts and circumstances are not a ‘red flag’.  MP3Tunes did not have knowledge of circumstances that should have raised a ‘red flag’.  Apart from websites that used a term such as ‘pirate’ in their URL, the infringing nature of websites would not be apparent from a brief or casual viewing.  EMI acknowledged that MP3Tunes users and executives have no way of knowing for sure whether free songs on the Internet are unauthorised. 
  • MP3Tunes did not promote copyright infringement to enhance its profits.  It therefore did not directly benefit from the infringing activity.  It did not have the right and ability to control the infringing activity, as the DMCA required something more than the ability to remove or block access to materials.  MP3Tunes was a fully automated system and did not participate in user decisions to link websites to Sideload or store music in their lockers.  

However, the decision also contained some good news for EMI.  The Court found that given the knowledge that MP3Tunes had from EMI’s notice, MP3Tunes should have also removed the files from users’ lockers where the users had used the specific websites to download the file.  MP3Tunes lost its safe harbour protection with respect to this failure.  The Court therefore found that MP3Tunes had contributory liability for the infringements of its users who stored these particular files in their lockers.  In addition, the founder of MP3Tunes, Michael Robertson, was personally liable for the infringing files that he had ‘sideloaded’.

EMI has stated that it will appeal the decision and so for the moment, whether MP3Tunes will be liable for further copyright infringement remains uncertain.