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Circuit Revives Copyright Case Against MP3tunes, Founder

Record companies and music publishers will get more damages and a second shot at holding the founder of MP3tunes liable for additional copyright infringement following a federal appeals court decision on Oct. 25.

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Record companies and music publishers will get more damages and a second shot at holding the founder of MP3tunes liable for additional copyright infringement following a federal appeals court decision on Oct. 25. EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al., Nos. Nos. 14‐4369‐cv(L), 14‐4509‐cv(XAP) (2d Cir. Oct. 25, 2016) ().

Reversing a lower court, the U.S. Court of Appeals for the Second Circuit said MP3tunes and founder and CEO Michael Robertson did not qualify for the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. §512.

The provision is available for internet providers who adopt and reasonably implement a policy to terminate “repeat offenders.”

EMI Group alleged MP3tunes and Robertson violated the Copyright Act through two services: a locker service for storing digital music and sideload.com, a service that lets users search for free music on the Internet.

Prior to trial, Southern District Judge William Pauley granted partial summary judgment to MP3tunes, finding it had reasonably implemented a repeat infringer policy. A jury went on to find for the plaintiffs in a $40 million-plus verdict that Pauley then partially set aside, leaving Robertson on the hook for some $12.2 million in damages.

The Second Circuit held the lower court employed too narrow a definition of “repeat infringer” and reversed Pauley’s decision granting MP3tunes judgment as a matter of law on a number of songs, including those by The Beatles, finding a reasonable jury could have concluded that MP3tunes had “red flag knowledge” of, or was “willfully blind to” infringing activity.

The ruling, by Judges Jose Cabranes, Chester Straub and Raymond Lohier in EMI Christian Music Group v. MP3TUNES, 14-4369, means that Robertson must pay roughly $41 million and faces additional exposure for greater infringement.

“The trial evidence supported the plaintiffs’ argument that Robertson and MP3tunes executives knew that personal file storage sites and college student webpages were distributing infringing files,” Lohier said. “There was also evidence that Robertson himself sideloaded from personal websites, and that other MP3tunes executives regularly sideloaded from these sites.”

So the jury could reasonably conclude the company knew that songs from those sites were “‘obviously infringing,’ yet failed to act on that information,” he said.

On top of finding MP3tunes liable for its own, and its users’ infringement, the court agreed with the jury’s finding of liability for sideloads performed by MP3tunes executives.

As to Robertson, Lohier said there was ample evidence to find him vicariously liable for copyright infringement, including testimony from one employee on using sideload marketing efforts to enlist people for the locker service — and that Robertson tried to use sideload.com to get people to upgrade to premium lockers.

“There was also evidence that Robertson, through a trust, was the near-exclusive funder of MP3tunes and thus had an ‘obvious and direct financial interest’ in infringement that drew subscribers to MP3tunes.com,” Lohier said.

Robertson also lost his challenge to the finding of contributory infringement.

“Robertson personally encouraged his employees to sideload songs to add to the index,” Lohier said. “Many of those songs were from sites that contained ‘pirated material.’“

Andrew Bart, a partner at Jenner & Block argued for the plaintiffs.

“We are gratified the court reinstated the jury’s verdict finding the defendants were willfully blind to the rampant infringement on their website,” Bart said. “Significantly, the court agreed with our position that an ISP forfeits its DMCA safe harbor protections when it is willfully blind to repeat infringement, including by failing to track users who upload or copy infringing files identified on takedown notices.”

Ira Sacks, a partner at Akerman, argued for the defendants. He did not return a call seeking comment.

***** Mark Hamblett writes for the New York Law Journal, an ALM sibling of this newsletter. He can be reached at mhamblett@alm.com, and on Twitter @Mark_Hamblett.

The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.

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