What Is Grooveshark?: A Look at the Evolution of File Sharing and Licensing

My journey through file sharing and digital downloading has been kind of a strange one.  I had Napster back in the day, then switched to Morpheus.  I think I had Limewire in college, but I can’t exactly remember.  Even in those days, it took FOREVER to download a song (or god FORBID a movie), and you never knew what you were actually going to get at the end of the day (i.e. is that really An American Tail or Debby Does Dallas??  Fuck it, it’s free, right?!).  My junior year, Napster came back as a legit subscription service and worked out a couple of licensing agreements with a bunch of Universities – my now alma mater, University of Miami (aka “THE U”), was one of those schools. 

I stuck to Napster like white on rice – I absolutely loved being able to stream any music I wanted for a small monthly fee.  In fact, when I was in college, Napster was FREE to UM students; I just loved it so much, I started paying the measly $12.95/month after I graduated to keep the features.  To this day, I am still a Napster subscriber, and the price has gone down.  Now, it’s only $15 every three months AND you get 15 free credits for tracks.  It’s cheap, it’s easy, and they have a great catalogue.  Plus, I’m in control.

I didn’t jump on the iTune bandwagons until I got my iPhone in…. god, I’m so embarrassed to say this… November 2009.  I never owed an iPod; I always have third party MP3 players because iPods were compatible with Napster (they are now).  I’m going to say it – I honestly don’t like iTunes.  I think the only thing it offers is mild convenience, esp with my iPhone (or the iPod Touch), you can get your music instantly, but only if you pay for it each time.  Napster “feels” more free to me.  Sure, I can’t instantly grab music on my MP3 player on the go, but I can stream it from up to 5 PCs at a time, and, honestly, that’s mostly where I listen to my music.

I think the fact that people want a lot of music but they don’t want to pay for that music (or feel like they’re paying for it) has given rise to this kind-of “customized” radio services like Pandora.  Because you can interact with the genome and “refine” it by adding variety and thumbing up or down certain songs to refine your taste.  I actually have friends that spent months refining their genomes to get the “perfect” station.  It’s fun!  It’s kind of like building a CD collection – it takes time and effort.  Remember how rewarding that used to be?  All their shiny cases lines up in a row, sorted alphabetically, or (if you’re daring) maybe by genre or cover art.  But I digress.  My point is that people still take pride in their music selections, and Pandora feeds that need.

But what if I crave MORE customization?  What if I crave “on demand” content all the time?  The music I want when I want it.  None of this “you can only interact with the genome up six times an hour.”  I want music without boundaries!  And I want to be free!  Well, industry folks say, you can’t have it for free.  As my old music business professor used to say: “when music is playing, someone is paying.”  Advertising just doesn’t cut the mustard for the licensing fees (plus, users hate commercials… yet still don’t want to pay for music.  Have you guys ever heard the expression ‘you can’t have your cake and eat it too’??)

Enter Grooveshark.  They say… why yes, you CAN have your cake and eat it too.  We’ll even BAKE your cake and handle all the liabilities and law suits when it poisons someone!  Ta da!  Grooveshark has taken a similar approach to Limewire and Grokster – “Come and get us.”   However, unlike Limewire and Grokster, Grooveshark preemptively offered music as an enticement for the majors to garner licensing deals with them.  Lots of indies are on board, but the real meat and potatoes (and what their success depends upon) are the major label releases.

Well, their plan has worked…. Kind of.  In ’09, EMI inked a licensing deal with Grooveshark licensing their entire catalogue under undisclosed terms.  Did EMI take equity?  What kind of licensing fees is Grooveshark paying?  Where is their leverage here??  Ooh… the contract deets are KILLING ME!!  But it appears that Grooveshark is leading the way in a new(er) approach to copyright licensing.  Give the people what they want, and when Big Daddy sees people love it, offer them a piece of the pie.  If the Copyright Act isn’t working for digital downloading (and, in many instances, it’s not), private contract seems to be the way to go.  Innovation can’t be stopped, so we need to contract around it.  All’s fair in music and war, I suppose.                

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The Helping Hand: The Limewire Case and Secondary Liability in Copyright Infringement

In a precedent-setting ruling, the U.S. District for the Southern District of New York has found both Limewire and its sole owner, Mark Gorton, “vicariously liable” for copyright infringement on a myriad of sound recordings.  You can read the full decision here, but for those of you less-inclined to spend a substantial amount of time reading 59-pages of legal jargon, I’m going to try and break it down for you.

First of all, let’s take a look at the different levels and types of copyright infringement.  The most common is direct infringement, where the person is held liability for actually committing the act of infringement themselves.  This is theory behind the RIAA cases that are suing consumers; it is the consumers that are either (or in some cases, both) uploading or downloading music from illegal peer-to-peer music sharing networks.  It does seem over the top for the RIAA to sue individuals for literally millions of dollars – the phrase “you can’t get blood from a stone” comes to mind – but it’s the one of the easier copyright claims to prove, and there are substantial statutory damages if you do.  They are capped at $175K PER infringement – that means not only per SONG, but also per upload or download.  Now I’m sure you can see how those ridiculously high verdicts are coming down.  Is it equitable?  Of course not.  However, the law allows for that as long as the RIAA can prove the person actually did the copying… which is pretty easy once their hard drive is seized.  So that’s direct infringement.

But the real meat is what’s going on with the companies “allowing” the file sharing, but they’re not doing the actual up or downloading.  So how are they being held liable?  Secondary infringement. 

After the Grokster case, there are actually now three theories of secondary liability that content owners can hang their hats on – the first is “contributory liability,” that is, when someone (or something, in the case of a company) knows or should know that infringement is occurring and that person is inducing or contributing to that (direct) infringement.  For example, let’s take the topic of my last blog entry, GirlTalk.  Let’s just assume for a second that DJ GirlTalk’s fair use defense failed; he would be directly liable for unlicensed samples, because he’s doing the actual creating.  His label, Illegal Art, could be held secondarily liable under contributor infringement for encouraging GirlTalk to use samples, supplying him with samples or the facilities to record his music, etc. (DISCLAIMER: I have no idea what GirlTalk’s relationship with his label is, and I am merely throwing possibilities out there.  I am not stating that ANY of this is fact).  Actually, depending on who owns the masters, they might actually be directly liable as well.   

However, it’s more likely that peer-to-peer file sharing networks will be held liable under the second theory of secondary liability – “vicarious liability.”  Unlike contributory infringement, vicarious liability does not require that the secondary infringer knew or even should have known about the infringement.  Instead, the two-prong test requires that the infringer 1) has the “right and ability” to exercise control over the direct infringers (and did not); and 2) they had a financial interest in the resulting infringement.  This claim is most about the connection between the direct infringer and the secondary infringer; not the actual act of infringement.

The third claim arose in the Grokster case, where the court held that the defendants “induced” direct infringement by distributing a device with the “object of promoting its use to infringe copyright, as shown by a clear expression or other affirmative steps taken to foster infringement.”  Unlike contributory infringement, the secondary infringer here must purposefully be inducing infringement for their own benefit and has taken “affirmative steps” to foster infringement.

This is exactly the snag that Limewire hit in their case.  A couple important things to note that Limewire did not before we get into what Limewire did do.  First, the court stressed that merely making the recordings available online, whether they were infringing or not, was not enough to hold Limewire liable for either direct or secondary infringement.  While Limewire’s program alone might be enough to meet the “inducement” standard, the company really shot themselves in the foot by coming up with a “Conversion Plan,” which encouraged users to join the site for free (and upload or download files illegally) so that Limewire could convert these users into paid subscribers and promote sales in their online.  In this plan, they also acknowledged that most of their users were infringers. In fact, there was a folder found at the Limewire offices labeled “Knowledge of Infringement.” Um…. OOPS. 

At first blush, it may seem that Limewire actually had a plan to stop infringement, and yes, that was part of the plan.  However, in order to execute it, they needed to promote more infringement first… and wouldn’t you know…that’s against the law.  They had a whole plan on college campuses that was designed to appeal to “Napster-banned colleges,” and was related to “file-sharing and getting free MP3’s.”  But it doesn’t stop there.  Limewire worked to make improvements to their software which would make it easier for users to locate unauthorized digital music, and its success was clearly dependent on these users.

Gorton himself was actually found liable as well, which surprised me at first, given the so-called “corporate veil” that is supposed to protect shareholders of a company.  However, I guess there is precedent in NY law to hold a person liable if they hold the majority of a company and are involved in its day-to-day decisions and activities.  Scary thought for those operating small companies! 

So what does this all mean for the future of file sharing and copyright?  As usual… TBD.  Grokster set a strong precedent against file sharing networks that is clearly being taken seriously.  It seems that the technicalities of “breaking up” a file-sharing company across jurisdiction isn’t working, and the company can’t avoid liability even if they don’t actively induce infringement; because the standard now includes new grounds for secondary liability, the pool of defendant will only expand.  There is still a slight caveat here, though – the court noted that (at least for summer judgment), Limewire could not be held liable for contributory infringement because they weren’t exercising meaningful control over their users.  So it looks like if you just stand back and mind your business and let the money come to you, you could fight a claim of secondary infringement.  Given that the law in these circumstances has been very broadly interpreted against infringers, though, I doubt this will last long. 

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Girl Talk and Fair Use: Toeing the Line

Alright, I know I’m late to the party, but I am completely and utterly obsessed with Girl Talk right now.  I mean, I just can’t get enough of it.  Every time I listen to his stuff, I find something new.  And then I literally freak out visibly in my car and scare passers-by.

However, I think part of my fascination with it is deeply connected to my affinity for copyright law and the internal struggle I’m facing with the fact that Girl Talk doesn’t have any kind of licensing arrangements (to the best of my knowledge) for the 300+ samples on Feed the Animals alone.  Girl Talk hasn’t been sued as of yet, which makes me think it’s probably unlikely that he will; let’s face it, not only would it be interpreted as a seriously dick move from either an artist or the RIAA, but it would also be terrible for their publicity and nothing but amazing for Girl Talk’s image and his music (which, unless the suit resulted in a judgment, simply means more and more money in HIS pocket).  It’s very clear that he’s a champion for what I generally think of as the “new” copyright law, but from a legal standpoint, does his art have a place in the current copyright law?  I actually don’t think so, and here’s why.

Girl Talk relies heavily on the concept of “fair use,” and claims that his short snippets and samples fall under what he terms an “exception” to copyright law.  Do I think Girl Talk knows his shit and is probably backed by one hell of copyright attorney?  Yes.  Do I think he probably falls under fair use?  Yes, but not for the reasons that he seems to be asserting.

Let’s talk about what fair us is NOT.  First of all, fair use is NOT an exception to copyright law; it’s a defense to copyright infringement applied on a case-by-case basis.  Fair use is probably one of the most widely known and widely misinterpreted parts of copyright law, which makes it extremely dangerous for people to rely upon.  There is also no time when you can rely on fair use based on “how much” you used.  There is no “six bar rule” or some minimal amount that people can use of a copyrighted work that is an absolutely bright line for fair use.  Roy Orbison has sued people over the first 6 notes of the bass line intro for “My Girl,” and Queen sued Vanilla Ice over the 7 note bass intro to “Under Pressure” (and though the case settled, I do believe some of the royalties for “Ice Ice Baby” are paid to Queen).

So what is fair use?  It’s an oh-so-fun 4-prong test that is applied when someone is sued for copyright infringement.  It’s up to the person that is being sued to apply the test which examines: 1) the nature of the original work; 2) the amount and substantiality of the content used; 3) purpose and character of the new work; 4) effect on the potential market.  “Nature” of the work basically refers to how “creative” the original work was – was it an original novel or the phone book?  The more “original” the original work was the more copyright “protection” it’s thought to have.  Amount of substantiality of the content used is pretty straightforward – how much did you take?  But beyond that, did you take what could be considered the “heart” of the work, or did you take an obscure, hidden 3^rd layer guitar track?  This is why the “six bar rule” doesn’t work, because everyone knows within 2 notes when “My Girl” in on the radio.  The bass line is so essential to the recognizability (that’s a technical term, btw) of the work that it’s taken on very strong copyright protection.  Purpose and character of the work refers to the new work and basically examines whether the work is for personal gain (“commercial” use) or more for educational purposes or for some universal betterment of society.  This is often why universities and educational institutions are not often bothered by content owners.  Although there are specific statutory provisions that safe guard schools and libraries, copyright is generally a bit more “elastic” in educational setting – after all, there’s a complete school of thought (HA!  PUN!) that revolves around the idea that copyright is all about the dissemination of art for the good of society. 

That prong is a serious issue for Girl Talk – no matter what artists say about doing art for art’s sake, we’re all out to support ourselves and make a living, and whether he cares about the fact that he IS making a living out of this… he is.  And that money is obviously due largely in part to the ridiculous number of samples he’s using. People know all these songs due to the success of the original work, and he’s capitalizing off of someone else’s goodwill for his own personal gain. Now, his response to this is that it’s HIS work – the mixing and the creative mashing he’s doing – that’s the real product people want.  And you know what?  He’s right.  I didn’t buy Feed the Animals because I wanted to hear a loop of “Jessie’s Girl,” “The Sign” and “Nothing Compares” all in one album, I bought it because the creativity blows my mind.  But the court looks at the commercial side for this answer, and it’s a tough one for him to fight.  

But the most important prong by far is the effect on the potential market of the original work.  The court basically examines whether the new work is a potential “substitute” for the original work – is it displacing potential profits that should be going to the original work?  (This is why the existence of YouTube just baffles me; obviously its entire purpose is to substitute free content for free content.  That’s a whole other ball of wax.  Or can of worms.  Whatever.)  Anyway, this is undoubtedly the prong that Girl Talk can hang his hat on.  As I said above, people aren’t buying his albums and going to his shows because they want to hear specific works – most people don’t even know what they’re going to be hearing at a Girl Talk show.  They aren’t picking Girl Talk over a Lil’ Wayne or Ludacris show or album – there’s just not enough of their content on the album to justify that. 

A Google images case actually set an amazing precedent in this field when they won a case that was brought by an artist that was upset about the thumbnails of her work that we being displayed by Google Images that were housed on unauthorized sites.  Google won because they successfully proved that anyone seeking out her works would not substitute a bad resolution thumbnail for the real deal.  Similarly, no one is going to pick Girl Talk for one sample or even ten of the samples; his work is not replacing the songs contained in his samples.

From a legal standpoint, Girl Talk is really toeing the line here because of the sheer quantity of samples – he’s basically flying in the face of copyright law and giving it a huge “fuck you.”  From a strictly legal standpoint, mind you.  However, from a practical standpoint his art can’t viably exist under the current interpretation of fair use and copyright law – the costs would simply be too prohibitive.  And it should exist.  Fair use has long been a thorn in the side of copyright law and it clearly needs actual common law (case precedent) or statutory reform.  Creative and innovation cannot be stopped, and the law needs to mold to it, not the other way around.

               

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Copyright Rights Demystified: A Practical Guide to Copyright Licensing, The Final Act!

Alright copyright licensors and licensees!  By now, I hope you’re feeling pretty comfortable with the way copyright rights break down; or, at least, more comfortable than you were before.  We’re finally in the home stretch, and today we’ll be tackling the last two rights in the copyright owner’s “bundle”: public display & derivative works.  I’ve saved these for last simply because they are generally more specific and less utilized than some of the other rights, particularly in the world of music.  But they are still important, and I advise that you ignore them at your peril.

Public display somewhat functions the same in public performance, at least with regard to the “public” part.  Once again, in order to qualify as a licensable right, is must be displayed to more than mere family or close friends in a private gathering; it must be a place that is generally open to the public, even if the display in a particular instance is during a private event in public.  Please see my blog on public performance for more detailed information on what constitutes a copyrightable work being in “public.” 

Assuming your display of the work is in “public,” you must obtain a license from the owner.  As you can probably surmise, this really isn’t applicable to music because music isn’t visual (philosophical arguments aside); this right mainly covers works of visual art and sometimes literature.  With regard to works of visual art, it is the right that needs to be licensed and needs to be negotiated straight with the copyright owner via a private agreement (to the best of my knowledge, there is no licensing agency for these situations, except maybe the gallery housing the work… although they are often the licensee!).  Like music, where the finer points of audio and performance are often hotly debated, so the elements and aspects of the display of art is of great import.  Whether you’re a licensor or a licensee, must sure your agreement covers the most detailed description of display possible.  Some things to consider are:

1)    Angle of display;

2)    Size of wall (required and/or preferred/mandated);

3)    Framing (if applicable);

4)    LIGHTING, including natural light;

5)    Placement within an actual space (featured, grouped with paintings of similar theme/ origin, etc)

6)    Space conditions, including temperature, air pressure/quality (lighting comes into play here, too);

7)    Moral Rights

8)    Length of display and/or rotation;

9)    Insurance;

10) Transportation and storage of the piece(s) before and after, including liability and responsible parties depending on the location of the art

The last consideration is especially important, given that visual art is often VERY expensive and irreplaceable.  If you are an artist, you want to strive for FCA with regard to transportation; this means as soon as the piece arrives in the hands of a “common carrier” (i.e. UPS, USPS, Fed Ex), it becomes their responsibility.  In contrast, so-called FOB shipping means that liability doesn’t shift to the carrier until it’s actually loaded on “board” – so if something happens before that time, you (artist) could be left holding the bag.  Not a good thing.

If you’re an artist living in Massachusetts, you should familiarize yourself with MGL 104A, the consignment art law.  It was revised a few years ago and lays out detailed (and rather strict) requirements for anybody or anything holding your art on consignment (which is almost always the case with galleries). 

Another important right exclusive to fine art is the idea of “moral rights.”  Basically, moral rights gives the copyright owner extended creative control over their art, even after it leaves their hands.  It protects against destruction of the art (and not just total destruction), as well as misappropriation (either putting someone else’s name on your art or putting your name on art you don’t want to be associated with).  Moral rights has been an area of constant debate and contention, particularly here in the US, where moral rights are extremely weak as compared with some of the origin countries of these rights, including France and other European countries, and Mexico.  As the US is a signatory to the Berne Convention, many feel that we need to beef up our moral rights to meet European standards.  However, this is another blog for another time.  For now, here is some light reading on moral rights, including the US and global comparison.

If you are involved with visual, graphic or fine art, I would highly recommend aligning yourself with an attorney that specializes in this area of law.  I don’t mean merely copyright law, either; there are a myriad of considerations are both important and specific to visual art, ranging from transportation to estate planning. 

Alright, that’s my 2 cents on that!  On to our last right: derivative works!

As defined by the Act, a derivative work is: “a work based upon one or more pre-existing works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship.” (17 USC §101). 

So what the HECK does that mean in normal terms?  It means that you changed the essential “character” of a work; that is, more than a mere cover (which is covered by a mechanical license, remember?!), but, say a POLKA cover of Metallica’s “Enter Sandman.”  If you change the “heart” of the work, be prepared to license the right to create a derivative work.

If is also important to remember that even though you, new artist, is creating a “new” work with it’s own, separate copyright, you don’t have any sort of copyright ownership over the original content you used; only the “new” stuff you created.  So, for example, if you take a series of short stories from the 60’s, let’s say, you only hold a copyright over the “new” work.  Generally, that’s the arrangement of the stories (assuming it’s unique enough to qualify for copyright), and any new material such as a foreword, epilogue, annotations, etc. 

What constitutes a derivative work is often difficult to quantify, given that it often walks the line between statutory licensing and another beast of copyright law… the dreaded FAIR USE DEFENSE (*shudder!!*).  The simplest advice I can give is to err on the side of caution – if you think your new work might be so transformative as to create a new work out of an already-created work, get a license.  I know this can seem like a pain in the ass, especially if you don’t think your work will garner enough to expose to warrant the payment of licensing fees.  But I PROMISE YOU, copyright litigation is lengthy and expensive, not to mention a complete pain in the ass.  If you reach out directly to the copyright owner, depending on how “big”/”popular” the work is, they will often charge a nominal or reasonable one-time fee.  I can assure this will NOT be the case if your work makes it big and you didn’t get permission. 

I think that’s really the lesson overall with copyright licensing – in case of doubt, simply ask.  You may be surprised at what the copyright owner has to say.  At its core, copyright is designed to create of balance of artistic dissemination and artistic protection.  And, often, it’s the sense of fairness and respect for your fellow artists that is at the heart of copyright licensing.  In a time when no one wants to pay for copyrighted materials, it’s important for copyright owners and content users to pave the way for new licensing deals that respect both the value of artistic expression and the new free market.

I hope you’ve found this series interesting and educational!  If you have any questions, please do not hesitate to post them here on the blog (I check it often as do some other copyright nerds), or visit our site at www.newleaflegal.com and email info@newleaflegal.com.  And for more information and cool blogs specifically covering licensing deals and issues, visit my partner Steven Shapiro’s blog, Brand Licensing – YEAH!  Happy licensing!

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Copyright Rights Demystified: A Practical Guide to Copyright Licensing, Part Trés

Ok, my soon-to-be copyright gurus, we’re half way through our riveting discussion of the separate rights that come with each copyright!  Today’s amazing break down covers a right that is fairly new to the Copyright Act: the right to public performance via digital transmission. 

Though a newer addition to our law, since this new rights initial inception into the Act in the 1990’s, it has been the subject of constant debate.  The most memorable recent debate is one most of the public is actually familiar with; the settlement between webcasters and the RIAA.  Just in case you’re not into reading Congressional rulings, here’s the skinny: fees for public performance were wiping out webcasters left and right, basically making it impossible for them to exist profitably as a business.  This was because, before the settlement, a webcaster had to pay a fee each time a song was played, and for each user that was playing it.  Although that fee was mere hundredths of a penny, it adds up FAST.  Let’s do a quick math problem: 15 songs per hour (approx 4 minutes/song), and let’s say 100,000 people are listening to a webcasted station at a given moment.  I can’t remember the exact old fee, but let’s say it is .007 cents.  That’s a whopping $10,500 PER HOUR for a webcaster!!  Hell, even if I completely off and it is $1,500, that’s still astronomical.  According to this article, under the old fee arrangement, even giants like Pandora were sending about 75% of their revenue straight out the door for this licensing fee.  And to add insult to injury, we’ve officially approached a time in history where no one wants to pay anything for music, leaving webcasters to rely solely on advertising income to stay afloat.  The system was clearly broken.

Luckily, after years of negotiation, a settlement was reached.  I won’t get into the nitty gritty of the exact figures (truth be told, I’m having a bit of trouble finding them online), but the fees are now structured around a percentage of revenues that increases with revenue size (i.e. Pandora pays more than your local radio station that simultaneously webcasts).  Also, content providers should not that subscription stations have different rates – in fact, there are quite a few different rates based on the type of digital broadcast you’re providing.  I would highly recommend spending some time on Sound Exchange, particularly in the FAQ (for both content providers and content owners) and in the Service Provider and Owner sections, respectively. 

Besides the fees themselves, the most important thing to ask is: Who is getting paid?  Well, this particular right belongs to the owners of sound recordings – not the owners of the songs themselves, who get paid under the Public Performance Rights that we discussed last time.  Thus, it’s mostly record labels that are seeing the benefit of this moolah, although there are some artists that have retained the rights to their sound recordings, particularly in the hip hop industry.  Sound Exchange is basically the “PRO” of sound recordings; much like ASCAP, BMI and SESAC oversee payment directly to publishers and songwriters, so Sound Exchange oversees the payment of royalties to the owners of sound recordings. 

PLEASE NOTE: if you are an artist and your own your own recordings (most likely where you are NOT signed to a label), you should register with Sound Exchange here.  Much like the PROs, Sound Exchange has a complex system for tracking plays of recordings and may have money for you!!  So get on the ball, people.

As a final note, I would like to briefly address the Performance Rights Act, which would essentially extend the “digital” rights to terrestrial radio… aka “regular” radio.  It is currently stalled up Capital Hill.  You may have heard some PSAs (Public Service Announcements) regarding this possible amendment, which essentially threaten to start charging people for radio and incorrectly label it a “tax” on radio.  I am not taking an official position on this, but you should note two bias things here: 1) these commercials were paid for by the broadcast industry, who are the direct targets of these new proposed fees; 2) the original proposal regarding payment on sound recordings was meant to encompass both analogue and digital broadcasts, but as a result of a tremendous lobbying effort by the broadcasters, it was limited to “digital” transmissions.  On the flip side of the coin, here is an article opposing the Act, and some perfectly logical reason supporting the proposition.

So there’s your crash course in digital transmissions.  Hopefully I’ll be able to button it all up real nice for you later this week when we round out with the last two rights: public display and derivative works.  As always, please feel free to email me directly @ shannon@newleaflegal.com

www.newleaflegal.com                  

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