Grooveshark Sued: Will the Safe Harbor Shield it from Liability?
Earlier this month, EMI Music Publishing sued Grooveshark, an online music search, storage, and streaming service for breach of contract. According to the New York Times, Grooveshark, owned by Escape Media Group Inc., was founded in 2006 and has an estimated 35 million users. The EMI suit, along with a lawsuit filed against Grooveshark by Universal Music, Warner Music Group, and Sony Music Entertainment last year, means all the major music labels are now suing the music service. How did Grooveshark get to this point? Grooveshark, besides seeking licensing from EMI, depended exclusively on the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA) to allow it to stream music without compensating copyright holders.
Under the safe harbor provision, 17 U.S.C. §512(c), service providers are not liable for “the storage of material, at the users’ direction, that resides on a network or system operated or controlled by the service provider.” The safe harbor protection is conditional, however, on the provider demonstrating three things: (1) it lacked knowledge the system contained infringing material, (2) the provider received no financial benefit directly from the infringement, and (3) upon receiving notice of infringement, the provider removed the material immediately.
Based on Grooveshark’s current business model, it appears it would be protected under the safe harbor provision. The music service allows its users to upload their music and stream the music for others; Grooveshark is merely the server the music sits on. Thus, you would expect Grooveshark to be sailing smoothly through litigation under the safe harbor provision.
But its case may be plagued by unexpected complications: recently, someone representing themselves as an employee of Grooveshark claimed in great detail on the popular blog Digital Music News that Grooveshark encouraged employees to regularly upload music to the site – an action not protected under the safe harbor provision. This finding led to an investigation by Universal which, according to TorrentFreak, revealed that several top executives and other employees of the business uploaded more than 113,000 songs to the server.
Grooveshark’s legal issues highlight the confusion over music streaming companies and the scope of protection under the safe harbor provision. Speaking as both a music composer and a frequent online music listener, I definitely have conflicting feelings on the subject of unlicensed use of music. On one hand, you want to protect websites that are simply allowing users to express themselves through the creation of playlists of music they store on the site. But on the other hand, you also want to compensate and motivate the artists and recording companies that have invested their resources to create the music.
Beyond balancing multiple interests, there were other options Grooveshark could have pursued. The music service could have obtained statutory licenses under §114 of the Copyright Act like Pandora, and/or paid a flat fee into an account for copyright holders or negotiated with music recordings clearinghouses and artists like Spotify did to get non-exclusive licenses. With these two legitimate options, why would anyone rely exclusively on the safe harbor provision that could leave a company open to multi-billion dollar lawsuits? Maybe Grooveshark desired to allow users to express themselves without liability, maybe it desired to retain a larger profit by not paying licensing fees, or maybe licensing fees were just too expensive for the start-up company. Whatever the motive, Grooveshark will have a tough legal battle ahead; the protection it thought it had under the safe harbor provision may not be guaranteed.