No Record But Still the Same Old Tune

The district court eloquently described the case’s status and defendants’ post-trial motion following a jury verdict in favor of the plaintiffs.  My favorite sentence in this passage is “Ultimately, the goal is to make a dispute understandable to a lay person.”:

While the world has moved beyond the free-MP3-download craze, the parties in this case have not. This hard-fought litigation spans 7 years and 628 docket entries. Numerous substantive motions were heard. And decisions by this Court did not deter the parties from revisiting the same issues time and again. As trial approached, the parties launched salvos of motions in limine seeking to resurrect discovery disputes, relitigate prior motions, and level an impressive array of claims and defenses. 

A primary function of pre-trial litigation is to distill claims. Ultimately, the goal is to make a dispute understandable to a lay person. Despite this Court’s efforts to winnow the issues, the parties insisted on an 82-page verdict sheet on liability and a 331-page verdict sheet on damages that included dense Excel tables, necessitating at least one juror’s use of a magnifying glass. While the jury did its best, their assignment was beyond all reasonable scale.

To understand how this happened, one must look at the impetus for this litigation. Robertson created a business model designed to operate at the very periphery of copyright law.  While Robertson’s business practices sometimes infringed copyrights, many of the Plaintiffs’ claims were just too big to succeed. Plaintiffs’ evidence on their most significant theories of liability—red flag knowledge and willful blindness—was sparse. And Robertson—by his words, actions, and demeanor—came across as unworthy of belief. That led the jury to rely on something other than the evidence in reaching portions of its verdict. For the following reasons, Robertson’s motions are granted in part and denied in part.

(Opinion pdf pages 1-2).

I previously blogged about this case in Accused Infringer Attacks Copyright Registration Forms to No Avail.  MP3tunes was an online music service that allowed users to search the Internet for free songs and to store those songs in the users’ MP3tunes personal online storage lockers.  The plaintiff music publishers sued MP3tunes and its founder, Michael Robertson, for copyright infringement.

The district court denied Robertson’s motion for judgment as a matter of law on the vicarious liability, contributory liability, individual liability and various other issues.  The district court granted Robertson’s motion on some alleged DMCA violations, the public display of cover art and the duplicative damages claims.

Robertson Was Vicariously Liable for the Users’ Infringing Activity

Vicarious liability requires 1) the right and ability to supervise the infringing activity and 2) receiving a financial benefit directly attributable to the infringing activity.

Robertson’s argument conflates ‘financial benefit’ with ‘profit.’ Robertson derived a financial benefit by using the infringing material to draw additional subscribers. It does not matter whether MP3tunes or Robertson profited, because the point was to grow the business and its user base. A profit need not be realized to satisfy the standard for financial benefit.  Accordingly, Robertson’s motion for judgment as a matter of law on this claim is denied.

(Opinion pdf page 6).

Robertson was Contributorily Liable for the Infringing Activity

Contributory liability requires 1) knowledge of the infringing activity and 2) inducing, causing or materially contributing to a third party’s infringing conduct.  The trial evidence showed that Robertson controlled MP3Tunes, that he knew the major labels did not distribute in MP3 format, that he was aware of the DMCA takedown notices and that he formed a company policy to ignore copyright infringement complaints absent a DMCA takedown notice.  This established constructive knowledge of the infringing activity. 

Robertson contributed to the infringing activity by funding the website, directing the company’s development and policies and developing and marketing the software used in the infringing activity.  The district court denied Robertson’s motion for judgment as a matter of law on this claim.

Robertson Was Individually Liable for the Corporation’s Vicarious and Contributory Infringement Liability

An individual defendant can be held personally liable for claims of direct and secondary liability of a corporation.

(Opinion pdf page 7).

The district court denied Robertson’s motion for judgment as a matter of law on this claim.

DMCA Safe Harbor:  Red Flag Knowledge and Willful Blindness

17 USC §512(c) of the Digital Millennium Copyright Act provides a service provider with a “safe harbor” against infringement claims in certain instances.

A service provider qualifies for § 512(c) immunity only if the service provider:

(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

Section 512(c)(1)(A).

The second provision has come to be known as the ‘red flag knowledge’ provision. The Second Circuit established an exquisite subjective/objective standard for distinguishing between actual and red flag knowledge. Actual knowledge refers to subjective awareness of infringement, and red flag knowledge arises where a provider is aware of facts that would have made specific infringement objectively obvious to a reasonable person.

(Opinion pdf page 9).

The evidence at trial was that the MP3tunes executives personally loaded some songs by The Beatles.  The district court ruled that the executives possessed actual knowledge of infringement and the company possessed red flag knowledge regarding those songs.

Plaintiffs also contend that Robertson had actual knowledge that he was infringing copyrights of works by The Beatles because he was unable to deny that he personally demonstrated how to sideload works by using The Beatles as an example. But that is a bridge too far. When asked if he had searched for works by The Beatles, Robertson testified that he could not recall.  Robertson’s ambiguous response was not probed to any depth. His ‘I don’t recall that’ answer was not distilled to a ‘no, it did not happen,’ a ‘yes, it happened’ or an ‘It could have happened but I just don’t remember’ answer. And there was no other evidence that answered counsel’s question.

It is black letter law that questions asked by counsel are not evidence.  While the jury could have disregarded Robertson’s answer as a feigned lack of recollection, it could not, in the absence of other evidence, use it to conclude that Robertson sideloaded works by The Beatles. And the record is bereft of any other evidence supporting the jury’s finding of red flag knowledge and willful blindness as to specific works by The Beatles.

(Opinion pdf pages 15 – 16).

The district court granted Robertson’s motion for judgment as a matter of law on The Beatles tracks that were not loaded on the servers by MP3tunes executives.

Specific Rights Claims

The plaintiffs claimed that MP3tunes violated its public performance rights.

The DMCA safe harbor is an affirmative defense to infringement of public performance rights.  Therefore, MP3tunes’ secondary liability for public performances is limited to links for which MP3tunes was willfully blind or had actual or red flag knowledge.

(Opinion pdf page 17).

Willful blindness is consciously avoiding confirming whether specific material that has a high probability of infringing is in fact infringing.

The right to publicly perform a work belongs to the copyright owner.  The jury found that third-party websites publicly performed the plaintiff’s works and that Robertson was vicariously and contributorily liable for third-party websites’ violations.  The district court denied Robertson’s motion on this issue.

The district court also upheld the jury’s verdict of copyright infringement on the reproduction of cover art.  The district court ruled in Robertson’s favor on the public display of cover art.

Robertson argued that the jury awarded duplicative statutory damages for multiple songs and cover art. 

The Copyright Act allows only one award of statutory damages for any work infringed.  Materials that are sold only as part of a compilation, such as songs on an album, ordinarily are not separate works for the purposes of statutory damages.

(Opinion pdf page 21). 

Robertson is correct that there was no evidence that each and every cover art work was made available separately. And there is no way to determine, based on the trial record, which cover art was or was not available separately. Had Plaintiffs proved that the cover art was available separately, then Plaintiffs could recover for infringement of its cover art separate from the recovery of the sound recording. But they did not. Therefore, recovery is available only for cover art for which Plaintiffs have not recovered on a sound recording.

(Opinion pdf page 24).

The district court granted Robertson’s motion in part on the cover art damages claim.

The district court reduced the jury’s punitive damages award from $7.5 million to $750,000.

This case is Capitol Records, Inc. v. MP3tunes, LLC, No. 07cv9931, U.S. District Court, Southern District of New York.

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