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Digital Music Service Shuts Down as Part of Copyright Lawsuit Settlement

P2P-network.svg.pngA Florida-based company shut down its major business operations in late April 2015 as part of a settlement in a lawsuit alleging more than 4,900 infringed copyrights. UMG Recording, et al. v. Escape Media Group, Inc., et al., No. 1:11-cv-08407, complaint (S.D.N.Y., Nov. 18, 2011). The defendant had operated a digital music service that claimed to offer access to “any song in the world.” Id. at 1. The case is reminiscent of the lawsuits brought more than a decade ago against individuals who allegedly downloaded songs through file-sharing services like Napster, except that this lawsuit targeted the company and its individual officers and employees, who allegedly made copyrighted materials available without licenses.

According to the complaint filed in November 2011, the defendant operated a website called Grooveshark, which it claimed had “a catalog of 15 million sound recordings available on demand.” Id. The plaintiffs owned the copyrights to many of the recordings allegedly included in the defendant’s catalog. They alleged that the defendant did not obtain licenses to use or distribute any of these recordings. They further claimed that the defendant openly acknowledged that its use of these recordings was unauthorized, and that its senior director stated that the company had never paid for licenses.

The defendant reportedly required employees and officers to personally upload recordings to the online database, and paid bonuses if someone’s number of uploads exceeded their assigned quota. The plaintiffs alleged that the defendant’s CEO, for example, was personally responsible for uploading at least 1,791 recordings. Once uploaded, a recording became available to the website’s users. The site had millions of visitors every month, which generated revenue through advertisements, subscriptions, and venture capital investments.

UMG Recording, which operates numerous record labels, including Interscope, Geffen, Def Jam Music Group, Motown, and Universal Music Group Nashville, filed suit against the defendant in November 2011. Other music publishers, such as Atlantic Recording Corporation, Warner Bros. Records, and Sony Music Entertainment, later joined the lawsuit as plaintiffs. The lawsuit alleged multiple instances of copyright infringement, 17 U.S.C. §§ 106, 501, and sought maximum statutory damages, which could be as much as $150,000 per infringed work under 17 U.S.C. § 504(c).

A U.S. district judge granted the plaintiffs’ motion for summary judgment on liability in September 2014, finding that the defendant had engaged in both direct and secondary copyright infringement of 4,907 recordings. The judge also ruled that the defendant’s actions were willful, which meant that the plaintiffs could be entitled to enhanced damages, as requested in the complaint. The plaintiffs exercised their right under § 504(c) to elect statutory, instead of actual, damages. The court set the case for a jury trial on damages in late April 2015, where the defendant faced potential liability of up to $736 million.

Prior to the trial date, the parties reached a settlement agreement. The defendant shut down the music service and placed an apology on the Grooveshark website on April 30, 2015. It agreed to delete its database of copyrighted recordings, forfeit the website and other intellectual property, and pay $50 million to the plaintiffs. It also agreed to pay a $75 million penalty for any future violation of the settlement agreement.

If you or your business is involved in a legal dispute, a knowledgeable intellectual property attorney can advise you of your rights and advocate on your behalf. James G. Schwartz has represented businesses and business owners in the San Francisco Bay Area for almost 40 years. Contact us today online or at (925) 463-1073 to schedule a free and confidential consultation.

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Photo credit: By User:Mauro Bieg (Own work) [Public domain], via Wikimedia Commons.