The opinion of the court was delivered by: Mazzarelli, J.P., J.
UMG Recs., Inc. v Escape Media Group, Inc.
Decided on April 23, 2013
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Angela M. Mazzarelli,J.P. Dianne T. Renwick Rosalyn H. Richter Judith J. Gische Darcel D. Clark, JJ.
Defendant Escape Media Group, Inc. developed, owns and operates an Internet-based music streaming service called Grooveshark. Users of Grooveshark can upload audio files (typically songs) to an archive maintained on defendant's computer servers, and other users can search those servers and stream recordings to their own computers or other electronic devices. Defendant has taken some measures to ensure that the Grooveshark service does not trample on the rights of those who own copyrights in the works stored on its servers. For example, it is a party to license agreements with several large-scale owners and licensees of sound recordings. In addition, it requires each user, before he or she uploads a work to Groovesharks servers, to confirm ownership of the recording's copyright or license, or some other authorization to share it.
Defendant concedes that it cannot ensure that each work uploaded to its servers is a non-infringing work. However, it has operated Grooveshark with the assumption that it is shielded from infringement claims by copyright owners by 17 USC § 512, popularly known as the Digital Millenium Copyright Act (DMCA). The DMCA, which was enacted in 1998 as an amendment to the federal Copyright Act, provides "safe harbors" to operators of certain Internet services, including defendant. Defendant relies on the protections delineated in section 512(c) of the DMCA, which provides: "(1) In general. -- A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider -"(A)(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;"(B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and"(C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity."
Plaintiff UMG Recordings, Inc. is the owner of the rights in many popular sound recordings that have been uploaded to Grooveshark. Many of those recordings were made prior to February 15, 1972 [FN1] (the pre-1972 recordings). That date is significant, because when the Copyright Act was amended in 1971 to include sound recordings, Congress expressly extended federal copyright protection only to recordings "fixed" on February 15, 1972 or after. Indeed, the Act expressly provided that "[w]ith respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this Title until 2067"[FN2] (17 USC § 301[c]). UMG claims in this action that by permitting the pre-1972 recordings to be shared on Grooveshark, defendant infringed on its common-law copyright in those works, and that the DMCA does not apply to those recordings.
In its answer, defendant asserted as its fourteenth affirmative defense that the pre-1972 recordings sat within the safe harbor of section 512(c) of the DMCA. UMG moved, inter alia, to dismiss that defense pursuant to CPLR 3211(b). It argued that the DMCA could not apply to the pre-1972 recordings because that would conflict with Congress's directive in section 301(c) of the Copyright Act that nothing in the Act would "annul" or "limit" the common-law copyright protections attendant to any sound recordings fixed before February 15, 1972. In response, defendant asserted that nothing in the plain language of the DMCA limited its reach to works fixed after that date. Further, it maintained that a ruling in UMG's favor would eviscerate the DCMA, insofar as companies like it would still need to expend massive resources policing the works posted on its servers, rather than being able to wait until a copyright holder or licensee notified it that its rights were being infringed.
The motion court denied plaintiff's motion. Relying heavily on Capitol Records, Inc. v MP3tunes, LLC (821 F Supp 2d 627 [SD NY 2011]), in which the United States district court tackled precisely the same issue and found that the DMCA embraced sound recordings fixed before February 15, 1972, the court stated that "there is no indication in the text of the DMCA that Congress intended to limit the reach of the safe harbors provided by the statute to just post--1972 recordings." It agreed with the district court that, although § 301(c) is an anti-preemption provision ensuring that the grant of federal copyright protection did not interfere with common-law or state rights established prior to 1972, that section does not prohibit all subsequent regulation of pre--1972 recordings. The court further noted that, as the district court found, the text of the DMCA does not draw any distinction between federal and state law, and the phrases "copyright owner" and "infringing" found in the DMCA were "applicable to the owner of a common-law copyright no less than to the owner of a copyright under the Copyright Act." Further, the court quoted the district court's observation that "the DMCA was enacted to clarify copyright law for internet service providers in order to foster fast and robust development of the internet. Limiting the DMCA to recordings [fixed] after 1972, while excluding recordings before 1972, would spawn legal uncertainty and subject otherwise innocent internet service providers to liability for the acts of third parties. After all, it is not always evident...whether a song was recorded before or after 1972.'" (quoting Capitol Records, Inc. at 642).
Finally, the court addressed a December 2011 report from the Office of the Register of Copyrights, addressed to the Speaker of the U.S. House of Representatives, recommending that Congress extend federal copyright protection to sound recordings fixed on or before February 15, 1972, and that the safe harbor provisions of § 512 be applicable to such recordings. The motion court acknowledged that the report took the position that Capitol Records, Inc. v MP3tunes was wrongly decided and that congressional action was necessary before pre-1972 recordings were embraced by the DMCA. Nevertheless, the court concluded that its reading of the DMCA was a reasonable interpretation of what Congress intended.
On appeal, UMG argues that, were the DMCA to be interpreted as protecting services like Grooveshark from infringement liability for pre-1972 recordings, section 301(c) of the Copyright Act would have been effectively repealed. That is because, it contends, section 301(c) forbids the Act from "annull[ing]" or limit[ing]" the common-law rights and remedies of owners of such works, and the DMCA, if it were to bar infringement actions against Internet companies that otherwise comply with the DMCA, would do just that. UMG characterizes section 301(c) as creating ...