Court makes a hash of online storage

Copyright Most of the initial post-game commentary on the U.S. District Judge William Pauley III’s long-awaited order in the  MP3tunes case (embedded below) has focused on the court’s finding on whether the online music locker service qualifies for the safe harbor protections in the DMCA, and its implications for other would-be cloud storage services (basically it does qualify, according to the court, although both MP3tunes and CEO Michael Robertson personally were found liable for contributory infringement, which is not covered by the §512). But the ruling’s most lasting impact may come from Judge Pauley’s almost cursory dismissal of the record label’s public performance claim.

While obviously central to the immediate dispute between the parties, Judge Pauley broke little new legal ground in his analysis of the safe harbor question. Basically, he drew on a well-known list of earlier cases to find that MP3tunes is in technical compliance with the statutory requirements for safe harbor protection as they’ve been interpreted by earlier courts. His finding on the public performance question, however, does seem to break new ground and could hold larger economic implications for future cloud-based media services than anything on the safe harbor side.

EMI had claimed that MP3tunes violated its public performance right (again, not covered by the §512 safe harbor) because the service relies on a “master copy”  to rebroadcast songs to users who have uploaded different copies of the same song. In its complaint, EMI cited the Second Circuit’s ruling in the Cablevision remote-storage DVR case and sought to distinguish MP3tunes’ approach to storage and Cablevision’s approach of storing individual copies of recorded programs for individual users.

As we’ve noted before, that ruling is highly problematic  for content owners hoping to bring cloud-based storage within the scope of license-able uses. So the effort by EMI to try to use the MP3tunes case to limit the reach of Cablevision by getting the court to distinguish between the two cases is hardly surprising. But in light of Judge Pauley’s ruling, the label might have been better off leaving bad-enough alone.

Rather than accept EMI’s argument that MP3tunes’ “master copy” storage approach made playback from its online lockers a public performance, legally distinguishable from Cablevision’s RS-DVR service, Judge Pauley makes a crucial technological distinction, noting that MP3tunes uses hash patterns to identify specific files (as opposed to songs) uploaded by users and then stores the hash, a process he likens to ordinary data compression.

More ominously for content owners, he then goes on to find any differences between MP3tunes’ storage system and the Cablevision system legally irrelevant anyway in this case since Cablevision is not an Internet service provider.

EMI relies on the Second Circuit’s holding that a cable provider did not violate television studios’ public performance rights in its digital recording and play back services because the cable provider did not use a master copy to play back shows recorded by their viewers…EMI’s argument, however, mischaracterizes MP3tunes’ storage system. The record demonstrates that MP3tunes does not use a “master copy” to store or play back songs stored in its lockers. Instead, MP3tunes uses a standard data compression algorithm that eliminates redundant digital data…

Apart from the fact that MP3tunes does not employ a “master copy” storage system, EMI’s reliance on [Cablevision] is inapposite. There, the cable-provider defendant was not an internet service provider and thus was ineligible for DMCA safe harbor protection…In contrast, MP3tunes’ online storage system utilizes automatic and passive software to play back content stored at the direction of users. That is precisely the type of system routinely protected by the DMCA safe harbor.

Rather than limit the scope of Cablevision, Judge Pauley’s ruling could be read as increasing the technological range of storage options providers of online media lockers can rely on without needing to secure public performance licenses from content owners. Advanced data compression could be the new de-duping, but without all the legal hassles or licensing costs.

If so it would be very good news for Dropbox, which uses a system very much like MP3tunes’ to store its users’ music uploads. It would also free Amazon’s Cloud Drive service and Google Music to adopt far-more efficient storage systems for their online music lockers without having to secure licenses from the record labels.

But it could further limit content owners’ leverage to extract license fees for online media storage.