May 15 2011
Amazon introduced its Cloud Locker and Amazon Cloud Player and Google has introduced Google Music (beta). Both companies are offering cloud based storage for music. No big deal, right? Wrong. Music labels are concerned because Amazon and Google haven’t worked out a business relationship wherein the music labels and the artists get a piece of the pie every time a song is access on the cloud.
One major music company, Sony Corp.’s Sony Music Entertainment, expressed dismay at Amazon’s plans, echoing concerns of others in the industry. “We are disappointed that the locker service that Amazon is proposing is unlicensed by Sony Music,” a spokeswoman said Tuesday evening.
Essentially, music labels want consumers to pay every time the music is accessed in a different manner. New technology, RIAA and others argue, should be monetized to the benefit of content creators.
Amazon and Google offering cloud storage for music that allows the music to be streamed and played on the web, regardless of device or location access reduces music companies revenue opportunities. We know that RIAA is sue happy but Amazon has even made noise that cloud storage may be made available for videos later which would bring in the MPAA. So what is the legality of this cloud storage and streaming thing? Here are my step by step thoughts.
First, let’s start with the question of whether music and videos (and books) can be taken from one form and changed into another form. Take a look at the RIAA website in which even the RIAA agrees that making a digital copy of a CD you own is legal within their interpretation of the law:
- It’s okay to copy music onto an analog cassette, but not for commercial purposes.
- It’s also okay to copy music onto special Audio CD-R’s, mini-discs, and digital tapes (because royalties have been paid on them) – but, again, not for commercial purposes.
- Beyond that, there’s no legal “right” to copy the copyrighted music on a CD onto a CD-R. However, burning a copy of CD onto a CD-R, or transferring a copy onto your computer hard drive or your portable music player, won’t usually raise concerns so long as:
- The copy is made from an authorized original CD that you legitimately own
- The copy is just for your personal use. It’s not a personal use – in fact, it’s illegal – to give away the copy or lend it to others for copying.
According to the RIAA it is okay to make a transformational copy so long as such a copy is for personal use. (but see RIAA’s comments in 2006 to the DMCA rulemaking wherein they claim this type of activity is not fair use).
The Audio Home Recording Act, companies that manufacture or import a digital audio recording must pay a licensing fee for each device (between $1 and $8 depending on the transfer cost). Neither cloud player allows for recording so I don’t see this act as the basis for imposing licensing fees on Amazon or Google.
Amazon and Google Cloud storage don’t have any sharing components which might implicate them under the METRO-GOLDWYN-MAYER STUDIOS INC. V.GROKSTER, LTD. (04-480) 545 U.S. 913 (2005). Under the Grokster case, the Supreme Court found that, in balance, the Grokster’s limited non infringing uses where outweighed by its infringing uses. Amazon and Google’s cloud player don’t have a sharing component that could lead to . In fact, cloud storage is much more like the Sony case wherein cloud storage principal use is time shifting.
Further, there doesn’t appear any inducement to infringe. In Grokster case, there were several examples given which the Court used to show that Grokster defendants intended for users to infringe:
StreamCast even planned to flaunt the illegal uses of its software; when it launched the OpenNap network, the chief technology officer of the company averred that “[t]he goal is to get in trouble with the law and get sued. It’s the best way to get in the new[s].” Id., at 916.
Amazon, in particular, could argue that it encourages lawful purchases by creating technology that places the legitimate purchases onto the Cloud. (Amazon allows you to make the CloudPlayer the default mechanism for storage instead of downloading after you complete an MP3 purchase).
Another legal case upon which Amazon and Google could rely is the Cablevision DVR suit which was won by Cablevision on appeal to the Second Circuit and the US Supreme Court refused to hear any further appeal. See THE CARTOON NETWORK LP v.CSC HOLDINGS, INC. and CABLEVISION SYSTEMS CORPORATION (PDF).
Cablevision offered cloud based DVR services without a set-top box allowing its customers to use traditional DVR features such as recording a show for later. A number of movie studios and television companies sued Cablevision. The district court ruling authored by Dennis Chin (who also authored the denial of the Google Settlement) initially granted an injunction against Cablevision but the Second Circuit overturned the decision in favor of Cablevision.
Of importance, the Second Circuit’s decision was not based on fair use doctrine as the Sony decision was. Cablevision had waived the fair use defense.
Critically for our analysis here, plaintiffs allegedtheories only of direct infringement, not contributory infringement, and defendants waived any defense based on fair use.
Cablevision argued that the playback copies made by the cloud based storage was direct infringement. The Second Circuit made two important holdings. First, when a “system” makes a copy a customer’s behest, it is obeying the command of the customer, not engaging in any “volitional conduct.”
In determining who actually “makes” a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct.
The second holding is that the transmission of the playback from the cloud did not constitute a public performance. This part of the decision was criticized by the Department of Justice in its brief filed with the Supreme Court when the Supreme Court was considered to grant cert. The Supreme Court asked the Solicitor General to provide its opinion as to whether it should hear the Cablevision case. The DOJ said no, but did find the language of the Second Circuit as to the public transmission troubling:
Such a construction could threaten to undermine copyright protection in circumstances far beyond those presented here, including with respect to VOD services or situations in which a party streams copyrighted material on an individualized basis over the Internet.
(VOD=Video on Demand). The DOJ said that the Second Circuit’s decision was very narrow and should not be read to extend beyond the limited circumstances:
The Second Circuit repeatedly explained that its rejection of petitioners’ public-performance claim depended on a range of factors: not only that each transmission would be sent to a single recipient, but also that (1) each transmission would be made using a unique copy of the relevant program; and (2) each transmission would be made solely to the person who had previously made that unique copy. See, e.g., Pet. App. 30a-31a, 36a, 39a, 41a. By limiting its holding to circumstances in which those two additional features are present, the Second Circuit sustained the legality of respondents’ proposed RS-DVR service without casting doubt on the widespread premise that VOD and similar services involve public performances.
The DOJ’s decision would seem to imply that Amazon and Google’s CloudPlayer may violate the public transmission prohibition. Indeed, DOJ said the following:
The Second Circuit’s decision, however, is unlikely to be the last appellate ruling to address these issues. Other cable providers may initiate services that are similar to respondents’ RS-DVR. Analogous issues also may arise with respect to other network-based services for copying and playing back copyrighted works. [FN3]
One example may be music lockering services, which permit users to upload files to a remote computer server and stream that music to a personal device over the Internet. The general development of cloud computing, which is an umbrella term for services where programs or files are stored remotely and accessed via the Internet or other means, may generate similar issues.
VOD is a bit different from the lockering services as VOD doesn’t require individual ownership per user, but instead transmits to numerous individuals from the same video source. Cablevision’s argument was that each user maintained its own copy that was then retransmitted at the request of the user, kind of a one copy per user argument.
MP3.com was sued vigorously over a similar cloud based streaming service and ultimately settled by paying over $53.4 million. MP3.com allowed streaming if the user could prove that they owned the song. Users did this by inserting the CD into the computer. EMI has sued MP3Tunes, a music lockering service, and that case is still ongoing.
NIMMER & NIMMER, the textbook on copyright, says that
[I]f a transmission is only available to one person, then it clearly fails to qualify as ‘public.’ For it neither directly reaches ‘a substantial number of persons’ nor is it transmitted to a place where such a grouping is congregated. As such it does not implicate the copyright owner’s rights.
David Parkman, former e-Music CEO, says Amazon (and Google)’s cloud service is completely legal because it is a one to one copy to play ratio. I tend to agree with Parkman. I don’t think that the DOJ’s concerns about the Second Circuit’s decision regarding public performance is intended to imply that music lockering by individual users would be unsupported by the DOJ, in part because the cloud service begins with the premise of ownership of a digital copy by the user whereas VOD and DVR services do not.
Why I am talking about this on a blog about books? Because what happens in these cases will affect, to a large degree, our ability to use a cloud based lockering service for digital books that we have all purchased. Suits between the big boys like Sony and EMI against Google and Amazon will provide clarity in the balance of rights between creators of intellectual property and the consumers of it. Remember that Apple bought Lala, a music streaming site, in 2009.
For DRM haters, it might not be a surprise that one legal scholar suggests DRM is the way to prevent cloud based streaming. See Vivian I. Kim, THE PUBLIC PERFORMANCE RIGHT IN THE DIGITAL AGE: CARTOON NETWORK LP V. CSC HOLDINGS, Berkeley Technology Law Journal 24:1 (2009) (PDF). One reason Amazon and Google’s cloud based services work is because almost all music is sold DRM free, thus allowing access without a specific software license.
In sum, there is no definitive legal ruling okaying Amazon, Google and soon, Apple’s, cloud based streaming services; but I think that Amazon et al has thrown down the gauntlet to the music labels. Game on.