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Court refuses to order stop of automated process for delivering digital music tracks to music company — Appalseed Productions, Inc. v. MediaNet Digital, Inc., 2012 WL 2700383 (S.D.N.Y. July 6, 2012)

This case is a good reminder of the different types of copyright licenses it takes to run an online music service and what happens when there’s a failure to keep track of the licenses obtained for each song.

MediaNet provides content from its song catalog to third-party Internet music services like MOG and iMesh.  End-users of the third-party services can access songs in different ways depending on their subscription — via full download, “limited” download (music downloaded to a device or hard drive can be played as long as the user remains a subscriber), or on-demand streaming.  MediaNet works with record labels and other copyright holders to obtain the necessary licenses for each song, which vary depending on the delivery method used by the end-user.  For limited downloads, a mechanical license is needed to copy and distribute the musical works embodied in the sound recordings.  For songs that are streamed on-demand, a mechanical license and a performance license are needed for the musical works.

The record labels deliver digital music tracks to MediaNet through an automated process called “ingestion.”  During ingestion, a record label delivers metadata about each track, including the delivery methods MediaNet is allowed to use with the track (streamed or downloaded).  The record labels regularly use the ingestion process to add new digital music tracks to MediaNet’s servers or to refresh the metadata for tracks.

MediaNet allegedly distributed songs — in which the plaintiffs (including Larry Weiss of Rhinestone Cowboy fame) owned the copyrights — to third-party music services for limited downloading and streaming without obtaining the necessary licenses.  The metadata indicating that the songs were not available for limited downloading or streaming apparently did not get transmitted to MediaNet during ingestion.  When MediaNet learned this, it blocked access to the tracks to end-users.  However, subsequent ingestions by the record labels reactivated access to the tracks.  MediaNet then manually removed the songs from its catalog and adopted measures to guard against inadvertent reactivation.

Skeptical that illegal access to the tracks had stopped for good, the plaintiffs asked for a preliminary injunction to stop MediaNet from using an automated process to add content to its catalog and from distributing its catalog to customers.  The court ultimately denied the injunction because the plaintiffs couldn’t show “irreparable harm,” a key requirement for an injunction.  Irreparable harm refers to injury that cannot be remedied with monetary compensation.  The plaintiffs basically argued that, without an injunction, they would have the burden of proving lost sales due to infringement.  That was not irreparable injury in the court’s view.  There was also evidence that MediaNet tracks the number of times songs are delivered via limited download and/or streaming.  It also wasn’t enough to argue that the allegedly infringing conduct would likely continue without the injunction.  The plaintiff’s still needed to prove irreparable harm, and they couldn’t do so.  It didn’t help either that the plaintiffs waited about two and a half years after learning about the alleged infringement before seeking an injunction.

LegalTXT Lesson:  The obvious legal lesson is that if you’re in the digital music business, make sure you have all the necessary licenses lined up for each song.  There’s a technical lesson here too.  Automated systems are only as good as their programming.  MediaNet struggled with filtering the offending songs out of their catalog because of variations in the spelling and punctuation used in the track titles of the songs.  MediaNet finally had to resort to a periodic manual search for the offending tracks.  While that might be the most effective way of preventing infringement, it’s not all that efficient.

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A civil CFAA claim for damages requires damage to computers, systems, or data — Schatzki v. Weiser Capital Mgmt, LLC, 2012 WL 2568973 (S.D.N.Y. July 3, 2012)

As I said in a previous post, we are seeing more activity dealing with the Computer Fraud and Abuse Act (CFAA).  The CFAA is both a criminal and civil statute.  The CFAA imposes criminal penalties on someone who  “intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains information from any protected computer”  or “intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage.”  A civil claim is available if, in addition to establishing the elements of a criminal violation, the plaintiff can show “damage or loss” as a result of the violation.  The damage or loss must be at least $5,000.00.

Schatzki is the latest case to read the terms “damage” and “loss” narrowly.  The defendants in the case allegedly obtained information from plaintiff’s computer systems without authorization and trafficked in computer passwords.  This access enabled the defendants to obtain valuable private and confidential information about the plaintiff’s clients, the plaintiffs said.  As a result, the plaintiffs had to hire consultants and incur legal fees.

The court said that the plaintiffs did not show the required “damage” or “loss,” and here’s why.  The plaintiffs failed to allege that the defendants’ access to the computer system damaged the data accessed or the system itself, or that the costs to recover the system/data exceeded $5,000.  The court also would not allow the plaintiffs to base their CFAA claim on other kinds of damages like lost profits, invasion of privacy, trespass to personal property, or misappropriation of confidential data.

LegalTXT Lesson: Quantify your damages if you are bringing a civil claim under the CFAA.  Also, remember that the CFAA is more in the nature of an anti-hacking statute than an anti-misappropriation statute.  Attempts to seek damages under the CFAA on a theory that someone gained access to electronic information and used it for improper purposes might not go very far.

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Not knowing others can see your Facebook comments doesn’t mean you can sue for invasion of privacy. —  Sumien v. Careflite, 2012 WL 2579525 (Tex. Ct. App. July 5, 2012)

This case goes into the category of “what you don’t know can hurt you.”  Two emergency medical technicians (Sumien and Roberts) had an exchange on the Facebook wall of another co-worker in which they made derogatory comments about a patient they had transported via ambulance.  Haynes, the sister of a compliance officer of employer of the two technicians (CareFlite), saw Roberts’ comments and was offended.  Haynes notified her sister (Calvert), who had access to the comments because she was Facebook friends with Roberts.  After Haynes complained to the management of CareFlite, Sumien and Roberts were terminated.  They sued CareFlite for unlawful termination and invasion of privacy.  The trial court granted summary judgment to CareFlite on all claims, and one of the technicians (Sumien) appealed.  The only issue in the appeal was whether the trial court should have granted summary judgment on the intrusion upon seclusion claim.

One of the requirements of an “intrusion into seclusion” claim is, unsurprisingly, an intentional intrusion into the seclusion or private affairs of another.  Sumien argued that CareFlite intruded upon his seclusion because one of its employees read his comments.  Sumien claimed to be unaware that Roberts’ Facebook friends (including Calvert) could see the comments he posted on Roberts’ wall.  Too bad, said the court.  The comments were visible to the Roberts’ friends, and so there was no intrusion into a private matter.

LegalTXTS Lesson: Know your privacy settings, and think through who could see what you share in the social media space.  This seems rather obvious, but then again, there are those who don’t do this and then claim their privacy is invaded.  The other point is that a intrusion into seclusion claim based on material posted on a social media network probably is difficult to win.  Some courts, like the one who ordered Twitter to comply with a subpoena last week, simply don’t regard posts on social media private at all.

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Court finds no expectation of privacy in tweets — People v. Harris, 2012 WL 2533640 (N.Y. City Crim. Ct. June 30, 2012)

A New York court ruled last week that Twitter must hand over subpoenaed information about one of its users, including tweets.  Let’s cut to the chase.  The most important statement in the ruling is this: “There can be no reasonable expectation of privacy in a tweet sent around the world.”  The court compared a tweet to shouting out the window — you can’t take back what you said, and anyone who heard you could testify about the statement.

The ruling has drawn criticism from online privacy advocates like the Electronic Freedom Frontier.  On a basic level, the court’s logic makes sense.  The problem is, will the ruling be used to justify refusal to recognize privacy interests in other forms of social media interactions?  Some courts already regard social media content as public per se.

Not all social media content is the same.  And the way content is shared (or not shared) should also be part of the privacy analysis. For instance, a Twitter user could set his account to private to exclude general access to his tweets.  By doing that, the user shows his intent not to communicate to the entire world.  Unlike shouting out a window, private tweets are more like striking a conversation with selected neighbors in your apartment building.

It’s unclear from the ruling if the Twitter user in this case protected his account.  Some commentators say the account was protected.  Regardless, the court made a sweeping statement about the lack of privacy interests in tweets without any attempt to differentiate between public and private Twitter accounts.  Such a broad-brushed approach seems to gloss over the legal significance of privacy settings.

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Here’s a fun news bite for today.  CNET reports that English rock band Def Leppard couldn’t come to terms with Universal Music on how much revenue the band can get from digital downloads of its songs, so it’s recording identical “covers” of its songs.  Def Leppard would own the masters of the “covers” and therefore control the financial terms of its distribution, including through digital downloads.  Clever, no?

Under U.S. copyright law, a musician may cover a song and distribute the recording so long as he gets a license (called a mechanical license) and pays a standard royalty fee to the song’s publisher.  The mechanical license can’t be denied.  The fee is 9.1 cents per song distributed for songs under five minutes and 1.75 cents per minute or fraction thereof over five minutes.  It’s not a bad price to pay for gaining control over rights to distribute a song.  Whether fans will think the covers are up to snuff is another matter.