July 01, 2009

The record companies achieved a significant victory on Tuesday when a federal judge in N.Y. soundly ruled in our favor in the lawsuit against Usenet.com.  Judge Harold Baer agreed with all of our claims of copyright infringement liability.  Below we’ll highlight three important implications this verdict has for all content communities.

Before we get to why this decision matters, let’s review what Usenet.com is and how it has premised its business model on theft:

Usenet.com is a subscription service that provides users access to online bulletin boards (or “newsgroups”) that it selects and hosts.  The messages, or “articles,” on many of these bulletin boards include numerous unauthorized copies of the record companies’ sound recordings.  To give one a snapshot of the quantity of unauthorized files on the service, our expert conducted a statistical analysis and determined that more than 94 percent of all content files in certain music-related newsgroups were infringing (ILLEGAL) or highly likely to be infringing. The defendants took advantage of this fact by marketing the service as an alternative to peer-to-peer file sharing programs that were “getting shut down” due to copyright infringement (the site went so far as to boast it was the “hottest way of sharing mp3 files over the Internet”). Even the defendants’ own consumer survey indicated that downloading free music was a big reason why many subscribers paid for the service.           

Now on to the importance of Judge Baer’s decision to not just music but all content communities:

First, the court found direct infringement of the distribution right.  Translation: In order to find direct liability he had to rule that the “volitional conduct” standard set by the Second Circuit in the recent Cablevision case was satisfied.  (In Cablevision, the Second Circuit held that Cablevision was not liable for direct copyright infringement because it lacked the volitional conduct necessary to establish liability and merely acted as a “passive conduit” for delivery of copyrighted works to its users.)  Judge Baer found that this test was satisfied because Usenet.com took active steps and routinely exercised control over its servers to facilitate users’ ability to obtain copyrighted music files.  Notably, this decision will substantially limit the ability of services who attempt to shield themselves under the guise of being a “passive conduit” to profit from the unauthorized distribution of copyrighted content.

Additionally Judge Baer found Usenet.com liable for secondary copyright infringement (contributory and vicarious liability), holding that the Sony Betamax case didn’t apply where the defendant has an ongoing relationship with the user of the service.  This too will substantially aid in our ability to enforce our rights against services engaged in copyright theft.

Finally, Judge Baer ruled that Usenet.com could not make use of the safe harbor afforded by the DMCA because it had willfully destroyed relevant evidence.  This clearly reaffirms the fact that courts do not take kindly to defendants destroying incriminating materials in an attempt to cover up the facts and shield themselves from liability.

The decision reinforces two basic points: If you mindfully operate an illegal service without compensating the artists and creators whose content you advertise, the law is not on your side. Further, given the abundance of reasonably-priced legal download services, why go to an illegal one?

A copy of the decision can be found here.

Jennifer Pariser, Senior Vice President, Litigation and Legal Affairs, RIAA