It did so without a license agreement, and the major music labels were not amused. Sony Music said it was keeping its "legal options open" as it pressured Amazon to pay up.
In the following weeks, two more companies announced music services of their own. Google, which has long had a frosty relationship with the labels, followed Amazon's lead; Google Music Beta was announced without the Big Four on board (read our first impressions).
But Apple has been negotiating licenses so it can operate iCloud with the labels' blessing.
The different strategies pursued by these firms presents a puzzle. Either Apple wasted millions of dollars on licenses it doesn't need, or Amazon and Google are vulnerable to massive copyright lawsuits.
All three are sophisticated firms that employ a small army of lawyers, so it's a bit surprising that they reached such divergent assessments of what the law requires.
So how did it happen? And who's right?
A lost decade
It was a service ahead of its time. Slip a CD into your computer, and the music on it would instantly be added to your online locker. From there, it could be streamed to any Internet-connected computer. Several services do this today, but MP3.com was launched more than a decade ago.
The site was a 1990s dot-com star, flush with cash from its $340 million IPO. The recording industry sued, arguing that MP3.com needed licenses to store and then stream their music. MP3.com countered that the technology was legal under copyright's fair use doctrine, much as format-shifting a CD might be.
A federal judge sided with the labels, and the threat of astronomical statutory damages forced MP3.com to settle the case for $53.4 million. Weakened by litigation and the bursting of the dot-com bubble, the company was forced to sell itself to Vivendi Universal in 2001; the music locker feature was abandoned soon afterwards.
After the acquisition, the new parent company ordered MP3.com to sue its old law firm for malpractice, arguing that no competent lawyer would have advised a client that operating the streaming service was legal under copyright law.
This scorched-earth strategy worked. MP3.com founder Michael Robertson describes the record labels' legal strategy as "a very effective campaign of terror."
By making examples of Napster, MP3.com, and other early innovators, the music industry was able to scare most of Silicon Valley away from developing technologies that would disrupt their industry.
For example, angel investor Paul Graham has compared the labels to a "rogue state with nuclear weapons," and he discourages entrepreneurs from creating startups that touch their music.
The result was a lost decade for music innovation. Throughout the '00s, no major software companies followed in Robertson's footsteps to create music locker services.
Signs of life
The first green shoot to break through this parched ground was a 2008 decision by the United States Court of Appeals for the Second Circuit. The defendant was the New York cable company Cablevision.
Rather than giving subscribers traditional DVRs that recorded programs within their homes, Cablevision developed an innovative "remote storage" DVR. Like an ordinary DVR, it records programs selected by the user and plays them back later, but the recorded content is stored in a Cablevision server room rather than a user's living room.
As usual, content providers sued for copyright infringement, saying that Cablevision was retransmitting their content without permission. Cablevision countered that its service was identical to users owning a long-range remote control, that all recording was done at the direction of users, and that separate copies of content were kept for each subscriber.
How could the mere length of the wire make copyright infringers of the company?
In 2008, the Second Circuit ruled for Cablevision. The decision has obvious relevance for music lockers, as Cablevision argued that it was merely serving as a passive conduit for users to store and retrieve their content; music lockers say the same.
James Grimmelmann, a law professor at New York Law School, spoke with us about the legal implications of Cartoon Network v. Cablevision. It was a groundbreaking decision but also a "bizarre" case that fails to resolve a number of key issues, he said.
Many observers expected the argument to focus on applying the Supreme Court's 1984 Sony decision, which held that "time shifting" with a VCR is legal under copyright's fair use doctrine. But the parties chose not to litigate the fair use question, focusing exclusively on whether Cablevision was directly liable for copyright infringement.
Thus, the Cablevision decision offers no real guidance on how to apply Sony to remote storage services. Nor does it provide any clarity on whether the providers of such services face indirect liability for the infringing activities of their users.
Still, when the Supreme Court declined to hear the Cablevision appeal in June 2009, the Second Circuit's decision became the strongest available legal foundation for a music locker service.
So far this year, three companies -- Amazon, Google, and Apple-- have jumped on the opportunity it provided. And if these pioneers don't get burned, others are likely to follow.
While all this was happening, MP3.com founder Michael Robertson wasn't sitting still.
Radicalized by the labels' destruction of MP3.com, he launched a new company called MP3tunes in 2005. It bore an uncanny resemblance to his original firm. Users could purchase songs from an online store for $0.88 and store them in a music locker for streaming to any device. They could also upload music from their computers, or "sideload" free music from the Web using a search engine called sideload.com.
To no one's surprise, Robertson found himself in court again. EMI filed suit in 2007, and the two companies have been locked in litigation ever since. Robertson says the parties have concluded their arguments and are now awaiting the judge's ruling.
In our common-law system, earlier court decisions create precedents that shape later litigation. This means that, whether they like it or not, Robertson's competitors could be influenced by the outcome of his case.
If Robertson wins his lawsuit, then Jeff Bezos and Larry Page can sleep more easily. On the other hand, if MP3tunes loses, it could call into question the legality of the larger companies' products. Google, at least, has taken an active interest in the MP3tunes case, filing an amicus brief in January in support of MP3tunes.
Looking for a safe harbor
One of the key weaknesses in MP3.com's legal defense was a consequence of its novel method of stocking its customers' lockers. In an era of 28.8k modems, actually ripping and uploading users' CD collections would have been a long, tedious process. So MP3.com came up with a novel solution: when a user inserted a CD into her computer, a fingerprint was calculated and compared to the fingerprints of thousands of ripped CDs that MP3.com had already loaded onto its servers.
Users didn't actually have to upload their music because once MP3.com verified that a user had a copy of a particular CD, it just used the ripped copy it already had.
This "Beam-It" feature was functionally equivalent to a system in which users actually ripped and uploaded their music, and it was a lot more efficient. But it wasn't identical, and it created a fatal weakness in MP3.com's legal position.
The Digital Millennium Copyright Act immunizes online service providers from liability when they store files on their servers "at the direction of a user." MP3.com was ripping the CDs itself; with no user involvement, it wasn't eligible for this powerful defense.
The newer MP3tunes avoided this Achilles' heel. With broadband now ubiquitous, MP3tunes requires users to upload actual copies of their music, greatly strengthening its claim to the safe harbor.
But EMI argues that MP3tunes is still ineligible for the safe harbor. To qualify, service providers must promptly remove material if they become "aware of facts or circumstances from which infringing activity is apparent." MP3tunes operates sideload.com, a music search engine that allows users with MP3tunes accounts to "sideload" search results into their lockers with one click.
Plenty of infringing music is available in sideload.com search results, and EMI argues that MP3tunes's failure to actively filter these results makes it ineligible for the safe harbor.
Robertson tells Ars that this reading of the DMCA is too demanding. He points out that many of the same music files are available through mainstream search engines such as Google and Bing.
A brief filed by Public Knowledge and several other groups agrees, arguing that the law only requires a service provider to remove specific content when they become aware it is infringing. They say that requiring services to actively monitor for infringing content would defeat the whole purpose of the safe harbor.
Google's ongoing struggle with Viacom over infringing content on YouTube will set an important precedent on this issue because Viacom made many of the same arguments about YouTube that EMI is now making about MP3tunes and sideload.com. In that case, Google prevailed at the district court level, and its appeal is now before the Second Circuit-- the same court that decided Cablevision (and would hear any appeals in the EMI v. MP3tunes case).
Even if MP3tunes loses on the DMCA immunity issue, it can still fall back on the Second Circuit's holding in Cablevision, arguing that it is merely a passive provider of file-storage services.
But MP3tunes faces a serious obstacle to making this argument. In Cablevision, the Second Circuit relied on the fact that the RS-DVR system made a distinct copy of a program for each user who recorded it. This design choice strengthened the analogy between Cablevision's product and a traditional home VCR/DVR.
It also helped Cablevision dodge liability under a 1984 decision that held that repeatedly showing the same video to different customers could violate the copyright holder's "public performance right."
Critics say the distinction is nonsensical. "There's no underlying policy logic," Grimmelmann tells Ars. "It's just courts distinguishing precedents they don't want to agree with."
Robertson-- whose MP3tunes service deletes redundant copies if multiple users upload the same file -- claims it would be preposterous to hold his company liable over this implementation detail.
"If MP3tunes is guilty of copyright infringement for deduplication, then so is every technology company in the United States," he says.
He has a point. As the Public Knowledge brief points out, such "deduplication" techniques are widely used in the IT industry. They are used by mail servers, cloud-storage services, and backup software. Indeed, recent versions of Windows and Mac OS X have file systems with "transparent compression" functionality-- essentially deduplication by another name.
If the courts hold that MP3tunes's use of deduplication techniques makes it liable for copyright infringement, numerous companies with otherwise-legal products could be forced to re-engineer them in a deliberately inefficient way to avoid liability.
New kids on the block
How do these factors affect Robertson's competitors? Amazon, Google, and Apple all offer the same core "music locker" functionality, but they each have important differences that could affect how each is viewed by the courts.
Apple has signed deals that should avoid legal trouble with the major labels, but they don't get Apple completely out of the woods.
As we've reported, not every recording company is jumping on the iCloud bandwagon. Presumably, customers will demand that all of their songs be synced with iCloud regardless of whether Apple has signed a deal with their copyright holders.
So Apple will have to choose between shipping an inferior product or risking lawsuits from smaller labels that choose not to sign up for iCloud. If it does the latter, then even Apple will have a (small) stake in MP3tunes' success.
Update: As we've previously reported, (but this author overlooked) if a song isn't in Apple's Match catalog, iTunes will upload the user's copy of the song. So Apple does, in fact, have a stake in the MP3tunes case.
Google has taken the much larger risk of creating a music service without paying the labels a dime. But its strategy is conservative in every other respect.
The company wouldn't talk to Ars on the record, instead directing us to its Terms of Service, which state that "you are directing Google to store a unique copy of Your Music on your behalf." This suggests that Google will be making millions of redundant copies of users' music in order to strengthen its claim to the Cablevision defense.
Google Music Beta doesn't offer the extensive sideloading functionality offered by MP3tunes -- or, as far as we can tell, any sideloading options at all. Users will only be able to upload music from their computer hard drives, not from other sites.
This strengthens Google's argument that its actions are legal under Cablevision, and also insulates the company from arguments that Google should be excluded from the DMCA safe harbor because too many users are sideloading pirated music.
Amazon.com did not respond to our request for an interview, so its situation is the least clear to us. But given the stakes, and Amazon's deep pockets, we're willing to bet the company will follow Google's lead and eschew deduplication despite its potential cost savings.
Grimmelmann points to one key difference between Google and Amazon: Amazon offers users the option to purchase music and put it directly into their lockers.
"Amazon took the position that they didn't require additional permissions under their existing licenses" to offer this feature, he said. He isn't sure what legal theory Amazon uses to justify doing this, but "whatever it is, I'm confident their lawyers think it's fine."
We sought comment from the recording industry, but they were tight-lipped. The RIAA has praised Apple's licensed iCloud service, but an RIAA spokesman declined to comment on Google and Amazon's cloud music offerings. An uncertain future
In other words, barring a major oversight by Amazon's lawyers, Google and Amazon are probably in the same legal boat. They have two lines of defense. The first is the DMCA safe harbor; if the courts decide they qualify, then they're likely to be immune from liability regardless of other factors.
If they aren't eligible for the safe harbor, then they'll fall back on the Second Circuit's Cablevision case. But this strategy has several risks.
One risk is that the case could be litigated in another circuit that declines to follow the Second Circuit's lead. Another is that they could lose on the fair use issues that the Second Circuit didn't consider in Cablevision. A court could find that fair use does not entitle users to upload their music collections to a third-party server, and that Google and Amazon are liable for facilitating and profiting from this infringing activity.
These risks will be heightened if MP3tunes loses its battle with EMI. If EMI wins, the labels will try to convince the courts that Cloud Player and Music Beta are more like an MP3tunes music locker than a Cablevision RS-DVR.
By closely following Cablevision's design principles and eschewing the more controversial features of MP3tunes, Google and Amazon have done all they can to make this a difficult argument to make. But MP3tunes, Music Beta, and Cloud Player still have the same core functionality, so the courts may not be convinced.
Still, judges seem to be strongly influenced by their perceptions about whether defendants are good corporate citizens. By carefully limiting their products' functionality and scrupulously hewing to the contours of the Cablevision case, Google and Amazon create the impression that they are well-meaning innovators doing their best to follow the law.
That's doesn't guarantee that they'll prevail, but it's the best they can do in a deeply uncertain legal environment, short of paying for licenses.
If forced to bet, our money would be on Google and Amazon's services withstanding court scrutiny -- but it's a tough call.
As for Robertson, we'd like to see him win, but we're not convinced he will.
Sideload.com is a remarkably useful and well-designed service, but it's also an extremely convenient way to get large quantities of infringing music. Theoretically, this shouldn't matter for the DMCA safe harbor analysis; many of the same files are available on mainstream search engines. But it could affect the court's perception of MP3tunes's good-citizen status.
If the courts think that MP3tunes and sideload.com are primarily a copyright-infringement system, they will figure out a way to rule against the company.
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