The Case of the Missing Copyright Law

There’s nothing like a good mystery. This story reminds me more of a subtle case of stolen art or child abduction that got swept under the rug rather than a grand robbery that grabbed attention like Napster did. Though, the story of Mp3.com, an online music destination site, wasn’t supposed to belong in the category of great detective books. The case of Mp3 began around the time of the launch of two new my.mp3.com services and appeared to end two years ago at the sale of the company. The ending unveiled the real mystery: the sale resulted from a questionable copyright issue regarding these services, which seems unresolved still, raised by the acquirer.

To start from the beginning, in 1999, Mp3.com was simply a platform for undiscovered artists to promote their music. Up and coming artists would upload background information and music to the company’s website, offer some songs for free and sell CDs. With over 12M users, the company had a strong platform to promote artists and personalize services to its music aficionados. In early 2000, the company launched two new services, BeamIt and Instant Listening, that allowed each my.mp3.com account to store online CDs owned or purchased. Like an online storage locker, a my.mp3.com account enabled a user to access and listen interactively to his CD collection on a PC or any internet-enabled device such as a TV, cell phone or PDA. Almost immediately after these services debuted, the Recording Industry Association of America (RIAA) twisted the plot and sued the company for copyright infringement. The following was evidence:

“BeamIt was technology that could determine what specific CD a user inserted in their CD-ROM drive by matching the ‘DNA’ of the CD to a database of CDs at Mp3. If I inserted India Arie’s Acoustic Soul in my CD-ROM, BeamIt would then ‘read’ the CD bits and try to make a match from its database. Once it recognized the CD as Acoustic Soul, I would have a digital copy of the CD in my account.

“Instant Listening offered instant gratification by allowing consumers who purchased CDs online to receive immediately a digital copy in their my.mp3.com accounts. Participating online retailers transmitted the receipt and account information to the company, and then my purchase would appear in my account”.

So, if the purpose of these services was to allow users to listen to music that they already owned, then why would the RIAA consider this illegal? The plot thickens: as it turned out, a district court agreed with the final plaintiff, Universal Music Group (UMG), stating, “Copyright, however, is not designed to afford consumer protection or convenience but, rather, to protect the copyright holders’ property interests” (UMG Recordings et. al v. Mp3.com, 5/4/2000). The judge wrapped the case up quickly by finding the company guilty of willful infringement and fining the company $25K for each CD copied in its database. That equated to potentially $120M-$250M, the largest copyright fine in history for a service only up for three months with no proof of facilitating piracy.

Perhaps, we need to reexamine the key facts of the case:

1) The company created a core database of CDs for two purposes i) to verify “ownership” which is similar to a bank manager checking your signature against a signature on file to open your safe deposit box; and ii) to minimize bandwidth and storage costs by only using one master copy of a CD (12M copies of a Dave Matthews CD would take up a lot storage space).

2) My.mp3.com only streamed music from its servers to a user¡¦s account. Streaming is very different than downloading because it prevents users from emailing songs in their account to 20M PCs or making additional CDs.

3) Security was built-in through the central database. The company only permitted one account to play music at a time, e.g. if I gave my password to a friend, it would bump one of us off the system.

4) The physical act of inserting a CD into a CD-ROM created a means to demonstrate ownership and minimized mass infringement, e.g., while I could give my Dave Matthew’s CD to some friends to put into their account, it is unlikely my CD would reach more than ten people.

Based on these facts, I couldn¡¦t help but wonder if the “crime” justified the punishment. These hardly imply that Mp3 was a potential “mass infringer” like Napster, though the judge argued deterrence was the reason for the harsh sentence. A few months later, Mp3.com settled for $50M with UMG and then was purchased for $370M by, yes, Vivendi Universal. Prior to the settlement, Representative Rick Boucher (D-VA) introduced the Music Owners Listening Rights Act of 2000 H.R. 5275 in response to the plight of Mp3.com that addressed the issue of listening to previously purchased music in individual storage accounts, but the bill disappeared after the two parties settled. The case appeared to be closed.

I unraveled part of the mystery of why the district court deemed the my.mp3.com services illegal by looking at the law under the microscope and questioning legal scholars about the case. Professors Fisher, Lessig and Volokh educated me that the act of replicating copyright materials for “commercial purposes” is frowned upon by courts. Since Mp3 “copied CDs” onto its servers for BeamIt, the judge’s ruling had some basis. I was reminded that “copyright owners do have the right to extract revenue from consumers that want to listen to their IP in any form.” The exception is a fair use clause that broadly speaking allows consumers to reproduce copyright works for personal use. However, this clause did not apply to Mp3 according to the judge, “Kon any view, defendant’s ‘fair use’ defense is indefensible and must be denied as a matter of law” (UMG v. Mp3.com 5/4/2000) – even though the intention of the database was to allow consumers to listen to their music online.

There is a missing piece of the puzzle. Those who follow digital music often hear about a common digital warehouse for any media that can be tapped by many different internet-enabled devices — the “celestial jukebox.” In order for the “celestial jukebox” to exist, copyright law needs to allow for caching (or copying) of copyright material on technology infrastructure such as a commercial server if the intention is to facilitate fair use. In the next chapter, I will look at the law and this issue more deeply. Unless our hope is that courts presciently interpret the law, we must look at the Mp3 story as one example where copyright law is outdated. If justice prevails, Congress, our new protagonist, will take another look at copyright law to rewrite the end to the Mp3.com case and open the door for new digital media legends to come.

It’s elementary. This is no or Sherlock Holmes tale, but see www.my.mp3.com for an example of how the service worked. Note: the only music that is allowed in the account currently is music from the company’s website; the above technologies are disabled. Please email comments to diuliano@empower.org.