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Grooveshark dealt a blow in label lawsuit number two

By | Published on Tuesday 30 September 2014


Hot on the heels of the record industry pushing for a final summary judgement in its favour in its first lawsuit against Grooveshark, boom, yesterday a federal judge ruled in the labels’ favour in the industry’s second legal assault on the often controversial streaming service.

Recap. Grooveshark allows users to upload tracks to its servers, meaning the streaming service boasts a very comprehensive library of tracks, even though it lacks licensing deals with most labels. But it avoids liability for copyright infringement, in the US at least, because it operates a takedown system, whereby labels can order content be removed. And even though users constantly replace removed content as soon as it’s taken down, that is enough for Grooveshark to avoid infringement liabilities according to most judicial interpretations of America’s Digital Millennium Copyright Act.

The labels see that as a loophole in the DMCA and want the Act revised. But in the meantime the major labels’ lawyers have been nervous about pursuing straight copyright infringement litigation against the digital firm, because they’d probably lose.

But lawyers for Universal came up with two ruses. First, sue Grooveshark specifically over the pre-1972 catalogue on its platform, because arguably the so called safe-harbour protections of the DMCA don’t apply to older recordings (see here for more on that). Second, sue Grooveshark over allegations that staff at the streaming firm, including its founders, also uploaded unlicensed tracks to the site, such uploads not being protected by DMCA safe-harbours. Much of the evidence that that had happened was actually gathered from data Grooveshark was forced to supply as part of the lawsuit number one.

And it was with lawsuit number two that the labels scored a win in New York yesterday. Despite constant denials by the Groovesharkers that anyone on the payroll had ever been involved in uploading content (the denials got only louder after one anonymous poster on the Digital Music News site claimed he had worked there and that staff were routinely ordered to upload unlicensed tracks), Judge Thomas P Griesa ruled that employees of the digital firm, including CEO Sam Tarantino and CTO Josh Greenberg, had indeed uploaded 5977 unlicensed tracks onto the firm’s servers.

“Each time [Grooveshark] streamed one of the plaintiffs’ sound recordings, it directly infringed upon plaintiffs’ exclusive performance rights”, said the judge, who also concluded that the Grooveshark company had destroyed important evidence in the case, including a list of the files Greenberg and others had personally uploaded.

Grooveshark said last night that it “respectfully disagrees with the court’s decision and is currently assessing its next steps, including the possibility of an appeal”. So it may not yet be game, set and match. Though if the majors secure a final summary judgement against Grooveshark in the pre-1972 litigation too (they have already scored a win in that case at the original appeal stage), the double whammy might be enough to finish the digital firm off.

If either of the lawsuits stick, Grooveshark would likely face a mega-damages bill the company would be unable to afford (the majors then, presumably, would go after the founders personally). Even while final appeals go through the motions, the digital firm – a relatively early entrant into the fully on-demand streaming market in the US – faces an uphill struggle. Unlike its rivals it has struggled to raise investment while saddled with so many legal woes, and brand partnerships – its biggest revenue stream to date – will be harder and harder to come by as ad agencies read about legal rulings against the firm.

Of course, amongst young music fans Grooveshark remains popular, and the company’s original strategy seemed to be that, eventually, the labels would settle in order to monetise that audience. Though LimeWire also had a massive audience and, in its final days, a decent legit service in development, but the majors had reached the point where they just wanted to see the previously bullish tech firm obliterated. And you sense the same is now true of Grooveshark.