THOMAS P. GRIESA, Sr., District Judge.
Plaintiffs in this case—nine corporations that own or hold exclusive licenses to the copyrights of a large body of popular sound recordings — have brought this copyright infringement action pursuant to 17 U.S.C §§106 and 501 against defendants Escape Media Group, Inc., ("Escape"), and its two founders, Samuel Tarantino and Joshua Greenberg (collectively "defendants").
The claims in this action arise from defendants online music service "Grooveshark." Plaintiffs allege that via their Grooveshark website, defendants illegally provide tens of millions of users with access to a comprehensive library of popular music that, in part, is comprised of plaintiffs' copyrighted sound recordings. The claims asserted in this action only relate to the direct upload of plaintiffs' copyrighted music by Escape's officers and employees. Thus, plaintiffs' claims only relate to a limited portion of the recordings available on the Grooveshark website.
Plaintiffs have moved for summary judgment on their claims that defendants are liable for both direct and secondary copyright infringement. Plaintiffs also allege that individual defendants Tarantino and Greenberg are individually liable for the copyright infringement.
Plaintiffs have also brought a motion for sanctions for the spoliation of evidence. Plaintiffs request that the court enter certain judgments against defendants and prevent defendants from advancing certain defenses to plaintiffs' copyright claims.
For the reasons set forth below, the court grants plaintiffs' motion for sanctions to the extent discussed in this opinion, though not in its entirety. The court grants plaintiffs' motion for summary judgment with respect to nearly all of its claims.
Plaintiffs in this case—Arista Music, Arista Records LLC, Atlantic Recording Corporation, Elektra Entertainment Group Inc., LaFace Records LLC, Sony Music Entertainment, UMG Recordings Inc., Warner Bros. Records Inc., and Zomba Recording LLC—are nine corporations that own or hold exclusive licenses to the copyrights of a large body of popular sound recordings. Together, plaintiffs own and operate many of the largest record labels in the world. Cumulatively, plaintiffs own, or have exclusive rights to, a large majority of copyrighted sound recordings sold in the United States, such as Michael Jackson, Prince, Beyonce, Green Day, and Elton John.
Defendant Escape Media Group is a Delaware corporation with its principal place of business in Gainesville, Florida and offices in New York City. Defendant Tarantino is the co-founder of Escape and its Chief Executive Officer. Defendant Greenberg is also a co-founder of Escape and its Chief Technology Officer. Together, Tarantino and Greenberg manage all aspects of Escape's business and have final authority in hiring, firing, and evaluating employee performance.
Escape's sole business is the ownership and operation of www.grooveshark.com (the "website" or "site"). This website allows users to listen to any song in the world for free and bills itself as "the world's largest ondemand and music discovery service." When a user chooses to listen to a given recording on the website, that recording is opened remotely, and its content is played through the website (in technology parlance, this process is called "streaming"). The recording is not downloaded (i.e. copied and transferred as a data file) onto the user's computer. Escape earns revenue by selling advertising on the website, and it has also explored offering a service on a subscription basis.
Although Grooveshark's music library includes works by all of plaintiffs' top commercial artists and attracts tens of millions of users each month, defendants have never obtained any licenses from plaintiffs to exploit any of their copyrighted sound recordings.
In order to understand the copyright claims at issue in the present litigation, it is necessary to examine the different stages of Grooveshark's development and how it acquired its extensive music library.
In 2006, Tarantino and Greenberg founded Escape and began to develop Grooveshark while they were freshmen at the University of Florida. Escape designed and operated the first version of Grooveshark as a "peer-to-peer" network ("P2P network").
In order to launch this P2P network, Escape distributed a proprietary software application called "Sharkbyte" that users installed on their local computers. SUF ¶5. This software allowed Grooveshark users to upload, download, or stream copies of sounds recordings to and from other users of the server.
Escape was aware that its business model depended upon the use of infringing content. SUF ¶¶14-15, 65, 7, 105. Escape acknowledged that it required—but did not have—licenses from plaintiffs to engage in or facilitate the distribution, performance, or sale of their copyrighted music to Grooveshark users.
In order to attract users to its P2P service, Escape needed to offer its Grooveshark users access to a large amount of music. Soon after its launch, Grooveshark did not have a large user base to leverage as a source for content. In response to this problem, Escape directed its employees to obtain and make available the content necessary to launch Grooveshark.
For example, in one company-wide forum post in 2007, Greenberg provided the following instructions to Escape employees:
Similarly, defendant Tarantino sent the following email to all employees and officers of Escape:
Along these lines, numerous Escape officers and employees testified that they received these instructions and uploaded popular music to Grooveshark at the direction of defendants.
Escape's initial Grooveshark P2P model only allowed users to download or stream music files from other users who were logged into their computes and running the Sharkbyte software. Horowitz Decl. ¶27. As a result, the availability of music files in the Grooveshark music library depended on the number of other users online at any given moment.
In June 2007, Escape began to use it central servers, which it referred to as their `cache', as a vast central storage library ("Central Music Library") for all of the music files available on the Grooveshark P2P Network.
In order to ensure that the Central Music Library had as much content as possible, Escape designed its Sharkbyte software so that it would automatically copy every unique music file from each of its users' computers and upload them to the storage library. SUF ¶20. Escape referred to this as a "cache everything" policy.
Escape recognized that it needed to continue to add new files to their storage library in order to make Grooveshark commercially attractive.
Escape employees have testified that they uploaded popular music files to the Central Music Library in response to defendants' instructions.
By early 2008, the Grooveshark service featured a library of more than one million digital music files, including thousands of infringing copies of plaintiffs' sound recordings that were uploaded by defendants and their employees. SUF ¶8. Nonetheless, Escape wanted to increase the size and scale of its operation to reach internal projections and raise additional capital from investors.
In response to these concerns, Escape launched a new streaming service in April 2008, which they referred to as Grooveshark Lite.
In order to launch Grooveshark Lite, Escape copied all of the digital music files located in the Central Music Library, including all of the infringing employee uploads, and placed these new copies on a new computer server dedicated to Grooveshark Lite users.
In the months leading up to the launch of Grooveshark Lite, Escape instructed its employees to upload as much content as possible to the Central Music Library in an effort to reach a benchmark of 2 million songs (a benchmark that defendants reached).
Grooveshark Lite eventually attracted an audience of millions of users.
In 2009, Escape received numerous Digital Millennium Copyright Act ("DMCA") takedown notifications from copyright holders demanding that it remove infringing copies of popular copyrighted songs from Grooveshark. Ashenden Decl. ¶20;
In addition, Escape employees regularly uploaded files to Grooveshark in order to "test" the functionality of the uploading process.
Escape's records provide data confirming the uploading of thousands of unique files to Grooveshark by its officers and employees.
The portions of the UsersFiles table produced by Escape during discovery contain proof of the uploading of more than one hundred and fifty thousand files to Grooveshark by its employees, including thousands of copies of sounds recordings owned by plaintiffs.
In addition to the database records, DMCA infringement notifications also provide evidence of illegal uploading by Escape employees. When Escape received a DMCA infringement notice from a copyright owner, Escape generated an automated notification letter to each user identifying the files they uploaded that were the subject of the DMCA infringement notice.
Finally, Escape's database records also provide evidence that the uploaded files were also streamed.
Beginning in 2007, Escape engaged UMG, Sony, and Warner—three of the plaintiffs in this action—in licensing discussions. Escape sought to enter into a license agreement with plaintiffs in order to use their sound recordings on Grooveshark. Tarantino Decl. ¶¶7, 31, 34, 38. However, none of the plaintiffs entered into a licensing agreement with defendants. During the discussions, the parties never discussed the issue of ongoing employee uploads of copyrighted material onto the Grooveshark network. Servodidio Reply Decl. in Supp. of MSJ ¶2, Ex. 1, Deposition of Tarantino (Q: "There never came a point during your negotiations with the labels that you told them . . . there were employees that were uploading and caching content." Tarantino: "It never came up."); Ex. 2, Deposition of UMG Corporative Representative Bryan Stone (Q: "In fact, Universal knew at this juncture that it was Escape that had been seeding the system to get it up and running; isn't that correct?" Stone: "No." Q: "Do you know if it was ever discussed between anyone at Universal and anyone at Escape? Do you know?" Stone: "That was not discussed").
The present litigation arose as a result of an earlier lawsuit by plaintiff UMG Recordings, Inc. ("UMG") against Escape. On January 6, 2010, UMG initiated an earlier action against Escape in New York state court (the "State Court Action") for common law copyright infringement of UMG's recordings that were created before 1972 and thus, are not subject to federal law. Reply Decl. of Servodidio, ¶4. The complaint included allegations relating to Escape's infringement of UMG's common law copyrights in its sound recordings by virtue of the uploading, reproduction, and distribution of UMG's copyright protected works.
In the State Court Action, UMG served discovery requests on Escape seeking, inter alia, information as to employee uploading of sound recordings.
UMG filed the instant action three months later on November 18, 2011, and the remaining plaintiffs joined this case less than one month later on December 15, 2011. In their complaint, plaintiffs only assert one cause of action against defendants: copyright infringement. Plaintiffs' claim only relates to the uploading of infringing files by Escape's employees and officers. Plaintiffs do not seek to hold defendants liable for infringement by users of the Grooveshark service in general.
In their amended complaint, plaintiffs named the instant defendants as well as the following former employees of Escape: Nicola Arabadjiev, John Ashenden, Chanel Munezero, Paul Geller, and Ben Westermann-Clark. On April 24, 2013, Plaintiffs entered into consent judgments against these individually named defendants permanently enjoining them from uploading infringing copies of plaintiffs' copyrighted works to the Grooveshark service.
Plaintiffs' filed their motion for summary for summary judgment on February 18, 2014; and their motion for sanctions for spoliation of evidence on February 19, 2014.
In conjunction with their motion for summary judgment, plaintiffs have also filed a motion for sanctions for the spoliation of evidence. Before considering the merits of plaintiffs' motion for summary judgment, the court will first consider plaintiffs' motion for sanctions. This is because the court's sanctions determinations directly relate to the evidence that the court will consider in its summary judgment analysis.
Plaintiffs have alleged that defendants knowingly destroyed three categories of evidence: (1) records that Escape's Chief of Technology Officer Joshua Greenberg uploaded infringing copyrighted sound recordings onto Grooveshark, (2) records of uploads (in addition to those described above,
Since the initial launch of Grooveshark in 2007, Escape has been fully aware of the threat of copyright litigation as well as the relevance of evidence reflecting the use of their service and related technical documents. For example, in a draft due diligence report from 2007, Escape expressly acknowledged that "to avoid legal actions by various organizations Grooveshark MUST secure" licenses from "Sony, BMG, EMI, Warner, and Universal" (i.e., plaintiffs in this action).
Moreover, by the end of 2008, plaintiffs' trade association, the Recording Industry of America, forwarded infringement notices to Amazon.com—the internet service provider that provided web hosting and other services to Escape—detailing the widespread copyright infringement taking place via Grooveshark.
Escape's general preservation obligations due to the distinct possibility of future copyright litigation took on additional significance when in January 2010, plaintiff UMG initiated the State Court Action. In connection with this action, in February 2010, UMG served document requests and preservation demands on Escape seeking production of: (i) "[d]ocuments reflecting use of the Grooveshark service by your employees, officers or directors"; and (ii) "all versions of all software (in all available forms, including source code, . . .) for the Grooveshark service, . . . as well as any historical versions of any such software. . . ."
Despite the existence of preservation obligations, plaintiffs contend that defendants destroyed the following relevant evidence.
Plaintiffs contend that defendants destroyed Greenberg's upload records during the pendency of the State Court Action.
As described in Dr. Horowitz's declaration, Escape maintained a database table called UsersFiles that contained a record of every file uploaded to Escape's central servers by each user. Horowitz Sanctions Decl. ¶10. This table contained the date/time of the upload, a serial number for the upload event, an identification number for the uploaded file, and the user's account number.
Greenberg received over thirty-nine DMCA notification letters from Escape for uploading 687 files to Grooveshark.
Servodidio Decl. at Ex. 1 (Greenberg Tr. at 518:23-519:6).
However, when Escape produced a copy of the UsersFiles table to plaintiffs, it did not contain any records associated with Greenberg's user account. Horowitz Sanctions Decl. ¶21 & Ex. 18. Plaintiffs requested that Escape produce any archived copies of Greenberg's uploading records and explain why his data was missing.
Given Escape's practices with respect to the creation and storage of upload data on the UsersFiles, Dr. Horowitz, plaintiffs' expert, concluded that defendants deleted the uploading records associated with Greenberg's account.
Second, plaintiffs contend that Escape deleted additional upload records from the UsersFiles table during the pendency of the State Court Action. It is unknown whether these additional uploads were from Escape employees.
During the State Court Action, Escape produced an Upload Report to plaintiffs in February 2011. The Upload Report contains records of 27 million uploads and submissions of files for uploading to the Grooveshark service through late January 2011. Horowitz Sanctions Decl. ¶25. The Upload Report is derived from the UsersFiles table and contains a subset of the fields from the UsersFiles table.
Based on a comparison of the Upload Report with the data from the UsersFiles tables produced by Escape in November 2013 during the course of the instant litigation, Dr. Horowitz confirmed that Escape permanently deleted records of over 320,000 files that appeared in the Upload Report.
Contemporaneous correspondence between Escape employees demonstrates that defendants deleted the upload records in early 2011: (i) Escape's Vice President of Engineering Jay Paroline deleted employee uploading records "by hand" from the database in April 2011; and (ii) in May 2011, Escape created a script called "deleter" to help purge the uploading records for specific user accounts more efficiently. Servodidio Sanctions Decl. at Ex. 21; Horowitz Sanctions Decl. ¶¶29-32.
Plaintiffs also allege that Escape failed to preserve over a year and a half of historical source code, relating to the operation of the Grooveshark server from its inception until October 2008. This time-period constituted the Sharkbyte, or P2P, era in Grooveshark's development.
Before addressing the substance of plaintiffs' claim, the court, relying upon Dr. Horowitz's expert report, provides a brief description of the use and importance of source code. Source code is a collection of instructions for a computer written by computer programmers.
Escape's first source code management system was called Subversion or "SVN."
In 2010, Escape produced a limited "snapshot" of source code stored in Escape's "SVN" source code management system to UMG in the State Court Action.
Dr. Horowitz explains the relevance of the missing source code in his declaration. He notes that while plaintiffs have obtained other evidence that definitively establishes the infringement of their works by defendants' employees, the deleted source code files and related data would have provided additional corroborative evidence regarding the functionality and development of the Grooveshark's infringing service during 2007 and 2008.
Courts have broad discretion to determine appropriate sanctions for discovery abuses under both Rule 37 of the Federal Rules of Civil Procedure and its own inherent powers.
The court's first inquiry is whether defendants had an obligation to preserve the relevant evidence. "The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation."
Since shortly after the launch of the Grooveshark service in 2007, defendants were aware that they may be subject to copyright infringement claims relating to the unlicensed uploading of plaintiffs' recordings onto Grooveshark.
After a court has found that a party had a duty to preserve the evidence that was destroyed, it must consider whether the party acted culpably in destroying the evidence.
Escape's deletion of the uploading records of Greenberg and other users was intentional and performed after Escape had received specific notice to preserve these records.
As for the destruction of Escape's source code, Escape also acted with the requisite culpability. In the State Court Action, Escape produced from its source code repository only one source code version used in the early period of Grooveshark development. Servodidio Decl. ¶20-21. After further discovery in 2013, Escape confirmed that it had failed to preserve any non-corrupt version of source code repositories including the "Web" repository. Servodidio Decl. ¶21. Escape explained that when its lease on a backup server used to store the relevant code expired several years ago, it chose not to preserve the source code.
Based on this evidence, it is clear that defendants acted with a culpable state of mind when it deleted Greenberg and other user upload information as well as the relevant source code. "Moreover, when evidence is destroyed in bad faith . . . that alone has been found sufficient to support an inference that the missing evidence would have been favorable to the prejudiced party, and thus relevant."
Having determined that the imposition of sanctions is warranted in this case, the Court must next determine the appropriate remedy. Tailoring an appropriate sanction lies within the sound discretion of the trial court and is to be assessed on a case-by-case basis.
Below, the court addresses the appropriate sanction for each of the three classes of despoiled evidence.
Plaintiffs request that the court enter a judgment finding that defendant Greenberg directly infringed upon plaintiffs' copyright protected sound recordings. Plaintiffs contend that but for Escape's spoliation, plaintiffs would have been able to irrefutably establish: (i) the total volume of copyrighted works uploaded by Greenberg; (ii) the specific names of each infringing file uploaded or otherwise distributed by Greenberg; (iii) the dates and times of each upload or distribution; and (iv) the ongoing distribution and exploitation of those files by Escape. Horowitz Sanctions Decl. ¶10. Plaintiffs request that the court find that Greenberg engaged in the willful infringement of at least 10,000 unique copyrighted works owned by plaintiffs. In support of this number, plaintiffs point to the following facts: (i) Greenberg ran a "seed point" from his personal computer which stored between ten and one hundred thousand files,
The court finds that Greenberg directly infringed plaintiffs' copyright protected recordings; however, the court does not agree with plaintiffs' request that it find 10,000 instances of infringement. As a point of reference, plaintiffs, as discussed below, present non-spoilated, or preserved evidence, of 224,000 employee uploads onto Grooveshark. However, plaintiffs have only established infringement claims for 4,053 recordings, or approximately 1.8% of the total. Thus, for the purposes of calculating the number of infringing uploads by Greenberg, the court applies this same percentage.
Here, the court accepts Dr. Horowitz's representation that defendant Greenberg uploaded 8,000 recordings to Grooveshark. Horowitz Decl. ¶18. 1.8% of 8,000 is 144. Accordingly, the court finds that plaintiffs are entitled to judgment as a matter of law that Greenberg illegally uploaded 144 of plaintiffs' copyright protected sound recordings onto Grooveshark.
Additionally, plaintiffs also request that the court enter a sanction relating to the streaming of Greenberg's uploaded files by Escape. In his analysis of the non-spoilated, record evidence, Dr. Horowitz found that on average, Escape streamed each one of plaintiffs' illegally uploaded sound recordings 21,000 times. Horowitz SJ Decl. Ex. I. Plaintiffs request that the court apply Dr. Horowitz's conclusions to the Greenberg uploads and find that Escape streamed each of Greenberg's illegally uploaded sound recordings 21,000 times. The court agrees.
Plaintiffs request that the court enter a judgment finding that Escape employees infringed an additional 100,000 unique copyrighted works by uploading these sound recordings onto Grooveshark. As discussed above, the Upload Report contained records of over 320,000 additional uploads, which Escape purged from its database through a combination of both automatic and manual deletion. Horowitz Sanctions Decl. ¶27-28. These records represent nearly 30% of the files uploaded by Escape's users during a time period when there is evidence that Escape repeatedly directed employees to upload files to Grooveshark.
Presented with these facts, plaintiffs request that the court enter a judgment finding that Escape employees directly infringed at least 100,000 of plaintiffs' copyrighted sound recordings by uploading copies of these works to Grooveshark. Once again, the court agrees with plaintiffs' general argument but disagree with the number proposed by plaintiffs.
The court assumes that employees uploaded 100,000 of the 320,000 deleted files. However, plaintiffs have assumed that all of these uploads constitute original, copyright protected sound recordings that belong to them. Thus, once again, for the purposes of calculating the spoilated, infringing sound-recordings, the court only finds that plaintiffs are entitled to 1.8% of the total. 1.8% of 100,000 is 1,800. Accordingly, the court finds that plaintiffs are entitled to judgment as a matter of law that Escape employees illegally uploaded 1,800 additional files to Grooveshark.
Moreover, as it did above,
Finally, plaintiffs request that this court preclude Escape from benefitting in any manner from Escape's failure to preserve source code. In light of Escape's spoliation of the relevant source code, the court finds that defendants are precluded from raising one of its substantive defenses to plaintiffs' motion for summary judgment.
In their opposition to plaintiffs' motion summary judgment, Defendants contend that it is possible that prior to 2008, or during the Sharkbyte era of Grooveshark's development, that employees might have scanned but not uploaded some of the infringing works onto the UsersFiles table. Defendants allege that "it is not possible to tell which records from the Sharkbyte era contained in this data table represent scans, in which event no copy of an audio file was made (and thus no infringement could have occurred), and which represent uploads, in which copying did occur." Def. Opp. to Plt. MSJ, pp. 32-33.
Plaintiffs, relying upon the declaration of Dr. Horowitz, contend that the missing source code would have disproved this argument advanced by defendants in their opposition papers. In his declaration, Dr. Horowitz explains that the missing source code would have provided important information with regard to the functionality and development of the Grooveshark service during 2007 and 2008, and more specifically, to the upload of music onto Grooveshark. Horowitz Sanctions Decl. ¶¶40-43. Dr. Horowitz contends that the deleted source code would have provided further corroboration that by August 2007, Escape modified the Sharkbyte software to upload—and not scan—all of the songs available on the Grooveshark service to the Central Music Library.
Plaintiffs request that defendants should not be able to benefit from any potential uncertainty resulting from the deletion of the source code. The court agrees. Accordingly, the court prohibits defendants from raising this defense to plaintiffs' motion for summary judgment.
In their complaint, plaintiffs assert a claim for copyright infringement. Plaintiffs allege that defendants are liable for both direct and secondary infringement of plaintiffs' copyrights. Plaintiffs allege that there is a record of additional, non-spoilated evidence that supports their claims. The court now turns to these contentions.
A motion for summary judgment must be granted if the moving party shows that "there is no genuine issue as to any material fact" and that it "is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party.
Before the court addresses the substance of plaintiffs' copyright claims, the court must first address defendants' objection to the admissibility of a report by Audible Magic Corporation—a software vendor—on which plaintiffs and their expert, Dr. Ellis Horowitz, rely to establish that the files uploaded by Escape's employees to Grooveshark correspond to plaintiffs' copyrighted sound recordings. The court must evaluate evidence for admissibility before it considers that evidence in ruling on a summary judgment motion.
Plaintiffs retained Dr. Ellis Horowitz, professor of computer science and electrical engineering at the University of Southern California, to undertake the following four tasks: (1) analyze the operations of the Grooveshark.com music service owned and operated by defendant Escape, (2) identify whether Escape employees uploaded music files to Grooveshark, (3) provide information that can be used to verify whether the music files uploaded by Escape employees are copies of plaintiffs' copyright sound recordings, and (4) calculate the number of times Grooveshark users have streamed employee-uploaded files. Horowitz Decl. ¶2.
Dr. Horowitz reviewed the data produced by Escape and identified over 224,000 employee uploads from 100 different employee accounts.
Plaintiffs and Dr. Horowitz relied upon a third party, Audible Magic Corporation ("Audible Magic"), to conduct the "audio fingerprinting" analysis. Audible Magic uses content recognition software to create an audio fingerprint or, a mathematical representation, of the way each recording produced by defendants sounds to the human ear.
The files that Dr. Horowitz identified as employee uploads were sent to Audible Magic for identification via their usual process of creating digital fingerprints for these files and then searching their database for matching fingerprints.
Defendants allege that Audible Magic is an expert witness and that plaintiffs' failure to both disclose Audible Magic as an expert witness and to provide an accompanying expert witness report until after discovery had closed violates Federal Rule of Civil Procedure 26(a)(2). Along these lines, Federal Rule of Civil Procedure 37(c)(1) provides that "a party that without substantial justification fails to disclose information required by Rule 26(a) . . . is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or non a motion any witness or information not so disclosed." Accordingly, defendants request that the court exclude the result of Audible Magic's analysis from consideration in connection with plaintiffs' motion for summary judgment. Defendants argue that they were prejudiced by plaintiffs' failure to disclose Audible Magic as an expert witness and provide an expert report, because they were subsequently unable to serve discovery requests on Audible Magic and conduct depositions on Audible Magic employees. In particular, defendants allege that they could not investigate the substance and reliability of Audible Magic's analysis.
In their filings, plaintiffs contend that Audible Magic is not an expert witness and the even assuming that it is an expert, that defendants were not prejudiced by Audible Magic's report. The court need not determine whether Audible Magic is an expert for the purposes of Rule 26 disclosure. Instead, even assuming that Audible Magic is an expert, the court finds that Audible Magic's report and conclusions are admissible, because defendants were neither prejudiced by the timing of plaintiff's disclosure of Audible Magic's report, nor by the substance of Audible Magic's actual report.
First, in accordance with the court's Amended Pretrial Scheduling Order, plaintiffs produced a timely and detailed expert report from Dr. Horowitz on December 6, 2013, almost two months prior to the close of fact and expert discovery on January 20, 2014. Servodidio Reply Decl. ¶14. In the report, Dr. Horowitz identified hundreds of thousands of audio files uploaded by Escape employees to Grooveshark, and confirmed that Audible Magic's results could be used to verify that the employee-uploaded files corresponded to plaintiffs' copyright protected material.
Second, any alleged prejudice alleged by defendants with regard to the timing of their receipt of the Audible Magic reports is largely attributable to defendants who delayed in providing plaintiffs with usable productions of audio files until mid-November 2013. Servodidio Reply Decl. ¶11. Defendants then provided supplemental productions that continued until early January 2014, which was after the formal completion of discovery.
Third, defendants chose not to depose Dr. Horowitz or a representative from Audible Magic as well as not to serve discovery requests upon these parties. Initially, defendants informed plaintiffs that they intended to depose Dr. Horowitz concerning his expert reports, and the parties scheduled a date for this deposition to take pace in Los Angeles on January 22, 2014.
Finally, it is important to note that Audible Magic is a vendor that has been repeatedly used in entertainment copyright cases and thus, its methods are well-known to those within the entertainment industry.
Accordingly, the court does not accept defendants' representations of prejudice resulting from plaintiffs' failure to disclose Audible Magic as an expert witness. The court finds Audible Magic's report to be admissible.
Defendants rely on four affirmative defenses as reasons why the court should not enter summary judgment in favor of plaintiffs on their copyright infringement claims: (1) equitable estoppel, (2) laches, (3) waiver, and (4) expiration of the statute of limitations. For each of these four defenses, the crux of defendants' argument is that the court should not grant summary judgment because there are factual issues as to whether plaintiffs' delay in beginning this action precludes plaintiffs' claim. The defendants have the burden of proof to establish a factual basis for all of their affirmative defenses in opposition to a motion for summary judgment.
The statute of limitations for copyright infringement claims is three years. 17 U.S.C. § 507(B). The Court of Appeals has held that copyright infringement claims accrue when the copyright holders discover, or with due diligence should have discovered, the infringement giving rise to the claim.
Defendants allege that plaintiffs knew of Escape's alleged infringement beginning in 2007. In support of this claim, defendants allege that during their licensing discussions, plaintiffs consistently advised defendants that they possessed federal copyright infringement claims based on Escape's conduct dating back to the 2007 launch of its Sharkbyte system. Tarantino Decl. ¶31, 43. Defendants contend that it is immaterial whether plaintiffs' specifically knew that certain of those claims might rest upon uploads by Escape employees.
While plaintiffs and defendants engaged in licensing discussions, during these meetings, plaintiffs never learned that defendants' employees were engaged in uploading copyright protected material onto Grooveshark. Servodidio Reply Decl. ¶2. During his deposition, defendant Tarantino acknowledged that during the course of the meetings, the issue of employee uploads "never came up" in discussion.
Ultimately, it was not until the parties were engaged in discovery with respect to plaintiff UMG's State Court Action that plaintiffs learned of Escape's employee uploads. Servodidio Reply Decl. ¶5. It was at this time, in August 2011, that defendants first disclosed its internal employee account information and database records.
Along these lines, defendants cannot set forth a claim for equitable estoppel, laches, or waiver. All three of these defenses are predicated upon plaintiffs waiting, or delaying, to bring a claim against defendants. As discussed above, plaintiffs promptly filed suit against defendants three months after learning of the employee uploads. Accordingly, the court finds that all of defendants' affirmative defenses must fail as a matter of law.
The court now turns to considering the substance of plaintiffs' copyright claims. Plaintiffs allege that defendant Escape is liable for both direct and secondary copyright infringement. Plaintiffs claim that defendant Escape is liable for direct copyright infringement under the theory of respondeat superior. Plaintiffs set forth three independent bases for secondary copyright infringement: (1) vicarious liability for infringement, (2) inducement of copyright infringement, and (3) contributory copyright infringement.
Finally, plaintiffs allege that defendants Tarantino and Greenberg, as corporate officers for Escape, are personally liable for all of the infringing employee uploads. Moreover, plaintiffs claim that Tarantino and Greenberg uploaded copyrighted sounds recordings to Grooveshark and are therefore also liable as direct infringers.
To establish a claim of copyright infringement, a plaintiff must establish (1) ownership of a valid copyright and (2) unauthorized copying or a violation of one of the exclusive rights afforded copyright owners pursuant to the Copyright Act.
It is undisputed that plaintiffs own the copyrights to the subject sound recordings. Defendants have not challenged the validity of plaintiffs' copyrights. It is also undisputed that plaintiffs did not approve of the reproduction, distribution, and public performance of the works in the suit. Courts have found that the unauthorized reproduction. distribution, and public performance of sound recordings via the internet violates the Copyright Act.
Escape's database records definitively establish that their employees uploaded copies of plaintiffs' sound recordings to computer servers owned or operated by defendants. SUF ¶3-8. As explained by Dr. Horowitz in his declaration, plaintiffs identified all of the specific files uploaded by Escape's employees using the same methodology that Escape followed to determine uploaders of infringing files subject to DMCA takedown notices. Horowitz Decl. ¶58; SUF ¶6. More specifically, in order to identify the user who uploaded the file to Grooveshark, defendants selected from the database—the UsersFiles tables—the earliest record for the submission of the file that is implicated by the DMCA notice.
Furthermore, plaintiffs established that the infringing employee uploads correspond to plaintiffs' copyrighted works.
Moreover, in order to address the employee uploads for which Escape did not produce audio files, plaintiffs also analyzed the metadata stored by Escape, which was associated with the employee-uploaded files, to confirm that the uploaded files corresponded to plaintiffs' copyrighted work. SUF ¶8; Horowitz Decl. ¶¶67-68. Based on this comparison, plaintiffs determined that an additional 377 employee-uploaded files match plaintiffs' works. Wright Decl. ¶6.
Based upon this analysis, plaintiffs have established that defendants illegally uploaded 4,053 of plaintiffs' copyrighted sound recordings. Moreover, the court must add to this total the number of illegal uploads that it found in deciding plaintiffs' motion for sanctions for the spoliation of evidence. The court found that plaintiffs were entitled to a finding of 1,800 illegal uploads and 144 illegal uploads based upon defendants' respective deletion of employee upload files and defendant Greenberg's upload files.
Finally, Escape's database records also confirm that it has streamed, or publicly performed, copies of plaintiffs' copyrighted sound recordings at least 36 million times. SUF ¶11; Horowitz Decl. ¶¶73-78. Each time Escape streamed one of plaintiffs' song recordings, it directly infringed upon plaintiffs' exclusive performance rights.
In support of these claims, plaintiffs have created a substantial and largely uncontroverted record of evidence. Confronted with this body of evidence, defendants have chosen a purposeful litigation strategy. As discussed above, defendants have primarily mounted procedural and evidentiary challenges to plaintiffs' copyright infringement claims. Defendants devote very little of their summary judgment memorandum to actually engaging with the substance of plaintiffs' copyright claim. At the end of their brief, defendants raise two substantive challenges, contending that there are factual issues that preclude summary judgment.
First, defendants contend that there are factual questions surrounding the employee uploads to Grooveshark that plaintiffs rely upon in their claims for copyright infringement. Defendants contend that it is possible that prior to 2008, or during the Sharkbyte era of Grooveshark's development, that employees might have scanned but not uploaded some of the infringing works onto the UsersFiles table. Defendants allege that "it is not possible to tell which records from the Sharkbyte era contained in this data table represents scans, in which event no copy of an audio file was made (and thus no infringement could have occurred), and which represent uploads, in which copying did occur." Def. Opp. to Plt. MSJ, pp. 32-33.
However, as discussed above in addressing plaintiffs' motion for sanctions, the court has precluded defendants from raising this defense. Notably, defendants deleted the "Web" source code, which would have provided important information with regard to the functionality and development of the Grooveshark service during 2007 and 2008, and more specifically, to the uploading of music onto Grooveshark. Horowitz Sanction Dec. ¶¶40-43. Defendants cannot benefit from any ensuing uncertainty resulting from the deletion of the "Web" source code. Accordingly, defendants are precluded from raising this defense to plaintiffs' motion for summary judgment.
Second, defendants advance a much more limited, albeit successful challenge to plaintiffs' motion for summary judgment. Defendants have identified 377 uploads that occurred outside of the confirmed employment dates of the relevant employees. Hostert Decl. ¶32, 33, Ex. A. In this analysis, defendants compared the dates associated with UsersFiles entries for the works-at-suit against the employment dates obtained from records maintained in the usual course of business by Escape's Human Resources department.
Having determined that employee uploads of the works-in-suit to Grooveshark violated plaintiffs' copyrights, the court turns to whether Escape is directly and/or secondarily liable for that infringement. Direct liability requires "volitional conduct" that "causes" the reproduction or distribution to be made.
For the reasons stated below, the court finds that defendants directly and secondarily infringed plaintiffs' copyrights.
In order to be found liable for direct infringement, a defendant must have engaged in some volitional conduct sufficient to show that it actively violated one of plaintiffs' exclusive copyrights.
Here, the court finds that plaintiffs have established a factual record demonstrating defendants' direct infringement of plaintiffs' copyright protected works. Defendants engaged in the required volitional conduct necessary to support a finding of direct infringement. More specifically, defendants instructed their employees to repeatedly upload substantial volumes of popular copyrighted music files to Grooveshark. SUF ¶¶15, 21, 26. For example, in one company-wide forum post in 2007, Greenberg provided the following instructions to Escape employees:
Similarly, defendant Tarantino sent the following email to all employees and officers of Escape:
Along these lines, numerous officers and employees of defendants testified that they received these instructions and uploaded popular music to Grooveshark at the direction of defendants.
Accordingly, as plaintiffs' have submitted uncontroverted evidence that defendants instructed their employees to upload copyright protected music onto Grooveshark, the court grants plaintiffs' motion for summary judgment on its claim for direct copyright infringement of its distribution, reproduction, and public performance rights.
"The Copyright Act does not expressly render anyone liable for infringement committed by another."
A defendant is liable for vicarious copyright infringement if it profits from direct infringement while declining to exercise a right to stop or limit it.
The first element of the test for vicarious liability is met if the plaintiff demonstrates that the defendant had the ability to supervise or control the infringing activity.
The second element of the vicarious infringement test requires showing a causal relationship between the infringing activity and any financial benefit that the defendant gains.
Here, the undisputed record evidence demonstrates that Escape received a financial benefit from the infringing employee uploads, which served as a draw for Grooveshark users.
Accordingly, as the undisputed facts demonstrate that Escape had the ability to control its employees infringing activity and that Escape continues to directly benefit from the copyright infringement, plaintiffs' motion for summary judgment on their claim for vicarious copyright infringement is granted.
In order to establish a claim for the inducement of copyright infringement, plaintiffs must demonstrate that Escape "(1) engaged in purposeful conduct that encouraged copyright infringement with the (2) intent to encourage such infringement."
Here, as described above, Escape and its executives directed their employees to engage in the uploading of digital music files to Grooveshark.
Accordingly, the court grants plaintiffs' motion for summary judgment on their claim of inducement of infringement.
A defendant may be held liable for contributory copyright infringement if, with knowledge of the infringing activity, the defendant materially contributes to the infringing conduct of another.
Here, as discussed above, the record clearly establishes that Escape had actual knowledge that its employees were uploading copyright-protected files onto Grooveshark. Escape was actively encouraging this very behavior.
Moreover, the record evidence also establishes that Escape materially contributed to the infringing conduct of its employees. Escape executives actively directed, encouraged, and condoned the company-wide infringement through instructing employees to upload copyrighted sounds recordings and through creating a Central Music Library to store and stream copies of plaintiffs' works. SUF ¶¶ 15-22, 24-27, 78-82, 84-85, 87, 90. Additionally, senior Escape officers personally participated in the copyright infringing activity and made their home internet connections available to increase the number of uploaded files.
Accordingly, as the record evidence makes clear that Escape knew of and materially contributed to the infringing employee uploads, the court grants plaintiffs' motion for summary judgment on their claim for contributory copyright infringement.
Plaintiffs allege that Escape's co-founders, defendants Tarantino and Greenberg, are jointly and severally liable for Escape's direct and secondary copyright infringement.
It is well settled in this Circuit that "[a]ll persons and corporations who participate in, exercise control over, or benefit from the infringement are jointly and severally liable as copyright infringers."
Here, defendants Tarantino and Greenberg satisfy the criteria for corporate officer liability. Tarantino and Greenberg are the co-founders of Escape. Tarantino is the Chief Executive Officer and Greenberg is the Chief Technology Officer. Together, Tarantino and Greenberg manage all aspects of Escape's business. They both directed the infringements at issue in the present litigation by: (1) creating a business model that was based upon the unlicensed sharing of copyright protected material, see SUF ¶¶ 2, 14-15, 65, 91-95; (2) sending written instructions to the entire company requiring employees to operate "seeding points" so that they could launch the Grooveshark P2P Network,
Accordingly, the court finds that Tarantino and Greenberg are jointly and severally liable with Escape for direct and secondary copyright infringement.
Finally, the court also finds that defendants and Greenberg are direct infringers of plaintiffs' work based on their uploads of copyrighted files to Grooveshark. As discussed above, a copyright holder's exclusive right of distribution and reproduction encompasses the uploading and transferring a copyrighted work.
Here, Tarantino and Greenberg each uploaded copies of plaintiffs' copyrighted works to Grooveshark. Defendants produced records demonstrating that Tarantino personally uploaded copyrighted sound recordings to Grooveshark. SUF ¶108. Additionally, as discussed above, due to defendants' deletion of Greenberg's upload records, the court has entered a judgment finding that Greenberg uploaded 144 sound recordings onto Grooveshark.
Accordingly, the record evidence reveals no genuine issue of material fact as to any of plaintiffs' theories of direct or secondary liability for copyright infringement on the part of defendants Escape, Tarantino, and Greenberg. The court finds that plaintiffs are therefore entitled to judgment as a matter of law on all of its claims except for the employee uploads that took place outside the employees' dates of employment.
The Clerk of this Court shall close all open motions in this matter and enter judgment in favor of the plaintiffs on all causes of action. The parties shall submit supplemental briefing of no more than ten (10) pages and proposed orders on the scope of permanent injunctive relief within twenty-one (21) days of the date of this Opinion and Order.
SO ORDERED.
