The court has set a conference for May 8 for remaining issues and damages. Grooveshark will be able to appeal the judgment.
EMI, now owned by Universal Music Group, first sued Escape in 2009. That litigation resulted in a settlement and a distribution agreement. In 2012, EMI gave Escape notice of breach of contract, terminated the contract and sued the company for copyright infringement for utilizing its content without the proper licenses. A judge from the U.S. District Court in Manhattan ruled against Escape in summary judgment in September.
Lacking a license for EMI's content, Escape claimed protection against infringement claims under the DMCA safe harbor. The provisions of Section 512 shelter digital services from the infringing activities of their users as long as certain conditions are met. While Grooveshark does license content from some small labels, it has a YouTube-like model that also allows users to upload content to be streamed by other users.
SiriusXM Copyright Battle: What Does the Latest Ruling Mean for Digital Music?
But Judge Nathan found Escape's practices did not entitle the company to a safe-harbor defense. Agreeing with recommendations of Magistrate Judge Sarah Netburn, Judge Nathan found that Escape's repeat infringer policy did not meet the conditions for eligibility spelled out in Section 512(i). Escape had an insufficient recordkeeping system, failed to terminate repeat infringers, and "actively" prevented copyright holders from collecting information needed for the takedown requests required by the DMCA.
Grooveshark provided a statement to Billboard outlining the company's plans to implement three changes to its policies and practices -- a three-strikes progressive response policy, a pre-screening tool for rights holders and the creation of an additional independent record of repeat infringers -- the goal of which are to bring the company closer to meeting the conditions of eligibility for DMCA safe harbor provisions. The full statement can be read at the Grooveshark blog.
Escape also attempted to exclude pre-1972 recordings from the ruling. It argued Judge Netburn erred in holding that aspects of copyright infringement under New York and federal law mirror each other. (There exist only state laws, not a federal law, governing pre-1972 recordings.) Judges Nathan and Netburn disagreed, with Judge Nathan citing the recent decision in Flo & Eddie, Inc. v. Sirius XM Radio, Inc that found "the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant [pertaining to something that attaches] to common law copyright in such a recording."
An RIAA spokesperson noted three aspects of the ruling in a statement to Billboard. “This was a strong decision – it again confirmed Grooveshark’s illegal business model and its ineligibility for the DMCA’s safe harbor. It also made clear that pre-1972 recordings enjoy state law copyright protection.”