Some of the biggest companies in the music industry, UMG, Capitol Records, Universal Music, Polygram, and Rondor, (collectively “UMG”) have banded together to bring a copyright infringement lawsuit to stop distribution of copyrighted song to prison inmates. Keefe Group and Centric Group sell “care packages” of various items that family members and friends can send to inmates who are incarcerated in correctional facilities. Many of these care packages include mixtapes, containing unauthorized copyrighted material. Keefe purchased the mixtapes from Ari’s Mixtapes, an online music retailer. UMG claims that Defendants gave away the music as a “loss leader,” enticing more buyers to their site where they could purchase more profitable items. UMG is asking for $150,000 per song in damages plus legal fees and costs.
The case sounds simple enough; a clear case of infringement, which seems to be the consensus on the new media and blogs. However, we are only getting on side of the story; the one based on UMG’s complaint filed with the California Court. The Defendants have not filed an answer yet. So what is really going on in this case? Can we read between the lines to discover how the Defendants might respond? If Defendants are infringers, are their actions worth $150,000 per song?
A Short Copyright Primer
Before we start analyzing the case details, let’s make sure everyone understands the basics of copyright. First, creative works receive copyright protection as soon as they are “fixed in a tangible medium,” like paper or a camera’s memory. Music, unlike visual arts, often have two copyrights, one for the recorded music, and one for the composition. When a composer writes a song for a singer or band, the composer maintains a copyright for the song, such as the words and musical arrangement, but the performer has a copyright in the recording.
Copyright holders have the exclusive right:
- to reproduce the copyrighted work in copies or phonorecords;
- to prepare derivative works based upon the copyrighted work;
- to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
- in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
- in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
- in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
These rights can be retained by the author or given away to other people or companies. In the music industry, performance and authorship rights are often given away to Record companies that help finance and promote the music. While technically, the copyrights are retained by the performers and composers, they often have no say in how their music is copied, distributed or performed. The music companies make those decisions and pay the musician’s royalties, although self-publishing through new Internet-based distribution channels is on the rise. In this case, the exclusive rights to the music at issue are held by the UMG, which can stop anyone from violating the exclusive rights mentioned above.
Also, copyright is basically a strict liability law, or a “no fault” law, which means that an intent is not required. If a copyrighted work is legitimately purchased, but the seller had not right to sell the work, the purchaser would be an infringer if they were to violate any of the exclusive rights. The fact that the person had no idea that the work was stolen when they bought it is not a defense. However, I say, “basically” strict liability because infringers can avoid liability under certain conditions, such as if the use is a” fair use,” yet still be an infringer. Lastly, copyright registration with the U.S Copyright Office is not required, nor does a work require a copyright notice or name affixed to the work. The exclusive rights are the author’s regardless of registration. However, registration does provide certain benefits, including larger monetary awards in some cases and potential to have the legal fees, and courts costs paid for as well.
UMG Case analysis:
Before we start the analysis, understand that we are undertaking this task without all the information. We only have what is in the filed UMG Complaint, which attempts to provide the best story for UMG to make its case. The story will enhance the good facts and leave out the one that may be detrimental to their case. The story will be written so that the plaintiff look great and the defendant look guilty. We can read between the lines a bit but since we don’t have Keefe’s response, our analysis may be off the mark.
The question, we will try to answer, is whether the Keefe / Centric and Ari’s Mixtapes violate UMG’s exclusive rights and if so, what might the use as a defense?
UMG claims that Defendants have, without permission, reproduced, distributed, and prepared derivative works based on a substantial number of copyrighted songs owned by UMG, including recordings featuring James Brown, Eminem, Tupac Shakur, LL Cool J, Nas, and Mary J. Blige.
Let’s look at the Defendants separately. First, Ari’s Mixtapes music site is a very popular mixtape sites which has been around since January, 2006, according to the arismixtapes.com domain registration information. Mixtapes have a huge underground following. People make them and trade them like they were art. The music is often changed so much that the original songs are hardly recognizable. How much the music is changed on the Cd’s in the prison care packages is unknown but, if a copyrighted song is used without permission, it is a copyright infringement. The record companies haven’t shut Ari’s down yet, so how are they getting around the standard licensing agreement for selling music. Part of the answer is in Ari’s disclaimer on the website:
Arismixtapes.com does not sell bootlegged or unofficial materials of any kind. When you make a purchase from Arismixtapes.com you agree that you are not purchasing the right to copy or redistribute any material that you purchase. All of the mixtape sales done by Arismixtapes.com are solely for the CD covers and artwork. All of the media material used on these CDs was supplied directly to Arismixtapes.com by various record labels and artists to be used by the DJ/Artist/Label solely for promotional use only. These CDs are provided to all customers of Arismixtapes.com free with purchase of the covers and artwork. Thus, all mixtape sales conducted by Arismixtapes.com are solely for the inserts and the media that constitute each mixtape, as media is solely for promotional use only as directed by the various labels and artists.
In some cases, record companies distribute promotional only copies of songs, which are given to people like DJs to play at various clubs. They are free to play, but cannot be sold. This is the workaround that Ari’s business runs under. Ari’s Mixtapes doesn’t sell music. They give away promotional versions of the music on a physical CD, which they buy and give away for free to the customer. What customers are buying is the Cover art and liner notes. Ari’s is only selling the artwork; how the purchaser of the artwork uses the songs is not Ari’s responsibility; they explain that they should be only used for promotional purposes, but they cannot police their customers after the product is sold.
Unfortunately, for Ari’s, that reasoning is based more on societal norms than the law. They are the same types of arguments used by Torrent sites; “we are just a directory. We don’t determine the content, and we can’t tell people what to do with it.” But courts have rejected that argument saying that torrent sites are providing a platform for infringement. Unlike the torrent sites which cut deeply into record company profits, underground mixtape sites like Ari’s don’t generate enough income to warrant a lawsuit, and in many cases. That doesn’t mean Ari is not an infringer though. Ari’s was likely tolerated by the recording industry but when Keefe’s, a major corporation, started using Ari’s Mixtapes for their own promotional purposes, a line was crossed that warranted action. As well, Keefe has deeper pockets, so there is more money to be gained.
Ari’s may have thought that the mixtapes fell under the fair use doctrine. Fair use is a difficult topic so if you want to know more, here is a fair use article to review. But in short, if the new work is transformative so that it is different enough from the original that it will have a new and different audience, then it may be fair use. That argument fails, however, because even if the work is a fair use, Ari’s is not the one who created it. They buy their mixtapes from others.
As for Keefe / Centric, It is difficult to tell from the Complaint, how much they knew. Was Keefe buying, what they thought were, legitimate mixtapes? Ari’s homepage claims that it has “The Widest Selection Of Official Mixtapes. . . 100% Official, No Bootlegs.” Certainly, even a short review of Ari’s website terms and condition would have alerted Keefe to the potential problems. As well, they may have thought that they were following Ari’s method by not charging for the music. However, Keefe’s was using them as a giveaway, a “loss leader,” to get the new client’s to buy other, more profitable goods the company sells. That tactic is less defensible. There is not enough information to speculate too much. However, UMG is going after Keefe (and Ari’s) for willful infringement, which is difficult to prove. The attorneys would not have gone down that road without a good argument to back it up.
Willful means “with intent,” knowing they were infringing. The general argument seems to be that that everyone knows that copying music is illegal. Ari claims to be an expert on music, so the companies must have some idea that they were doing something illegal. Even Ari’s disclaimer shows some level of intent.
Remember though, copyright infringement does not require intent; it is a strict liability law. So why does that matter here? If an intent can be proven in a case in which statutory damages are available, then the penalties are much higher.
Statutory damages are available if the copyright holder registers the work with the Copyright Office prior to discovery of the infringement, or within three months of publication. UMG and other large media companies generally register their music catalogs and so the companies can claim statutory damages. Under the Copyright Act, statutory damage awards range from $750-30,000 per infringement. On the other hand, willful infringement has a maximum penalty of $150,000 per infringement. Legal fees will also be awarded to the plaintiffs if they win. The potential for much higher penalties will put UMG in a better position when negotiating terms of a settlement.
Like most copyright infringement cases, the odds that this case will go to trial is very small. UMG will make their case, Defendants will make their counter arguments, and then the two will trade documents and battle for position. Once the discovery process is under way, depositions are being taken, and important documents are revealed, each side will know the strength of their positions. That’s when we can expect settlement talks to commence. Unfortunately, settlements are rarely public knowledge. Neither side wants anyone to know what they are willing to pay in case they are in another similar lawsuit. It might play out differently the next time. So we may never know the final results. For now, any ideas on how the case may differ from our analysis will depend on new factual details that may come in the Defendant’s answer.
If you have any comments or or just want to talk about mixtapes, please leave your comments below.