The story of David and Goliath is a well-known, time-honored tale. But what about the story of Goliath versus Goliath? This is exactly the type of legal battle brewing between Amazon.com and the “Big 4” music labels – Universal Music Group, Sony Music Entertainment, Warner Music Group, and EMI.
In March of this year, Amazon sent vibrations across the digital music world when it launched its Amazon Cloud Drive service – without having first obtained music licenses. The Big 4, believing Amazon is illegally retransmitting copyrighted content without their permission, are incensed; Amazon, however, does not believe licenses are necessary to maintain its Cloud service and so it proceeded without them. Amazon Cloud Drive is akin to a personalized online “locker” which allows users to upload their files, namely digital music, to the Cloud on Amazon’s website. The user is then able to remotely access any file in the Cloud from other computers or devices, including Android phones and the iPad. The main draw of Amazon Cloud is that it enables users to listen to their music wherever they go – without lugging around an external hard drive, or purchasing duplicate music files.
In today’s rapidly changing and ever-evolving digital age, a company’s ability to be the first to market a product or service has colossal rewards in terms of garnering large market share loyalty and the billions of dollars in revenue that comes with it. Take Apple for example. Apple’s iTunes and iPod hold an 83% and 73% market share on the digital music downloading and mp3 player markets respectively. This is largely due to the fact that Apple was the first company to offer a comprehensive music downloading service and corresponding mp3 player nearly a decade ago. By betting that its Cloud service would not require any new licenses to operate, Amazon became the first major company to unveil a cloud service to customers – a move it hopes will allow it to capitalize on the digital cloud market share and give Apple a run for its money in the digital music business (Apple’s own iCloud is set to unroll later this fall after Apple obtains updated music licenses to operate the service). But, will Amazon’s Cloud start free-fallin’ when stacked against the powerful hand of the law?
A decade ago, in MP3.com v. Universal Music Group, a federal district court judge in New York found that MP3.com willfully violated copyright owners’ rights by operating an online digital music locker. MP3.com, like Cloud, gave users access to an online music database available for streaming play. A user would insert a CD into their computer and MP3.com would match the file to a master copy in its database and then allow the user to stream the file. Because users were not actually required to upload the file, only verify that they owned it by inserting the necessary CD, MP3.com was in essence allowing millions of users to stream the same master copy of a song file over and over. The court held that MP3.com was guilty of copyright infringement by offering such a service without a license.
Although Amazon Cloud is essentially providing the same digital music locker as MP3.com, its technical operation may yield one vantage point in distinguishing itself from MP3.com before a court of law. Unlike MP3.com, Amazon Cloud requires the user to individually upload each file into their cloud in order to access it. Further, rather than allow users access to a master copy in the database, the Cloud’s Terms of Usage provide that a unique copy of each person’s individual file will be stored on the server. Though it may be cumbersome for Amazon’s servers to store millions of copies of the same file for each user, this operational technicality benefits Amazon Cloud’s legal position.
Effectively, Amazon Cloud acts as a passive, intermediary service that allows users to shift when and where they play back their music. This may bode well legally for Amazon Cloud. When a person purchases a digital music file from iTunes or Amazon’s Music Store, the user is allowed to use that file for personal and non-commercial purposes. Amazon argues that the Cloud merely provides users with increased personal access to their media by allowing no-hassle access to music on different devices. Courts have held that space-shifting (also known as format-shifting) is permissible under copyright law. Space-shifting allows the owner of a media file to convert the media from one format to another. It occurs, for example, when a user inserts a CD into a computer and copies the files to the hard-drive, thus shifting the format from the physical CD-rom file to a digital mp3 file.
In 1999, the Ninth Circuit Court of Appeals, in Recording Indus. Ass’n of Am. v. Diamond Multimedia Sys., Inc., held that the transfer of a user’s files from the user’s hard drive to a portable mp3 player constituted a valid application of space-shifting. The court explicitly stated that “such copying is a paradigmatic non-commercial personal use.” Space-shifting, however, has been rejected by courts in some circumstances. In the aforementioned MP3.com case the court rejected space-shifting because users were given streaming access to a single master derivative file. Likewise, in A&M Records v. Napster, Inc,. the court struck down space-shifting because, as applied, it allowed the file to be stored in an electronic database where it could be easily copied and downloaded by other users, thereby infringing on copyrights. Courts, therefore, were not rejecting the idea of space-shifting, but rather were striking it down when used to improperly infringe on the rights of copyright owners.
However, Amazon Cloud is not format-shifting per se. Rather, it provides a passive interface for the user to stream the format to a different location. This type of format-shifting which utilizes the internet to stream a user’s unique file between remote devices has become known as place-shifting. While no court has ruled on the legality of place-shifting, Amazon Cloud can make a strong argument by analogizing itself to the space-shifting upheld by the Ninth Circuit in Recording Indus. Amazon Cloud merely allows space-shifting to occur remotely in a different place.
Moreover, since Amazon Cloud requires the user to upload his or her own files and stores a unique copy of those files in its database, Amazon can legally distinguish itself from the MP3.com music locker. Further, the fact that users are not allowed to openly share the contents of their Cloud with other users, that files are not stored on an open database where they can be easily copied and that Amazon limits a user’s Cloud access to no more than eight devices, not only allows Amazon to distinguish itself from Napster and other peer-to-peer file sharing services, but demonstrates Amazon’s willingness to protect copyright owners. In fact, the Cloud is primarily being marketed as a way for user’s to upload and access legally purchased media files. Although the Cloud cannot currently distinguish between whether a user’s uploaded files were legally or illegally acquired, the Digital Music Copyright Act will likely provide Amazon with a safe-harbor from liability. The DMCA safe-harbor provision “immunizes online service providers from liability when they store files on their servers ‘at the direction of a user.’”
Amazon Cloud is not providing unfettered access to a database of music; its set-up as a personalized, passive conduit to shift the place of media access gives it strong legal footing to argue that copying music to the Cloud is a paradigmatic non-commercial personal use of a user’s files. Although none of the Big 4 have yet to file a lawsuit, if and more likely when they do, there is a good possibility that the Amazon Cloud will float on.
* Lisa Peterson is a second-year law student at Wake Forest University. She holds a Bachelor of Arts in Political Science with a minor in Economics from Northwestern University. Ms. Peterson’s legal interests include business and corporate law, entertainment law, and government and public policy.