Non-commercial P2P file sharing is not fair use says court in Sony BMG v Tenenbaum case

A U.S. district court has now issued a wide area injunction in the Sony BMG  Music Entertainment v Tenenbaumcase, 2009 WL 4723397 (D.Mass.Dec 7. 2009). The order is as follow:

“…defendant shall be, and hereby is, enjoined from directly or indirectly infringing plaintiffs’ rights under federal or state law in any sound recording, whether now in existence or later created, that is owned or controlled by plaintiffs (or any parent, subsidiary, or affiliate record label of plaintiffs) (“Plaintiffs’ Recordings”), including without limitation by using the Internet or any online media distribution system to reproduce or distribute any of Plaintiffs’ Recordings, except pursuant to a lawful license or with the express authority of plaintiffs. Defendant also shall destroy all copies of Plaintiffs’ Recordings that defendant has downloaded onto any computer hard drive or server without plaintiffs’ authorization and shall destroy all copies of those downloaded recordings transferred onto any physical medium or device in defendant’s possession, custody, or control.”

The order in the case, is the culmination of significant litigation in which the defendant called into question whether file sharing over p2p systems could be fair use and whether statutory damages could be recovered for non-commercial file sharing.

Earlier this month US district court judge Gertner rejected the defendant’s fair use defense that all non-commercial file sharing was a fair use on the ground that file sharing over p2p networks hurt rights holders. Sony BMG  Music Entertainment v Tenenbaum, 2009 WL 4547019 (D.Mass. Dec 7, 2009).

The defendant, Joel Tenenbaum, was accused of using file-sharing software as a college sophomore to download and distribute 30 copyrighted songs belonging to the plaintiffs. His defense was that his file sharing constituted a “fair use” under the U.S. Copyright Act.

The Court, deeply concerned by “the upheaval of norms of behavior brought on by the internet, did everything in its power to permit Tenenbaum to make his best case for fair use.” The court had made clear that it was prepared to consider the defense and expressed the view that  fair use defense might be made out in specific fact situations such as: file sharing for the purposes of sampling music prior to purchase where the file e.g. an MP3 file, is deleted after sampling; space-shifting to store legally purchased music more efficiently; or use of new file-sharing networks before digital media could be purchased legally.

The defendant, however, eschewed a modest exception and “mounted a broadside attack that would excuse all file sharing for private enjoyment.” He argued that all a defendant needs to show is that he did not make money from the files he downloaded or distributed-i.e., that his use was “non-commercial”.

The court categorically rejected that such a sweeping fair use defense was available. According to the court “ It is a version of fair use so broad that it would swallow the copyright protections that Congress created, defying both statute and precedent.” Allowing fair use for non-commercial file sharing would be harmful to rights holders and undermine legitimate markets for sound recordings. According to the court:

“The following details were not in genuine dispute: (1) the main purpose of Tenenbaum’s file sharing was his own private enjoyment and that of his friends, that is, the very use for which the artist or copyright holder is entitled to expect payment as a reward; (2) he downloaded entire songs, although not entire albums of music; (3) he did not transform the 30 works at issue (i.e., turn them into his own creative work); (4) his file sharing spanned more than four years and several different software platforms, both before and after this activity was detected in August 2004; and (5) during that time, his file-sharing software made more than 800 songs available to other Kazaa users to download.See Pls.’ Statement of Facts at 1-4, 6. His activity continued notwithstanding changes in the case law, making it clear that the conduct was not protected; by 2001, for example, the Ninth Circuit had held that peer-to-peer file sharing was not fair use. See A & M Records, Inc. v. Napster, Inc ., 239 F.3d 1004, 1012-19 (2001). And his activity continued even after digital music was lawfully available; the iTunes Music Store, which made authorized digital downloads widely available, debuted in April 2003, approximately 15 months before Tenenbaum’s computer was detected on the Kazaa network. See Apple Launches the iTunes Music Store, http://www.appl (last visited Dec. 4, 2009). Tenenbaum did not contest these facts at summary judgment; he argued, instead, that they just did not matter.”

“The only fair use factor on which the defendant offered any challenge to was the effect of his file sharing on the potential market for or value of the copyrighted works. See 17 U.S.C. § 107(4)…. In any event, the issue is not the impact on the universe of artistic creation or whether record companies are making enough money in Tenenbaum’s view. The issue is the impact of file sharing on the market for these specific works. And in this regard, the law and the evidence are clear: A court must consider “ ‘whether unrestricted and widespread conduct of the sort engaged in by the defendant … would result in a substantially adverse impact on the potential market’ for the original.”…”

“There can be no question that on this record continuous, high-volume file sharing-offering exact duplicates to millions of peer-to-peer users for free-would negatively affect the market for these copyrighted works. While the Court recognizes that not every download would represent a lost sale, it is clear that some portion of paying consumers would shift to free downloads if this activity were considered a fair use. Given the record, the plaintiffs’ factual presentation, and the defendant’s extraordinarily meager response, the Court was obliged to find as a matter of law that Tenenbaum’s use would negatively impact the potential market for the downloaded works if it were widespread.”

Although the purpose of Tenenbaum’s file sharing may not have been “commercial” in any classic sense, as noted above, from a consequential perspective the difference becomes harder to make out. The Court sees little difference between selling these works in the public marketplace and making them available for free to the universe of peer-to-peer users. If anything, the latter activity is likely to distribute even more copies-and therefore result in a bigger market impact-because there is no cost barrier at all. It is difficult to compete with a product offered for free. The plaintiffs provide evidence that the widespread availability of free copies of copyrighted works on the internet has decreased their sales revenue, a market reality that other courts have credited.

“Even if every download does not represent a lost sale, as the Court recognizes, it is plain that consumers who regularly pay for music would shift to free downloads if given the chance. Indeed, that is the very premise of Tenenbaum’s sweeping argument-that this music should be free to individuals simply because it has “gone digital.” He all but concedes the lost sales that would result from his version of fair use. He claims that copyright law does not protect what he labels “an outdated business model” and that the plaintiffs have other means of profiting from these works. What he seems to be arguing is that, even in the era of file sharing, the plaintiffs still make a enough money from their copyrights. But the sufficiency of the plaintiffs’ profits is not the measure of fair use, nor is Tenenbaum’s view of what amount of profits are “enough.” Congress has not capped the revenue that a copyright holder may derive from its monopoly, and that is indeed a quintessential legislative judgment.”

“To be sure, some authorities suggest that the “network effects” of making these works available for free may in fact enhance their overall value, especially for lesser-known artists, by increasing buzz and publicity… That may be so in certain mixed systems, where some free distribution feeds demand for legitimate online sales. But Tenenbaum’s version of fair use would destroy even that equilibrium. It would simply eliminate the market for digital downloads among individual consumers by transforming all file sharing for private enjoyment into fair use. Who would continue to use the iTunes Store or its equivalents, under the circumstances? The Copyright Act grants the plaintiffs an exclusive right to distribute these works; file sharing effectively displaces that right, and the market it represents, by offering the same works for free.

Prior to this decision, Tenenbaum had also argued that statutory damages were not available for non commercial p2p file sharing. Capital Records, Inc.v. Alaujan 626 F.Supp.2d 152 (D.Mass. Jun 15, 2009)  He had argued that such damages were so excessive that they violated his right to due process. The court also rejected this defense.

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