UMG Recordings, Inc. v. MP3.com, Inc.
92 F. Supp. 2d 349 (2000)
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Rule of Law:
Making unauthorized digital copies of entire copyrighted works to provide a commercial streaming service is not a 'fair use,' even if access is limited to users who prove ownership of a physical copy, because such a service is not transformative and usurps the copyright holder's potential licensing market.
Facts:
- MP3.com, Inc. launched a service called 'My.MP3.com' which allowed subscribers to listen to digital copies of music recordings over the internet.
- To build its music library, MP3.com purchased tens of thousands of commercial CDs containing copyrighted recordings owned by the plaintiffs.
- Without authorization from the copyright holders, MP3.com copied these recordings in their entirety onto its own computer servers in MP3 format.
- To gain access to a specific recording on the service, a subscriber had to first prove they owned the physical CD.
- Proof of ownership was accomplished either by inserting the user's own CD into their computer drive for verification (the 'Beam-it Service') or by purchasing the CD from one of MP3.com's partner retailers (the 'Instant Listening Service').
- After verification, the subscriber could stream the digital copy of the recording stored on MP3.com's servers from any internet-connected computer.
Procedural Posture:
- A group of record companies (plaintiffs) sued MP3.com, Inc. (defendant) in the U.S. District Court for the Southern District of New York for copyright infringement.
- The plaintiffs filed a motion for partial summary judgment, asking the court to find MP3.com liable for infringement as a matter of law.
- MP3.com opposed the motion, asserting the affirmative defense of 'fair use' under the Copyright Act.
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Issue:
Does copying entire copyrighted musical recordings onto a company's servers to provide a streaming service for users who also own the physical CDs constitute fair use under the Copyright Act of 1976?
Opinions:
Majority - Rakoff, District Judge
No. Copying entire copyrighted musical recordings onto a company's servers to provide a streaming service for users who own the physical CDs does not constitute fair use. The court analyzed the four statutory fair use factors and found they all weighed against MP3.com. First, the purpose and character of the use was commercial and not transformative; simply retransmitting the recordings in a different medium ('space-shifting') does not add new meaning or expression. Second, the nature of the work was highly creative musical recordings, which are at the core of copyright protection. Third, the amount used was the entirety of the copyrighted works. Fourth, the service usurped the plaintiffs' potential market to license their works for digital distribution, a right reserved for the copyright holder. The court rejected the argument that the service was a benefit to consumers, stating that consumer convenience does not justify misappropriating a copyright holder's property.
Analysis:
This decision was a landmark ruling in the early era of digital music, firmly establishing that 'space-shifting' an entire creative work for a commercial service does not qualify as a transformative fair use. It reinforced the copyright holder's control over derivative markets, clarifying that a third party cannot preemptively enter a new market, like digital streaming, under the guise of fair use. This ruling heavily influenced the subsequent development of the digital music industry, pushing it towards a model based on licensing agreements with copyright holders, as seen in services like Spotify and Apple Music, rather than unauthorized copying.
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