On Friday, a panel of the Seventh Circuit issued a very important opinion, per Judge Easterbrook, in BMG Music et al v. Cecilia Gonzalez. Here is a link to the oral argument.The case involved a consumer who, using KaZaA, downloaded more than 1,370 songs over the course of a few weeks after getting high-speed Internet access. Thirty of these songs formed the basis for a successful summary judgment motion (although Judge Easterbrook ignored that limitation and held that "all of the 1,000+ of her downloads violated the statute").
The end result was a finding of infringement and an award of $22,500 in statutory damages, calculated at the minimum of $750 per work. On this award, the court of appeals agreed with the district court that there is no right to a jury under Feltner provided only minimum damages are sought; that makes sense: there is no discretion or fact finding involved (once the court, as happened here, rejects the reduction down to $200 permitted by Section 504(c)(2)).
The opinion is significant in many respects. First, it established primary liability for those who download (at least under similar facts), an essential underpinning to all the previous (and presumably future) third party liability suits. The opinion then discusses what constitutes primary liability.
Defendant's argument was that she was just previewing songs, "sampling music to determine what she liked enough to buy at retail," and therefore her use was a fair use. She did not, however, erase the 30 songs in question and had not bought an authorized copy of them. On this basis and the fact that the works involved in Sony were transmitted as part of a free, over-the-air broadcast, the court of appeals rejected any analogy to Sony timeshifting. No attempt was made in the opinion to determine how long one might keep a copy for preview, although arguably the answer is that one cannot make such a copy at all, which may explain why no attempt was made.
The court then went on to discuss Internet radio and iTunes, noting that had Gonzales copied from a licensed stream, copyright owners would have received a royalty from the broadcasters. This part of the opinion is ambiguous: does it suggest that had she copied the same 30 songs and kept them as she did, that would have been OK because the stream was licensed, or is it further evdience of harm to the market? The industry's brief is not ambiguous: there is no fair use preview or any fair use for home copying, at least using a system like KaZaA.
The court also referred to "teasers" - 30 second samples on sites like amazon.com, which it said was licensed. These may be licensed, but is that determinative of the issue? If a book publisher licenses excerpts for abstracts, does that alone kill fair use? What if one did make a "preview" copy from such a site? Would that be OK because the copyright owner was getting paid, or would it be not OK because the copyright owner was getting paid?
The court's opinion also glides over a number of nuances in Aimster and in one passage misstates UMG Recordings, Inc. v. MP3.com, 92 F. Supp.2d 349 (S.D.N.Y. 2000), saying that that opinion held "downloads are not fair use even if the downloader already owns one purchased copy." MP3.com didn't involve downloading at all: MP3.com bought lawfully made CDs, copied them on to its servers and through a verification process permitted consumers who had also purchased lawfully made copies to space-shift stream the CD. Judge Posner has criticized Mp3.com, and had Judge Easterbrook accurately understood the facts, one wonders whether, under some of the language in the BMG opinion, he would have come out the other way too, at least with respect to the consumer. (Recall MP3.com was a suit against MP3.com, not consumers, and over the server copy).
In any event, the BMG opinion is a huge win for the industry.