14

‐ 4369(L)

EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

1 UNITED STATES COURT OF APPEALS 1

FOR THE SECOND CIRCUIT 2

3

August Term, 2015 4

5

(Argued: May 11, 2016 Decided: October 25, 2016 6

Amended: December 13, 2016) 7

8

Docket Nos. 14

‐ 4369

‐ cv(L), 14

‐ 4509

‐ cv(XAP) 9

10

_____________________________________ 11

EMI CHRISTIAN MUSIC GROUP, INCORPORATED, PRIORITY 12

RECORDS LLC, BEECHWOOD MUSIC CORPORATION, COLGEMS

‐ EMI 13

MUSIC, INCORPORATED, EMI APRIL MUSIC, INC., EMI BLACKWOOD 14

MUSIC, INC., EMI FULL KEEL MUSIC, INC., EMI GOLDEN TORCH 15

MUSIC CORPORATION, EMI LONGITUDE MUSIC, EMI VIRGIN 16

MUSIC, INC., EMI VIRGIN SONGS, INC., CAPITOL RECORDS, LLC, 17

18

Plaintiffs

‐ Counter

‐ Defendants

‐ Appellees

‐ Cross

‐ Appellants

, 19

20

EMI AL GALLICO MUSIC CORPORATION, EMI ALGEE MUSIC 21

CORPORATION, EMI FEIST CATALOG, INC., EMI GOLD HORIZON 22

MUSIC CORP., EMI GROVE PARK MUSIC, INCORPORATED, EMI 23

HASTINGS CATALOG, INCORPORATED, EMI MILLS MUSIC, 24

INCORPORATED, EMI MILLER CATALOG, INCORPORATED, EMI 25

ROBBINS CATALOG, INCORPORATED, EMI U CATALOG, INC., EMI 26

UNART CATALOG INC., JOBETE MUSIC COMPANY, 27

INCORPORATED, SCREEN GEMS

‐ EMI MUSIC, INCORPORATED, 28

STONE AGATE MUSIC, STONE DIAMOND MUSIC 29

CORPORATION, 30

31

Plaintiffs

‐ Appellees

‐ Cross

‐ Appellants

, 32

33

v. 34

3514

‐ 4369(L)

EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

2 MP3TUNES, LLC, 1

2

Defendant

‐ Counter

‐ Claimant

‐ Cross

‐ Appellee

, 3

4

MICHAEL ROBERTSON, 5

6

Defendant

‐ Appellant

‐ Cross

‐ Appellee .* 7

8

_____________________________________ 9

10

Before: 11

12

CABRANES, STRAUB, and LOHIER, Circuit Judges. 13

14

In this appeal, we principally address one requirement of the Digital 15

Millennium Copyright Act (“DMCA”) safe harbor: that an internet service 16

provider “adopt[] and reasonably implement[]” a policy to terminate 17

“repeat infringers.” 17 U.S.C. § 512. The plaintiffs, all record companies 18

and music publishers, brought this copyright infringement suit against 19

MP3tunes, LLC and its founder and Chief Executive Officer Michael 20

Robertson. The plaintiffs alleged that two websites created by MP3tunes— 21

MP3tunes.com, which primarily served as a locker service for storing 22

digital music, and sideload.com, which allowed users to search for free 23

music on the internet—infringed their copyrights in thousands of sound 24

recordings and musical compositions. After the parties filed cross

‐ motions 25

for summary judgment, the United States District Court for the Southern 26

District of New York (Pauley, J.) determined, among other things, that 27

MP3tunes had a reasonably implemented repeat infringer policy. A jury 28

ultimately returned a verdict in favor of the plaintiffs that was partially 29

overturned by the District Court. We AFFIRM in part, VACATE in part, 30

REVERSE in part, and REMAND for further proceedings. 31

32

A NDREW H. B ART (Frank P. Scibilia, M. Mona 33

Simonian, Ross M. Bagley, Pryor Cashman LLP, 34

New York, NY, Luke C. Platzer, J. Douglas 35

Wilson, Jenner & Block LLP, Washington, DC, on 36

* The Clerk of Court is directed to amend the official caption to conform

with the above.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

3 the brief ), Jenner & Block LLP, New York, NY, for 1 Plaintiffs

‐ Appellees

‐ Cross

‐ Appellants. 2

3

I RA S. S ACKS (Mark S. Lafayette, Jamie B. Shyman, 4

Patricia M. Carlson, on the brief ), Akerman LLP, 5

New York, NY, for Defendant

‐ Appellant

‐ Cross

‐ 6 Appellee. 7

8

LOHIER, Circuit Judge : 9

In this appeal we principally consider the requirement of the Digital 10

Millennium Copyright Act (“DMCA”) safe harbor that an internet service 11

provider “adopt[] and reasonably implement[]” a policy to terminate 12

“repeat infringers.” 17 U.S.C. § 512. Plaintiffs

‐ appellees

‐ cross

‐ appellants 13

are all record companies and music publishers. They filed this copyright 14

infringement lawsuit against MP3tunes, LLC and its founder and Chief 15

Executive Officer Michael Robertson, 1 alleging that two internet music 16

services created by MP3tunes infringed their copyrights in thousands of 17

sound recordings and musical compositions. The two services are 18

MP3tunes.com, which primarily operated as a locker service for storing 19

digital music, and sideload.com, which allowed users to search for free 20

music on the internet. 21

1 MP3tunes declared bankruptcy approximately two years before this case

proceeded to trial. It is not a party to this appeal.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

4 On summary judgment, the United States District Court for the 1

Southern District of New York (Pauley, J.) granted partial summary 2

judgment to the defendants, holding that MP3tunes had a reasonably 3

implemented repeat infringer policy under § 512. A jury ultimately 4

returned a verdict in favor of the plaintiffs, but the District Court partially 5

overturned the verdict. 6

For reasons we explain below: (1) we VACATE the District Court’s 7

grant of partial summary judgment to the defendants based on its 8

conclusion that MP3tunes qualified for safe harbor protection under the 9

DMCA because the District Court applied too narrow a definition of 10

“repeat infringer”; (2) we REVERSE the District Court’s grant of judgment 11

as a matter of law to the defendants on claims that MP3tunes permitted 12

infringement of plaintiffs’ copyrights in pre

‐ 2007 MP3s and Beatles songs 13

because there was sufficient evidence to allow a reasonable jury to 14

conclude that MP3tunes had red

‐ flag knowledge of, or was willfully blind 15

to, infringing activity involving those categories of protected material; (3) 16

we REMAND for further proceedings related to claims arising out of the 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

5 District Court’s grant of partial summary judgment; and (4) we AFFIRM 1

the judgment in all other respects. 2

BACKGROUND 3

I. MP3tunes.com and Sideload.com 4

Robertson founded MP3tunes in 2005. It is undisputed that, by then, 5

Robertson was familiar with both the online music industry and copyright 6

litigation, having previously run the music site MP3.com, against which a 7

copyright infringement judgment was entered in 2000. See UMG 8

Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349, 350 (S.D.N.Y. 2000). 9

While recruiting for MP3tunes several years later, Robertson emphasized, 10

“[T]his will be VERY big news. Major labels selling MP3s. MP3.com guy 11

back to rejuvenate MP3 business. Largest copyright infringer of all time 12

back at it again. Lots of juicy press angles.” 2 13

MP3tunes.com was MP3tunes’s first project. Initially, customers 14

could visit MP3Tunes.com and purchase MP3 versions of music created by 15

musicians who were not associated with major record labels. In 2005 16

2 An MP3, otherwise known as an MPEG

‐ 1 Audio Layer 3, is a common

digital audio compression algorithm used to make an audio file smaller

without significantly reducing sound quality. See Recording Indus. Ass’n

of Am. v. Diamond Multimedia Sys., Inc., 180 F.3d 1072, 1074 (9th Cir.

1999).14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

6 MP3tunes.com added a “locker storage” service, which charged users a fee 1

to store music on the MP3tunes server. A user who uploaded songs to her 2

“locker” (through LockerSync, a free plugin on the site) could play the 3

music through other internet

‐ enabled devices. 4

MP3tunes owned and operated a second website, sideload.com, that 5

allowed users to search for free music on the internet. Sideload.com 6

offered a free plug

‐ in to enable users to “sideload” (or, to use Robertson’s 7

definition of “sideload,” enabled users to “download[]” directly to their 8

MP3tunes lockers) free songs that they found on the internet. Songs 9

sideloaded into users’ lockers were then added to sideload.com’s index of 10

searchable songs. This meant that the more songs users sideloaded from 11

the internet, the more free music became available for sideload.com users 12

to stream, download, or sideload into their own lockers. MP3tunes’s 13

executives, including Robertson, used their own accounts with MP3tunes 14

to store sideloaded songs. 15

Users of MP3tunes.com could store a certain amount of music 16

through the service for free and could purchase additional storage space 17

for tiered fees, while storage associated with sideloaded songs did not 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

7 count against the free storage limit. Partly as a result, sideload.com 1

became “the most effective partner in driving traffic to [MP3tunes’s] locker 2

service.” Joint App’x 1930. At Robertson’s direction, MP3tunes strove to 3

expand sideload.com’s catalog by encouraging users to upload songs to 4

the sideload.com index. For example, members of MP3tunes’s staff were 5

encouraged to upload songs from their own accounts, even when those 6

songs came from websites that appeared to contain infringing material. 7

Robertson directed MP3tunes employee Sharmaine Lindahl to provide 8

MP3tunes employees a list of sites featuring free MP3s “for sideloading 9

purposes.” Joint App’x 1241. Lindahl observed that one of the sites on the 10

list “look[ed] to be mainly pirated music.” Joint App’x 1239. MP3tunes 11

also encouraged repeated sideloading among MP3tunes.com users by 12

creating a “Sideload Hall of Fame” consisting of the “top 25 Sideloaders 13

with accounts at MP3tunes.com.” 14

In October 2006 MP3tunes added a cover art feature. When a user 15

began to “sync” or upload a song to her locker and cover art was not part 16

of the music file, MP3tunes’s software would “automatically go check 17

for

. . . cover art” provided on Amazon.com and download the cover art to 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

8 MP3tunes’s servers. Although MP3tunes had two agreements with 1

Amazon, an Amazon operations analyst testified at trial that the copying 2

of cover art violated the agreements. The analyst explained that “there 3

was no reference to Amazon around th[e] cover image[s]” and that the 4

display of the cover art therefore “was not being used for the primary 5

purpose of driving traffic to Amazon,” as the agreements required. 6

II. Procedural History 7

In 2010 the parties cross

‐ moved for summary judgment. The District 8

Court granted the plaintiffs’ summary judgment motion on certain claims 9

that are not the subject of this appeal, including the claims of direct 10

infringement by Robertson for the songs he personally sideloaded. The 11

District Court also granted the defendants summary judgment on other 12

claims on the ground that MP3tunes qualified for safe harbor protection 13

under the DMCA and that the safe harbor barred the plaintiffs’ state

‐ law 14

claims for infringement of recordings “fixed” before February 15, 1972. 3 15

3 A recording is “fixed” in this context when it is embodied in a permanent

or stable medium that can be perceived, reproduced, or otherwise

communicated. 17 U.S.C. § 101; see also Copyright Office, Copyright

Registration for Sound Recordings, Copyright Circular #56, at 1 (the

copyright law of the United States defines “sound recordings” as “works14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

9 The District Court also addressed § 512(i)(1)(A)’s requirement that a 1

service provider “adopt[] and reasonably implement[]

. . . a policy that 2

provides for the termination in appropriate circumstances of 3

subscribers

. . . who are repeat infringers.” The District Court held that 4

MP3tunes had such a policy because it “demonstrated that it has a 5

procedure for responding to DMCA takedown notifications and does not 6

interfere with copyright owners’ ability to issue such notices.” Capitol 7

Records, Inc. v. MP3tunes, LLC, 821 F. Supp. 2d 627, 639 (S.D.N.Y. 2011). 8

As proof of the existence and effectiveness of the procedure, the District 9

Court pointed out that MP3tunes had “terminated the accounts of 153 10

users who allowed others to access their lockers and copy music files 11

without authorization.” Id. Finally, in a separate ruling related to 12

Robertson’s motion for summary judgment, the District Court determined 13

that it had personal jurisdiction over Robertson because “MP3tunes did a 14

significant amount of business with New York customers and Robertson 15

exercised extensive control over MP3tunes.” Special App’x 76. 16

that result from the fixation of a series of musical, spoken, or other

sounds”).14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

10 Prompted by our subsequent decision in Viacom International, Inc. 1

v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012), the District Court partially 2

reconsidered its ruling that MP3tunes qualified for safe harbor protection 3

under the DMCA. Whether MP3tunes was barred from the DMCA’s safe 4

harbor protection (because it was willfully blind to or had red

‐ flag 5

knowledge of infringing activity), it held, actually presented a question of 6

fact that a jury had to decide, not a question of law. 7

The case thereafter proceeded to trial before a jury, which returned a 8

verdict for the plaintiffs and awarded them approximately $48 million, 9

$7.5 million of which constituted punitive damages against Robertson. 10

The District Court then granted judgment as a matter of law as to some of 11

the claims. It reversed the jury’s finding that MP3tunes was willfully blind 12

or had red

‐ flag knowledge regarding several different categories of songs 13

on the ground that there was insufficient evidence of willful blindness or 14

red

‐ flag knowledge. Finally, it reduced the punitive damages award 15

against Robertson to $750,000 on the ground that the $7.5 million punitive 16

damages award violated due process. 17

This appeal and cross

‐ appeal followed. 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

11 DISCUSSION 1

I. The Plaintiffs’ Appeal 2

The plaintiffs challenge three rulings made by the District Court: 3

first, that MP3tunes reasonably implemented a repeat infringer policy and 4

was eligible for DMCA safe harbor protection for pre ‐ and post

‐ 1972 5

songs; second, that the jury’s finding of red

‐ flag knowledge or willful 6

blindness with respect to certain categories of songs was wrong as a matter 7

of law; and third, that the plaintiffs were entitled to only one award of 8

statutory damages for songs where the copyright to the musical 9

composition and the copyright to the sound recording were owned by 10

different holders. 11

We address each of these challenges. 12

A. “Reasonably Implemented” Repeat Infringer Policy 13

The DMCA shields a service provider from liability for the 14

infringing acts of its users if the provider satisfies certain conditions. One 15

of those conditions requires that a service provider “adopt[] and 16

reasonably implement[]

. . . a policy that provides for the termination in 17

appropriate circumstances of subscribers and account holders of the 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

12 service provider’s system or network who are repeat infringers.” 17 U.S.C. 1

§ 512(i)(1)(A). The plaintiffs argue that MP3tunes never reasonably 2

implemented a repeat

‐ infringer policy because it failed to track users who 3

repeatedly created links to infringing content in the sideload.com index or 4

who copied files from those links, which appeared on multiple takedown 5

notices sent to MP3tunes. 6

In addressing this argument, we answer two questions: first, 7

whether certain MP3tunes users qualified as “repeat infringers”; and 8

second, if so, whether MP3tunes reasonably implemented a policy directed 9

at them. 10

We begin with the first question. The District Court held that “[t]he 11

purpose of subsection 512(i) is to deny protection to websites that tolerate 12

users who flagrantly disrespect copyrights.” Capitol Records, 821 F. Supp. 13

2d at 637. For the purposes of § 512(i)(1)(A), it defined a “repeat infringer” 14

as a user who posts or uploads infringing content “ to the internet for the 15

world to experience or copy” knowing that the conduct infringes another’s 16

copyright. Id. at 638. In contrast, the District Court believed, a user who 17

downloads or copies “songs from third

‐ party sites for their personal 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

13 entertainment” could not be a “repeat infringer.” 4 Id. The District Court 1

thus concluded that only users who upload infringing content are “blatant 2

infringers that internet service providers are obligated to ban from their 3

websites.” Id. 4

We reject this definition of a “repeat infringer,” which finds no 5

support in the text, structure, or legislative history of the DMCA. 6

Starting with the text, we note that the DMCA does not itself define 7

“repeat infringers.” But “where a statute does not define a term, we give 8

the term its ordinary meaning.” Laurent v. PricewaterhouseCoopers LLP, 9

794 F.3d 272, 281 (2d Cir. 2015) (quotation marks omitted). In this context, 10

we take “repeat” to mean “a person who does something

. . . again or 11

repeatedly,” Oxford English Dictionary (3d ed. 2009), while an “infringer” 12

is “[s]omeone who interferes with one of the exclusive rights of a

. . . 13

copyright,” Infringer, Black’s Law Dictionary (10th ed. 2014). Copyright 14

infringement is a strict liability offense in the sense that a plaintiff is not 15

4 The District Court explained that, unlike users who upload infringing

content, users who download “content for their personal use and are

otherwise oblivious to the copyrights of others

. . . like MP3tunes users

who sideload content to their lockers for personal use, do not know for

certain whether the material they download violates the copyrights of

others.” Id.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

14 required to prove unlawful intent or culpability, see Cartoon Network LP, 1

LLLP v. CSC Holdings, Inc., 536 F.3d 121, 130 (2d Cir. 2008); Shapiro, 2

Bernstein & Co. v. H. L. Green Co., 316 F.2d 304, 308 (2d Cir. 1963), and a 3

user does not have to share copyrighted works in order to infringe a 4

copyright, cf. Arista Records, LLC v. Doe 3, 604 F.3d 110, 124 (2d Cir. 5

2010). In the context of this case, all it took to be a “repeat infringer” was 6

to repeatedly sideload copyrighted material for personal use. 7

We turn next to the structure and context of the DMCA, interpreting 8

the term “repeat infringer” against the backdrop of the statute as a whole. 9

It is important to recall that the DMCA imposes certain requirements on 10

service providers in exchange for limitations on liability. It would make 11

little sense to link that limitation on liability to the knowledge of users. 5 12

5 The Nimmer treatise on copyright law similarly links the term “repeat

infringer” more directly to the knowledge of service providers rather than

users. See 4 Nimmer on Copyright § 12B.10. The treatise defines an

“infringer” for the purposes of § 512(i)(1)(A) as follows: “either a party

who has been adjudicated to have committed copyright infringement, or a

party about whom the service provider has actual knowledge that s/he has

engaged in infringement.” Id. § 12B.10[B][3][c]. The treatise cautions that

a service provider has to have done more than just receive a copyright

holder’s takedown notices in order to be charged with knowledge of

infringement. Id. In this case, as will become clear, we need not decide

whether takedown notices suffice on their own to prove that the provider

was aware of infringement.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

15 Indeed, the DMCA explicitly relieves service providers from having to 1

affirmatively monitor their users for infringement—something that would 2

likely be required should MP3tunes have to ascertain its users’ knowledge. 3

See 17 U.S.C. § 512(m)(1) (“Nothing in this section shall be construed to 4

condition the applicability of [the DMCA safe harbors] on a service 5

provider monitoring its service or affirmatively seeking facts indicating 6

infringing activity.”); Viacom, 676 F.3d at 41 (“[T]he safe harbor expressly 7

disclaims any affirmative monitoring requirement—except to the extent 8

that such monitoring comprises a ‘standard technical measure’ within the 9

meaning of § 512(i).”); S. Rep. 105

‐ 190, at 52 (1998); H.R. Rep. 105

‐ 551(II), at 10

61 (1998) (“[T]he Committee does not intend [the repeat

‐ infringer policy 11

requirement] to undermine the principles of new subsection (l) or the 12

knowledge standard of new subsection (c) by suggesting that a provider 13

must investigate possible infringements, monitor its service, or make 14

difficult judgments as to whether conduct is or is not infringing.”). 15

The legislative history also confirms our view that the District 16

Court’s definition of “repeat infringer” as limited to willful infringement is 17

too narrow. The Senate and House reports accompanying the DMCA 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

16 recognize a difference between inadvertent and willful infringement. But 1

both reports also assert that a “repeat infringer” requirement is meant to 2

deter those “who repeatedly or flagrantly abuse their access to the Internet 3

through disrespect for the intellectual property rights of others.” S. Rep. 4

105

‐ 190, at 52 (1998); H.R. Rep. 105

‐ 551(II), at 61 (1998) (emphasis added). 5

In other words, the legislative history of the DMCA indicates that a 6

“repeat infringer” does not need to know of the infringing nature of its 7

online activities. 8

Finally, none of our sister circuits has adopted the District Court’s 9

definition of “repeat infringer” to include only those who willfully infringe 10

copyrights. To the contrary, the Seventh Circuit has suggested that the 11

term covers users of file

‐ sharing services who are “ignorant or more 12

commonly disdainful of copyright.” See In re Aimster Copyright Litig., 13

334 F.3d 643, 645 (7th Cir. 2003). 14

Our view of what Congress meant by the term “repeat infringer” 15

leads us to conclude that the District Court improperly granted summary 16

judgment. Prior to trial, there was clearly enough disputed evidence 17

relating to MP3tunes’s policy regarding infringers to conclude that 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

17 summary judgment was inappropriate. To show that it reasonably 1

implemented such a policy, MP3tunes proffered evidence at the summary 2

judgment stage that it terminated 153 users who shared locker passwords. 3

In response, though, the plaintiffs demonstrated that MP3tunes did not 4

even try to connect known infringing activity of which it became aware 5

through takedown notices to users who repeatedly sideloaded files and 6

created links to that infringing content in the sideload.com index. 6 See 7

Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1110 (9th Cir. 2007) (“[A] 8

substantial failure to record webmasters associated with allegedly 9

infringing websites may raise a genuine issue of material fact as to the 10

implementation of the service provider’s repeat infringer policy.”). 11

Furthermore, the plaintiffs presented evidence that MP3tunes 12

executives were encouraged to and did personally sideload songs from 13

blatantly infringing websites. See Pls.’ Mem. Law Supp. Mot. Summ. J. 14

(07

‐ cv

‐ 9931 Docket No. 207) 12–14 (citing an email encouraging employees 15

to sideload from a website containing “pirated” music). The same 16

executives made the songs available to sideload.com users. There was also 17

6 We do not address the question whether MP3tunes would be required to

terminate a user who visited sideload.com only to stream files rather than

sideload them into an MP3tunes locker.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

18 evidence that MP3tunes was capable of cataloging the sideloads of each 1

MP3tunes user. A jury could reasonably infer from that evidence that 2

MP3tunes actually knew of specific repeat infringers and failed to take 3

action. 4

A reasonable jury alternatively could have determined that 5

MP3tunes consciously avoided knowing about specific repeat infringers 6

using its services, even though the infringement was rampant and obvious. 7

In Viacom, we held that “the willful blindness doctrine may be applied, in 8

appropriate circumstances, to demonstrate knowledge or awareness of 9

specific instances of infringement under the DMCA.” 676 F.3d at 35. 10

Thus, at trial the plaintiffs could prevail by demonstrating that MP3tunes’s 11

failure to track users who created links to infringing content identified on 12

takedown notices or who copied files from those links evidenced its willful 13

blindness to the repeat infringing activity of its users. 14

Our conclusion that the District Court improperly granted partial 15

summary judgment to MP3tunes on the basis of its policy regarding 16

“repeat infringers” is not inconsistent with the DMCA’s provision 17

declaring “that safe harbor protection cannot be conditioned on ‘a service 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

19 provider monitoring its service or affirmatively seeking facts indicating 1

infringing activity.’” Id. at 41 (quoting 17 U.S.C. § 512(m)(1)). Based on 2

the available evidence, a reasonable jury could have concluded that it was 3

reasonable for MP3tunes to track users who repeatedly created links to 4

infringing content in the sideload.com index or who copied files from 5

those links. See Aimster, 334 F.3d at 655 (“The common element of 6

[DMCA] safe harbors is that the service provider must do what it can 7

reasonably be asked to do to prevent the use of its service by ‘repeat 8

infringers.’”). After all, MP3tunes had already tracked and removed 153 9

users “who allowed others to access their lockers and copy music files 10

without authorization,” Capitol Records, 821 F. Supp. 2d at 639; by 11

comparison, requiring MP3tunes to extend that policy to users who 12

sideloaded infringing content may not be an unreasonably burdensome 13

request. Furthermore, doing so would not require MP3tunes to “monitor” 14

or “affirmatively seek facts” about infringing activity in a manner 15

inconsistent with § 512(m)(1) because it already had adequate information 16

at its disposal in the form of takedown notices provided by EMI as to 17

which links were allegedly infringing. Cf. Perfect 10, 488 F.3d at 1112–13 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

20 (declining to hold that the defendant service provider failed to implement 1

its repeat infringer policy in a reasonable manner based on its receipt of 2

takedown notices that did not substantially comply with § 512(c)(3) 3

because the service provider would have had to “cobble together adequate 4

notice” and would therefore be “unduly burden[ed]”). MP3tunes would 5

simply have had to make use of information already within its possession 6

and connect that information to known users. While the defendants could 7

yet make the case at trial that it was unreasonable under the circumstances 8

to ask MP3tunes to identify users who repeatedly infringed plaintiffs’ 9

copyrights by sideloading music files, no evidence available at the 10

summary judgment stage compelled that conclusion as a matter of law. 11

For these reasons, we vacate the District Court’s grant of summary 12

judgment and remand for further proceedings. 7 13

7 In its summary judgment ruling, the District Court also held that

MP3tunes was eligible for DMCA protection for pre

‐ 1972 sound

recordings, which are protected by state rather than federal copyright law.

The plaintiffs challenge this decision on appeal, but their challenge is

foreclosed by our recent decision in Capitol Records, LLC v. Vimeo, LLC,

826 F.3d 78 (2d Cir. 2016). In Vimeo, we held that “the safe harbor

established by § 512(c) protects a qualifying service provider from liability

for infringement of copyright under state law.” Id. at 93.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

21 B. Red

‐ Flag Knowledge and Willful Blindness 1

We turn next to the District Court’s determination that the jury’s 2

finding of red

‐ flag knowledge or willful blindness with respect to certain 3

categories of songs was wrong as a matter of law. We start with the 4

proposition that even if a service provider has a reasonably implemented 5

repeat infringer policy, it relinquishes the DMCA’s safe harbor if it, first, 6

has “actual knowledge that the material or an activity using the material 7

on the system or network is infringing” or “in the absence of such actual 8

knowledge, is [] aware of facts or circumstances from which infringing 9

activity is apparent,” and second, “upon obtaining such knowledge or 10

awareness, [does not] act[] expeditiously to remove, or disable access to, 11

the material.” 17 U.S.C. § 512(c)(1)(A); see also 17 U.S.C. § 512(d)(1). At 12

trial, the plaintiffs contended that MP3tunes was “aware of facts or 13

circumstances from which infringing activity was apparent”—or in other 14

words had “red

‐ flag knowledge” or willful blindness, see Viacom, 676 15

F.3d at 31, 35, with respect to several categories of songs. The jury found 16

that MP3tunes had knowledge as to four categories of files: (1) those stored 17

on domains identified in takedown notices as having ten or more 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

22 infringing files; (2) sideloads of MP3s before January 2007; (3) certain 1

sideloads by MP3tunes executives; and (4) works by the Beatles. The 2

District Court upheld the jury’s finding of red

‐ flag knowledge with respect 3

to certain songs and subsets of songs but granted the defendants judgment 4

as a matter of law as to two categories of songs that are the subject of our 5

review: MP3s from major labels issued before 2007, and all songs by the 6

Beatles. 7

We have already explained that the DMCA does not impose “an 8

amorphous obligation to take commercially reasonable steps in response to 9

a generalized awareness of infringement.” Viacom, 676 F.3d at 31 10

(quotation marks omitted). Accordingly, “[o]n the issue of disqualifying 11

knowledge

. . . the burden falls on the copyright owner to demonstrate that 12

the service provider acquired knowledge of the infringement, or of facts 13

and circumstances from which infringing activity was obvious, and failed 14

to promptly take down the infringing matter, thus forfeiting its right to the 15

safe harbor.” Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78, 95 (2d Cir. 16

2016). In other words, a copyright owner must point to a defendant’s 17

“actual knowledge or awareness of facts or circumstances that indicate 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

23 specific and identifiable instances of infringement.” Viacom, 676 F.3d at 1

32. 2

With this principle in mind, we conclude that the trial evidence in 3

this case, viewed in the light most favorable to the plaintiffs, see Izzarelli v. 4

R.J. Reynolds Tobacco Co., 731 F.3d 164, 167 (2d Cir. 2013), showed that 5

MP3tunes and Robertson knew that major music labels generally had not 6

even authorized their music to be distributed in the format most widely 7

available on sideload.com, let alone authorized it to be shared on the 8

internet. In particular, Robertson apparently knew that major record labels 9

had not offered songs in MP3 format until 2007. In January 2007, in 10

connection with MP3tunes’s MP3 sale model, for example, Robertson 11

admitted that “popular acts have never before sold tracks in MP3 12

formats.” Joint App’x 3145–46. With respect to MP3s sideloaded before 13

2007, therefore, the jury reasonably could have concluded that MP3tunes 14

and Robertson were aware of “facts and circumstances that make 15

infringement obvious.” Vimeo, 826 F.3d at 98. 16

What prompted the District Court to conclude otherwise? In 17

granting judgment as a matter of law to the defendants on this issue, the 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

24 District Court explained that barring MP3tunes from the DMCA safe 1

harbor “would require Defendants to actively conduct routine searches 2

and eliminate material likely to be infringing.” Capitol Records, Inc. v. 3

MP3tunes LLC, 48 F. Supp. 3d 703, 716 (S.D.N.Y. 2014). It therefore 4

understandably concluded that imposing such a duty clashed with the 5

DMCA’s “express

. . . disavowal of a duty to affirmatively monitor.” Id. 6

Under the circumstances of this case, we respectfully disagree with the 7

District Court’s assessment, primarily for two reasons. 8

First, the jury was clearly instructed, and we presume it understood, 9

that MP3tunes had no continuing, affirmative duty to monitor its servers 10

for infringement. The jury could comply with that instruction and still 11

find that MP3tunes was required to disable access to pre

‐ 2007 songs by 12

“act[ing] expeditiously to remove, or disable access to” the pre

‐ 2007 songs 13

“upon obtaining such knowledge or awareness.” 17 U.S.C. 14

§ 512(c)(1)(A)(iii). There was evidence at trial that MP3tunes could disable 15

access. Indeed, an expert testified that searching through libraries of MP3 16

songs was a common function of MP3tunes’s business. The jury was 17

therefore permitted to conclude that a time

‐ limited, targeted duty—even if 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

25 encompassing a large number of songs—does not give rise to an 1

“amorphous” duty to monitor in contravention of the DMCA. Viacom, 2

676 F.3d at 31; see also id. at 34 (suggesting that a reasonable jury could 3

find red

‐ flag knowledge with respect to groups of clips). The same is true 4

of the Beatles songs. The jury heard evidence that Robertson knew there 5

had been no legal online distribution of Beatles tracks before 2010, other 6

than one track used within a video game. Robertson further admitted that 7

he authored a 2009 e

‐ mail that showed he was aware of the plaintiffs’ 8

position that “[the] Beatles have never authorized their songs to be 9

available digitally.” Joint App’x 3165. And MP3tunes was made aware 10

through user emails that Beatles songs such as “Strawberry Fields 11

Forever” were on sideload.com’s index. The jury could have reasonably 12

concluded that MP3tunes had red

‐ flag knowledge of, or was willfully 13

blind to, the infringing nature of the Beatles tracks on its servers and failed 14

to “act[] expeditiously” to remove them. 17 U.S.C. § 512(c)(1)(A)(iii). 8 15

Second, the jury could reasonably have found that MP3tunes 16

conceived of and was designed to facilitate infringement based in part on 17

8 We do not mean to suggest that a copyright holder may create red

‐ flag

knowledge merely by asserting that distribution of its works is “never

authorized.”14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

26 evidence presented at trial that MP3tunes “actively encourage[ed] 1

infringement” and that Robertson and MP3tunes executives “personally 2

used [sideload.com] to download infringing material.” Columbia Pictures 3

Indus., Inc. v. Fung, 710 F.3d 1020, 1043 (9th Cir. 2013). Although such 4

evidence might not alone support a separate finding of red

‐ flag knowledge 5

or willful blindness as to users, see Vimeo, 826 F.3d at 99, the jury could 6

certainly rely on it in deciding whether MP3tunes was entitled to the 7

DMCA safe harbor, see Fung, 710 F.3d at 1040 (holding that “aspects of the 8

inducing behavior that give rise to liability are relevant to the operation of 9

some of the DMCA safe harbors and can, in some circumstances, preclude 10

their application”). Indeed, the jury could reasonably have understood 11

Robertson to have admitted on cross

‐ examination that sideload.com “was 12

premised on the notion that everything that was on the internet that was 13

not locked down could be sideloaded into the site.” Joint App’x 2342. 14

And in editing sideload.com’s Frequently Asked Questions (“FAQs”), 15

Robertson emphasized that the site should tell users that its music is “legal 16

to download” because “[s]ideload.com does not store any music, but 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

27 rather links to files publicly available [in] other places on the net.” Joint 1

App’x 3017. 2

For these reasons, we reverse the District Court’s ruling vacating the 3

jury verdict with respect to red

‐ flag knowledge and willful blindness for 4

pre

‐ 2007 MP3s and Beatles songs. 9 5

C. Statutory Damages 6

The plaintiffs also challenge the District Court’s decision to allow 7

only one award of statutory damages where the copyrights to the sound 8

recording and to the musical composition are owned by separate plaintiffs. 9

Section 504(c) of Title 17 provides that a “copyright owner may elect

. . . to 10

recover, instead of actual damages and profits, an award of statutory 11

damages for all infringements involved in the action, with respect to any 12

one work” in an amount of up to $30,000 if the infringer acted innocently 13

or of up to $150,000 if the infringer acted willfully. “For the purposes of 14

[§ 504(c)], all the parts of a compilation or derivative work constitute one 15

work.” 17 U.S.C. § 504(c)(1); see Xoom, Inc. v. Imageline, Inc., 323 F.3d 16

9 We note that, should it be found on remand that MP3Tunes did not

reasonably implement a repeat infringer policy and is therefore ineligible

for DMCA safe harbor protection at all, the jury’s finding of red

‐ flag

knowledge or willful blindness as to the above categories of songs would

not be required to impose liability.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

28 279, 285 (4th Cir. 2003), abrogated on other grounds by Reed Elsevier, Inc. 1

v. Muchnick, 559 U.S. 154 (2010). A derivative work is “a work based 2

upon one or more preexisting works, such as a

. . . sound recording.” 17 3

U.S.C. § 101. If “there are several different versions of plaintiff’s work, 4

each of which commands a separate copyright,” but “the defendant’s work 5

incorporates material covered by each of those copyrights,” the Copyright 6

Act “provides for but a single statutory damages award.” 5 Nimmer on 7

Copyright § 14.04[E][1][b]. 8

As noted, the District Court held that the plaintiffs could recover 9

only one statutory damages award for a musical composition and its 10

corresponding sound recording, even where the composition and the 11

recording were owned by separate plaintiffs. In doing so, it agreed with 12

those district courts that have concluded that infringement of a musical 13

composition and its corresponding sound recording entitles a plaintiff to 14

only one statutory damages award. See, e.g., Spooner v. EEN, Inc., No. 08

‐ 15

CV

‐ 262

‐ P

‐ S, 2010 WL 1930239, at *4 (D. Me. May 11, 2010); see also 16

Reservoir Media Mgmt., Inc. v. Craze Prods., No. 1:13

‐ cv

‐ 1847 (GHW), 17

2015 WL 5692105, at *7 (S.D.N.Y. Sept. 28, 2015) (citing with approval 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

29 Judge Pauley’s reasoning in Capitol Records, but declining to decide 1

whether the plaintiffs were entitled to multiple statutory damages awards 2

for a musical composition and its corresponding sound recording). Other 3

courts, meanwhile, have explained that multiple statutory damages can be 4

awarded when the copyrights to the sound recording and the musical 5

composition are owned by different plaintiffs. See, e.g., Teevee Toons, Inc. 6

v. MP3.com, Inc., 134 F. Supp. 2d 546, 548 (S.D.N.Y. 2001) (concluding that 7

“where

. . . the plaintiffs owning the copyrights on the musical 8

compositions are separate from the plaintiffs owning the copyrights on the 9

sound recordings, each may recover statutory damages”). 10

A plain reading of the Copyright Act’s text supports the District 11

Court’s conclusion. See Patry on Copyright § 22:186 (“Sound recordings 12

are defined in section 101 as a species of derivative work of the underlying 13

musical composition, and, as such, both fall within the one work, one 14

award rule for statutory damages that only award[s] for infringement of 15

both works

. . . regardless of whether there are different owners.”). 16

Both the House Report and the Senate Report accompanying the 17

Copyright Act reinforce this point: 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

30 Subsection (c)(1) [of 17 U.S.C. § 504] makes clear

. . . that, 1

although they are regarded as independent works for other 2

purposes, “all the parts of a compilation or derivative work 3

constitute one work” for th[e] purpose [of assessing 4

statutory damages]. Moreover, although the minimum and 5

maximum amounts are to be multiplied where multiple 6

“works” are involved in the suit, the same is not true with 7

respect to multiple copyrights, multiple owners, multiple 8

exclusive rights, or multiple registrations. This point is 9

especially important since, under a scheme of divisible 10

copyright, it is possible to have the rights of a number of 11

owners of separate “copyrights” in a single “work” 12

infringed by one act of a defendant. 13

H.R. Rep. No. 94

‐ 1476, at 162 (1976); S. Rep. No. 94

‐ 473, at 144 14

(1975). In our view, then, Congress did not intend for separate 15

statutory damages awards for derivative works such as sound 16

recordings, even when the copyright owner of the sound recording 17

differs from the copyright owner of the musical composition. 18

In sum, the District Court’s decision to permit only one 19

award of statutory damages for the musical composition and 20

corresponding sound recording comports with both the plain text 21

and the legislative history of the Copyright Act. We therefore 22

affirm that part of the judgment. 23

II. Robertson’s Appeal 2414

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

31 Robertson’s cross

‐ appeal challenges several rulings of the 1

District Court, some relating to the liability of MP3tunes and some 2

relating to his own personal liability. We address each challenge in 3

turn. 4

A. MP3tunes’s Liability 5

i. Red

‐ Flag Knowledge and Willful Blindness 6

Robertson challenges the District Court’s ruling on red

‐ flag 7

knowledge and willful blindness. In particular, he argues that the District 8

Court erred in upholding the jury’s verdict of red

‐ flag knowledge and 9

willful blindness with respect to songs sideloaded from personal file 10

storage sites and student

‐ run college webpages with what are alleged to be 11

“obviously infringing” URLs. 10 12

“The hypothetical ‘reasonable person’ to whom infringement must 13

be obvious is an ordinary person—not endowed with specialized 14

knowledge or expertise concerning music or the laws of copyright.” 15

10 Robertson also asserts that the District Court was wrong to conclude that

MP3tunes had red

‐ flag knowledge of the infringement of “Strawberry

Fields Forever.” Because we reverse the District Court’s determination

regarding red

‐ flag knowledge or willful blindness with respect to all

Beatles songs, including “Strawberry Fields Forever,” we need not address

this argument.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

32 Vimeo, 826 F.3d at 93–94. That said, “[i]t is

. . . entirely possible that an 1

employee of the service provider

. . . may well have known that [a] work 2

was infringing, or known facts that made this obvious.” Id. at 97. “If the 3

facts actually known by an employee of the service provider make 4

infringement obvious, the service provider cannot escape liability through 5

the mechanism of the safe harbor.” Id. 6

The trial evidence supported the plaintiffs’ argument that Robertson 7

and MP3tunes executives knew that personal file storage sites and college 8

student webpages were distributing infringing files. There was also 9

evidence that Robertson himself sideloaded from personal websites, and 10

that other MP3tunes executives regularly sideloaded from these sites. The 11

jury could therefore conclude that MP3tunes knew that songs from sites 12

with personal file storage or college URLs were available on sideload.com 13

and that those sites were “obviously infringing,” yet failed to act on that 14

information. For these reasons, we affirm the District Court’s order 15

denying judgment as a matter of law with respect to this category of songs. 1614

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

33 ii. Direct Liability for Infringement of Cover Art 1

At trial, the jury found that MP3tunes was liable for directly and 2

willfully infringing all 296 works of cover art associated with the plaintiffs’ 3

songs and albums. The District Court partially upheld that jury verdict 4

when it ruled on Robertson’s motion for judgment as a matter of law, 5

although it granted the motion and vacated the verdict as to some of the 6

cover art. On appeal, Robertson contends that the entire verdict relating to 7

cover art infringement should have been vacated. We disagree. 8

“[V]olitional conduct is an important element of direct liability.” 9

Cartoon Network, 536 F.3d at 131. The District Court instructed the jury as 10

follows: “When a person or company itself copies, distributes, publicly 11

performs, or displays the copyrighted work without authorization or other 12

defense, it is considered a ‘direct infringement.’ In order to be a direct 13

infringer, a person or company must have engaged in a volitional act that 14

causes the alleged copying.” Joint App’x 4380. Robertson asserts that 15

MP3tunes could not have engaged in a “volitional act” with respect to the 16

cover art infringement because the retrieval of that art was not directed by 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

34 MP3tunes but rather obtained from Amazon.com at the direction of the 1

user when the user selected a song. 2

The record contradicts Robertson on this point. MP3tunes’s 3

employees testified that the company’s LockerSync system was designed 4

to retrieve one aspect of a copyrighted work (the album art) whenever a 5

user uploaded another aspect of a copyrighted work (the song). In other 6

words, the system retrieved a copyrighted item that a user did not request, 7

frequently without the user’s knowledge of the copyrighted nature of the 8

item. This constituted enough evidence, in our view, that copying of the 9

cover art was directed by MP3tunes, not users. 11 And a jury reasonably 10

could also infer that each of the 296 images had been downloaded from 11

Amazon.com at least once because the evidence presented at trial showed 12

that each image was actually downloaded several times. 13

Robertson follows up by arguing that the plaintiffs’ cover art 14

copyrights themselves are invalid. First, he contends, the plaintiffs 15

improperly used a Form SR (also used for the corresponding sound 16

11 For the same reason, we reject Robertson’s argument that MP3tunes was

entitled to DMCA protection under § 512(c) for cover art infringement. As

Robertson acknowledges, the subsection covers only “infringement of

copyright by reason of the storage at the direction of a user.” 17 U.S.C.

§ 512(c)(1) (emphasis added).14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

35 recording) to register the cover art copyrights. We reject that argument. 1

Pursuant to 37 C.F.R. § 202.3, the SR class “includes all published and 2

unpublished sound recordings,” and “[c]laims to copyright in literary, 3

dramatic, and musical works embodied in phonorecords may also be 4

registered in this class under paragraph (b)(4) of this section” if certain 5

conditions are met. Because visual works are not explicitly listed as a 6

category that can also be included in SR copyrights, Robertson argues that 7

the plaintiffs’ registration of cover art on Forms SR renders their cover art 8

copyrights invalid. But a few years ago the Copyright Office issued a 9

circular that expressly sanctioned the use of a Form SR to register both the 10

recording and associated images. See Copyright Office, Copyright 11

Registration for Sound Recordings, Copyright Circular #56, at 3 (Aug. 12

2012) (providing instructions for how to fill out a Form SR “if the claim 13

includes artwork, photographs, and/or liner notes”). The Copyright 14

Office’s interpretations of the Copyright Act are entitled to some deference 15

insofar as we deem them to be persuasive. See Morris v. Bus. Concepts, 16

Inc., 283 F.3d 502, 505–06 (2d Cir. 2002). Here, we are persuaded by the 17

Copyright Office’s apparent view that there is no logical distinction 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

36 between “literary” works and “visual” works associated with a sound 1

recording such that the former is properly registered on a Form SR but the 2

latter is not. 3

Robertson separately claims that the copyrights are invalid because 4

the Forms SR fail to list the authors of the cover art. But the forms were 5

registered as works

‐ for

‐ hire, which do not require a separate identification 6

of artists. Moreover, a certificate of registration with inaccurate 7

information is invalid only if, among other things, the registrant knew it 8

was inaccurate. 17 U.S.C. § 411. There is no evidence on this record that 9

the certificates of registration at issue here were inaccurate. And, even if 10

there were, there is no evidence that the plaintiffs knew the copyrights 11

inaccurately described authorship. 12

iii. Liability for Infringement by MP3tunes Executives 13

In addition to finding MP3tunes liable for its own infringement and 14

for the infringement of its users, the jury held MP3tunes liable for the 15

sideloading activity of three MP3tunes executives (Emily Richards, 16

Douglas Reese, and Mark Wooten) under a theory of respondeat superior. 17

Robertson argues that there was insufficient evidence that these employees 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

37 acted within the scope of their authority and in furtherance of MP3tunes’s 1

business when downloading the challenged songs. 2

We think there was sufficient evidence for a rational jury to 3

conclude that MP3tunes was liable under a respondeat superior theory. 4

Among other evidence admitted at trial, Reese wrote an email asserting 5

that “we [MP3tunes employees] would see[d] the [sideload.com] index 6

with higher quality tracks.” Joint App’x 2049. An MP3tunes employee 7

testified that she and other MP3tunes employees “specifically sought out 8

websites on the Internet to locate files and sideload them into the Sideload 9

index,” and that they all did so “as employees of MP3tunes.” Joint App’x 10

2057. Robertson directed that the same employee provide other MP3tunes 11

employees a “list of some sites featuring free MP3s” “for sideloading 12

purposes.” Joint App’x 1957. There was also ample evidence from which 13

a juror could reasonably have inferred that these executive sideloads were 14

performed from MP3tunes’s offices. And it was clearly in MP3tunes’s 15

interest to increase the number of quality songs on sideload.com by using 16

its employees to expand the index. 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

38 B. Robertson’s Liability 1

i. Personal Jurisdiction 2

Robertson challenges the District Court’s personal jurisdiction ruling 3

on various grounds. We review a District Court’s ruling on personal 4

jurisdiction de novo. See Bank Brussels Lambert v. Fiddler Gonzalez & 5

Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002). 6

Relying on Walden v. Fiore, 134 S. Ct. 1115 (2014) and Daimler AG 7

v. Bauman, 134 S. Ct. 746 (2014), Robertson argues as an initial matter that 8

the District Court erred in imputing MP3tunes’s contacts with New York 9

to him. But Robertson was no mere employee of MP3tunes. He was its 10

founder and CEO, and he exercised extensive control over MP3tunes’s 11

day

‐ to

‐ day activities. According to one MP3tunes employee, “no one 12

made any final decisions other than Michael.” Joint App’x 1173. Under 13

these circumstances, it was appropriate for the District Court to consider 14

the scope of MP3tunes’s activities in New York in evaluating whether it 15

could exercise personal jurisdiction over Robertson. See Retail Software 16

Servs., Inc. v. Lashlee, 854 F.2d 18, 23 (2d Cir. 1988). “[T]his is not a case 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

39 where an individual defendant who is unaffiliated with a corporation is 1

being haled into court by a large multinational corporation.” Id. 12 2

Robertson also argues that, in any event, he and MP3tunes 3

combined lacked sufficient “minimum contacts” as required by the Due 4

Process Clause. But Robertson was aware both that MP3tunes had at least 5

400 users located in New York and that his company provided services to 6

New York customers. Under these circumstances, the District Court’s 7

exercise of personal jurisdiction over Robertson comported with due 8

process. He knew, in other words, that MP3tunes had “purposefully 9

12 Neither Daimler nor Walden compels a different conclusion. Daimler

addressed general jurisdiction, not specific jurisdiction, and Robertson

does not dispute that there is an “affiliation between the forum [of New

York] and the underlying controversy” such that only specific jurisdiction

is needed over Robertson. Licci ex rel. Licci v. Lebanese Canadian Bank,

SAL, 732 F.3d 161, 170 (2d Cir. 2013) (quoting Goodyear Dunlop Tires

Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). The Supreme Court

expressly declined to “pass judgment on invocation of an agency theory in

the context of general jurisdiction.” Daimler AG, 134 S. Ct. at 759

‐ 60.

Meanwhile Walden held that a defendant’s relationship with a forum state

“must arise out of contacts that the ‘defendant himself’ creates with the

forum State.” 134 S. Ct. at 1122 (quoting Burger King Corp. v. Rudzewicz,

471 U.S. 462, 475 (1985)). But the Court in Walden emphasized only that

personal jurisdiction cannot arise from contacts between the plaintiff or

third parties and the forum State. Id. It left unaddressed the role of a

corporation’s activities in evaluating a court’s personal jurisdiction over its

top executive, including where the executive is, as here, intimately

involved with all aspects of the company’s operation.14

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

40 avail[ed] [it]self of the privilege of conducting activities within [New 1

York], thus invoking the benefits and protections of its laws.” See Chloé v. 2

Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 171 (2d Cir. 2010) (quoting 3

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). “[J]urisdiction 4

is appropriate in New York because [MP3tunes] has developed and served 5

a market for its products there.” Id. That MP3tunes served a national 6

market, as opposed to a New York

‐ specific market, has little bearing on 7

our inquiry, as attempts to serve a nationwide market constitute “evidence 8

of [the defendant’s] attempt to serve the New York market, albeit 9

indirectly.” Kernan v. Kurz

‐ Hastings, Inc., 175 F.3d 236, 243 (2d Cir. 1999); 10

see Chloé, 616 F.3d at 171. 11

Finally, Robertson insists that the District Court should have 12

required the plaintiffs to establish that the District Court had personal 13

jurisdiction over him by a preponderance of the evidence at a hearing or at 14

trial. But we are not persuaded that the District Court erred in 15

determining that it had personal jurisdiction over Robertson without 16

holding a hearing or putting that issue to the jury. On a summary 17

judgment motion, a judge may “properly examine[] the record to 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

41 determine if there [are] undisputed facts that could resolve the 1

jurisdictional issue.” Ball v. Metallurgie Hoboken

‐ Overpelt, S.A., 902 F.2d 2

194, 197 (2d Cir. 1990). Robertson did not challenge the facts that the 3

District Court deemed most persuasive in finding personal jurisdiction: 4

that he had engaged in previous litigation with record companies in New 5

York based on similar infringing activities; that MP3tunes had a number of 6

users in New York; and that Robertson had extensive control over 7

MP3tunes. See Joint App’x 1135. For these reasons, we conclude that the 8

District Court did not err in determining at the summary judgment stage 9

that it could exercise personal jurisdiction over Robertson. 10

ii. Vicarious and Contributory Liability 11

In addition to attacking the District Court’s exercise of personal 12

jurisdiction over him, Robertson argues that there was insufficient 13

evidence to support the jury’s finding that he was vicariously or 14

contributorily liable for MP3tunes’s infringements. In the same vein, he 15

adds that the District Court’s jury instructions regarding vicarious and 16

contributory liability were erroneous. 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

42 We start with Robertson’s challenge to the jury’s vicarious liability 1

finding and the District Court’s jury instructions. Vicarious liability for 2

copyright infringement may arise only when the defendant had the “right 3

and ability to supervise [that] coalesce[d] with an obvious and direct 4

financial interest in the exploitation of copyrighted materials.” Softel, Inc. 5

v. Dragon Medical & Sci. Commc’ns, Inc., 118 F.3d 955, 971 (2d Cir. 1997) 6

(alteration in original) (quoting Shapiro, 316 F.2d at 307). An increase in 7

subscribers or customers due to copyright infringement qualifies as an 8

“obvious and direct financial interest.” See Shapiro, 316 F.2d at 307. With 9

these principles in mind, we conclude that the District Court did not err 10

when it instructed the jury that an “obvious and direct financial interest

. . . 11

may be established where infringing material acts as a ‘draw’ to attract 12

subscribers to a defendant’s business, even if it is not the primary, or even 13

a significant draw.” Joint App’x 2423–24; see also Owen v. Thermatool 14

Corp., 155 F.3d 137, 139 (2d Cir. 1998). 15

And here there was ample evidence to support the jury’s finding, 16

aided by a proper instruction, that Robertson was vicariously liable for 17

copyright infringement. Among other things, an MP3tunes employee 1814

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43 testified that she and other employees “used Sideload marketing efforts to 1

try to get people to sign up for lockers” and emphasized the availability of 2

free music on sideload.com “in connection with trying to get users to 3

purchase lockers.” Joint App’x 2059. Meanwhile, Robertson sought to use 4

sideload.com to attract free users to MP3tunes whom MP3tunes could 5

thereafter “upsell” to premium lockers. Joint App’x 2337. There was also 6

evidence that Robertson, through a trust, was the near

‐ exclusive funder of 7

MP3tunes and thus had an “obvious and direct financial interest” in 8

infringement that drew subscribers to MP3tunes.com. Cf. Softel, 118 F.3d 9

at 971. The jury thus had sufficient evidence to find Robertson vicariously 10

liable in this case. 11

Robertson’s challenge to the jury’s contributory liability finding 12

fares no better. A contributory infringer is “one who, with knowledge of 13

the infringing activity, induces, causes or materially contributes to the 14

infringing conduct of another.” Gershwin Publ’g Corp. v. Columbia 15

Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). “[O]ne who 16

distributes a device with the object of promoting its use to infringe 17

copyright, as shown by clear expression or other affirmative steps taken to 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

44 foster infringement, is liable for the resulting acts of infringement by third 1

parties.” Metro

‐ Goldwyn

‐ Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 2

913, 919 (2005). 3

Based on our review of the trial record, we reject Robertson’s 4

challenge to the jury’s verdict finding him liable for contributory 5

infringement based on the infringing activities of both MP3tunes 6

executives and MP3tunes users. Robertson personally encouraged his 7

employees to sideload songs to add to the index. Many of those songs 8

were from sites that contained “pirated material.” The entire point of 9

sideloading to the index was to make more music available for user 10

download—even though Robertson knew the music was generally not 11

available for free in MP3 form. See id. at 936. This, in turn, aided and 12

abetted infringement by sideload.com users. 13

Nor are we persuaded by Robertson’s argument that the District 14

Court should have instructed the jury that his participation needed to be 15

substantial and to have had a direct relationship to the infringement in 16

order to find him liable for contributory infringement. The District Court 17

instructed the jury as follows: “A defendant is liable for contributory 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

45 infringement if, one, with knowledge of the infringing activity, two, that 1

defendant introduces, causes, or materially contributes to the infringing 2

conduct of another.” Joint App’x 2424. We have not previously insisted 3

on use of the phrase “substantially contributes” rather than “materially 4

contributes” in the context of a jury instruction about contributory 5

infringement. To the contrary, we have more often regarded the words 6

“material” and “substantial” as synonymous. See Substantial, Black’s Law 7

Dictionary (10th ed. 2014). We conclude that the District Court’s use of the 8

phrase “materially contributes” rather than “substantially contributes” 9

was not misleading and adequately informed the jury of the law. See 10

Owen, 155 F.3d at 139. We also think that the District Court was not 11

required to instruct the jury specifically that there had to be a “direct 12

relationship” between the contributor’s activities and the infringement. 13

We have never held that such an instruction was necessary. In any event, 14

the District Court’s instruction adequately captured the necessary 15

relationship when it reminded the jury that a defendant “materially 16

contributes to the infringing conduct of another if the defendant engages 1714

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

46 in personal conduct that is part of, encourages, or assists the 1

infringement.” Joint App’x 2425. 2

Robertson relies on Sony Corp. of America v. Universal City Studios, 3

Inc., 464 U.S. 417, 442 (1984), to suggest more broadly that he cannot be 4

held secondarily liable as a matter of law. In Sony, the Supreme Court 5

held that when a product is capable of “substantial noninfringing uses,” its 6

manufacturer cannot be liable simply for knowing that the product could 7

be used in a way that would constitute infringement. Id. at 456. But the 8

Supreme Court has since clarified that “where evidence goes beyond a 9

product’s characteristics or the knowledge that it may be put to infringing 10

uses, and shows statements or actions directed to promoting infringement, 11

Sony’s staple

‐ article rule will not preclude liability.” Grokster, 545 U.S. at 12

935. Here, the evidence showed that Robertson acted in a manner 13

intended to promote infringement. We therefore reject Robertson’s 14

argument based on Sony. 15

C. Damages 16

Finally, Robertson challenges the District Court’s award of statutory 17

and punitive damages. We address each challenge in turn. 1814

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EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al.

47 i. Statutory Damages 1

Robertson claims that the District Court’s award of multiple 2

statutory damages for music singles and the albums on which they appear 3

was error. As previously noted, statutory damages are awarded for 4

infringement of each copyrighted “work.” 17 U.S.C. § 504(c). Several of 5

the songs relevant to the trial were issued both as singles and as part of 6

albums. The District Court instructed the jury that, so long as the plaintiffs 7

proved that “on the date of infringement, each individual sound recording 8

at issue in this case was available for purchase as a single,” it could issue 9

multiple statutory damages awards for singles that appeared on the same 10

album. Capitol Records, 48 F. Supp. 3d at 721. The jury found that each 11

song was available for purchase as a single on the date of infringement. 12

Materials that are sold as part of a compilation, such as songs on an 13

album, ordinarily are not deemed separate works for the purpose of 14

determining statutory damages. See Bryant v. Media Right Prods., Inc., 15

603 F.3d 135, 141 (2d Cir. 2010); 17 U.S.C. § 504(c)(1) (“[A]ll the parts of a 16

compilation

. . . constitute one work.”). But when a copyright holder or 17

publisher issues material on an independent basis, the law permits a 1814

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48 statutory damages award for each individual work. See Twin Peaks 1

Prods., Inc. v. Publ’ns Int’l, Ltd., 996 F.2d 1366, 1381 (2d Cir. 1993). In 2

other words, our “focus[] [is] on whether the plaintiff—the copyright 3

holder—issued its works separately, or together as a unit.” Bryant, 603 4

F.3d at 141. For these reasons, we conclude that the District Court 5

properly allowed separate statutory damages awards for songs that the 6

plaintiffs issued as singles, even if those songs were also made available on 7

albums. 8

And there was evidence at trial that all the songs in question were 9

made available as singles on the date of infringement. For example, an 10

EMI and Capitol Records executive testified that, with the exception of 11

tracks by Bob Seger and the Beatles, as well as one track by Pink Floyd, 12

EMI’s entire catalog was available for download and sale as singles, Joint 13

App’x 2476–82, and that this amounted to “95 to 98 percent of our total 14

catalogue available,” Joint App’x 2482. Based on this and other evidence, 15

the District Court did not err in upholding the jury’s verdict of statutory 16

damages. 1714

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49 ii. Punitive Damages 1

In addition to statutory damages on the plaintiffs’ Copyright Act 2

claims, the jury awarded $7.5 million in punitive damages against 3

Robertson on the plaintiffs’ common law claims. Robertson now argues 4

that the reduced award of $750,000 violated his right to due process. We 5

disagree. In granting this reduced award, the District Court properly 6

analyzed the factors enumerated in State Farm Mutual Automobile 7

Insurance Co. v. Campbell: “the degree of reprehensibility of [Robertson’s] 8

misconduct”; “the actual or potential harm suffered by the plaintiff” as 9

compared to “the punitive damages award”; and “the difference between 10

the punitive damages awarded by the jury and the civil penalties 11

authorized or imposed in comparable cases.” 538 U.S. 408, 418 (2003). 12

CONCLUSION 13

We have considered the parties’ remaining arguments on appeal 14

and conclude that they are without merit. For the foregoing reasons, we: 15

(1) VACATE the District Court’s grant of partial summary judgment 16

to the defendants based on its conclusion that MP3tunes qualified for safe 1714

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50 harbor protection under the DMCA because the District Court applied too 1

narrow a definition of “repeat infringer”; 2

(2) REVERSE the District Court’s grant of judgment as a matter of 3

law to the defendants on claims that MP3tunes permitted infringement of 4

plaintiffs’ copyrights in pre

‐ 2007 MP3s and Beatles songs because there 5

was sufficient evidence to allow a reasonable jury to conclude that 6

MP3tunes had red

‐ flag knowledge of, or was willfully blind to, infringing 7

activity involving those categories of protected material; 8

(3) REMAND for further proceedings related to claims arising out of 9

the District Court’s grant of partial summary judgment; and 10

(4) AFFIRM the judgment in all other respects. 11