Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 1 of 24
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`Capitol Records, LLC, d/b/a EMI Music North
`America,
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`USDCSDNY
`DOCUMENT
`ELECTRO NI CALLY FILED
`DOC#:
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`DATE r-, n_s_n...,,.,: M~A=-R ~:?'~~5 . 20f5
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`Plaintiff,
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`12-CV-6646 (AJN)
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`-v-
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`Escape Media Group, Inc.,
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`Defendant.
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`MEMORANDUM AND
`ORDER
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`ALISON J. NATHAN, District Judge:
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`Before the Court is the report and recommendation ("Report" or "R&R") of Magistrate
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`Judge Sarah Netbum dated May 28, 2014, Dkt. No. 90, regarding PlaintiffEMI Music North
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`America ("EMI")'s motion for summary judgment. EMI moved for summary judgment as to its
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`First and Sixth Claims for federal and common law copyright infringement. By stipulation,
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`Defendant Escape Media Group, Inc. ("Escape") conceded liability as to EMI's Second Claim
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`for breach of the parties' September 24, 2009 Digital Distribution Agreement ("Distribution
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`Agreement"). Dkt. No. 24. EMI did not move for summary judgment as to its Third Claim for
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`breach of the parties' September 24, 2009 Settlement Agreement and Mutual Release
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`("Settlement Agreement"), Fourth Claim for unjust enrichment, or Fifth Claim for unfair
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`competition, so those claims were not before Judge Netbum and are not before the Court now.
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`Judge Netbum recommended denying Escape's challenge to the declaration of Ellis Horowitz
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`and granting EMI's challenge to the declaration of Cole Kowalski. She also recommended
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`denying EMI' s motion for summary judgment as to its claim for direct infringement of its right
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`of reproduction, but granting the motion as to its remaining copyright infringement claims and as
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`to Escape's affirmative defenses under the Digital Millennium Copyright Act ("DMCA") and
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`under the parties' Distribution and Settlement Agreements. Escape objects to Judge Netbum's
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`1
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 2 of 24
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`recommendations regarding (1) challenges to the Horowitz and Kowalski Declarations, (2) its
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`entitlement to a DMCA safe harbor, and (3) the release of claims under the parties' prior
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`agreements. For the reasons discussed below, the Court adopts Judge Netbum's
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`recommendations in full.
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`I.
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`BACKGROUND
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`Because Escape objects only to Judge Netbum's application of the law to the facts of this
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`case, the Court adopts in full her recitation of the relevant facts. See R&R 27-41. 1 The Court
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`assumes familiarity with this material.
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`II.
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`STANDARD OF REVIEW
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`District courts may designate magistrate judges to hear and determine certain dispositive
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`motions and to submit proposed findings of fact and a recommendation as to those motions. 28
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`U.S.C. § 636(b )(1 ). Any party wishing to object to a magistrate judge's report and
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`recommendation must do so within fourteen days after being served with a copy of the report and
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`recommendation. Id. If a party submits a timely objection to a report and recommendation, the
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`district court reviews de nova those portions to which the party objected. Id.; see also Norman v.
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`Astrue, 912 F. Supp. 2d 33, 39 (S.D.N.Y. 2012). Otherwise, if "no 'specific written objection' is
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`made, the district court may adopt those portions 'as long as the factual and legal basis
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`supporting the findings and conclusions set forth ... are not clearly erroneous or contrary to
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`law."' Norman, 912 F. Supp. 2d at 39 (quoting Eisenberg v. New England Motor Freight, Inc.,
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`564 F. Supp. 2d 224, 226-27 (S.D.N.Y. 2008)). "A decision is 'clearly erroneous' when the
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`reviewing Court is left with the definite and firm conviction that a mistake has been committed."
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`Courtney v. Colvin, No. 13 Civ. 02884 (AJN), 2014 U.S. Dist. LEXIS 4559, at *3-4 (S.D.N.Y.
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`Jan. 14, 2014) (quoting Laster v. Mancini, No. 07 Civ. 8265 (DAB), 2013 U.S. Dist. LEXIS
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`138599, at *6-7 (S.D.N.Y. Sept. 25, 2013)).
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`1 Where the Court cites additional factual materials, it draws from the Reply Statement of Undisputed Facts
`("RSUF"), Dkt. No. 85. If supported, and if Escape did not controvert the fact by pointing to admissible evidence,
`the Court "consider[s] the fact undisputed for purposes of the motion." Fed. R. Civ. P. 56(e)(2); Local Rule 56.l(d);
`see also Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993).
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`2
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 3 of 24
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`Summary judgment is granted "if the movant shows that there is no genuine dispute as to
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`any material fact and the movant is entitled to judgment as a matter oflaw." Fed. R. Civ. P.
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`56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A genuine dispute as to
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`any material fact exists "if the evidence is such that a reasonable jury could return a verdict for
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`the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). On a motion
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`for summary judgment, a court views all evidence in the light most favorable to the non-movant,
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`Overton v. N. Y State Div. of Military & Naval Affairs, 373 F.3d 83, 89 (2d Cir. 2004), and
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`"resolve[s] all ambiguities and draw[s] all permissible factual inferences in favor of the party
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`against whom summary judgment is sought," Sec. Ins. Co. of Hartford v. Old Dominion Freight
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`Line, Inc., 391 F.3d 77, 83 (2d Cir. 2004).
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`The movant "always bears the initial responsibility of informing the district court of the
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`basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to
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`interrogatories, and admissions on file, together with the affidavits, if any,' which it believes
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`demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. But
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`"[ e ]ven where facts are disputed, in order to defeat summary judgment, the nonmoving party
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`must offer enough evidence to enable a reasonable jury to return a verdict in its favor." Byrnie v.
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`Town of Cromwell Bd. of Educ., 243 F.3d 93, 101 (2d Cir. 2001). And if"a plaintiff uses a
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`summary judgment motion, in part, to challenge the legal sufficiency of an affirmative defense(cid:173)
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`on which the defendant bears the burden of proof at trial-a plaintiff 'may satisfy its Rule 56
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`burden by showing that there is an absence of evidence to support [an essential element] of [the
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`non-moving party's case]."' Nw. Mut. Life Ins. Co. v. Fogel, 78 F. Supp. 2d 70, 73-74 (E.D.N.Y.
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`19990 (quotingFDICv. Giammettei, 34 F.3d 51, 54 (2d Cir. 1994)).
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`III. DISCUSSION
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`As noted, Escape objects to Judge Netburn's recommendations regarding (1) challenges
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`to the Horowitz and Kowalski Declarations, (2) its entitlement to a DMCA safe harbor, and (3)
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`the release of claims under the parties' prior agreements. EMI does not object to Judge
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`Netburn's Report, including her recommendation that the Court deny its motion with respect to
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`3
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 4 of 24
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`direct infringement of its right of reproduction. The court will tum to issues relating to the
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`declarations first and will then analyze the merits of the dispositive motion.
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`A.
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`Objections to the Horowitz and Kowalski Declarations
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`Before delving into the merits ofEMI's summary judgment motion, Judge Netbum
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`addressed challenges concerning two declarations submitted by the parties. Judge Netbum
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`recommended (1) denying Escape's challenge to the Horowitz Declaration and (2) granting
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`EMI' s challenge to the Kowalski Declaration. R&R 7.
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`Escape objects to both recommendations and contends that they should be reviewed de
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`nova as if it had made an objection to a dispositive matter. The Court disagrees. Both Escape
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`and EMI argued to Judge Netbum that the challenged declarations violated Rule 26, the Federal
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`Rule of Civil Procedure governing discovery, and Judge Netbum properly noted that both
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`parties' attempts to preclude the Court from relying on the declarations were based primarily on
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`Rule 3 7, which provides certain sanctions for failures to make disclosures or to cooperate in
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`discovery. Magistrate judges may, and often do, rule on nondispositive pretrial matters,
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`including discovery disputes. Fed. R. Civ. P. 72(a). Contrary to Escape's suggestion, such
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`nondispositive pretrial matters are reviewed for clear error. Id.; see also§ 636(b)(l)(A).
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`Moreover, the fact that Judge Netbum efficiently resolved the Rule 37 sanctions in the
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`same Report in which she provided recommendations as to the motion for summary judgment
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`does not change the standard of review applied to the Rule 37 sanctions. See Cardell Fin. Corp.
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`v. Suchodolski Assocs., 896 F. Supp. 2d 320, 324 (S.D.N.Y. 2012) ("A district court evaluating a
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`magistrate judge's report may adopt those portions of the report addressing non-dispositive
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`matters as long as the factual and legal bases supporting the findings and conclusions set forth in
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`those sections are not clearly erroneous or contrary to law." (citing Fed. R. Civ. P. 72(a)); see
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`also Arista Records, LLCv. Doe, 604 F.3d 110, 116 (2d Cir. 2010) ("Matters concerning
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`discovery generally are considered 'nondispositive' of the litigation." (quoting Thomas E. Hoar,
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`Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990)); RMED Int'l, Inc. v. Sloan's
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`Supermarkets, Inc., No. 94 Civ. 5587 (PKL) (RLE), 2000 U.S. Dist. LEXIS 4892, at *4 n.l
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`4
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`(S.D.N.Y. 2000) ("A decision to admit or exclude expert testimony is considered
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`'nondispositive' of the litigation." (collecting cases)). Therefore, the Court reviews Judge
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`Netburn's recommendations concerning the Horowitz and Kowalski Declarations for clear error.
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`Finding none, the Court adopts her recommendations to deny Escape's challenge to the Horowitz
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`Declaration and to strike the Kowalski Declaration under Rule 37(c)(l).
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`B.
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`Copyright Infringement
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`With one minor exception, Escape does not make any specific objections to Judge
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`Netburn's conclusions of direct and secondary liability for copyright infringement. Rather,
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`Escape primarily contends that there was no evidence from which copyright infringement could
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`be found because it argued that the Horowitz Declaration should be excluded from the universe
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`of facts at issue on this motion. As noted, the Court finds no clear error with Judge Netburn's
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`discovery-related conclusions. Therefore, there is evidence from which copyright infringement
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`can be found because Horowitz's analysis of Grooveshark's system revealed, inter alia, 2,807
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`EMI-copyrighted sound recordings were copied on Escape's servers in at least 13,855 separate
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`files, and EMI-copyrighted works were streamed 12,224,567 times since March 23, 2012.
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`The only specific objection regarding copyright infringement that Escape raises is a
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`footnote in its objection brief arguing that Judge Netburn "overlooked an important distinction
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`between federal and New York law concerning 'public performance' rights in sound recordings."
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`Obj. 2 18 n.11. But Escape did not raise this point in its opposition to summary judgment, and it
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`is well established that a party may not raise an argument in an objection to a report and
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`recommendation of a magistrate judge that was not fairly presented to the magistrate judge in the
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`first instance. See, e.g., US. Bank NA. v. 2150 Joshua's Path, LLC, No. 13-CV-1598 (SJF),
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`2014 U.S. Dist. LEXIS 127596, at *4 (E.D.N.Y. Sept. 10, 2014) ("'A district court will generally
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`not consider arguments that were not raised before the magistrate judge.'" (quoting Diaz v.
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`Portfolio Recovery Assocs., LLC, No. 10 Civ. 3920, 2012 U.S. Dist. LEXIS 72724, at *5
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`2 Obj. stands for Escape's objection to Judge Netbum's Report (Dkt. No. 94).
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 6 of 24
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`(E.D.N.Y. May 24, 2012)). Therefore, because Escape did not raise this argument before Judge
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`Netburn, the Court reviews Judge Netburn's conclusion on this point for clear error.
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`Escape argues that it was error for Judge Netburn to hold that the elements for copyright
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`infringement under New York and federal law mirror each other and, therefore, may be analyzed
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`together. Contrary to Escape's suggestion that Judge Netburn cited no authority for her
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`conclusion on this point, she relied on Judge Sullivan's opinion in Capitol Records, LLC v.
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`ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013), which stated that "the elements for a direct
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`infringement claim under federal law mirror those for infringement of common law copyright
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`under [New York] state law." R&R 51. Judge Sullivan, in turn, relied on Capitol Records, Inc.
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`v. Naxos of America, Inc., 830 N.E.2d 250, 265 (2005) ("Naxos"), which held that "New York
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`provides common-law copyright protection to sound recordings not covered by the federal
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`Copyright Act, regardless of the public domain status in the country of origin, if the alleged act
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`of infringement occurred in New York." ReDigi, Inc., 934 F. Supp. 2d at 658 n.8. Like Judge
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`Sullivan, other judges in this Court have similarly relied on Naxos to conclude that New York
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`would recognize a right of public performance in sound recordings that would mirror the federal
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`copyright in such sound recordings. See, e.g., Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13
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`Civ. 5784 (CM), 2014 U.S. Dist. LEXIS 166492, at *25 (S.D.N.Y. Nov. 14, 2014) (interpreting
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`Naxos and other New York authority to predict that "the New York Court of Appeals would
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`recognize the exclusive right to public performance of a sound recording as one of the rights
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`appurtenant to common law copyright in such a recording"). The Court agrees with this
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`authority and, therefore, it finds no clear error with Judge Netburn's conclusion that the elements
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`for EMI's federal claims for copyright infringement mirror its state law claims for copyright
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`infringement.
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`Because Escape does not make any specific objections to the remainder of Judge
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`Netburn's recommendations regarding copyright infringement, the Court also reviews those
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`conclusions for clear error. See, e.g., Watson v. Geithner, No. 11 Civ. 9527 (AJN), 2013 U.S.
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`Dist. LEXIS 141009, at *5-6 (S.D.N.Y. Sept. 27, 2013). Judge Netburn concluded that EMI had
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`established that it owns or has the exclusive right in the United States to enforce copyrights in
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`2,807 sound recordings. She further held that Escape directly infringes EMI's right of public
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`performance, but that it does not directly infringe EMI's right of reproduction. Judge Netburn
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`then concluded that Grooveshark users directly infringe EMI's rights ofreproduction and
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`distribution, and that Escape is secondarily liable for this infringement under theories of
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`vicarious and contributory liability. The Court finds no clear error with these conclusions.
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`Finally, because Judge Netburn observed that common law copyright infringement claims
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`generally mirror those of federal claims, she found that EMI was entitled to summary judgment
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`on its direct infringement claims-except with respect to its right of reproduction-and its
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`secondary infringement claims for its pre-1972 recordings under New York common law. The
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`Court finds no clear error with these conclusions.
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`Because the Court finds no clear error with Judge Netburn's copyright infringement
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`recommendations, the Court adopts them in full. But before concluding that EMI is entitled to
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`summary judgment, the Court must examine Escape's objections regarding its two affirmative
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`defenses under the DMCA and under the parties' prior agreements.
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`C.
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`DMCA Safe Harbor
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`Escape objects to Judge Netburn's recommendations about its non-entitlement to the
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`DMCA safe harbor, so the Court reviews this issue de nova. The Court notes at the outset that it
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`agrees with Judge Netburn's careful analysis of this issue, see R&R 52-79, and limits its
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`discussion here to Escape's specific objections regarding Judge Netburn's conclusions.
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`As Judge Netburn noted, the DMCA added four safe harbor provisions to the Copyright
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`Act in the form of 17 U.S.C. §§ 512(a)-(d), which shield service providers from liability for
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`copyright infringement under certain circumstances. But to qualify for any of the DMCA safe
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`harbors, the service provider must first satisfy the "conditions for eligibility" described in 17
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`U.S.C. § 512(i), which, among other things, require a service provider to have "adopted and
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`reasonably implemented, and informs subscribers and account holders of the service provider's
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`system or networks of, a policy that provides for the termination in appropriate circumstances of
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`subscribers and account holders of the service provider's system or network who are repeat
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`infringers." § 512(i)(l)(A). Like many courts, Judge Netbum isolated each component of
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`§ 512(i)(l )(A)' s repeat infringer policy requirement and then analyzed Escape' s purported policy
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`to see if it satisfied the statute. See, e.g., Ellison v. Robertson, 357 F.3d 1072, 1080 (9th Cir.
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`2004) (noting a service provider must "(1) adopt a policy that provides for the termination of
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`service access for repeat copyright infringers in appropriate circumstances; (2) implement that
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`policy in a reasonable manner; and (3) infonn its subscribers of the policy."); Wolk v. Kodak
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`Imaging Network, Inc., 840 F. Supp. 2d 724, 744 (S.D.N.Y. 2012) ("To fulfill the requirements
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`of 17 U.S.C. § 512(i), a service provider must (i) adopt a policy that provides for the termination
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`of service access for repeat copyright infringers; (ii) inform users of the service policy; and (iii)
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`implement the policy in a reasonable manner." (citing Corbis Corp. v. Amazon.com, Inc., 351 F.
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`Supp. 2d 1090, 1100 (W.D. Wash. 2004))).
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`Judge Netbum first noted that the repeat infringer policy that Escape informs its users of
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`is not the same policy it purports to implement, but she generously concluded that Escape has
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`"adopted" a repeat infringer policy based on its so-called "one strike policy." She further
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`concluded, and Escape agrees, Obj. 19, that the relevant repeat infringer policy for§ 512(i)
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`purposes is this so-called "one strike policy," not the policy set forth in Escape's Terms of
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`Service. Under its one strike policy, Escape purports to "disable[] account holders' upload
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`privileges in response to DMCA notifications, but does not delete all data or audio files
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`associated with their account or bar them from signing in to simply and passively use the
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`Grooveshark website." Obj. 19 (citing Hostert Deel. iii! 24-29). Judge Netbum concluded that
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`this policy of only barring uploading privileges while retaining accounts does not satisfy the
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`repeat infringer policy requirement because it does not actually "implement" a repeat infringer
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`policy within the meaning of§ 512(i), and, even assuming it did, Escape does not reasonably
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`implement the policy, i.e., Escape does not tenninate user's uploading privileges in appropriate
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`circumstances. Cf Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1110-15 (9th Cir. 2007)
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`("CCBill") (analyzing separately "implementation" and "reasonable implementation" under
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`§ 512(i)). Escape objects to both conclusions, which the Court addresses in tum.
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`1.
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`Actual Implementation
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`As Judge Netbum noted, Congress provided little guidance on the meaning of§ 512(i)'s
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`various requirements. But over time, courts have looked at certain recurring features to
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`determine whether a service provider's repeat infringer policy is implemented within the
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`meaning of§ 512(i). For the reasons discussed below, the Court agrees with Judge Netbum that
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`three such features are relevant here: (1) Escape's failure to keep adequate records of
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`infringement; (2) Escape' s practice of actively preventing copyright owners from collecting
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`information necessary to issue DMCA takedown notifications; and (3) Escape's failure to
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`"terminate" repeat infringers. Each of these shortcomings, standing alone, is sufficient to deny
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`Escape's safe harbor defense.
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`a)
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`Record Keeping
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`Beginning with adequate recordkeeping, Judge Netbum correctly noted that because
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`"[t]he purpose of subsection 512(i) is to deny protection to websites that tolerate users who
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`flagrantly disrespect copyrights," courts have recognized that "service providers that
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`purposefully fail to keep adequate records of the identity and activities of their users and fail to
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`terminate users despite their persistent and flagrant infringement are not eligible for protection
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`under the safe harbor." Capitol Records, Inc. v. MP3tunes, LLC, 821 F. Supp. 2d 627, 637
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`(S.D.N.Y. 2011) ("MP3tunes") (citations omitted); see also Disney Enters. v. Hotfile Corp., No.
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`11-20427-CIV-WILLIAMS, 2013 U.S. Dist. LEXIS 172339, at *67 (S.D. Fl. Sept. 20, 2013)
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`("Hotfile") ("[A] reasonable policy must be capable of tracking infringers."). Indeed, ifrecords
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`of infringement are not kept, it is impossible to know whether repeat infringement is occurring
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`Prior to Judge Netbum's Report, Escape consistently argued that it did not need to track
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`repeat infringement because repeat infringement could not occur under its one strike policy. For
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`example, Escape' s opposition to summary judgment stated that "because it is Escape' s policy to
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`disable a user's uploading privileges following the receipt of one notice ... there is no necessity
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`to search for 'repeat' infringers." Opp'n3 at 36 n.14; see also Semel Deel. Ex. 1 (Hostert Dep.
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`136:12-140:23). Similarly, EMI's Local Rule 56.1 statement noted that "Escape has no policy to
`try to identify repeat infringers that are using Grooveshark." RSUF ii 91. Disputing this fact in
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`its counterstatement, Escape stated that it "has a 'one strike' policy of terminating the uploading
`privileges of users associated with DMCA takedowns," RSUF ii 91, but this response does not
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`actually dispute the fact that Escape does not try to identify repeat infringers. In addition, EMI
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`provided evidence that Escape does not keep an independent record of the instances in which a
`user has received multiple DMCA takedown notices. RSUF ii 98. Escape countered this fact by
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`arguing that "Escape's database includes records of every DMCA takedown processed,
`including the associated users," RSUF ii 98 (emphasis added), which essentially states that
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`Escape could review its entire database to identify repeat infringers, but it does not controvert the
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`fact that Escape does not keep an independent record of repeat infringers. These facts led Judge
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`Netbum to conclude that "Escape does not try to identify repeat infringers and fails to keep
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`records that would allow it to do so." R&R 64.
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`Now, however, Escape's objection retreats from its earlier contention that it does not
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`need to keep records of repeat infringement under its one strike policy. Nonetheless, like its
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`responses to EMI' s Local Rule 56.1 statement, its objection fails to point to admissible evidence
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`showing that it actually tries to identify repeat infringers who are using Grooveshark. For
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`example, Escape's objection provides a detailed description of how it "records the removal of
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`files in response to DMCA notices, inter alia, by moving data contained in its 'UsersFiles' table,
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`which links each file on Grooveshark with the accountholder who submitted it, to a related data
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`table entitled 'Deleted_ U serFiles. "' Obj. 22. But Escape avoids mentioning that this "Deleted
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`Database" does not distinguish between files deleted due to DMCA takedown notices and files
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`deleted due to other reasons; i.e., this database is not an independent record of infringement.
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`3 Opp'n stands for Escape's opposition to EMI's motion for summary judgment (Dkt. No. 77).
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`Due to the importance of adequate recordkeeping to the repeat infringer policy
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`requirement, the Court agrees with Judge Netbum that because Escape purposefully fails to keep
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`adequate records of repeat infringement, it does not satisfy the§ 512(i) eligibility condition.
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`Accord Hotfile, 2013 U.S. Dist. LEXIS 172339, at *28 (finding §512(i) not satisfied where the
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`service provider's "repeat infringer policy was not tied to notices of infringement it received
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`from copyright owners," and the service provider "did not track the notices and did not base its
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`policy on how many notices were associated with certain users (such as by 'flagging' them).");
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`see also MP3tunes, 821 F. Supp. 2d at 637.
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`b)
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`Organization of User-Submitted Files
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`Not only does Escape fail to keep adequate records of repeat infringement, but it also
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`employs a practice that prevents copyright owners from being able to identify repeat
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`infringement in the first place. As Judge Netbum explained, Grooveshark's site organizes
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`multiple files containing the same song together, but only the "Primary File" can be streamed by
`Grooveshark users. RSUF if 117. When Escape receives a DMCA takedown notice for files that
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`infringe a copyrighted work, only the Primary File linked to a song is removed, and, if there are
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`Non-Primary Files associated with that same song, the song remains available to Grooveshark
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`users because a new Primary File will be selected automatically from the Non-Primary Files the
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`next time the song is selected for streaming. RSUF iii! 119-22.4 As aptly described by EMI's
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`expert, the system acts as a technological Pez dispenser: Each time a Primary File for a song is
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`removed due to a DMCA takedown notice, a Non-Primary File is slotted in to take its place, with
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`the process continuing until there are no remaining Non-Primary Files for that particular song,
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`and there is nothing to keep the Non-Primary Files from replenishing. Because it is not possible
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`for content owners to obtain uniform resource locators (URLs) for Non-Primary Files, RSUF
`if 124, and because the only URL visible to a user and content owners is the URL for the Primary
`File for a song, RSUF if 125, content owners must submit successive takedown notices even for
`
`4 Escape disputed this statement of fact, but its citation to paragraphs 13-17 of the Hostert Declaration did
`not controvert this fact.
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 12 of 24
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`Non-Primary Files slotted behind Primary Files that have already received takedown notices.
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`Judge Netbum concluded that this practice "may 'actively prevent copyright owners from
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`collecting information needed to issue [DMCA] notifications' in a manner that would have any
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`meaningful consequence." R&R 65 (quoting CCBill, 488 F.3d at 1109).
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`In its objection, Escape latches on to Judge Netbum's use of the word "may" to argue
`
`that she made an "equivocal statement [that] merely identifies a factual issue for determination at
`
`trial, rather than invalidating Escape's DMCA defense as a matter oflaw." Obj. 24. But Escape
`
`does not dispute any of the material facts at issue. Rather, its own description of its whack-a(cid:173)
`
`mole practice belies any genuine dispute of material fact: "[T]he sole effect of Escape's
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`'primary file' practice is that only one of the grouped files is available on the website at a time,
`
`and thus visible to content owners [such as EMI]. While this may require content owners such as
`
`EMI to issue DMCA notifications seriatim - - i.e., a notification addressed to the primary file,
`followed by Escape's removal of the content, and then, if the next primary file contains the same
`
`recording, issuance of a subsequent notice, etc. - - it does not 'prevent' copyright owners from
`
`policing the site." Obj. 24-25. Thus, Escape acknowledges that because of the way it organizes
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`user-submitted files, content owners can only see URLs for Primary Files. It further
`
`acknowledges that it forces content owners to submit successive notifications for the Non(cid:173)
`
`Primary Files slotted behind the Primary File even though the whole purpose of organizing the
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`files in this way is to group together files representing the same song.
`
`Other courts have rejected DMCA safe harbor protection for service providers employing
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`similar practices that actively prevent copyright owners from enforcing DMCA takedown
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`notifications in a meaningful way. In In re Aimster Copyright Litigation, for example, the
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`defendant service provider instructed users on how to transfer their files in encrypted form,
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`which led the court to conclude that "[a]dopting a repeat infringer policy and then purposely
`
`eviscerating any hope that such a policy could ever be carried out is not an 'implementation' as
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`required by§ 512(i)." 252 F. Supp. 2d 634, 659 (N.D. Ill. 2002). On appeal, the Seventh Circuit
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`affinned, noting that "[f]ar from doing anything to discourage repeat infringers of the plaintiffs'
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 13 of 24
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`copyrights, Aimster invited them to do so, showed them how they could do so with ease using its
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`system, and by teaching its users how to encrypt their unlawful distribution of copyrighted
`
`materials disabled itself from doing anything to prevent infringement." In re Aimster Copyright
`
`Litig., 334 F.3d 643, 655 (7th Cir. 2003). Here, Escape did not teach its users how to encrypt
`
`their files to hide them from copyright owners-it hid the files on its own. Therefore, the Court
`
`agrees with Judge Netburn that the undisputed facts demonstrate that the way Escape organized
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`user-submitted files actively prevented copyright owners from being able to issue meaningful
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`DMCA takedown notifications, which is an independent basis for concluding that it did not
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`"implement" a repeat infringer policy as§ 512(i) requires. Accord CCBill, 488 F.3d at 1109
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`("We hold that a service provider 'implements' a policy if it has a working notification system, a
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`procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent
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`copyright owners from collecting information needed to issue such notifications." (citing Ellison,
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`357 F.3d at 1080; Corbis, 351 F. Supp. 2d at 1102-03; In re Aimster Copyright Litig., 252 F.
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`Supp. 2d at 659).
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`c)
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`Termination of Repeat Infringers
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`On top of the two above-noted problems with the implementation of Escape's repeat
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`infringer policy, Judge Netburn found what this Court deems an even more fundamental problem
`
`with Escape's policy: As implemented, it does not actually "provide[] for the termination ... of
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`subscribers and account holders ... who are repeat infringers." R&R 68 (quoting
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`§ 512(i)(l)(A)). Here it is important to distinguish between the policy that Escape informs its
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`users of and the policy it purports to follow. The policy contained in Grooveshark's Terms of
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`Service does provide for terminating the accounts of repeat infringers:
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`Should [Escape] discover or be informed that you have posted User Content for
`which you do not personally own the copyright or otherwise do not have the
`necessary authority from the copyright owner, [Escape] may take all appropriate
`steps to rectify your noncompliance, including without limitation, disabling your
`ability to upload User Content to the Service, unless you provide [Escape] with a
`counter notification of your right to upload such User Content in compliance with
`our Copyright Policy. Should [Escape] discover or be infonned that you continue
`to upload User Content for which you do not personally own the copyright or
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`Case 1:12-cv-06646-AJN-SN Document 104 Filed 03/25/15 Page 14 of 24
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`otherwise do not have the necessary authority from the copyright owner after
`[Escape] has made reasonable efforts to disable your ability to do so, you will be
`considered a repeat infringer, and [Escape] will terminate your account and delete
`all data associated with your account; remove all of the User Content you have
`uploaded/submitted to the Site; and use its reasonable efforts to prohibit you from
`signing up for another User account in the future.
`
`Semel Deel. Ex. 14 at 4. But, as noted above, it is undisputed that Escape does not actually
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`follow this policy; instead, it follows its one strike policy under which it purports to terminate the
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`uploading privileges of first-time infringer