He’s youthful, handsome, an entrepreneurial dynamo, and his personal wealth has been estimated at times at near a billion dollars. But even for a San Diego tech innovator like Michael Robertson (shown at right), a $750,000 copyright judgment against him personally has to sting, especially when it has been affirmed recently by an appellate court.

The U.S. Court of Appeals for the Second Circuit has ruled against Robertson and his defunct online music storage firm MP3tunes, allowing plaintiffs to pursue further  infringement claims in a long-running lawsuit involving record companies and music publishers once part of EMI Group Ltd.

In EMI Christian Music Group, Inc et al. v. MP3tunes, LLC et al,  music industry plaintiffs not only won what analysts say is their key dispute, the appellate opinion also narrows the circumstances in which Internet service providers (ISPs) can claim safe harbor from copyright liability.

Repeat infringers

The EMI case called on  U.S. Circuit Judge Raymond J. Lohier Jr., writing for a three-judge appellate panel, to consider 17 U.S.C. § 512 and the requirement of the Digital Millennium Copyright Act, aka the DMCA, that to achieve the statute’s safe harbor protections from infringement actions, an ISP must “adopt[] and reasonably implement[]” a policy to terminate “repeat infringers.”

The case went up to the appellate court after a federal jury in 2014 returned a roughly $48-million verdict against MP3tunes and Robertson, holding them liable for infringement. Robertson was found directly liable for $7.5 million in punitive damages. The trial judge reduced that sum to $750,000 citing a violation of Robertson’s due process.

But the trial court found some DMCA safe harbor protections for Robertson and MP3tunes.com, a   website he founded in 2005 as a place where customers could go to purchase music in the MP3 digital format and created by musicians not associated with major record labels. The company later morphed into a service that permitted users to stockpile music in “the cloud” in online “lockers.” The trial court said MP3tunes, as an ISP, had taken some steps to deal with 150 or so repeat infringers.

And here’s where the appellate court disagreed and overruled the trial court in late October.

Woes with ‘side-loading’

The appellate judges noted that to upload content into the online lockers, Robertson and MP3tunes tapped online tools available at a second, related website, sideload.com. It not only let users upload tunes to their locker but also to search for free music on the Internet. When users stored songs in their MP3tunes locker,  Robertson’s sites also simultaneously added the music into sideload’s index of songs and they became searchable and promoted as “free.” Many clearly weren’t, including songs by the Beatles.

The ex-EMI plaintiffs took issue with a trifecta of rulings by the lower court and questioned on appeal: MP3tunes’ repeat infringer policy; the jury’s findings of willful blindness about some categories of songs; and the number of statutory damage awards available with regard to certain songs.

Plaintiffs argued that MP3 tunes failed to track repeat users who created links to infringing material that were the subject of multiple DMCA take-down notices. Because MP3 tunes received and knew of these notices, the music industry parties argued the company was ineligible for DMCA safe harbor protections because it had not dealt with repeat infringers. The appellate court agreed, looking to the ordinary meaning of repeat infringer. The appellate judges said the DMCA did not provide a clear definition, but they said the scofflaws at issue only had to be “repeatedly upload[ing] or download[ing] copyrighted material for personal use.”

Willful blindness

Meantime, the appellate court also overruled the trial court on the issue of “willful blindness,” and whether Mp3tunes and Robertson should have known and done more to avert infringement with two categories of songs: “MP3s from major labels issued before 2007, and all songs by the Beatles.”

The appellate judges cited and confirmed the finding in Capitol Records, LLC v. Vimeo, LLC, thereby placing the burden on the music industry plaintiffs to show instances where MP3tunes and Robertson  knew or should have known of infringement. But the appellate court’s said in its opinion that Robertson clearly knew a lot about major labels and how they distributed music in the MP3 format. The judges also cited a Robertson email, in which he acknowledged that he knew the plaintiff’s position that Beatles music at that time was unauthorized for  digital availability. The court also zinged Robertson and Mp3tunes executives for using sideload themselves to download infringing material. The judges said this showed they actively encouraged infringement.

The court, rejecting Robertson’s various attacks on the trial court’s holdings adverse to him, including whether he was within its jurisdiction and had contributed to infringment, upheld the $750,000 judgment against him personally. The appellate court remanded the case to the trial judge to sort out how its ruling affects any unresolved issues.