Photo by Lauren Mack

By Lauren Mack

This year’s CMJ CLE event kicked off with a discussion on two of the biggest topics in the music industry right now: piracy and cloud computing. Although cloud music services have been hyped as the music industry’s solution to piracy, there are still many questions about the legality of the cloud music services themselves. Mark Eisenberg, Co-founder and Principal of Latticeworks Media, explained that this uncertainty stems from the existing laws not fitting new paradigms. The more innovative companies are, the more uncertainty there is and the more likely the issue is to be caught up in years of litigation.

There are three basic models for cloud music services. The sideload model is when the content is stored in the cloud and the purchaser is allowed to download it into multiple devices. The scan and match model involves the cloud service scanning the user’s hard drive and then allowing the user to access any song on the provider’s server that it can verify the user already owns. The third model, possession, permits the user to store any music he or she owns in the cloud, no matter how it was obtained.

What is unclear is what types of licenses these different models require, if any. Moderator Michael Poster, Partner at Vandenberg & Feliu, LLP, questioned the panel on what impact they thought the recent decision in the copyright infringement suit against cloud music provider MP3Tunes would have. The panelists agreed that it did little to create certainty for cloud music providers because it was a lower court decision, and the case is likely at the beginning of a long appeal process. Adam Parness, Senior Director of Music Licensing at Rhapsody International, Inc., noted that one immediate effect it did have was to change the leverage points of parties currently in negotiations for cloud music services.

While Amazon and Google have launched their cloud music streaming services sans licenses, Apple did obtain licenses for its much anticipated scan and match model. Some have speculated that Apple’s iTunes Match will essentially allow users to “sanitize” their pirated music by matching the pirated song on the user’s hard drive, thereby allowing the user to download a clean, and likely higher quality, copy from Apple’s server. Parness defended the idea of sanitizing pirated music collections, admitting that “the cat is out of the bag,” and that since piracy is going to exist no matter what, it might as well be monetized.

Eisenberg felt that the successful cloud music service would create the “ubiquity of the user experience” consumers crave by allowing them to play music everywhere – in their home, walking down the street, and in the car – without necessarily paying more for each new location.

Perhaps the safest route for a startup wanting to include music in its service is to allow the users to upload their own content. Michael Elkin, Managing Partner of the Winston & Strawn, LLP New York’s office, explained that several courts have ruled that general knowledge of infringing content uploaded by a user is not alone enough to hold a service provider liable for copyright infringement under Section 512 of the Digital Millennium Copyright Act, creating more certainty for a cloud service provider that a YouTube-like model will shield it from suit than a model untested by the courts.