Digital Media

Last week, a music site called BlueBeat made headlines by offering Beatles songs as free streams and 25 cent downloads. The Beatles are known for not making their songs legally available on iTunes or any other online forum, so observers rightly asked "how are they doing this legally?"

EMI, the record label that owns The Beatles' recordings, has a simple response: they're not doing this legally. But here's where the story gets very strange.

The legal reasoning in this case is straight out of "Alice in Wonderland."

(Credit: Wikimedia Commons (public domain illustration))

BlueBeat is owned by a company called Media Rights Technologies, which specializes in digital rights management technology. DRM is supposed to be used to prevent copyright infringement. But according to a 2007 blog post on HuffingtonPost.com by the company's founder, Hank Risan, MRT backed into this business after being--get this--targeted by the RIAA for copyright infringement.

As Risan explains in his post, he and a partner had posted a bunch of streaming-audio files to a Web site about the history of music. The RIAA issued a takedown notice, and the site took the streams down.

The streams had been protected by Windows Media DRM, but according to Risan, an update to the Media Player broke the DRM. In response to this flaw, Risan created MRT and built his own DRM system, which he claimed would be far more robust than the systems on the market at that time. Then, in 2007, MRT sent cease-and-desist letters to Microsoft, Apple, Adobe, and RealNetworks, ordering them to use MRT's DRM technology instead of their own, on threat of legal action.

The legal reasoning was twisted--basically, MRT argued that the Digital Millennium Copyright Act should force these companies to use the most robust DRM technology available, even if that technology was created by somebody else. Predictably, nothing ever came of this demand.

MRT's legal reasoning is equally funny this time around, as Ars Technica reports. According to the report, MRT claims that it didn't post the exact Beatles recordings. Instead, it posted "psychoacoustic simulations," then added simple video content to them. This constitutes a new audiovisual work, and isn't covered by the existing copyrights, MRT argues. In fact, MRT even went so far as to apply for copyrights on the "new" works!

Perhaps this is all some kind of metacommentary on the frustrating inconsistency of U.S. copyright law, but I predict that MRT is going to be laughed out of court. In the meantime, if you want your Beatles music online, it's still available on BlueBeat as of the time I posted this. I didn't want to give the company a credit card to test the whether the downloads work, but the streams sound pretty close to perfect...especially considering that they're only psychoacoustic simulations.

Update: 5:42 p.m. PT: To include information about a witness being compensated by EMI.

The copyright lawsuit filed by major recording company EMI against Michael Robertson, founder of MP3tunes.com, took an unexpected turn on Friday.

A U.S. District judge will allow EMI to file suit against Robertson personally--not just his company, MP3tunes, according to a copy of the judge's decision. Besides accusing MP3tunes of violating its copyright in a suit filed in November 2007, EMI also named Robertson as a defendant.

A year ago, a judge in the case threw out the copyright-infringing charges against Robertson, but on Friday, Judge William Pauley, for the U.S. District Court of the Southern District of New York, decided to let EMI once again name Robertson as a defendant.

Michael Robertson, founder of MP3tunes.com

(Credit: James Martin/CNET)

The reason for the switch was the new evidence provided by MP3tunes' former president. In April of 2008, Emily Richards gave a deposition. In July of this year, 10 months after she left the company, she gave another one. In the latter testimony, Richards said Robertson was making a lot of the decisions for the company and that Robertson handled "technical, product decision, and legal matters without her involvement." This, argues EMI, shows that Robertson exercised control over MP3tunes and this should allow it to bring a suit against him personally.

MP3tunes, which allows users to store their songs in a digital locker and access them from any Web-enabled device, argued that this statement was consistent with Richards' earlier testimony. The judge didn't buy it.

"From the court's review of both depositions, it is clear that Richards provided new testimony," Pauley wrote.

Robertson said on Monday afternoon that the difference between Richards first deposition and her last was that EMI paid her $10,000. An EMI spokeswoman could not be reached for comment.

In Pauley's decision, he notes that EMI agreed to compensate Richards for "documented legal fees and costs up to $10,000" as well as pay expenses for her lawyer. The judge apparently saw nothing wrong with the arrangement. Pauley however noted that Richard testified that she left the company at Robertson's request, a fact that "bears on her credibility."

The good news for Robertson, who also founded MP3.com (now owned by CNET publisher CBS Interactive) and Linspire, is that Pauley threw out one of EMI's copyright claims. EMI's other claims, however, will be allowed to proceed.

Robertson, who in the past has called EMI's attempts to sue him personally "despicable," said that EMI's attempts to go after his personal assets is the music label's newest way of discouraging technologists from developing businesses that use their content in ways they don't like.

"We want to argue the merits of the case," Robertson said. "They want to drag it out...people should be able to store their music online."

The case is scheduled to go to trial in March.

Lawyers working on a $1 billion copyright lawsuit filed by Viacom against Google's YouTube may have uncovered evidence that employees of the video site were among those who uploaded unauthorized content to YouTube.

In addition, internal YouTube e-mails indicate that YouTube managers knew and discussed the existence of unauthorized content on the site with employees but chose not to remove the material, three sources with knowledge of the case told CNET.

The e-mails, according to the sources who asked for anonymity because of the ongoing litigation, surfaced during an exchange of information between the two sides of the legal dispute. They are one of the cornerstones of Viacom's case, as well as that of a separate class action lawsuit filed against Google and YouTube by a group of content owners, the sources said. The group includes a European soccer league and a music-publishing company.

Such evidence could be a major blow to YouTube's defense. If managers possessed "actual knowledge" of copyright infringement on the site and did not quickly remove it, the company may not be entitled to protection under the Digital Millennium Copyright Act's safe-harbor provision, according to legal experts.

"The facts you described could very well be the smoking gun that puts a hole through Google's case," Roger Goff, an entertainment attorney not involved in the case, told CNET News. "(If the facts are accurate), Google will have a very difficult time claiming that (its staff members) don't undermine its protection."

The provision, established in 1998, was designed to give online services a measure of protection from liability for infringing materials uploaded to their sites--as long as they meet a certain criteria, including:

• (A)(i) The services don't have actual knowledge that the material, or an activity using the material on the system or network, is infringing.
• (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or
• (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material.

The entertainment industry has been skeptical about YouTube's claims that it did not have knowledge of the once-plentiful amounts of infringing content available on the site. Clips from popular TV shows, feature films, or sports events would often bubble up in YouTube's Most Viewed or Most Discussed sections.

It should be noted that the correspondence described by sources likely make up only a sliver of the material exchanged, and there's no way to know the full spectrum of internal discussions regarding copyright at YouTube.

"The characterizations of the supposed evidence, made in violation of a court order, are wrong, misleading, or lack important context and notably come on the heels of a series of significant setbacks for the plaintiffs," Aaron Zamost, a YouTube spokesman, said Monday evening. "The evidence will show that we go above and beyond our legal obligations to protect the rights of content owners."

Any questions about what YouTube employees may or may not have uploaded to YouTube must also be asked of Viacom's employees. Court documents show that on August 25, Viacom agreed to turn over records that shed light on "Viacom's decisions to upload or authorize the uploading of videos to YouTube" and on the company's policies "for allowing videos to remain on YouTube for marketing promotional or other business reasons."

This suggests that Viacom employees also uploaded clips to the site. A company representative declined to comment.

Viacom has long acknowledged that it was one of the first to promote shows online by posting clips to YouTube. But the conglomerate has also said the uploading of clips does not undermine or diminish its copyright claim.

YouTube's counterargument has always been, how is the company supposed to know the difference between pirated and legally uploaded clips when companies like Viacom are among those uploading material?

Google acquired YouTube for $1.65 billion in October 2006, a price tag that set the bar for Web 2.0 acquisitions. Long before that, many in the film and television industries claimed that YouTube was building a big audience by enabling people to pirate professionally produced television shows and films.

Since Viacom first filed its suit in March 2007, accusing Google and YouTube of encouraging users to commit intellectual-property theft, many online services and entertainment companies have closely watched the case because of its broad implications. What the YouTube-Viacom suit could help settle, to some degree, is who is responsible for policing and initiating the removal of pirated materials--the copyright owners or the operators of online services?

But should the case ever go to trial, the outcome may be less significant than legal experts once predicted. While the lawsuit has meandered in the courts for 30 months, other legal battles featuring companies with less marquee value have already gone a long way toward determining Web services' key issues surrounding copyright.

Two weeks ago, U.S. District Judge A. Howard Matz issued a decision saying video site Veoh was not responsible for copyright violations committed by users because it was entitled to protection under the DMCA. Universal Music Group, the world's largest record company, had filed a copyright suit against Veoh that experts said was very similar to the YouTube-Viacom case. Matz's decision appeared to set an important precedent that would help YouTube and Google argue against Viacom, the parent company of MTV Networks and Paramount Pictures.

"The issue is whether Veoh takes appropriate steps to deal with copyright infringement," Matz wrote. He concluded that it had.

YouTube supporters cheered Matz's ruling, believing that it would apply to YouTube's situation because the Web's largest video site had long established and enforced a "takedown policy," whereby the company removed infringing content, once notified by a copyright owner. And later, the video site took steps not required by the DMCA by establishing a state-of-the-art filtering process that helps block material from being uploaded to the site.

But attorneys for Viacom and members of the class action are expected to argue that YouTube's filtering system is a gaping hole in YouTube's defense. One of the major complaints that content owners had about YouTube was that before the company launched its filtering technology, they were forced to file takedown notices for every instance of infringement. In some cases, an entertainment company could remove a popular clip, only to see someone else upload it again seconds later.

Lawyers for Viacom and the class action group are expected to argue that if YouTube was notified that a specific clip was pirated, and had the power to prevent copies from going up but did not act to remove them, the company violated the DMCA.

The plaintiffs use as evidence a paraphrased statement from Chad Hurley, YouTube's CEO, and one of its three co-founders, which appeared in The New York Times in February 2007, the sources said.

"(Hurley) said the company was still working on its filtering technology," the Times wrote. "He said it had agreed to use it to identify and possibly remove copyrighted material from Warner Music, and it would discuss a similar arrangement with Viacom as part of a broader deal."

A Viacom representative said at the time, "They are saying we will only protect your content if you do a deal with us--if not, we will steal it."

The YouTube-Viacom suit is unlikely to go to trial before next year. Certainly, with YouTube wooing entertainment companies as it attempts to battle Hulu, Netflix, Crackle, iTunes, and other digital-video outlets, there exists the possibility that YouTube and Viacom will come to some kind of settlement.

A settlement might be anticlimatic, but could be the best for all concerned.

A legal complaint seeking class action status filed in Houston on Friday accuses social-publishing site Scribd of egregious copyright infringement.

Joe Sibley (left) and law partner Kiwi Camara.

(Credit: Camara & Sibley law firm)

Scribd managers have "built a technology that's broken barriers to copyright infringement on a global scale and in the process have also built one of the largest readerships in the world," the attorneys representing the class wrote in the complaint. "The company shamelessly profits from the stolen copyrighted works of innumerable authors."

While this may sound like a generic copyright case, there's one interesting side note. The attorneys that filed the lawsuit are at the head of Camara & Sibley, the Houston-based firm defending Jammie Thomas-Rasset against copyright claims made by the music industry.

Joe Sibley and Kiwi Camara have made names for themselves largely by representing Thomas-Rasset, the Minnesota woman accused by the music industry of copyright violations. In June, a jury found her liable for willful copyright infringement and ordered her to pay $1.9 million in damages. Thomas-Rasset has asked for a new trial.

In an interview for a story published in July, Sibley said he and Camara could see themselves working for copyright owners, if they believed in the issue. He told me that they weren't locked into any legal dogma and would take cases based on their merits. It's not unusual for lawyers to argue both sides of copyright issues.

In their complaint, filed in U.S. District Court for the Southern District of Texas, the lawyers wrote that plaintiff Elaine Scott, a book author, found on Scribd in July an unauthorized copy of one of her titles, "Stocks and Bonds: Profits and Losses, A Quick Look at Financial Markets." They claim that the book had been downloaded more than 100 times from Scribd, which her attorneys called the "YouTube for documents."

Neither Scott nor Scribd representatives were immediately available for comment.

The class purports to represent "every author who owns a valid registered copyright in a work infringed by Scribd." Camara & Sibley said the number of infringing material on Scribd was known only to that company but predicted that the size of the class could be huge.

They did note that Scribd has said it would remove infringing documents when notified by a copyright owner, as is required by the Digital Millennium Copyright Act. San Francisco-based Scribd also has created an automated filtering system designed to prevent the publishing on its system of unauthorized works, once identified, from being uploaded again.

Camara & Sibley say very clearly what they think of Scribd's business model.

"Under the aegis of self-promoting misinterpretations of federal statutes," the lawyers wrote in their complaint, "the West Coast technology industry has produced a number of start-up firms premised on the notion that commercial copyright infringement is not illegal, unless and until the injured party discovers and complains of the infringing activity, and (the) infringer fails to respond to such complaints."

Camara & Sibley added to the complaint, "Apparently (the West Coast start-ups) believe any business may misappropriate and then publish intellectual property, as long as it ceases to use a stolen work when an author complains...Many millions of dollars have been invested in this business plan."

(Credit: Twitter)

Actress-singer Courtney Love used Twitter to rail against what she claimed was the unauthorized use of Kurt Cobain's likeness in the video game Guitar Hero 5, going so far as to threaten a lawsuit.

But Activision, the maker of Guitar Hero, said the company is in possession of an agreement signed by Love that authorized it to create an avatar in the likeness of the former Nirvana front man. At this point who knows who is in the right. What is certain is that Love--widowed when Cobain shot himself in 1995--didn't present a convincing case by issuing meandering, disjointed, caustic, and barely readable Twitter posts.

Perhaps she came to the same conclusion. On Thursday evening, Love blocked public access to her Twitter account, courtneylover79.

(Credit: Activision)

Love's Twitter-tweak of Activision is a powerful endorsement for the need of celebrity publicists. In an age when a cell phone is all that is needed for stars to communicate with their fans, a carefully cultivated image can get shredded with a few ill-advised key strokes. Love's tweeting is an example of what can happen when someone famous, either out of anger, despair, or lunacy, addresses the Web without proper supervision.

"Have fun with your avatars you slimebags," the 45-year-old Love wrote in a Tweet posted early Thursday morning (most of the grammar and spelling is as it appeared in Love's posts). "i rant? F*** off i have proof youve simply never bothred to look. so f***ing play your videogame.

"we have NOTHING to do with this," she said in another post as she denied involvement with the Cobain avatar, "it was presented to me and oi said 'show me a better avataR' TO DRAG MY HEELS., never did i intend on allowing GUITARHERO for me or for Kurt i am NOT yoko f***ing Ono no ofense to her, but i am a different person entirely and this is insane."

Love later acknowledged that she did sign some sort of agreement with Activision.

"I signed whats known as a (deal) memo under great pressure and i was pleasnat to work with? HA i wouldnt show up i made them change all sorts of s***t, and even then i had no intention of doing his btw we get NO money for this, travesty, Frances (her and Cobain's daughter) gets NO money for the rape."

From reading Love's tweets, what appears to have happened is Activision went to Love for permission to use Cobain's likeness. When she saw that Cobain's avatar not only can be programmed to perform Nirvana's music but also the songs from Bon Jovi, Bush, and Madonna, she became dissatisfied. Her outrage also came after rock critics and Nirvana fans began holding her responsible for the alleged defiling of Cobain's memory.

Despite all her bluster, there may be little that Love can do to force Activision to make changes, said Mark Litvack, a well-known entertainment attorney at the law firm Reed Smith.

Litvack said that California law does indeed protect a deceased person's likeness. A California statute commonly referred to as the "Fred Astaire law," named after the legendary dancer and movie star whose likeness was used without permission following his death, says that anyone using another person's likeness for commercial purposes without consent from them or their estate "shall be liable for any damages sustained by the person or persons injured."

"But Activision would have known this," Litvack said. "It appears, she licensed her husband's likeness and the fact that she licensed them away was her decision. I get the sense that this is a case of sellers' remorse and as far as the law is concerned all she's left with is her remorse."

One way Love may benefit from her bizarre tweeting is that it's drawing attention to the Cobain avatar.

Anyone who has any knowledge of Cobain knows he took himself and his music very seriously and is unlikely to have allowed his likeness to be seen shimmying around on stage like some teen pop star or feigning the poses of a rap singer, which is what his avatar can be made to do on Guitar Hero 5.

Some may find the depiction to be disrespectful or at the very least not very authentic. That may do more to force Activision's hand than any Twitter bashing from Cobain's inarticulate wife.

TiVo said Wednesday that it is suing AT&T and Verizon over three DVR patents. The complaints seek damages and a permanent injunction.

Simply put, TiVo is pursuing the same legal playbook it followed against Dish/EchoStar. The patents in question include 6,233,389, 7,529,465 and 7,493,015.

TiVo recently won another legal victory against EchoStar, which was found in contempt of court in its legal spat. TiVo won $103 million in damages, but the case will have another hearing in November or so. EchoStar appeals continue. Meanwhile, the U.S. Patent and Trademark Office is reviewing TiVo's patents at Echostar's request.

In a statement, TiVo CEO Tom Rogers said:

We will continue to pursue enforcement where necessary to stop infringement of our intellectual property.

On a conference call, Rogers noted that TiVo was still going to generate value through partnerships and distribution deals, but wanted investors to recognized the company's intellectual property portfolio.

The lawsuits against AT&T and Verizon come as TiVo reported a fiscal second quarter net loss of $2.9 million, or 3 cents a share, compared with a profit of 3 cents a share a year ago. The company reported revenue of $57.3 million, down from $65.2 million a year ago. Wall Street was expecting a loss of 5 cents a share.

Rogers called the quarter "solid" since the company delivered adjusted EBITDA of $5.2 million. TiVo said it has been focused on distribution via the likes of RCN and Best Buy. The company also said DVR rollouts with Comcast and DirecTV are on track.

Updated August 27: to correct amount of quarterly net loss.

A group of Facebook users filed a civil lawsuit Monday that alleges the social-networking site is violating California consumer privacy laws.

The lawsuit, which was filed in California's Orange County Superior Court on behalf of five users, seeks a jury trial, as well as damages and attorneys' fees. The five plaintiffs are described as two children younger than 13, a user of the original Facebook, a professional photographer, and an actress and model.

The 40-page complaint accuses the Palo Alto, Calif.-based company of violating California privacy and online privacy laws by disseminating private information to third parties for commercial purposes.

"Plaintiffs and the general public desire and expect a level of privacy, which Facebook has failed to satisfy under its current policies, procedures, practices, and technology," the complaint states.

A Facebook spokesman declined to comment on the specifics of the lawsuit other than to say, "We see no merit to this suit and we plan to fight it."

The plaintiffs' attorney did not immediately respond to a request for comment.

Facebook is no stranger to privacy controversy. In July, an investigation by Canada's privacy commissioner suggested Facebook is unconcerned with members' privacy and called on it to do more. Commissioner Jennifer Stoddart expressed concern that while it's easy for members to deactivate their accounts, it's less clear on how to actually delete them. Facebook could therefore retain member data from deactivated accounts for an indefinite period of time in violation of Canadian privacy law.

The social network went through a user backlash over the introduction of its News Feed in 2006, and a bigger one over the controversial Beacon advertising program. More recently, a revision to Facebook's terms of use prompted consumer advocacy blog The Consumerist to highlight language that it said meant that Facebook claimed ownership of user profile data and photos.

Update: 8:30 a.m.: To include iLike news.

The financial troubles dogging Qtrax, a peer-to-peer music service that has spent years trying to get off the ground, appear to be deepening.

Millennium Information Technologies is one of several companies suing Qtrax.

Last month, CNET News reported that enterprise software giant Oracle had filed a lawsuit against New York-based Qtrax, alleging that the service owed it $1.9 million and had violated its copyright. Now, records show that at least two other companies have filed suit in New York against the music service in efforts to collect allegedly unpaid bills from the music start-up.

In addition, Qtrax is behind in payments to at least one of the four major recording companies, according to music industry sources.

Qtrax CEO Allan Klepfisz said Friday that the start-up has secured some funding and is close to putting its money problems behind it, but acknowledged that management has had trouble at times paying bills. He also argued that a start-up with financial problems isn't news. Perhaps, but it's hard to name another digital music service of any size that was sued by vendors or creditors before it launched. Klepfisz said that Qtrax has been seven years in the making.

The New York-based company generated some media attention with its ambitious plan of offering ad-supported music downloads free of charge to the public via peer-to-peer technology. In 2008, Qtrax trumpeted the signing of licensing agreements with all four major labels, only to have to acknowledge later that those "deals" weren't actually signed. The company's credibility was called into question after that.

Qtrax is by no means the only company that has experienced financial setbacks.

Money troubles are common in the struggling ad-supported music sector. Ruckus closed in January, and SpiralFrog shut down in March. Imeem staved off a financial crisis when it obtained new funding and negotiated better licensing rates from the major record labels. Not one of the players in the sector has yet to report a profit but Imeem said it is moving towards profitability. Another company in the space that claims to have been profitable for the past eight months is iLike, which was said to be an acquisition target by MySpace according to a Monday report in TechCrunch.

The additional lawsuits against Qtrax were both filed this spring. Millennium Information Technologies said in documents filed in April with the Supreme Court of the State of New York that Qtrax paid it $85,000 but still owes $147,634.72 for helping to implement Oracle's software to Qtrax's site. Last week, Millennium filed for a default judgment against Qtrax

In June, a company called Las Vegas Wall Street Group filed papers with the same court accusing Qtrax and Klepfisz of owing it $1.5 million. Representatives from Millennium and Las Vegas Wall Street Group did not respond to interview requests.

Klepfisz said Friday that Las Vegas Wall Street Group is not a vendor but did not dispute that Qtrax owes the company money. "The facts will emerge in due course," he said. As for Millennium, Klepfisz said there was more to the story than what was in the court documents.

"By and large, all our vendors have done an exceptional job," Klepfisz said. "There are occasional exceptions. We feel we have a basis for this action (with Millennium)."

Klepfisz's statement suggests that Qtrax was unhappy with the quality of service it received from Millennium. There were, however, no complaints from Klepfisz when he responded to Millennium's demands for payment, documents show.

"Next wire I believe is Wed. I will confirm," Klepfisz wrote Millennium representatives, who filed copies of the e-mails with the New York court. "I think by early July we can clear whatever is deemed to be outstanding."

Klepfisz also wrote: "Sorry for the lateness. Will be in your account first thing in the morning. Another installment Tuesday. Thanks."

One February 2008 payment that Qtrax sent Millennium for $26,250 "was returned, and not honored by the Defendant's financial institution, citing 'insufficient funds.'"

In Oracle's suit, the software maker produced a copy of what it charged was a $1.8 million bounced check.

In a note posted to the Qtrax blog two weeks ago, Klepfisz addressed the site's long-awaited launch date.

"I cannot sign off without a discussion of our launch date," he wrote. "So, are we going to set a launch date? Well, I said in the last blog that we will do so when (the company's funding) is deposited. And I thought it would happen by now. I was wrong. It is not yet deposited. But it is scintillatingly close. So stand by. We will be announcing that final immutable launch date very soon."

Google's acquisition of video-compression software company On2 Technologies is being challenged in court by On2 shareholders dissatisfied by Google's $106.5 million offer.

The lawsuit, which was filed Monday in Delaware Chancery Court, seeks class action status and a permanent injunction against the deal. The suit, first reported by the New York Post, also seeks an accounting of all damages caused by the defendants Google and On2's board of directors.

On2 declined to comment, and Google did not immediately respond to requests for comment.

Under the terms of the stock swap, which was announced earlier this month, each share of On2 will be exchanged for 60 cents' worth of Google common stock--a 57 percent premium over On2's closing stock price on the last trading day before the announcement. The complaint notes that On2's stock traded at 65 cents in May and reached as high as $1.16 in 2008.

The lawsuit also alleges that On2's board agreed to provisions that prohibit the company from entertaining other offers.

The deal, which is expected to close in the fourth quarter of this year, still needs the approval of On2 shareholders, but the board has yet to announce a date for the vote.

On2's video-compression technology is used in Adobe's Flash software and the Hulu video site, among others. The company licenses various "codecs"--the software used to encode video so it's compact enough to squeeze down a narrow Internet pipe, then to expand it at the other end.