When you think of “Peggy Sue” by Buddy Holly, “Johnny B. Goode” by Chuck Berry, and “My Girl” by the Temptations, you think classic, iconic, rock and roll. Now, in light of the most recent legal setback against music sharing website Grooveshark, these songs may also represent a potentially significant limitation by the drafters of the Digital Millennium Copyright Act’s (DMCA) Online Copyright Safe Harbor provision – providers, including user-generated content (UGC) websites, may not have safe harbor protection for pre-1972 sound recordings.

Grooveshark is a music sharing website that allows users to upload music files and stream music content uploaded by other users.  Universal Music Group (UMG) owns the rights to many recordings shared on Grooveshark, including pre-1972 recordings like Peggy Sue, Johnny B. Goode, and My Girl. UMG sued Grooveshark in New York state court for copyright infringement based on its users’ uploads and music streaming. In pressing its case, UMG argued that the DMCA’s safe harbor provisions did not apply to the pre-1972 sound recordings shared on Grooveshark’s website. Last July, the New York state court rejected UMG’s argument relying heavily on the New York federal court decision Capitol v. MP3Tunes, which held that the safe harbor applied to both pre- and post-1972 recordings. UMG appealed, and last week a New York appellate state court overturned the lower court’s decision,based on precisely the opposite reading of the DMCA from the lower state court and MP3Tunes interpretation.

For the uninitiated, the DMCA is a 1998 law that provides a “safe harbor” to UGC websites from online copyright infringement liability caused by their users.  In a nutshell, a UGC website can claim the benefit of the DMCA’s safe harbor so long as it (1) has reasonably implemented a copyright offender policy which includes a registered agent with the copyright office to address copyright complaints and (2) does not have knowledge of the infringing material posted by its users (or is not aware of facts from which infringing activity is apparent) or after obtaining such knowledge or awareness, the UGC website expeditiously removes the infringing content, e.g., in response to a “takedown notice” sent by a copyright holder to the UGC’s designated DMCA notice agent. The DMCA Safe Harbor paved the way for the explosion of UGC websites over the last 15 years. No DMCA Safe Harbor, no UGC websites. And certainly no Grooveshark. Although Grooveshark takes certain measures to protect against infringement (like entering into license agreements with some music recording owners and licensees of music recordings), Grooveshark’s business model hinges on the presumption that it is shielded from copyright liability by the DMCA for all the music content shared on its site.

UMG challenged Grooveshark’s presumption, specifically arguing that the DMCA does not provide “safe harbor” for sound recordings before 1972 because these recordings are governed by state law and not U.S. copyright law or the DMCA. The New York state appellate court agreed, concluding that the plain language of section 301(c) of the Copyright Act states that no “rights or remedies” under common law copyright shall be “annulled or limited” and applying the DMCA’s safe harbor provisions to pre-1972 recordings would do just that, i.e., prevent UMG from immediately suing Grooveshark for New York state common law copyright infringement and restricting UMG’s initial remedy to a takedown notice. The court noted that if Congress intended to modify section 301(c) when it enacted the DMCA, then it easily could have said so and it did not.

So what does all this mean for UGC websites? First, the law on whether the DMCA safe harbor applies to pre-1972 sounds recordings is conflicted. The MP3Tunes case – which the lower New York state court had relied on – explicitly rejected the logic endorsed by the New York state appellate court on Section 301(c) and the DMCA. MP3Tunes held that such an “interpretation of 301(c) would eviscerate the purpose of the DMCA . . .  the DMCA was enacted to clarify copyright law for internet service providers in order to foster fast and robust development of the internet. Limiting the DMCA to recordings after 1972, while excluding recordings before 1972, would spawn legal uncertainty and subject otherwise innocent internet services providers to liability for the acts of third parties.” Moreover, the Ninth Circuit Court of Appeals held in Perfect 10 v. ccBill that all state intellectual property claims against UGC websites were preempted by federal law under Section 230 of the 1996 Communications Decency Act.  Both cases stand in sharp contrast to the New York state appellate court’s Grooveshark decision.

Second, if the ruling sticks, it presents an intractable and potentially insurmountable problem for music sharing sites like Grooveshark.  In order to screen for pre-1972 sound recordings Grooveshark would have to pre-screen all files to make sure it has segregated the pre-1972 files into one bucket and the post-1972 files into another. As many commentators have already noted, how Grooveshark is supposed to do that is unclear. And how it could do so without spending an enormous amount of time and money is an even more difficult question.  Pre-screening all UGC content also raises the possible risk that Grooveshark would fall out of the DMCA safe harbor for post-1972 infringing files that it fails to catch by not acting expeditiously to remove or disable access to that material.

Unsurprisingly, Grooveshark has indicated that it will appeal the decision and lobby on the Hill to address the apparent drafting flaw in the DMCA. Stay tuned.