Arista Records LLC v. Usenet.Com, Inc.

• Decision Date: 30 June 2009
• Docket Number: No. 07 Civ. 8822(HB).,07 Civ. 8822(HB).
• Citation: 633 F.Supp.2d 124
• Parties: ARISTA RECORDS LLC, Atlantic Recording Corporation, BMG Music, Capitol Records, LLC, Caroline Records, Inc., Elektra Entertainment Group Inc., Interscope Records, LaFace Records LLC, Maverick Recording Company, Sony BMG Music Entertainment, UMG Records, Inc., Virgin Records America, Inc., Warner Bros. Records, Inc., and Zomba Recording LLC, Plaintiffs, v. USENET.COM, INC., Sierra Corporate Design, Inc., and Gerald Reynolds, Defendants.
• Court: U.S. District Court — Southern District of New York

633 F.Supp.2d 124

ARISTA RECORDS LLC, Atlantic Recording Corporation, BMG Music, Capitol Records, LLC, Caroline Records, Inc., Elektra Entertainment Group Inc., Interscope Records, LaFace Records LLC, Maverick Recording Company, Sony BMG Music Entertainment, UMG Records, Inc., Virgin Records America, Inc., Warner Bros. Records, Inc., and Zomba Recording LLC, Plaintiffs, v. USENET.COM, INC., Sierra Corporate Design, Inc., and Gerald Reynolds, Defendants.

No. 07 Civ. 8822(HB).

United States District Court, S.D. New York.

June 30, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Steven Bernard Fabrizio, Duane C. Pozza, Luke Cardillo Platzer, Jenner & Block LLP, Washington, DC, Gianni P. Servodidio, Jenner & Block LLP, New York, NY, for Plaintiffs.

Charles Stewart Baker, Jim D. Aycock, Tina M. Stansel, John Reid Hawkins, Joseph D. Cohen, Porter & Hedges, L.L.P., Houston, TX, Lauren Eve Handler, Porzio, Bromberg & Newman, P.C., Morristown, NJ, Ray Berkerman, Ray Berkerman, P.C., Forest Hills, NY, for Defendants.

OPINION & ORDER

HAROLD BAER, JR., District Judge.

This action arises out of allegations of widespread infringement of copyrights in sound recordings owned by Plaintiffs Arista Records LLC; Atlantic Recordings Corporation; BMG Music; Capitol Records, LLC; Caroline Records; Elektra Entertainment Group Inc.; Interscope Records; LaFace Records LLC; Maverick Recording Company; Sony BMG Music Entertainment; UMG Recordings, Inc; Virgin Records America, Inc.; Warner Bros. Records Inc; and Zomba Recording LLC ("Plaintiffs"), copies of which are available for download by accessing a network of computers called the USENET through services provided by Defendants Usenet.com, Inc. ("UCI"),¹ Sierra Corporate Design, Inc. ("Sierra"), and spearheaded by their director and sole shareholder, Gerald Reynolds ("Reynolds") (collectively, "Defendants"). Specifically, Plaintiffs brought this action alleging (1) direct infringement of the Plaintiffs' exclusive right of distribution under 17 U.S.C. § 106(3);² (2) inducement of copyright infringement; (3) contributory copyright infringement; and (4) vicarious copyright infringement. There are two motions by Plaintiffs before me— one for termination due to discovery abuse, and another for summary judgment —with a cross-motion for summary judgment from the Defendants. Defendants'³ cross-motion for summary judgment argues that they are entitled to the safe harbor protections of § 512(c) of the Digital Millennium Copyright Act ("DMCA"). All parties filed numerous additional motions to exclude certain testimony, as well as voluminous evidentiary objections. Plaintiffs opine that their motion for terminating sanctions alleges discovery abuse sufficient to require that I strike the Defendants' answer and enter a default judgment in their favor ("Terminating Sanctions Motion"). For the reasons set forth below, Plaintiffs' Terminating Sanctions Motion is granted to the extent discussed in this opinion, though not in its entirety; Plaintiffs' motion for summary judgment is granted with respect to all claims; and Defendants' motion for summary judgment is dismissed as moot.

I. FACTUAL BACKGROUND

A. The USENET and How It Works

The USENET network, created over twenty years ago, is a global system of online bulletin boards on which users (or "subscribers") may post their own messages or read messages posted by others. Defendants' Statement of Undisputed Facts ("Defs.' SUF") 1. To obtain access to the USENET, a user must gain access through a commercial USENET provider, such as Defendant UCI, or an internet service provider. See Memorandum Opinion & Order, dated January 26, 2009 ("Sanctions Order") at 3. Messages posted to the USENET are commonly known as "articles." Id. Articles, in turn, are posted to bulletin boards called "newsgroups." Id. Newsgroups often are organized according to a specific topic or subject matter, and are oftentimes named according to the subject matter to which the articles posted to the newsgroup relate. Defs.' SUF 2. The USENET is divided into nine major subject headings known as "hierarchies," one of which is the alt.* hierarchy. Defs.' SUF 3-4. Content files known as binaries, which represent computer files such as images, videos, sounds, computer programs and text, are found in the alt.* hierarchy. Defs.' SUF 5. These binary files are encoded in text form for storage and processing, and require a software program to convert the text into a content file such as an image or music file. See id.

Users review available articles for potential download by selecting a newsgroup and then perusing the "headers" or titles of articles that are posted to that newsgroup; based on the header, the user may request to download articles that are of interest. Horowitz Decl. ¶ 21. Some news servers include a search field in which a user may type the name of a desired file and then review a list of articles responsive to the search request. Id. ¶ 24; Plaintiffs' Statement of Uncontroverted Facts ("Pls.SUF") 91. Once an article is retrieved, software is used to convert the text file into binary content; however, this conversion process is automated and virtually invisible to the user. Horowitz Decl. ¶ 35. "The combination of these additional features creates a user experience that substantially mimics the user experience of applications used on peer-to-peer file-sharing networks" such as Napster. Id. ¶ 36. Once the file is retrieved and converted, it is downloaded from the USENET provider's server and a copy is stored on the user's personal computer. Id.

To post an article to the USENET, a user must first obtain access to at least one USENET host, such as UCI; second, the user must use the proper USENET protocol for posting messages; and third, upon uploading the article to the USENET host, the article is distributed across the USENET network to other hosts' servers. Defs.' SUF 33; see also Sanctions Order at 3 ("The servers at each Usenet hub are programmed to feed the articles its users have posted to other Usenet servers, based on a user's implicit or explicit configuration settings, and, in turn, the servers receive postings from other servers."). This process is not completely automated; rather, USENET providers control which articles in which newsgroups are transmitted to, and accepted from, other providers through this "peering" process. See Horowitz Decl. ¶¶ 26, 57-58; Pls.' SUF 71. Articles that are posted to the USENET are not retained on the network indefinitely; rather, retention rates range from days to months depending on the host's server capacity. Defs.' SUF 14. Once the maximum capacity is reached, the server deletes older articles to make room for newer articles. Id. Unlike other forms of file-sharing networks, such as peer-to-peer networks, articles on the USENET are saved to news servers instead of another end-user's personal computer; a user accesses these articles and content files by connecting to these central servers that are available through their provider's service. See Horowitz Decl. ¶ 15.

B. Defendants and Their Business

Sierra purchased the domain name "www.usenet.com" in 1998, and it ran the website until UCI was formed in 2004. Defs.' SUF 17. Defendants offer access to the USENET to subscribers who sign up for Defendants' services on the www. usenet.com website. See Defs.' SUF 19. To subscribe, the user may choose among a variety of monthly subscription plans, which vary in price depending on the user's desired bandwidth allocation. Id.; see also Defs.' SUF 38. Subscribers pay Defendants a monthly rate ranging from $4.95 to $18.95; for a monthly fee of $18.95, users had access to unlimited downloads. See Pls.' SUF 63-64; see also Pls.' SUF 65-66; Sanctions Order at 4. The user must then accept certain "Terms of Use" ("TOU") that govern the relationship between UCI and its subscribers. Pls.' SUF 67. Among the terms in the TOU is UCI's official policy prohibiting the upload of unauthorized, including copyrighted, content without the permission of the rights owner. Defs.' SUF 20. Once a user subscribes to Defendants' service, he or she is provided access to over 120,000 newsgroups. Defs.' SUF 28. Defendants themselves operate over 34 different computer servers that perform tasks that include storing content and transmitting copies of articles to users upon request. Pls.' SUF 89. Defendants' "front-end" servers (which manage interactions with subscribers and transmit requested articles) display articles available for download on servers over the USENET, and are configured to connect to the correct "spool server" (which actually store the articles) to retrieve an article that the user requests. See Defs.' SUF 28; Horowitz Decl. ¶¶ 46, 50, 67, 92. Defendants' spool servers have the ability to filter or block groups or articles, and can define feeds that specify which articles and newsgroups are copied to the spool servers. Horowitz Decl. ¶ 62. Defendants also have the ability to create designated servers for certain kinds of newsgroups; they exercised this ability by creating servers for newsgroups containing music binary files to increase their retention time. See Pls.' SUF 93-96. Defendants have, at times, exercised their right and ability to restrict, suspend or terminate subscribers, including by suspending accounts of users who sent "spam" messages and restricting download speeds of subscribers who downloaded what Defendants considered to be a disproportionate volume of content. Pls.' SUF 69. They have also taken measures to restrict users from posting or downloading articles with pornographic content. Pls. SUF 70; see also Pls' SUF 112. Defendants likewise have the right and ability to block access to articles stored on their own servers that contain infringing content. Pls.' SUF 72.

C. Evidence of Defendants' Subscribers Downloading Plaintiffs' Works

There can be no dispute that Defendants'...