Cloudy with a chance of litigation 27/06/2011

By Jerome John

Australian Copyright Council


Amazon, Google and Apple have each unveiled ‘cloud’ music services in the last three months, creating a frenzy of interest in how these new business models will work and posing a raft of questions about the legal implications of services which don’t have licences from music rights holders.


In January 2000, a user logging on to the website would have been greeted by the offer of an intriguing new service called ‘Beam-It’. Once installed on the user’s computer, Beam-It software would match the songs on the user’s CDs with songs on’s music database, and these matches would then be available for streaming back to the user. created its music database by ripping thousands of CDs and did so without any licences from record companies or publishers. Inevitably, a group of music publishers and record companies sued and the matter was settled in court in June 2000, with a summary judgement against and in favour of the rights holders.[1] paid settlement fees and was eventually sold to Universal Music Group. The Beam-It service was taken offline and faded into digital obscurity.


Fast forward to 2011 and we see echoes of in the new ‘cloud’ music services being rolled out by Amazon, Google and Apple. This time, though, the services are operating in a very different technological and business environment. A multiplicity of media devices, faster wireless internet speeds, and the search for new ways to commercialise digital music consumption have made cloud storage a hotly contested new business proposition.


What is the cloud?


The term ‘cloud’ is often used when referring to these services but what exactly does it mean? The cloud can be defined in many different ways and refers to a variety of theories and services. According to the US-based National Institute of Standards and Technology: “Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.” [2]


What does this all mean? Basically, think of the cloud not as a particular technology but as a way of structuring the organisation and flow of data. The cloud can enable data (such as music and images) to be stored and processed in multiple, remote locations and done so independently of a particular computer or device. Now let’s look at the key competitors offering a cloud music storage service.


1. Amazon Cloud Player [3]


Unveiled on March 29th this year, the Amazon Cloud Player offers two different services:

o A copy of any music purchased through Amazon’s digital music store can be stored on Amazon’s Cloud Drive and the purchaser can stream or re-download this music at any time, to a variety of devices;

o Users can also upload their own digital music files (whether purchased through Amazon or not) to Amazon’s Cloud Drive and then stream or download them at any time, to a variety of devices.


Amazon has released cloud player software for the PC and Mac platforms, as well as a cloud player app for Android devices. The service gives users up to 5GB of storage free, and offers more storage space at a range of price points (e.g. $20 for 20GB, $50 for 50GB). Music purchased through Amazon’s digital music store does not count toward storage space.


Amazon launched its Amazon Cloud Player without signing any deals with record labels or publishers and the service continues to operate without any such licences. Amazon stated in a letter to record companies: “We are not looking for licences for Cloud Drive or Cloud Player as they exist today – as no licensees are required".[4] Further, an Amazon spokesperson told technology publication Ars Technica that, “the functionality of saving MP3s to Cloud Drive is the same as if a customer were to save their music to an external hard drive or even iTunes”.[5] In other words, Amazon asserts that the cloud is effectively the same as the user's hard drive, remotely located.


Publishers and record companies are yet to take legal action but a Sony representative was quoted in the LA Times as critical of Amazon's approach to licensing: “We are disappointed that the [digital] locker service that Amazon is proposing is unlicensed by Sony Music and we hope that Amazon will resolve the situation quickly by agreeing to a license with us. We are keeping all our legal options open." [6]


2. Google Music [7]


Google announced its Music Beta by Google (Google Music) service on May 10th 2011. The service allows users to upload their music files to Google’s servers and then streams these to their PC or to an Android device using Google’s Music Player, or an app for their mobile device. There are a number of added features, including the ability to create a playlist that syncs across devices and the availability of music offline across devices. The service is free at the moment but fees could be announced when the final version of the product is launched.


The key difference between Google’s service and Amazon’s Cloud Music player is that the user cannot purchase music through Google Music, so the only music they can access from the cloud is their own collection (this is currently capped at 20,000 songs per user). Like Amazon’s service, no licensing deals have been signed with record labels or publishers. Google had been in negotiations with music labels and publishers prior to the launch but agreements were not reached. [8]


Arguably, Amazon and Google have launched their services with limited features, reflecting the limit of what each company considers it can legally provide without licences from rights holders. Both companies have stated that negotiations with record labels and publishers remain on the cards for a later date when more features are available. New features may well require a more complicated engagement with the music content.


3. iTunes Match (iCloud)


On June 7, Apple announced it would launch a wide suite of services broadly termed ‘iCloud’.[9] Whilst Apple’s entry is the most recent in this space, its service is arguably the highest profile of the three. We focus here on the iTunes Match music service, which forms a key part of iCloud.


iTunes Match works differently from Amazon Cloud Player and Google Music services – largely because Apple has made deals with rights holders, enabling extra functionality and access to Apple’s music library. iTunes Match uses a process called Scan & Match, which scans a user’s music library, cross-checks the user’s list of music with Apple’s own music database, and then instantly gives the user access to Apple’s high-quality copies of matched songs on all of the user’s iDevices (iPhone, iPod, iPad, etc.). Apple’s iTunes database currently contains about 18 million songs, and where a user’s music cannot be matched in the Apple database, it is uploaded from the user to the cloud.


Unlike the Google and Amazon services, Apple does not stream the music – it saves a copy of the song to each user device. Because Apple uses its own licensed copy where there is a match with the user’s collection, it can sync the user’s collection more quickly and also replace lower quality music in the user’s collection with higher quality files.


The service costs $25 per year, which is split between the record labels and Apple.

A key point to keep in mind is that it doesn’t matter where a user’s music files come from: whether the files have been ripped from a CD, purchased at another digital music store or even illegally downloaded, they will be matched to Apple’s music database and the user provided with a legitimate version of that song from Apple. Rights holders receive the agreed royalties from distribution of the music.


The service has polarised the sector. Critics argue that it operates as something of an amnesty for pirated music, effectively legitimising large amounts of pirated content for a fraction of the revenue the music would have generated had it been paid. The counterpoint is that the scheme means that rights holders get at least some revenue from pirated material rather than none at all. As the service hasn't officially launched yet, economic data following a period of operation is still needed before any conclusions can be drawn.


The legal Issues


There are two core intellectual property issues at play with the cloud music services: firstly, whether there are any infringements when users uploads music to their cloud storage and secondly, whether permission is needed from the rights holder to stream users’ music back from the cloud. To further complicate matters, Amazon, Google and Apple’s services do not discriminate between legitimate and illegitimate content uploaded to their servers.


These legal issues are presently unsettled but stakeholders may not have to wait long to get some legal guidance in this area in the US, given the decision pending in Capitol Records, LLC. et al v MP3Tunes, LLC. [10]


MP3Tunes launched in February 2005, offering a service by which users can upload their digital music to MP3Tunes’ digital locker (i.e. the cloud) and then stream this music back to their computers and various other devices. There is an ad-supported, free service (limited to 2GB of space), as well as ad-free, paid options with more storage space. The site operates without licences from the rights holders and is quite similar in functionality to Amazon Cloud Player and Google Music. MP3Tunes also has a companion service called SideLoad, which aggregates links to free music files available on the web and allows users to save these files into their lockers.


EMI and its subsidiaries sued the operators of MP3Tunes (and SideLoad) in 2007, arguing that it was engaged in an unauthorised use of their music. The plaintiffs argued that MP3Tunes “does not own the music it exploits; nor does MP3Tunes have any legal right or authority to use or exploit that music...MP3Tunes does not in any way compensate the lawful owners of the music it exploits”.[11] MP3Tunes is relying on the US DMCA safe harbour provisions for its defence, as well as raising questions about whether the storage and streaming of files owned by users needs permission from rights holders in the first place.


This complex litigation has been running for four years and a decision is expected in August 2011. [12] The outcome may shine some light on the current legal grey areas associated with storage of content on the cloud.


The Australian context


Amazon, Google and Apple cloud services are not available in Australia and there has been no indication of when such services might arrive. If licensing deals are negotiated, then the services will follow the terms of those licences. But if we consider things at the more general level, interesting legal questions arise.


In Australia, copying a file is considered a use of the reproduction right and uploading or streaming a file is considered a use of the communication right. There are exceptions in the case of format shifting or space shifting for private use, and for temporary use as part of a technical process, but the legality of the uses in unlicensed cloud services is not clear. Also, there are particular distinctions in Australian copyright law between legitimate and illegitimate content for services provided by internet intermediaries. As cloud services develop, it is likely that there will be calls for greater legal clarity on the issues in Australia.



[1] UMG Recordings, Inc. v., Inc. 92 F. Supp. 2d 349 (S.D.N.Y. 2000)

[2] Mell, P. & Grance, T. “The NIST Definition of Cloud Computing (Draft)”, January 2011, National Institute of Standards and Technology

[3] See details at

[4] Christman, E. “Amazon Letter To Labels: Cloud Drive Locker Has Boosted MP3 Sales” Billboard 11/4/2011 at

[5] Cheng, J. “Amazon on Cloud Player: we don't need no stinkin' licenses” Ars Technica 29/3/2011 at

[6] Pham, A & Guynn, J. “Google Music launches without label deals” Los Angeles Times 10/5/2011 at

[7] See details at

[8] Bruno, A “Google Music Launched Today – Without Licenses” Billboard at

[9] See details at

[10-11] Capitol Records, LLC. et al v MP3Tunes, LLC., and Michael Robertson No. 07 Civ 9931 United States District Court Southern District of New York

[12] Clarke, G “Google and Amazon cloud music nears judgment day” The Register 27/5/2011 at

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Breakthrough on International Peformers’ Rights 27/06/2011

After a 10-year standstill, the World Intellectual Property Organisation (WIPO) has announced a breakthrough on a treaty for performers’ rights.


While performances by singers and musicians in sound recordings are protected by international treaty, there is no equivalent protection for performers in audiovisual works (e.g. films, videos, TV). Attempts to bring audiovisual works into line with sound recordings have stalled in the negotiation phase at WIPO for the last 10 years, with recent dissent coming down to a single clause about the transfer of rights between performers and producers.


On 24 June, WIPO announced a breakthrough in the negotiations of its key copyright committee [1], saying that the General Assembly would receive a recommendation in its September sitting to resume the final phase of treaty negotiations. This is likely to conclude the much sought-after treaty for the protection of performances in audiovisual works.


The breakthrough was facilitated by agreement over Article 12, the clause covering transfer of rights between performers and producers. In some territories rights belong to the performers while in others, they belong to the producers. The wording in the new article will reportedly establish some balance between producers’ and performers’ rights. [2]


According to WIPO: “The adoption of a new instrument would strengthen the position of performers in the audiovisual industry by providing a greater legal basis for the use of audiovisual works, both in traditional media and in digital networks. Such an instrument would also contribute to safeguarding the rights of performers against the unauthorised use of their performances in audiovisual media, such as television, film and video.” [3]


Currently in Australia, there are three separate areas of rights relating to performers under the Copyright Act 1968. These are:


o The right to grant or refuse consent to the recording of a performance;

o Co-ownership of copyright in a sound recording of a performance; and

o Moral rights in relation to live performances and performances in sound recordings.


This clearly indicates the stronger position of performers in a sound recording when compared with performers in an audiovisual performance. These stronger rights reflect Australian activity at the international level: both its accession to the WIPO Performances and Phonograms Treaty (WPPT) and Australia’s Free Trade Agreement with the US.


[1, 3] WIPO at:

[2] Catherine Saez, Intellectual Property Watch, 24 June 2011,

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Four fundamental principles of copyright 23/05/2011

What is the rationale underpinning Australia’s copyright law? The Copyright Council put this question to a panel of Australian experts and we bring you their considered – and concise – answer.


Late last year the Copyright Council invited five highly respected Australian academics (some of whom are also legal practitioners) to come together as an independent advisory group to the Council on the subject of copyright reform. The five academics –Sam Ricketson, Michael Fraser, Melissa deZwart, David Brennan and David Lindsay – accepted the Council’s invitation and met for the first time in February 2011.


The first task they set themselves as a group was to draft a concise statement on the core principles underlying Australian copyright law. Unlike some other jurisdictions – the United States, for example, where copyright legislation has philosophical ties to the US Constitution, or the European Union, where national legislation operates within the context of EU directives and laws – Australian copyright legislation is public policy based. Further, in the view of the expert group, there has been insufficient debate about public policy consequences in relation to copyright law and the question should be asked, ‘Where does Australia source its impetus for copyright law?’


In the interests of more informed policy debate in Australia, the group offers the following statement on the principles underpinning Australian copyright law:


“In harmony with Australia’s international obligations, the Copyright Act 1968 is underpinned by the following four principles:


1. The importance of encouraging the endeavours of authors, performers and producers by recognising economic rights in relation to their creations and productions, including such additional protections as are appropriate to prevent the prejudicial activities of third parties that occur on a commercial scale.


2. The related importance of conferring on human creators and performers personal rights to ensure reasonable attribution for their creations and to prevent unreasonable derogatory treatments of their creations.


3. The recognition that the rights referred to in Principles 1 and 2 are not absolute, and are subject to limitations (which may be either absolute or conditional) in relation to:

a. uses that cause minimal prejudice to those rights;

b. uses necessary for freedom of expression, information or innovation;

c. uses necessary to promote social, political or cultural objectives;

d. uses necessary to facilitate legitimate commerce.


4. The need to apply the rights referred to in Principles 1 and 2 and the limitations referred to in Principle 3 in a manner that takes account of evolving technologies, social norms and cultural values.


The expert panel will be providing advice to the Copyright Council, based on the rationale above, in the lead-up to the review of Australian copyright law planned by the Australian Attorney General. The panel will also present its ideas on copyright reform at the 15th biennial Copyright Law and Practice Symposium (October 13-14, 2011) at the Maritime Museum in Sydney. Other speakers at the conference will include the Director General of the World Intellectual Property Organisation, Dr Francis Gurry, the Senior Copyright Counsel for Google, William Patry, and the Australian Attorney-General, Robert McClelland.

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Digital Opportunity – the Hargreaves Report 23/05/2011

The big-picture, economic-based approach taken by the chair of the independent review of the UK’s intellectual property framework, Professor Ian Hargreaves, is likely to be closely considered by those undertaking Australia’s planned review of copyright law.


In the opening sentences of his report, Digital Opportunity: A Review of Intellectual Property and Growth [1], Hargreaves answers what he describes as British Prime Minister David Cameron’s “exam question”: Is the UK’s existing IP framework impeding national innovation and economic growth? The short answer, says Hargreaves, is “yes”.


“We have found that the UK’s intellectual property framework, especially with regard to copyright, is falling behind what is needed. Copyright, once the exclusive concern of authors and their publishers, is today preventing medical researchers studying data and text in pursuit of new treatments. Copying has become basic to numerous industrial processes, as well as to a burgeoning service economy based on the internet. The UK cannot afford to let a legal framework designed around artists impede vigorous participation in these emerging business sectors.” [2]


But if this last sentence creates the impression that the creative industries – and the “artists” and creators that feed them – are seen by Hargreaves as being of small economic importance, then this is not so. The Executive Summary is filled with economic statistics on the value of the creative industries and a strongly held view that the UK has a competitive advantage in this area, which it should pursue. What fuels the Hargreaves report is a drive to identify laws and regulations that are providing little or no demonstrable economic benefit to these industries, while impeding growth and innovation in other areas. So while he recommends substantial changes in UK – and EU – copyright law, Hargreaves endorses the “basic model” of copyright, “which has sustained creative businesses for more than three centuries”. [3]


Hargreaves casts the ten recommendations in the report as “modest in ambition and wholly achievable”. [4] Based on an economic assessment conducted by the Review team, he estimates that implementation of the ten recommendations would add between 0.3 per cent and 0.6 per cent to annual GDP growth in the UK. [5]


Below are some of his key copyright-related recommendations:


(i) Digital Copyright Exchange

In order to boost UK firms’ access to transparent, contestable and global digital markets, the UK should establish a cross sectoral Digital Copyright Exchange. Government should appoint a senior figure to oversee its design and implementation by the end of 2012. A range of incentives and disincentives will be needed to encourage rights holders and others to take part… [from Recommendation 3]


This proposal is designed to address both the difficulty of clearing rights and of finding rightsholder information. Some of the features offered by the Digital Copyright Exchange would include:

• a record of ownership of rights and the terms on which they are available

• either automated licences or access to a negotiating agent (depending on the rightsholder preference).

• low cost resolution of disputers

• greater transparency in the marketplace


But Hargreaves himself acknowledges that such a scheme would be difficult to implement (some say impossible on the basis that rightsholders will not agree to it and international treaties will constrict it), and notes that others have tried to implement similar schemes with only limited success.


Therefore, “participation should be genuinely voluntary but the Government should also ensure that participation in the Digital Copyright Exchange confers clear benefits and that there are costs of voluntary exclusion”. [6] Suggested incentives include:

• higher damages for infringement of rights to works available through the exchange than for others

• making sanctions for infringement under the Digital Economy Act apply only to works available through the exchange

• requiring that orphan works searches check the information in the exchange

• giving creators the right to withdraw from future publisher/record companies contracts where their existing works are not marketed through the exchange

• putting publicly owned copyright material on the exchange from day one

• Government funding for establishment costs


(ii) Orphan Works

The Government should legislate to enable licensing of orphan works. This should establish extended collective licensing for mass licensing of orphan works, and a clearance procedure for use of individual works. [Recommendation 4]


The report broadly supports the Nordic model of extended collective licensing (where after obtaining a certain critical mass of members, a collecting society is authorised to licence on behalf of non-members unless they opt out). The scheme Hargreaves recommends for the UK in the case of mass licensing (i.e. for a group or collection of works) would involve a diligent search to ensure the rights owners could not be found, or had not opted out, after which a licence would be issued for the use of the works. Any fees paid would be held by the relevant collecting society until the owner of a work was identified or, if no owner came forward after a certain period of time, could be used for social or cultural purposes, or contribute to the running costs of the Digital Copyright Exchange.


For licensing of individual works, a more tailored approach would see the Government granting an authorisation to deal in a specific orphan work (after a diligent search): “Should an owner later come forward, future use of the work from that point would be subject to negotiation, but there would be no liability for past use beyond any licence fee set by Government of its appointed agent.” [7]


(ii) Limits to Copyright

Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also support at EU level an exception to support text and data analytics. The UK should give a lead at EU level to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This would be designed to allow uses enabled by technology of work in ways which do not directly trade on the underlying creative and expressive purpose of the work. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract. [from Recommendation 5]


There are many suggestions for reform in this recommendation; a couple are already in place in Australia (i.e. exceptions for parody and format shifting), others have been on the agenda in the past (e.g. the call for legislation to ensure that copyright exceptions are protected from override by contract), while others (e.g. an exception to support text and data analytics) will create new public policy discussion. Driving them all is Hargreaves’ view that exceptions should be constructed in a way that makes them “technologically neutral and so capable of adapting to subsequent waves of change”. [8]


While Hargreaves ultimately comes down against the importation of American ‘fair use’ provisions into British law, he admires some of the outcomes that he says have been enabled to a large degree by the US system: “Notably those relating to reverse engineering, home video recording, and internet search caching and thumbnail images.” [9]


In order to achieve similar benefits without the complication of ‘fair use’, he urges the UK Government to work at EU level for the introduction of a new exception (its introduction would currently be prohibited under EU law) “allowing uses of a work enabled by technology which do not directly trade on the underlying creative and expressive purpose of the work…For instance, in data mining or search engine indexing, copies need to be created for the computer to be able to analyse; the technology provides a substitute for someone reading all the documents. This is not about overriding the aim of the copyright – these uses do not compete with the normal exploitation of the work itself – indeed they may facilitate it. Nor is copyright intended to restrict use of facts. That these new uses happen to fall within the scope of copyright regulation is essentially a side effect of how copyright has been defined, rather than being directly relevant to what copyright is supposed to protect.” [10]


There are many other ideas within Hargreaves’ report, including:


• A recommendation specifically focusing on ‘cleaning up’ the patchwork of protection available for designs.

• A recommendation on enforcement of IP rights, calling for Government to pursue an “integrated approach based on enforcement, education and crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields”. [11]

• A call for the UK’s Intellectual Property Office to be empowered to issue statutory opinions where these will help clarify copyright law. [12]


There is much in the report to interest Australian stakeholders and no doubt some of Hargreaves’ proposals will gain support here in the lead up to the review of our national copyright law.


[1-2] Digital Opportunity: A Review of Intellectual Property and Growth, Professor Ian Hargreaves, May 2011, p.1

[3] ibid p.28; [4-5] p.7; [6] p.33; [7] p.39; [8] p.46; [9-10] p.47; [11-12] p.9

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Ireland follows on the heels of the UK’s copyright review 23/05/2011

In the lead up to the release of the UK’s Hargreaves report, Ireland’s Minister for Jobs, Enterprise and Innovation, Richard Bruton, launched Ireland’s own review of copyright in early May.


Using much of the same rhetoric as accompanied the launch of the UK’s review of intellectual property law, Bruton said he wished to identify any legislation that might be deemed to create barriers to innovation and make recommendations to resolve any problems identified. “There is a perception in certain industries,” he said, “that national copyright legislation does not cater well for the digital environment and actually creates barriers to innovation and the development of new business models.” [1]


The Minister said he expected to receive the final report from a three-person review committee by the end of 2011.


Terms of Reference [2] for the Irish review are:

1. Examine the present national copyright legislation and identify any areas that are perceived to create barriers to innovation.

2. Identify solutions for removing these barriers and make recommendations as to how these solutions might be implemented through changes to national legislation.

3. Examine the US-style ‘fair use’ doctrine to see if it would be appropriate in an Irish/EU context.

4. If it transpires that national copyright legislation requires to be amended but cannot be amended, (bearing in mind that Irish copyright legislation is bound by the European Communities Directives on Copyright and Related Rights and other international obligations) make recommendations for changes to the EU Directives that will eliminate the barriers to innovation and optimise the balance between protecting creativity and promoting and facilitating innovation.


Further details of the review are available online at:


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UK releases Hargreaves Report 19/05/2011

The much-anticipated Hargreaves Review report on intellectual property reform was released yesterday in the UK, with some media describing its recommendations as ‘radical reform’ and others saying it did not go far enough.


Some of the changes recommended in the Hargreaves report will be a non-event from Australia’s perspective, as they are already enshrined in our national copyright legislation:


• Legislation to allow format shifting for personal use (e.g. CDs to digital music players and computers)

• An exception to infringement in the case of parody of copyright works


Other recommendations break new ground:


• The creation of a Digital Copyright Exchange

• Legislation to allow the licensing of orphan works


The review was announced by the British Prime Minister, David Cameron, in November 2010, with review recommendations due in April 2011. Professor Ian Hargreaves (Cardiff University) was appointed as chair.


Cameron pointed to the ‘fair use’ copyright provisions in the United States as a possible model for reform, saying: “Over there, they have what are called ‘fair use’ provisions, which some people believe gives companies more breathing space to create new products and services.”


Some Internet groups welcomed Cameron’s announcement, saying it would provide an opportunity to redress the balance between copyright owner and user interests set by the Digital Economy Act of 2010 (which underpins the introduction of a system of ‘graduated response’ by ISPs, to prevent online copyright infringement). Other commentators accused the Government of being too much in the thrall of major IT corporations such as Google and Facebook.


To read the report, go to:

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