Grooveshark emails outed in copyright case

Grooveshark, a controversial music-streaming service, intended to use unlicensed tracks to build a huge online following that it could then use to negotiate terms with copyright owners from a position of strength, according to emails entered into court records, and obtained by ZDNet Australia's sister site CNET.

Earlier this month, Universal Music Group, the largest of the top four record companies, filed a copyright lawsuit in a US federal court against Escape Media Group, the parent company of Grooveshark, a music service that enables users to share songs with other users. In the complaint, Universal Music accuses Grooveshark's leadership of copyright infringement, and claims that managers have uploaded pirated songs themselves.

Grooveshark responded to Universal's allegations that managers uploaded songs by calling them a "gross mischaracterisation of information".

Universal Music's complaint and exhibits have now been made public in their entirety, and they include more of Grooveshark's internal emails. The correspondence doesn't present much more information about the alleged uploading by Grooveshark employees and managers, but it does offer some startling revelations about Grooveshark's business strategy.

"The only thing that I want to add is this: we are achieving all this growth without paying a dime to any of the labels," wrote Sina Simantob, Grooveshark's chairman, in an email on 1 December 2009. The note was addressed to "Josh" — presumably Josh Greenberg, one of the company's co-founders and CTO. "My favourite story related to our case is the story of a kid who appears in front of the judge for sentencing for the crime of having murdered both his parents, saying, 'judge have mercy on me cuz [sic] I am an orphan'.

"In our case," Simantob continued, "we use the label's songs till we get a 100 [million] uniques, by which time we can tell the labels who is listening to their music, where, and then turn around and charge them for the very data we got from them, ensuring that what we pay them in total for streaming is less than what they pay us for data mining. Let's keep this quite [sic] for as long as we can."

These emails will likely only confirm what some music-industry hardliners have believed for a long time; namely, that some start-ups set out to build their businesses using copyrighted material without paying for it, in hopes of developing such a large audience that record companies would be forced to offer more generous licensing terms down the line. Some music execs believe that some start-ups essentially dare the labels to sue.

In an email written to a venture capitalist in April 2010, Simantob appears to acknowledge that this is the strategy employed by Grooveshark.

"We bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission," Simantob wrote in an email to Andrew Lipsher, a partner at Greycroft, a venture capital firm. "When EMI sued, everyone thought it is the end of the company. "Once EMI, Grooveshark settle ... everyone said EMI was weak anyway, so the real Goliath to beat is [Universal Music Group]. Well, it took the boys a bit before they could re-group, but I think these guys have a real chance to settle with UMG within a year, and, by that time, they'll be up to 35 million unique, and a force to be dealt with."

Simantob was overly optimistic. Universal Music, which filed a previous copyright suit in New York state court against Grooveshark in 2010, and included some of Simantob's emails in that case, is now asking for damages in the federal complaint that could top US$1 billion.

But it is unclear here how Simantob's apparent acknowledgement that Grooveshark intended to build a business on unlicensed music will affect Universal's case. Nowhere in the emails included in Universal Music's exhibits does Simantob mention piracy or illegal file sharing.

Grooveshark says it is protected by the Digital Millennium Copyright Act's safe harbour, which protects online service providers from liability for copyright violations committed by users. The DMCA requires service providers to meet a certain criteria, which includes not having any direct knowledge of copyright violations, and not profiting from infringing material.

At a minimum, though, Simantob's emails could raise questions about the company's credibility.

Here's the Universal complaint itself:

Via CNET