You may have read recently that American streaming service Grooveshark will be heading back to the court rooms after one of the biggest labels in music Universal launched a lawsuit against the company alleging rampant copyright infringement. Now I know what you’re all thinking, we’ve been down this road before, companies shouldn’t be punished for the actions of their users.

But the Grooveshark case is very different from other cases brought by the media conglomerates against internet startups, in fact the Universal lawsuit specifically charges that not only are Grooveshark employees actively infringing their copyright, but they are doing it at the direction of management at the company. If Universal can prove these charges then Grooveshark’s days may well be numbered.

In case you’re unfamiliar with the service Grooveshark provides let’s go back to basics. Grooveshark is an on-demand digital music streaming service, or as they like to call it ‘the worlds iPod’. The distinction of on-demand is important, because if it was not on-demand then it would be classified as an online radio station, much like fellow service Pandora, and it would have to adhere to the blanket licensing agreements all radio stations are required to agree to.

This includes paying the all the music played, something Grooveshark does not do as they don’t have licensing agreements with any of the majors outside of EMI, and a licensing agreement with Merlin who act on behalf of a number of indies. Even their agreement with EMI and Merlin only came about after those labels launched a massive lawsuit against Grooveshark, again for rampant copyright infringement.

You see the reason that a company like Grooveshark can exist is because they abuse a deliberate loophole in the Digital Millenium Copyright Act (DMCA), the overarching copyright legislation in the United States, that created a provision commonly called ‘safe harbor’.

The safe harbor provisions of the DMCA removed online service providers such as Grooveshark and Youtube from copyright liability if they adhere to certain prescribed guidelines and promptly block access to allegedly infringing material (or remove such material from their systems) if they receive a notification claiming infringement from a copyright holder or the copyright holder’s agent.

In other words, as long as you act promptly to remove copyrighted material at the copyright holders request than you are not classified as infringing their rights. The idea behind this provision was that a site like Youtube couldn’t be sued for a user uploading a music video without permission as long as they made an effort to delete it.

These safe harbor provisions are so important to todays internet that without them sites like YouTube, eBay, Blogger, Wikipedia, and Flickr simply wouldn’t exist. They couldn’t. They’d be up to their eyeballs in copyright lawsuits. Most of the big players understand how important a provision like those laid out in the DCMA are. Those provisions were revolutionary at the time, but have quickly been adopted and emulated around the world, including importantly by the European Union.

But as with anything, if you give them an inch someone will inevitably run a mile. In this case the offender is Grooveshark who use the safe harbor provisions to somehow justify the continued existence of copyrighted material on their site, despite repeated take down notices brought not only by the major labels but by artists themselves.

There are numerous accounts from artists themselves which you can find on the internet where they have tried to have their music removed from Grooveshark only to have it reappear a few days later. This seems to be the modus operandi for Grooveshark, as long as they respond to requests to remove copyright material promptly it doesn’t matter that the exact same material reappears a few days later.

In fact they quite indignantly suggest in interviews that it is the fault of the labels that this continues to happen and that they as a company shouldn’t have to actively police what kind of material is uploaded to the site. Grooveshark suggest that for repeated copyright infringement to stop labels should simply sign licensing agreements with them.

This is an extract from an email written by Sina Simantob, Chairman of Escape Media Group who operate Grooveshark, which explains the attitude the company has towards copyright infringement on their service and paying for the rights to stream songs:

The only thing I want to add is this: we are achieving all this growth without paying a dime to any of the labels. 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 I am an orphan.”

In our case, we use the label’s songs till we get a 100m uniques, by which times 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 why we pay them in total for streaming is less than what they pay us for data mining. Let’s keep this quiet for as long as we can.