Grooveshark under attack despite recent deal on royalties with Sabam

The free music streaming service Grooveshark is under fire. Critics say that Grooveshark provides music tracks without the consent of the right holders, whereby it infringes intellectual property law. Since a couple of weeks, Grooveshark is blocked in Germany. However in Belgium, the Belgian collecting society for authors, composers and publishers Sabam entered into an agreement with Grooveshark. With this agreement, authors and composers would receive royalties for every time a Grooveshark user listens to their music. Though criticism remains, as critics believe the agreement between Sabam and Grooveshark doesn’t make Grooveshark legal in Belgium.

Grooveshark is a free on-demand music streaming service where users can listen en share music. The platform currently has at least 35 million members, who are able to upload their own tracks to Grooveshark’s music library. Grooveshark says its service is legal under the Digital Millennium Copyright Act (DMCA), a U.S. federal law that protects Internet companies that host third-party material if they comply with take-down notices from copyright holders. Grooveshark has been buried under notice-and-take-down orders nonetheless, with some copyright holders arguing that company employees upload files themselves. This conduct would mean Grooveshark’s content is not (fully) user-generated and then the safe harbour clause of the DMCA might not apply.

Simim, a management organization of music producers told Tweakers.net that Grooveshark operates without the consent of record companies. Despite their NTD-policy, which is a common and legal practice in the EU as well, there are more fundamental issues with the service, according to Simim. The agreement between Sabam and Grooveshark will not solve these problems if Sabam is not the copyright owner. Until Grooveshark has the consent of both the author and the record company, Grooveshark is still not a legal music streaming service, according to Simim.

Grooveshark has been accused of disrespecting copyrights by all four major record companies. Sony, EMI, Universal and Warner say they are not compensated for the use of their work on the streaming platform. Last year, Universal Music sued Grooveshark, stating that Groovesharks’ employees itself were uploading music on Grooveshark without their permission. Furthermore, the American music company EMI also sued Grooveshark for allegedly failing to pay royalties. Meanwhile in Denmark, Grooveshark was sued by the Danish anti-piracy organisation RettighedsAlliancen (RA). RA claimed that Grooveshark had no (licensing) contracts with right holders to offer their music, and therefore violates copyright law.

2012 may well be the year of truth for Grooveshark’s business, which is mainly based on advertising and sponsoring. Will these legal battles eventually strangle their company, or only make them stronger?

References: The New York Times, DigitalTrends.com, Tweakers.net

By: Deniece Teterissa and Peter van der Veen