JED S. RAKOFF, U.S.D.J.

The complex marvels of cyberspatial communication may create difficult legal
issues; but not in this case. Defendant's infringement of plaintiffs'
copyrights is clear. Accordingly, on April 28, 2000, the Court granted
defendant's motion for partial summary judgment holding defendant liable
for copyright infringement. This opinion will state the reasons why.

The pertinent facts, either undisputed or, where disputed, taken most
Favorably to defendant, are as follows:

The technology known as "MP3" permits rapid and efficient conversion of
Compact disc recordings ("CDs") to computer files easily accessed over the
Internet.  See generally Recording Industry Ass'n of America v. Diamond Multimedia
Systems Inc., 180 F.3d 1072, 1073-74 (9th Cir. 1999). Utilizing this technology,
defendant MP3.com, on or around January 12, 2000, launched its "My.MP3.com"
service, which it advertised as permitting subscribers to store, customize,
and listen to the recordings contained on their CDs from any place where they
have an Internet connection. To make good on this offer, defendant purchased
tens of thousands of popular CDs in which plaintiffs held the copyrights, and,
without authorization, copied their recordings onto its computer servers so as to
be able to replay the recordings for its subscribers.

Specifically, in order to first access such a recording, a subscriber to
MP3.com must either "prove" that he already owns the CD version of the
recording by inserting his copy of the commercial CD into his computer
CD-Rom drive for a few seconds (the "Beam-it Service") or must purchase the CD
From one of defendant's cooperating online retailers (the "Instant Listening
Service"). Thereafter, however, the subscriber can access via the Internet
From a computer anywhere in the world the copy of plaintiffs' recording made by
defendant. Thus, although defendant seeks to portray its service as the
"functional equivalent" of storing its subscribers' CDs, in actuality
defendant is re-playing for the subscribers converted versions of the recordings it
copied, without authorization, from plaintiffs' copyrighted CDs. On its
face, this makes out a presumptive case of infringement under the Copyright Act
of 1976 ('"Copyright Act"), 17 U.S.C. § 101 et sea.. See, e.g., Castle Rock
Entertainment, Inc. v. Carol Publishing Group, Inc., 150 F.3d 132, 137 (2d
Cir. 1998); Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192 (2d
Cir. 1985).{1}

Defendant argues, however, that such copying is protected by the
Affirmative defense of "fair use." See 17 U.S.C. § 107. In analyzing such a defense,
the Copyright Act specifies four factors that must be considered: "(1) the
Purpose and character of the use, including whether such use is of a commercial
nature or is for nonprofit educational purposes; (2) the nature of the copyrighted
work; (3) the amount and substantiality of the portion used in relation to
the copyrighted work as a whole; and (4) the effect of the use upon the
potential market for or value of the copyrighted work." Id.  Other relevant factors
may also be considered, since fair use is an "equitable rule of reason" to be
applied in light of the overall purposes of the Copyright Act. Sony
Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 448, 454 (1984);
see Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 549 (1985).

Regarding the first factor -- "the purpose and character of the use"
--defendant does not dispute that its purpose is commercial, for while
subscribers to My.MP3.com are not currently charged a fee, defendant seeks
to attract a sufficiently large subscription base to draw advertising and
otherwise make a profit. Consideration of the first factor, however, also
involves inquiring into whether the new use essentially repeats the old or
whether, instead, it "transforms" it by infusing it with new meaning, new
understandings, or the like. See, e.g., Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569, 579 (1994); Castle Rock, 150 F.3d at 142; see also Pierre N.
Leval, "Toward a Fair Use Standard," 103 Harv. L. Rev. 1105, 1111 (1990). Here,
although defendant recites that My.MP3.com provides a transformative "space
shift" by which subscribers can enjoy the sound recordings contained on
their CDs without lugging around the physical discs themselves, this is simply
another way of saying that the unauthorized copies are being retransmitted
in another medium -- an insufficient basis for any legitimate claim of
transformation. See, e.g. Infinity Broadcast Corp. v. Kirkwood, 150 F.3d
104, 108 (2d Cir. 1998) (rejecting the fair use defense by operator of a service
that retransmitted copyrighted radio broadcasts over telephone lines); Los
Angeles News Serv. v. Reuters Television Int'l Ltd.. 149 F.3d 987 (9th Cir.
1998) (rejecting the fair use defense where television news agencies copied
copyrighted news footage and retransmitted it to news organizations), cert.
denied, 525 U.S. 1141 (1999); see also American Geophysical Union v. Texaco
Inc., 60 F.3d 913, 923 (2d Cir.), cert. dismissed, 516 U.S. 1005 (1995); Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522, 1530-31 (S.D.N.Y. 1991); see generally Leval, su ra, at 1111 (repetition of copyrighted material that "merely repackages or republishes the original" is unlikely to be deemed a fair use).

Here, defendant adds no new "new aesthetics, new insights and understandings" to the original music recordings it copies, see Castle Rock, 150 F.3d at 142 (internal quotation marks omitted), but simply repackages those recordings to facilitate their transmission through another medium. While such services may be innovative, they are not transformative.{2}

Regarding the second factor -- "the nature of the copyrighted work" – the creative recordings here being copied are "close[] to the core of intended copyright protection," Campbell, 510 U.S. at 586, and, conversely, far removed from the more factual or descriptive work more amenable to "fair use," see Nihon Keizai Shimbun, Inc. v. Comline Business Data, Inc., 166 F.3d 65, 72?73 (2d Cir. 1999); see also Castle Rock, 150 F.3d at 143-44.

Regarding the third factor -- "the amount and substantiality of the portion
[of the copyrighted work] used [by the copier] in relation to the copyrighted
work as a whole" -- it is undisputed that defendant copies, and replays, the
entirety of the copyrighted works here in issue, thus again negating any
claim of fair use. See Infinity Broadcast, 150 F.3d at 109 ("[T]he more of a
copyrighted work that is taken, the less likely the use is to be fair . . .
."); see generally Leval, supra, at 1122 ("[T]he larger the volume . . . of
what is taken, the greater the affront to the interests of the copyright
owner, and the less likely that a taking will qualify as a fair use.").

Regarding the fourth factor -- "the effect of the use upon the potential
Market for or value of the copyrighted work" --defendant's activities on their
Face invade plaintiffs' statutory right to license their copyrighted sound
recordings to others for reproduction. See 17 U.S.C. § 106. Defendant,
however, argues that, so far as the derivative market here involved is concerned,
plaintiffs have not shown that such licensing is "traditional, reasonable,
or likely to be developed." American Geophysical, 60 F.3d at 930 & n.17.
Moreover, defendant argues, its activities can only enhance plaintiffs' sales, since
subscribers cannot gain access to particular recordings made available by
MP3.com unless they have already "purchased" (actually or purportedly), or
agreed to purchase, their own CD copies of those recordings.

Such arguments -- though dressed in the garb of an expert's "opinion"
(that, on inspection, consists almost entirely of speculative and conclusory
statements) -- are unpersuasive. Any allegedly positive impact of defendant's
activities on plaintiffs' prior market in no way frees defendant to usurp a further
market that directly derives from reproduction of the plaintiffs' copyrighted
works.  See Infinity Broadcast, 150 F.3d at 111. This would be so even if the
copyrightholder had not yet entered the new market in issue, for a
copyrightholder's "exclusive" rights, derived from the Constitution and the
Copyright Act, include the right, within broad limits, to curb the Development of such a derivative market by refusing to license a copyrighted work or by doing so only on terms the copyright owner finds acceptable. See Castle Rock, 150 F.3d at 145?46; Salinger v. Random House, Inc., 811 F.2d 90, 99 (2d Cir.), cert. denied, 484 U.S. 890 (1987). Here, moreover, plaintiffs have adduced substantial evidence that they have in fact taken steps to enter that
market by entering into various licensing agreements. See, e.g., Forrest R. Aff., Ex.
F., Vidich Dep. at 61-63; id., Ex. N; Goodman R. Aff., Ex. B., Silver Dep. at
64-65; id., Ex. D, Eisenberg Dep. at 130-32; id., Ex. E., Evans Dep. 145-48.

Finally, regarding defendant's purported reliance on other factors, see
Campbell, 510 U.S. at 577, this essentially reduces to the claim that
My.MP3.com provides a useful service to consumers that, in its absence,
will be served by "pirates." Copyright, however, is not designed to afford consumer
protection or convenience but, rather, to protect the copyrightholders'
property interests. Moreover, as a practical matter, plaintiffs have
indicated no objection in principle to licensing their recordings to companies like
MP3.com; they simply want to make sure they get the remuneration the law
reserves for them as holders of copyrights on creative works. Stripped to
its essence, defendant's "consumer protection" argument amounts to nothing more
than a bald claim that defendant should be able to misappropriate
plaintiffs' property simply because there is a consumer demand for it. This hardly
appeals to the conscience of equity.

In sum, on any view, defendant's "fair use" defense is indefensible and
must be denied as a matter of law. Defendant's other affirmative defenses, such as
copyright misuse, abandonment, unclean hands, and estoppel, are essentially
frivolous and may be disposed of briefly. While defendant contends, under
the rubric of copyright misuse, that plaintiffs are misusing their "dominant
market position to selectively prosecute only certain online music technology
companies," Def.'s Consolidated Opp. to Pls.' Motions for Summ. J. at 21,
the admissible evidence of records shows only that plaintiffs have reasonably
exercised their right to determine which infringers to pursue, and in which
order to pursue them, cf. Broadcast Music, Inc. v. Peppermint Club, Inc.,
1985 WL 6141, at *4 (N.D. Ohio Dec. 16, 1985). The abandonment defense must also
fall since defendant has failed to adduce any competent evidence of an
overt act indicating that plaintiffs, who filed suit against MP3.com shortly
after MP3.com launched its infringing My.MP3.com service, intentionally abandoned
their copyrights. See Richard Feiner & Co., Inc. v. H.R. Indus., Inc., 10
F. Supp. 2d 310, 313 (S.D.N.Y. 1998). Similarly, defendant's estoppel defense
Must be rejected because defendant has failed to provide any competent evidence
That it relied on any action by plaintiffs with respect to defendant's
My.MP3.com service. Finally, the Court must reject defendant's unclean hands defense
Given defendant's failure to come forth with any admissible evidence showing bad
faith or misconduct on the part of  plaintiffs. See generally Dunlop McCullen v. Local 1-S, AFL-CIO-CLC, 149 F.3d 85, 90 (2d Cir. 1998); A.H. Emery Co. v. Marcan Prods Corn, 389 F.2d 11, 18 n.4 (2d Cir.), cert. denied, 393 U.S. 835 (1968).

The Court has also considered defendant's other points and arguments and
Finds them sufficiently without merit as not to warrant any further comment.

Accordingly, the Court, for the foregoing reasons, has determined that
plaintiffs are entitled to partial summary judgment holding defendant to
have infringed plaintiffs' copyrights.

________________________
JED S. RAKOFF.
U.S.D.J
 

Dated:  New York, New York
        May 4, 2000

{1} Defendant's only challenge to plaintiffs' prima face case of infringement is the suggestion, buried in a footnote in its opposition papers, that its music computer files are not in fact "reproductions" of plaintiffs' copyrighted works within the meaning of the Copyright Act. See, e.g., 17 U.S.C. § 114(b).   Specifically, defendant claims that the simulated sounds on MP3 based music files are not physically identical to the sounds on the original CD recordings.  See Def.'s Consolidated Opp. to Pls.'  Motions for Partial Summ. J. at 13-14 n.9. Defendant concedes, however, that the human ear cannot detect a difference between the two. Id.  Moreover, defendant admits that a goal of its copying is to create a music file that is sonically as identical to the original CD as possible. See Goodman Reply Aff., Robertson Dep., Ex. A, at 85. In such circumstances, some slight, humanly undetectable difference between the original and the copy does not qualify for exclusion from the coverage of the Act.

{2} Defendant's reliance on the Ninth Circuit's "reverse engineering" cases, see Sony Computer Entertainment, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000); Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1527 (9th Cir. 1993), is misplaced, because, among other relevant distinctions, those cases involved the copying of software in order to develop a new product, see Sony Computer Entertainment, 203 F.3d at 606; Sega Enterprises, 977 F.2d at 1522, whereas here defendant copied CDs onto its servers not to create any new form of expression but rather to retransmit the same expression in a different medium.

{3} The Court also finds no reason to alter or postpone its determination
simply because of the recent filing of the complaint in Lester Chambers et
al. v. Time Warner, Inc., et al. 00 Civ. 2839 (S.D.N.Y. filed Apr. 12, 2000)
(JSR), the allegations of which, according to the defendant here, call into
question the exclusivity of plaintiffs' copyrights. The allegations of a complaint,
having no evidentiary value, cannot defeat a motion for summary judgment.

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