In a ruling by United States District Judge Thomas P. Griesa in the United States District Court in Manhattan, Grooveshark parent company Escape Media and two of the company’s top executives were found liable for infringing the rights of the labels on a grand scale.

The summary judgment is not a pretty read. It summarizes Grooveshark’s history and how the service began with licensed aims in mind, but achieved that by infringing the labels’ rights in the hope of reaching deals later on.

The initial problem was obtaining content to offer to users. The company solved the issue by getting employees to “seed” music to other users via its own P2P sharing software known as Sharkbyte. A 2007 email from co-founder Josh Greenberg to employees reads:

Please share as much music as possible from outside the office, and leave your computers on whenever you can. This initial content is what will help to get our network started—it’s very important that we all help out! If you have available hard drive space on your computer, I strongly encourage you to fill it with any music you can find. Download as many MP3’s as possible, and add them to the folders you’re sharing on Grooveshark. Some of us are setting up special “seed points” to house tens or even hundreds of thousands of files, but we can’t do this alone… There is no reason why ANYONE in the company should not be able to do this, and I expect everyone to have this done by Monday… IF I DON’T HAVE AN EMAIL FROM YOU IN MY INBOX BY MONDAY, YOU’RE ON MY OFFICIAL SHIT LIST.

In 2007, music obtained via Sharkbyte and other means was used to populate Grooveshark’s central music storage library. Internal company emails showed Greenberg, Tarantino and Escape’s senior programmer encouraging employees to bring in and download music so it could be uploaded to the company’s servers.

By 2008 the Grooveshark service carried more than a million tracks, including thousands uploaded by Greenberg, Tarantino and other employees. That service grew by another million tracks and eventually into the streaming service available today.

A year later the service was beginning to receive DMCA takedown notices but according to the decision handed down yesterday, the company had a solution to keep that content online.

“Escape’s senior officers searched for infringing songs that had [been] removed in response to DMCA takedown notices and re-uploaded infringing copies of those songs to Grooveshark to ensure that the music catalog remained complete,” the decision reads.

Furthermore, records show that thousands of the DMCA notices sent by the labels were forwarded internally to employees, including Greenberg and Tarantino, for the music they had personally uploaded. The fact that employees were uploading content became known to the labels following discovery in another case currently before the courts.

While the Court accepted that Escape and its employees uploaded thousands of tracks, the huge numbers claimed by the labels were rejected. In total the Court found that the defendants are liable for uploading ‘just’ 5,977 copyright works.

And, of course, there is the not insignificant number of tracks the company streamed to its users over the course of its operations. Escape’s own records show that it “streamed or publicly performed”, copies of plaintiffs’ copyrighted sound recordings at least 36 million times.

“Each time Escape streamed one of plaintiffs’ song recordings, it directly infringed upon plaintiffs’ exclusive performance rights,” the decision reads.

As a result of Greenberg and Tarantino instructing company employees to upload copyright-protected music to Grooveshark, the Court granted the labels’ motion for summary judgment on its claim for direct copyright infringement.

On the secondary infringement front the Court ruled that Escape Media is liable for the direct infringements of the employees it instructed to upload music.

“[The record labels] advance three theories of secondary liability: (1) vicarious copyright infringement, (2) inducement of copyright infringement, and (3) contributory copyright infringement. The court finds for plaintiffs on all three theories of liability,” the judgment reads.

In respect of Escape’s co-founders, Tarantino and Greenberg, the Court found that they are not only “jointly and severally liable for Escape’s direct and secondary copyright infringement” but also liable for direct infringement due to their own personal uploads of infringing content to Grooveshark.

The judgment concludes with an instruction for the parties to submit proposals on the scope of a permanent injunction against Grooveshark within 21 days. Escape Media has already announced its intention to appeal.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The date when the tracks were recorded is important, since songs recorded before February 15, 1972, are covered under New York state law and not federal copyright legislation where safe harbor provisions of the DMCA apply.

“This case arises from Defendant’s massive willful copyright infringement and unfair
competition in violation of New York common law,” Universal writes in its latest submission to the Court.

“[Grooveshark parent company] Escape infringed UMG’s copyrighted works billions of times since it launched the current iteration of Grooveshark without any license from UMG and in flagrant violation of UMG’s exclusive rights.”

Describing Escape’s “pervasive copyright infringement” as part of a “premeditated business strategy” carried out by a “blatantly infringing pirate music service”, Universal Music (UMG) has now moved for summary judgment in the case on copyright infringement and unfair competition grounds.

“Escape has admitted that it competes with UMG in the market for the
dissemination of music over the Internet. Accordingly, it obtained an unfair competitive advantage over authorized streaming services by using UMG’s sound recordings without a license or payment.”

Previously, Escape Media counter-claimed against UMG when the company allegedly that UMG had tried to interfere with its business by influencing third-party companies to curtail relationships with the streaming service. UMG states those were legitimate anti-piracy tactics and dismisses Escape’s claims as an attempt to distract from the case in hand.

“Having no substantive defense to UMG’s infringement claims, Escape filed several baseless counterclaims against UMG for alleged interference with contracts and business relations,” UMG writes.

“The undisputed record confirms that the communications at issue directly related to the efforts by UMG and related companies to curtail the massive infringement of its copyrights by Escape’s Grooveshark service and thus were wholly appropriate and justified.”

UMG says it is entitled to summary judgment on all matters including copyright infringement, unfair competition and Escape’s counter-claims.

“In view of the foregoing, UMG respectfully requests that this Court grant summary
judgment against Escape for common law copyright infringement of UMG’s copyrights in the Works-in-Suit, based on Escape’s invasion of its rights of reproduction, distribution, and performance, as well as for unfair competition, and for UMG on Escape’s counterclaims for tortious interference with contract and business relations,” UMG concludes.

In 2011 it appeared that Grooveshark would be able to claim safe harbor protections on pre-1972 recordings after all when a court ruled in its favor. However, in April 2013 a panel reversed the decision.

“The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation,” Justice Angela Mazzarrelli wrote.

Whether UMG will obtain their summary judgment and at what financial expense to Escape Media and Grooveshark will be developments for the months to come.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

While Google cited Terms of Service violations, ongoing copyright-related issues with the world’s largest recording labels were the number one suspect for the takedown. Generally, Grooveshark parent company Escape Media are not on good terms with the RIAA due to legal issues dating back several years.

Last month, however, there appeared to be something of a turnaround in relationships with Google when Grooveshark announced that it was about to debut Chromecast support via the Play Store.

The development was well received, with Hypebot wondering if Google welcoming Grooveshark back amounted to redemption for the US-based streaming company.

But now, less than a month later, it’s all over.

“After a jointly approved press release from Grooveshark, we were notified by Google [that] our app was suspended for Terms of Service of compliance,” Grooveshark announced today.

The development came as a surprise to Grooveshark, since the company believes it did enough to comply with Google’s Terms of Service this time around. However, it will come as no surprise that the root of the complaint lies with the major recording labels based in the United States.

According to a statement sent to TheNextWeb, the RIAA is behind the suspension after claiming that Grooveshark’s service infringes on their artists’ copyrights.

“We found this interesting as Google (YouTube) is also engaged in a lawsuit over the same points,” a Grooveshark spokesperson said.

While that is indeed true, YouTube’s relationships with the labels are considerably better than those currently enjoyed by Grooveshark. Even Google sympathizes with the labels, something which became evident last year when the search giant excluded the term Grooveshark from its Autocomplete and Instant services.

But despite the drawbacks, Grooveshark continues. Grooveshark for Android can still be downloaded from the company’s site. Chromecast functionality also remains.

“You may still access your full Grooveshark library on Chromecast via our main site (grooveshark.com) or html5 mobile site….using the ‘mirroring’ tool,” the company concludes.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The case, which sees Arista Music heading up a list of labels including Atlantic, Sony, UMG and Warner, has Grooveshark standing accused of massive copyright infringement. Grooveshark sees itself as nothing more than a music-only version of YouTube with all the legal protections that affords. Needless to say, the music giants frame things quite differently.

Motion for summary judgment

This week the labels went for the throat, moving for an order granting summary judgment against Grooveshark parent company Escape Media and Grooveshark founders Sam Tarantino and Joshua Greenberg.

“By any objective measure, Grooveshark is a linear descendant of infringing music services such as Napster, Grokster, and LimeWire, all shuttered by federal courts for large-scale copyright infringement,” law firm Jenner & Block wrote on behalf of the labels.

“Like those pirate services, Grooveshark illegally provides tens of millions of users with access to a comprehensive library of popular music overwhelmingly comprised of unlicensed copies of Plaintiffs’ copyrighted sound recordings.”

The twist in the Grooveshark story is that the labels say that in order to build a comprehensive catalog of music, the company’s founders “expressly and repeatedly” instructed Escape employees to upload as many sound recordings to Grooveshark as possible, including ones from the plaintiffs’ catalogs.

Encouraged employees to upload music – the early days

Many of the labels’ claims date back to Grooveshark’s early days as P2P sharing software ‘Sharkbyte’, a service they say was trying to grow its catalog of musical offerings.

The labels say that in his deposition Tarantino admitted that the company intended to “vacuum in” all of the infringing music available on other then-current P2P networks with the aim of later monetizing it, “by selling pirated copies of Plaintiffs’ sound recordings to Grooveshark users for profit.”

And this is where the labels’ claims get very serious indeed. The RIAA says that Grooveshark’s founders instructed employees to create user accounts and store “hundreds of thousands of digital music files on their computers” with the aim of uploading these files to other service users.

“Thus, Defendants provided a substantial portion of the infringing content files used for the initial Grooveshark service,” the labels explain.

Citing information reportedly obtained from emails, sundry documents, and testimony from former Grooveshark employees, the labels claim that Tarantino and Greenburg made it very clear that all employees were expected to upload as much music as possible into the Grooveshark system, including the most popular current songs.

The aim, the labels say, was for Grooveshark to get big first, with an eye on striking licensing deals later. Directly quoting comments made by Escape Media’s Chairman, Grooveshark “bet the company on the fact that [it] is easier to ask forgiveness than it is to ask permission.”

Centralizing Grooveshark

Due to its peer-to-peer nature, the system preceding today’s Grooveshark required that users remain online in order to seed plenty of content, meaning that when those users disappeared, so did the music. The labels say that by introducing changes, Grooveshark made their service more commercially viable.

“In order to overcome this limitation, in June 2007, Defendants began to utilize their central servers – internally referred to as their ‘cache’ – as a vast central storage library for all of the music files available on the Grooveshark P2P Network (hereinafter the “Central Music Library”). As a result, users had access to all the music in the Central Music Library regardless of the number of users online at the time,” the labels write.

Those changes, they say, only came about through yet more infringement, with Grooveshark’s founders “repeatedly instructing” employees to upload infringing content.

“Simply put, Defendants made it a job requirement that Escape’s employees engage in copyright infringement in order to attract users and thus benefit Defendants,” they write.

Web-based Grooveshark

The labels add that when Grooveshark introduced its current web-streaming model infringement continued, as “Escape employees regularly uploaded files to Grooveshark (including copies of popular sound recordings owned by Plaintiffs) in order to ‘test’ the functionality of the uploading process.”

In 2009 the record companies say they sent numerous DMCA notices to Grooveshark which “threatened to diminish” the Grooveshark library.

A sample of the alleged uploading activities of Grooveshark employees

“As part of this process, Escape’s senior officers searched for infringing songs that Defendants had removed in response to DMCA takedown notices and re-uploaded infringing copies of those songs to Grooveshark to ensure that its music catalog was complete.”

While the exact number of infringements is redacted in court documents, the labels say that music by Michael Jackson, Prince, Beyoncé, Jay-Z, Green Day, Britney Spears, plus tens of thousands of other popular sound recordings had their copyrights infringed. Virtually all of Escape’s employees were identified as serial infringers, the labels say.

Liability for infringement

As a result of the actions detailed above, the record companies say that Escape Media is liable for both direct and secondary copyright infringement. Vicarious liability (profiting from and failing to prevent infringement), inducement (encouraging employees to infringe), and contributory infringement (assisting employees to infringe) are all in the mix.

The recording firms add that founders Sam Tarantino and Joshua Greenberg share personal liability for all of Escape’s infringing activities since they personally participated in and directed the infringing conduct of Escape’s employees. In addition, Tarantino and Greenberg are being held personally liable for direct infringement over their own infringing uploads to the Grooveshark service.

Destruction of evidence.

In addition to their motion for summary judgment, the labels have filed for evidentiary and monetary sanctions against Escape after the company allegedly engaged in “repeated, willful spoliation of multiple categories of key evidence.” If that evidence had been available it would have shown details of infringement which would’ve “exposed [Escape] to hundreds of millions of dollars” in additional damages.

The labels say that Escape destroyed hundreds of thousands of uploading accounts, including one operated by founder Joshua Greenberg.

“[It] is an undisputed fact that Escape’s Chief Technology Officer, Joshua Greenberg, uploaded a massive volume of infringing copyrighted works to the Grooveshark service. However, despite explicit demands to preserve such evidence, Escape systematically deleted internal database records for Greenberg’s user account.”

It’s further claimed that other Escape employees deleted their uploading accounts and the company created a script to purge uploading records. Important encryption data was also discarded.

“Escape has admitted that it deleted the method of encryption for the Upload Report after the report was produced to UMG thereby rendering it impossible for Plaintiffs to use the report to identify the uploading activities associated with hundreds of undisclosed employee accounts. In other words, Escape knowingly destroyed key evidence of the true scope and scale of its employees’ infringement.”

As a result of these alleged actions the labels ask the court to impose penalties on Escape to not only punish the company, but to “deter others who might view Escape’s bad-faith litigation tactics as a blueprint for future cases.”

Endgame

Whether the case will end in summary judgment is yet to be seen but if the pattern for the Hotfile and isoHunt cases are anything to go by, a Grooveshark-terminating agreement could be on the cards in the months to come.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

However, over the past several years Grooveshark has been tangled up in legal battles with all of the major labels over copyright and licensing related issues, conflicts which appear to have cooled but have yet to go away.

But despite a toning down of the war rhetoric and a recently signed deal with Sony, Grooveshark has failed to become a service the labels are prepared to recommended to the public as they would a product like Spotify. In fact, there are signs that the labels still have bad feeling towards the US-based company, and not just on home soil either.

The BPI has now embarked on two major rounds of bulk site blocking in the UK. These initiatives first appear as communications sent out to members of music licensing outfit PPL in which they are asked if the sites listed have procured any licenses. The information is sent back to the BPI and then several months later court-ordered High Court blocking takes place.

After learning of the first batch mid 2012, in May 2013 TorrentFreak learned that the BPI was preparing the way for a second site blocking blitz.

That process was completed on October 30 when the majority but not all sites on the May list were blocked by UK ISPs.

As we noted at the time, one of the sites that remained unblocked despite being on the list was Grooveshark. Had the labels decided to let Grooveshark go, free to swim another day? New information received by TorrentFreak this week suggests that is almost certainly not the case.

In fresh correspondence sent out by PPL on behalf of the BPI, members are being asked about Grooveshark in the same format as they have been in previous preludes to site blocking.

While it seems fairly obvious what this is all about and where it will lead, speaking with TorrentFreak the BPI was a little more circumspect over the nature of this member polling.

“BPI regularly carries out intelligence on unlicensed websites. This helps to help protect musicians and support the growth of legal music services,” the music group told us.

“Checking with our and PPL’s members to see if they have licensed particular websites is an ongoing part of this process. It’s something we did in respect of Grooveshark earlier this year and we are now updating our records to ensure they remain accurate.”

TorrentFreak reached out to Grooveshark to discuss the information detailed above but in line with our requests for comment on similar topics in the past, the company failed to respond to our emails.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

That’s not the start of some terrible geek in-joke but a question that Grooveshark founder Sam Tarantino has always been happy to answer, and for good reason.

Tarantino, the company’s current CEO, sees his streaming product as very much like a music-only version of YouTube. Just like its Google-owned counterpart, anyone can upload content to Grooveshark in order for the world to enjoy that same material on their machines.

But as Grooveshark has made clear to TorrentFreak in the past, the similarities don’t end there. Just like YouTube, Grooveshark is very aware that some users may upload content to which they don’t own the rights. So, in common with YouTube, Grooveshark abides by United States law and when someone notifies them that a copyrighted track has been uploaded, they take it down.

YouTube’s problems with rightsholders during the past few years (notably Viacom) have been widely documented but the company has largely sorted out its differences with rightsholders and has become a valuable marketing machine and source of revenue. Despite fighting lawsuits with several major labels, Grooveshark has always believed it can follow in YouTube’s footsteps, and now there are signs that against the odds they just might achieve their goal.

Grooveshark has just announced that it has reached a settlement with Sony/ATV Music Publishing. The agreement, which puts all legal disputes between the companies behind them, sees the signing of a licensing agreement to make Sony/ATV content legally available from the Grooveshark platform.

“We are excited to add Sony/ATV Music’s impressive array of songwriters to our catalogue further advancing our mission to empower creators with the best audio platform in the world,” CEO Sam Tarantino said in a statement.

According to research from Informa, Sony/ATV is the world’s largest music publisher accounting for 30% revenue market share in 2012.

The licensing deal is the second in less than four weeks for Grooveshark. Earlier this month the company announced that it had settled its differences with EMI Music Publishing with the signing of a licensing agreement. According to Informa, EMI is the second largest music publisher with a 20% revenue market share in 2012.

So where now for Grooveshark?

Even on the back of May’s ‘consent judgments‘ no announcement has yet been made in respect of settlements or licensing deals with Universal or Warner. Furthermore, the company still has to shake off some unpleasant problems such as being the subject of a Danish ISP block and being censored by Google. TorrentFreak also asked the BPI if Grooveshark will remain a target in the UK, but we’ve yet to receive a response.

The big question now, however, goes back to the difference between YouTube and Grooveshark. The former proactively screens for infringing content based on lists supplied by rightholders and even has a deal with Universal that allows them to take down, seemingly, whatever they like.

Does Grooveshark aspire to be just like YouTube in all ways in the name of survival? Time will tell.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The label claimed hundreds of millions of dollars in damages and accused the company of massive copyright infringement. The accusations included claims that bosses and other workers at the company, from the CEO down, personally uploaded many thousands of infringing tracks to the service.

Universal was later joined by Sony, Warner and several other labels who all called for the shutdown of the streaming service and fines against the named employees. In recent months activity in the case slowed down, but behind the scenes the discussions continued.

This has now resulted in a voluntary agreement between the labels and five Grooveshark employees. Nikola Arabadjiev is the only one who still works at the company. Grooveshark founder Sam Tarantino and co-founder Josh Greenberg have not signed an agreement.

The “consent judgments” obtained by TorrentFreak suggest trouble for Grooveshark, which up until now streamed millions of songs without explicit authorization from copyright holders.

Under the agreement the named Grooveshark employees are prohibited from infringing copyrights of musical works owned by the major labels. In addition, they must never again work with a business that systematically infringes upon label copyrights.

“The Defendant and all those acting in concert with the Defendant shall be immediately and permanently enjoined from infringing in any manner any copyright in any and all sound recordings, whether now in existence or later created, in which any of the Plaintiffs own or control any exclusive rights under Section 106 of the United States Copyright Act (the “Copyrighted Works”),” the agreement reads.

“This shall include, but is not limited to, copying, uploading, reproducing, distributing, transmitting or publicly performing any of the Copyrighted Works in violation of the United States Copyright Act, via the Grooveshark service or any other online streaming service, website, application, or peer-to-peer or file-trading system that operates without authority or license from the appropriate Plaintiff or any of its licensees,” it adds.

TorrentFreak approached Grooveshark and the record labels for comment on the recent developments. Grooveshark’s attorneys preferred not to comment on the developments and we have yet to hear back from the labels.

The current lawsuit is just one of many Grooveshark has been dragged into over recent years. January last year EMI sued the music service over a contractual dispute, and Grooveshark has been blocked following court orders in Germany and Denmark. This week, record labels in the UK indicated that they are preparing an ISP blockade of the site.

Over the years Grooveshark has always fiercely defended its business, arguing that it operates within the boundaries of the law and removes unauthorized content when it receives a DMCA takedown notice. At the same time, they negotiated licensing deals with the major labels.

“Laws come from Congress. Licenses come from businesses, Grooveshark is completely legal because we comply with the laws passed by Congress, but we are not licensed by every label (yet),” Grooveshark’s Paul Geller said previously.

However, it seems that the major labels probably want to quash the site entirely instead of legitimizing it through licensing deals.

At the time of writing the music service is still up and running and no settlement with Grooveshark has been entered. However, now that key defendants in the case have struck a deal it would be no surprise if parent company Escape Media follows suit.

Update: Grooveshark sent the following statement. We have yet to get a reply on out follow up questions asking what the settlements mean for the future of the site.

“We are pleased that the case between Universal Music and Escape Media has been narrowed and simplified by the removal of some individual defendants from the case upon their stipulation to simply obey the law—something Escape Media does every day through its active licensing of millions of tracks and its strict compliance with the Digital Millennium Copyright Act. Escape Media Group will continue to deliver innovative new solutions and services that revolutionize music consumption for its growing audience of 30 million+ fans around the world.”

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Again, just like YouTube, Grooveshark says that if any rightsholder has a problem with any content being made available, upon correct notification and in line with relevant law it will remove access to said content. This is how the DMCA works – as long as the correct procedures are followed it exists to stop service providers being held responsible for the infringements of others.

However, in January 2010, Universal Music Group filed a lawsuit in a New York court in which it claimed that Grooveshark had copies of its music in its archives. But there was an interesting twist – Universal said that since the music came from the company’s pre-1972 back catalog and was therefore covered by New York state law and not the federal Copyright Act, Grooveshark would not be able to rely on the safe harbor provisions of the DMCA.

After a summary of the DMCA’s requirements including the responsibilities of both copyright holders and service providers and what the latter must do to receive safe harbor protection, yesterday the Court reached its decision.

“There is no textual, or other reason, to think that Congress intended to limit that distribution of responsibilities to only post-1972 recordings,” Judge Barbara R. Kapnick wrote, effectively neutralizing the first element of Universal’s unconventional attack on Grooveshark.

In a response to the 2010 lawsuit, Grooveshark parent company Escape Media had also filed several other counterclaims, not only on the issue of the DMCA, but also concerning competition.

Escape stated that it is a competitor to Universal and that the music company had engaged in an unlawful anti-competitive campaign “to exploit its sizeable market power by coercing third party business entities into refusing to deal with Escape” and Escape had suffered significant damages as a result.

Escape said that Universal coerced two of its advertising partners – Hewlett Packard and INgrooves – into breaching their contracts and terminating their relationships with Escape. The deal with HP is reported as being worth $325,000. Escape also claim that Universal had their Grooveshark app pulled from the Apple App Store.

Universal tried to have these and other counterclaims dismissed. They succeeded on one point concerning antitrust, with the Judge noting that those laws were enacted for the “protection of competition, not competitors” and that injury to a competitor [Grooveshark] is not “injury to competition as a whole.”

The end result though, with the lion’s share of the counterclaims against Universal allowed to stand, is great news for Grooveshark.

A source close to the company told TorrentFreak they are “thrilled” at the prospect of counterclaims worth “tens of millions of dollars, if not more” going through.

Who knows, maybe they might prove to be a good point of negotiation in the other case the companies are still fighting?

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

In November 2011, Universal Music, the world’s largest recording label, sued the music streaming service in a copyright infringement lawsuit claiming hundreds of millions of dollars in damages. In December, Sony and Warner joined the action and in January this year EMI sued over a contractual dispute.

Just last month a group of entertainment companies in Denmark obtained a court order forcing an ISP to block Grooveshark at the DNS level, a punishment previously inflicted on The Pirate Bay after prolonged legal argument.

So when the recording labels claim that Grooveshark has cost them hundreds of millions of dollars and when headlines refer to the music streaming service in the same breath as The Pirate Bay, are those statements and associations fair?

According to a source close to Grooveshark who spoke to TorrentFreak under condition of anonymity, the differences are not only palpable but the accusations made by some in the recording industry are just plain false.

Our source insists that Grooveshark has aggressively pursued licenses across the globe, gone directly to artists and has built (and continues to build) systems to help rights holders manage their content and receive revenue shares. But sometimes Grooveshark’s ideals run counter to the labels’ preferred route to the market.

“Grooveshark wants to keep the platform Open. That is to say, even after all the deals are inked, the company wants artists to be able to share without having to go through a label. That’s Grooveshark’s definition of open,” TorrentFreak was told.

Another perceived area of conflict is that Grooveshark want to keep their platform and musical offering unlimited.

“That doesn’t mean that users don’t have to pay and it certainly doesn’t mean that record labels don’t get paid, but users might pay with their attention or their interaction, or (and I know this is controversial) with their data,” our source explained.

Grooveshark’s 35 million users are a rich source of information which the company believes could be of immense value to the record labels. A comment from a company exec quoted in the Universal lawsuit suggested that in some instances that value could cover the costs of music licensing. In some instances and in a practical sense, information may be the only currency users have to trade for music.

“If a 13-year old kid can’t get access to music because she or he doesn’t have a credit card and Grooveshark can earn enough money to pay a record label off of a few survey questions then that should be net positive for the label, the artist, the user and Grooveshark,” our source noted. “The alternative is piracy.”

Of course, stopping piracy is something the labels are striving for every day, but they also want to do business on their terms and maintain control over their product. Grooveshark, it seems, may be being perceived as problematic in that area.

“As far as I can tell, it’s not that labels don’t want money. It’s that they don’t want Grooveshark’s type of money. They see that model as a slippery slope,” our source explains.

“The last thing they want is for artists to be able to make a living in a way that undercuts the 1-to-1 value of recording to dollar. It’s seen as an attack on their power base, which is not what Grooveshark set out to do.”

TorrentFreak has learned that Grooveshark’s creators initially believed that the labels would not only embrace the company’s technology, but seeing value in new artist revenue streams would also be the first to invest. That seems unlikely now.

But the company still firmly believes that long-term viability coupled with equity and revenue sharing can bring in more money than traditional streaming models for the labels. However, for reasons best known to Universal, Warner and Sony, the litigation route has been selected instead and Grooveshark will now have to fight its corner in a civil lawsuit, presumably protected by the DMCA.

“The DMCA Safe Harbors are not a loophole,” our source insists.

“They are necessary for the progress of society and are meant for situations EXACTLY like Grooveshark’s. It’s not something to use for protection or to hide behind. It’s meant to allow the development of technologies that are potentially revolutionary. That doesn’t mean that if you operate within them, you shouldn’t be expected to reward content creators for their work and that’s not what we want them to mean.”

But because of the position Grooveshark finds itself in, the company has been left with a dilemma.

“When record labels use threat of criminal prosecution as a negotiating tactic you are left with two choices; Continue working to improve the user experience, build tools for those rights holders that do want to participate and do your best to walk the straight and narrow of the law. Or stop innovating in an industry that is desperate for innovation.”

“Which is the principled position?”

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

RettighedsAlliancen chief Maria Fredenslund said that Grooveshark had no content agreements or licenses with members of her group, accused the service of being “completely uncooperative” in negotiations, and that effectively taking down content from Grooveshark had proven impossible.

The resulting legal action was directed “randomly” at telecoms company ’3′ with a complaint that the ISP’s customers breach copyright and as their supplier they are contributing to infringements.

’3′ argued that not all content on Grooveshark is offered without permission since artists and labels legally upload and distribute their music via the service. If the court did indeed order an injunction its effects would be disproportionate and result in the censorship of legal content, ’3′ argued.

However, the court said that even though certain aspects of the Grooveshark service may be considered legal, the extent of the copyright violations being committed using the service overwhelmed them.

The Bailiff Court said that ’3′ was unlikely to suffer any financial losses as the result of an injunction and since ’3′ customers are violating copyright law when they stream music from Grooveshark, they would not be able to claim compensation from ’3′ when they could no longer access the site.

Based on the Danish implementation of the Infosoc Directive, the court ordered an immediate injunction against ’3′ which prohibits it from facilitating subscriber access to Grooveshark.

“Grooveshark is an illegal site, which is really big and popular. But they have a business model that is based on trickery and fraud,” said RettighedsAlliancen chief Maria Fredenslund commenting on the news.

“Many users believe that when they use Grooveshark payment goes back to the artists and producers. So we think it was important to close off access so the legitimate sites have a chance to recover,” Fredenslund added.

But Troels Møller, co-founder of internet think-tank Bitbureauet, says blocking access to Grooveshark is a step too far.

“This is an attack on free speech and basic Internet freedom. Danish politicians need to educate themselves on this subject, and realize that what is going on is very dangerous. It’s a slippery-slope into complete internet censorship,” he told TorrentFreak.

“In Denmark we are seeing this kind of censorship in more and more areas. It has expanded from blocking child abuse-sites to also blocking file-sharing sites like The Pirate Bay, and again to foreign pharmacy and gambling sites. And now we see blocking of music streaming sites without the proper license. What’s next?”

In the meantime, ’3′ are planning their next move

“We have received the result and will now decide what to do next,” Stinne Green Paulsen, Communications Manager at ’3′, told TorrentFreak. “We have four weeks to decide if we want to proceed or not.”

Proceeding would mean ’3′ taking the case to the High Court, but whatever the decision in the meantime the injunction will stand.

In addition to Grooveshark, other sites that have been blocked in Denmark on copyright infringement grounds include AllofMP3 and more recently The Pirate Bay.

RettighedsAlliancen did not immediately respond to a request for comment.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.