By FMC legal intern Michelle Davis

This just in (again): if you’re an online service provider and want to enjoy safe harbor protections under the Digital Millennium Copyright Act (DMCA), you’ve got to play by the rules.

That’s the lesson storage locker service Hotfile learned the hard way when it was sued by all five major motion picture studios (Disney Enterprises, Inc., Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Columbia Pictures Industries, Inc., and Warner Bros. Entertainment Inc.) in the Southern District Court of Florida. U.S. District Court. In her ruling on Aug. 28 (and just recently made public), Judge Kathleen Williams found that Hotfile could be held liable for the infringing material users uploaded to its site.

As Terry Hart, director of legal policy at Copyright Alliance explains, there are provisions in the DMCA that serve to strike a balance between “protecting creators’ rights and promoting the growth of online services.”

To be perfectly clear: FMC is supportive of so-called “safe harbors” that limit liability for online services, because these protections are essential to the innovations that musicians and other creators use every day. And it’s bigger than music—these technologies can play an important role in free expression and democratic participation at home and abroad. All of this is laid out in federal statute; it’s the courts task to examine the facts in a given case and make determinations about whether a service is playing loose and fast with the law. The point is, the actions of a few bad actors should not undermine the rationale for having safe harbors.

However, while third-party liability protection is essential for the growth of new and innovative businesses, these protections are not granted unless the service provider pulls its weight in dealing with infringement. Among other things, the DMCA requires two basic conditions of eligibilityfor safe harbor protection: 1), implementation of a repeat infringer policy; and 2), a service provider can’t have “actual knowledge that the material or an activity using the material on the system or network is infringing.” If the service provider has “actual knowledge” of infringement, it must “act expeditiously to remove, or disable access to, the material.” Courts have interpreted this to mean an awareness of a specific instance of infringement—which typically comes in the form of a rightsholder takedown notice.

Additionally, the statute says that, “in the absence of such actual knowledge” a service cannot be “aware of facts or circumstances from which infringing activity is apparent.” This seems to leave a lot of room for interpretation by the courts, but it’s a bit above our pay grade.

In this case, the court decided that Hotfile did not meet either criterion. The locker service “effectively did nothing to tie notices to repeat infringers” and it failed to respond to a “substantial number” of takedown notices from copyright holders.

There are a couple key points to underscore here. First, just because Hotfile lost its safe harbor protections does not mean that all locker services are unprotected. It also does not mean that all use of locker services is illicit. Pretty much every media-maker we know uses some kind of locker service to efficiently store and send everything from studio sessions to final mixes to soundboard recordings from last night’s gig.

These technologies are increasingly essential and extremely useful. From individual artist to music label, lockers and digital distribution in general open up a world of opportunity for collaboration and, yes, commerce. So while Hotfile set the bar low in terms of fulfilling its obligations under DMCA, there is no reason to demonize the entire technology.

We’ll be exploring these issues and more at the Future of Music Summit on Oct. 28-29 at Georgetown University in Washington, DC. Musician scholarships are available—see you there!