Hydroshare (http://www.hydroshare.tv) enables recording artists and authorized rights owners to upload their promotional music files as multimedia projects, which are then stored and indexed for mass free-distribution. Hydroshare also indexes and redistributes projects that have been freely released on the web and promoted as viral, creating a curated repository of promotional music (formally called “mixtapes”) and video. There are two issues of legal liability involved in the operation of Hydroshare: I. Liability to performance right holders (labels/artists) stemming from the redistribution of promotional music on the Internet. II. Liability to the rights owners of underlying music reused by the artist in the promotional project.

1. Hydroshare’s Legal Defenses Against Copyright Infringement Claims: Promotional
Music Storage and Redistribution Under the Implied License Doctrine, Fair Use, and
the Digital Millennium Copyright Act Safe Harbor Provisions
“You can't steal something that was designed to be free.” ­ TRON: Legacy (2010)
Introduction
Hydroshare (http://www.hydroshare.tv) enables recording artists and authorized
rights owners to upload their promotional music files as multimedia projects, which
are then stored and indexed for mass free‐distribution. Hydroshare also indexes and
redistributes projects that have been freely released on the web and promoted as
viral, creating a curated repository of promotional music (formally called
“mixtapes”) and video.
There are two issues of legal liability involved in the operation of Hydroshare:
I. Liability to performance right holders (labels/artists) stemming from the
redistribution of promotional music on the Internet.
II. Liability to the rights owners of underlying music reused by the artist in
the promotional project.
I. Promotional music released into the stream of commerce for free by
the appropriate copyright holders are distributed under a revocable
non­exclusive implied license to duplicate and redistribute the
work, and thus Hydroshare’s redistribution is a Fair Use.
a. Copyright Law in the Modern Digital Music Landscape
Digital technology and the Internet revolution have shifted certain social and
business norms, creating dissonance with existing copyright law in the process.1
Specifically, the Copyright Act states that copyright is automatically granted to
content owners and subsequently protected unless it is explicitly waived.2 Therefore
a person who violates any of a copyright owner’s exclusive rights is strictly liable as
an infringer.3 However, this law sits in direct opposition from modern trends in
1 See generally Christopher Jensen, Note, The More Things Change, the More They Stay the Same:
Copyright Digital Technology, and Social Norms, 56 Stan. L. Rev. 531 (2003).
2 17 U.S.C. § 102(a) (2000).
3 17 U.S.C. § 501(a) (2000).
Marvin Barksdale for Hydroshare, Inc. 1

2. digital technology, which generally enable anyone to easily copy, distribute, and
make digital works from available media without regard to applicable copyright
law.4 From these technologies, new sharing and distribution norms have emerged
and found expression through peer‐to‐peer networks, open‐source software,
promotional mixtapes, and other regimes where unlicensed copying and
distribution are deemed acceptable. 5
In this new environment, while a number of content producers with large sunk costs
may desire to restrict all unauthorized uses of content, other content producers
adhering to new norms, commonly waive some copyright restrictions and prohibit
others, e.g. “for promotional use only6” or claims for “failure to properly attribute
authorship.7” The later group of copyright owners, preferring to allow certain uses
but not others, may use “rights management” or chose to license specific uses of
their works. These Digital Rights Management systems (or DRMs) allow a copyright
holder to “implement technical constraints on access to and use of digital
information,”8 and copyright law provides supplemental protection by prohibiting
their circumvention.9 A copyright owner looking to protect unauthorized
distribution of his work can also choose from the many ready‐made rights
management systems, including password protection, content scrambling, and
streaming. 10 However, when one of these ready‐made systems does not reflect the
rights holder’s preferences, the copyright owner may choose to forego such
protection, thereby enabling free sharing.11 The result is the automatic reservation
of all rights12 ‐ a default imposed by the law that fails to reflect the copyright
owner’s preferences13.
As discussed earlier, many rights holders choose to license their work for specific
uses, outside of DRM. Although these licenses may be exclusive, most licenses
granted to consumers are nonexclusive: “When the totality of the parties’ conduct
indicates an intent to grant such permission, the result is a nonexclusive license.”14
These nonexclusive licenses may be expressly written, orally stated, or implied from
conduct,15 and the scope of the implied license depends on the licensor’s intent16.
4 See Jensen, supra note 2, at 556.
5 See David W. Opderbeck, Peer to Peer Networks, Technological Evolution, and Intellectual Property
Reverse Private Attorney General Litigation, 20 Berkeley Tech L.J. 1685, 1696099 (2005).
6 See Umg Recordings, Inc, V. Augusto, 2011 U.S. App. Lexis 52 (9th Cir. Cal. Jan. 4, 2011)
7 Chris Anderson, The Long Tail: Why The Future Of Business Is Selling Less Of More 74 (Hyperion
2006) (Quoting Columbia University Law Professor Tim Wu).
8 Dan L. Burk & Julie E. Cohen, Fair Use Infrastructure For Rights Management Systems, 15 Harv. J.L. &
Tech. 41, 50 (2001).
9 See Digital Millennium Copyright Act §103(A), 17 U.S.C. § 1201 (2000)
10 See Seshadri At 4
11 Id.
12 See 17 U.S.C § 501 (A); But See 17 U.S.C. § 107 (2000) (Stating That Some Uses, Such As For News
Reporting, May Be Fair Use).
13 See Raghu Seshadri, Bridging The Digital Divide: How The Implied License Doctrine Could Narrow
The Copynorm­Copyright Gap, Ucla J.L. 4 (2007)
14 3 Melville B. Nimmer & David Nimmer, Nimmer On Copyright § 10.03[A][7] At 10 49 To 50 (2007).
15 Id.
Marvin Barksdale for Hydroshare, Inc. 2

3. Furthermore, an implied license can be found where the copyright holder engages in
conduct “from which [the] other [party] may properly infer that the owner consents to his
use.”17 Thus, for courts to rule in favor of the existence of an implied license between an
artist or representative releasing a promotional album and a free-content distribution
website like Hydroshare, there must be evidence of the copyright holder’s intent to not
only release the music for no cost to the public but to also permit the re-distribution of the
work. In instances of valid implied consent, for Courts to find otherwise would subject
this free promotional music to unreasonable restrictions defeating the purpose for which
it was intended.18 Thus, in order to reach this conclusion, we must analyze the
relationship of the U.S. Copyright Act and the evolution of modern marketing and
promotional business strategy to the Recording Industry.
This analysis of the evolving business strategy of releasing free promotional music
by the Recording Industry will also prove vital in determining whether
Hydroshare’s redistribution of content qualifies as a “fair use”. In a 2003 statement
commissioned and sponsored by the National Digital Infrastructure and
Preservation Program, the US Library of Congress stated that the permissibility of
copying or ”harvesting” publicly available content depends on consideration of
traditional fair use factors.19 Under the Copyright Act, “fair use” of a copyrighted
work “is not an infringement of copyright.”20 The fair use doctrine “creates a limited
privilege in those other than the owner of a copyright to use the copyrighted
material in a reasonable manner without the owner’s consent,” and “permits courts
to avoid rigid application of the copyright statue when, on occasion, it would stifle
the very creativity which that law is designed to foster.” The Library of Congress
recommended circumstantial case‐by‐case review on the following factors: the
nature of the material copied, the scope of the copying, who would have access, and
how the archival use could affect the copyright owner’s market.21 This paper
argues that because recording industry copyright owners now utilize authorized
digital promotional releases for a variety of legitimate business purposes, they are
inherently reliant on the spread and redistribution of this content, and therefore to
stifle its subsequent distribution would defeat the purpose for which it was
intended.
16 See Effects Assocs. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990); Lulirama Ltd., Inc. v. Axcess Broad.
Servs., Inc., 128 F.3d 872, 882 (5th Cir. 1997).
17 See, e.g., De Forest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241 (1927) (setting forth
requirements for an implied license defense to a charge of parent infringement.
18 See Storm Impact, Inc. v. Software of the Month Club, 13 F. Supp. 2d 784, 790 (N.D. Ill. 1998)
19 June Besek, Copyright Issues Relevant to the Creation of a Digital Archive: A Preliminary Assessment,
Council on Library and Information Resources Washington, D.C. and Library of Congress, 17 (2003).
20 17 U.S.C. § 107.
21 See Besek at 17
Marvin Barksdale for Hydroshare, Inc. 3

4. b. The Copyright Act and the Economics of the Traditional Recording
Industry
Section 102 (a)(2) of the Copyright Act of 1976 provides legal protection for
“musical works, including any accompanying words.” For a work to be protected, it
must be original, and must be “fixed in any tangible medium of expression”22.
Through the Act, copyright owners are given a set of exclusive rights to incentivize
them to continue creating works, and which benefit society as a whole.23 This
bundle of rights includes the right to: 1) reproduce the work, 2) prepare derivative
works, 3) distribute copies or phonorecords of the work, 4) perform the work, and
5) display the work. 24
Historically music industry revenues have come primarily from selling physical (and
later digital) music products. Thus, it follows that copyrights have been vital to
labels and artists, as the rights afforded to these rights holders directly determine
profit and royalty distribution.25 Each of the bundle of rights granted to musical
works through the Copyright Act create an exclusionary and exploitable right to a
limited extent26. A digital sale of a digitally formatted musical work, just like a
traditional sale of a compact disc, creates numerous royalties for the copyright
owners of the underlying works. Generally, two royalties are generated through the
sale of a musical work in a sound recording – a musical composition or mechanical
royalty and the performing artist royalty.27
Considering the money potentiality generated through the use of one musical
composition in the sale of an album, the economics of copyright protection become
clear.28 For example, assume one songwriter produces three songs that are used in a
commercial album. Further assuming two million copies of the sound recording are
distributed in the United States, the mechanical royalty due to the copyright owner in the
musical composition would be $480,000.29
In addition to the composer, the performing artist (generally signed to record label) is
also paid a royalty from digital and physical music sales. As compensation for recording
music exclusively with one label and signing over the copyright in the sound recording,
the performing artist is paid a royalty based on the number of sound recordings sold.30
But in exchange for distribution, marketing, and other company services, performing
22 17 U.S.C. § 102(a)(2)(2006).
23 See Washingtonian Publ’g Co. V. Pearson 306 U.S. 30, 36 (1939)
24 See id. §106.
25 See Brian Mencher, Digital Transmissions: To Boldly Go Where No First Sale Doctrine Has Gone
Before, 10 UCLA ENT. L. Rev. 47, 53 (2002)
26 Id at 8 (citing 17 U.S.C. § 102(a)(2))
27 See generally Donald S. Passman, All You Need To Know About The Music Business 211(2000) (The
royalty became known as a “mechanical” for the action that was taken when the musical sounds were
mechanically molded into the vinyl album.).
28 Mencher at 9.
29 Using the current the royalty rate determined by the U.S. Congress, songwriters are paid 8 cents
per musical composition user, per sound recording distributed. (37 C.F.R. § 255.3 (2002))
30 See Passman, supra note 45 at 90.
Marvin Barksdale for Hydroshare, Inc. 4

5. artists give up a number of their formerly exclusive copyrights to the label, including
autonomy regarding distribution and creative decisions. While the royalty rate fluctuates
with the medium used (i.e. cassette, compact disc, new media), an average performance
royalty is about 15% of listed retail price.31 In dollars and cents, this averages out to a
$1.10 royalty for each sound recording sold.32 Thus, for the album that sells 2 million
copies, the performing artist receives roughly $2.2 million.
During the music industry’s “Golden Age” (from 1992 – 1999) consumption of albums in
the US rose to nearly 3.5 albums per person per year, with total recorded music revenue
topping off in ‘99 at nearly $15 Billion.33 Music’s permeation into the psyche of
Americans, as well as into their collective wallets, can be directly correlated with its
permeation into multiple facets of popular culture. Through the expansion of radio, film,
cable television, and print media, music was able to affect nearly every aspect of world
culture.
The Golden Age of the music business also led to the proliferation of new recording
industry commerce and marketing strategies. Instead of relying on radio to introduce the
public to new music, music marketers also began utilizing television executives, writers,
club disk jockeys, and other influencers to promote music to the public. Thus began the
music industry swell of promotional music.
c. The History and Economic Rationale Behind Promotional Music
Although the common business practices of marketing and promoting products
have expanded over time, the core concepts behind promotion have remained
relatively the same. Promotional releases in the recording industry (promos for
short), traditionally were copies of singles, albums, or EPs issued by a label to
journalists, radio stations, retail stores, and other parties who might provide some
form of product promotion or otherwise generate industry “buzz.”34 Standard
industry practice is that no royalties are paid to the composers and performers of
the recorded materials given away as promotional items35. But whether the act is
sending out key chains, Frisbees, or new music, record companies pass on the costs
of producing and distributing promotional items to the artists that they promote,
often against the artists’ advances.36
31 Id. at 90.
32 Id.
33 Paul Cashmere, "Music Sales Down To One Album Per Person Per Year” Undercover News: Your
Daily Music Fix. 28 Feb 2011 Web. 23 April 2011.
34 Lawrence J. Glusman, Comment, It’s My Copy, Right?: Music Industry Power to Control Growing
Resale Markets in Used Digital Audio Recordings, 1995 WIS. L. REV. 709, 736 n.120.
35 Donald E. Biederman, Martin E. Silfen, Law and business of the Entertainment Industries, Nov 30
2006, Greenwood Publishing, 721
36 Corrina Cree Clover, Accounting Accountability: Should Record Labels Have a Fiduciary Duty to
Report Accurate Royalties to Recording Artists?, 23 LOY. L.A. ENT. L. REV. 395 (2003). (An “advance”
is defined in the boilerplate language of most music industry contracts as a “prepayment of future
royalties.”)
Marvin Barksdale for Hydroshare, Inc. 5

6. Although promotional music has always been freely given, labels and artists remain
explicit regarding their intent the recordings not be resold. This concept was
recently litigated in the UMG Records v. Augusto case in the Ninth Circuit, where
Universal Music Group brought an infringement claim against a defendant who was
selling legally obtained promotional CDs.37 In order to overcome the burden of proof
necessary for the suit, although UMG admitted sending the unsolicited CDs to the
defendant by mail, they relied on inclusion of a CD affixed sticker that read “Promotional
Use Only-Not For Sale” in some cases and in others a lengthier statement that reads:
“This CD is the property of the record company and is licensed to the
intended recipient for personal use only. Acceptance of this CD shall
constitute an agreement to comply with the terms of the license. Resale or
transfer of possession is not allowed and may be punishable under federal
and state laws.”38
Although the restrictions of this “license” were ultimately struck down in this case, it
accurately represents the marketing and promotional strategy of record labels in the
bygone age of physical CD and record promotion: release physical promotional copies
only to intended taste makers who affect the buying market.
In any given era of the recording industry, promotional music strategy has always
directly mirrored music consumption. In the Golden Age of recorded music, promos
were given freely to influencers in TV, movies, and media. However, in the ‘70s and
early ‘80s, promo distribution was limited to radio and club disk jockeys.
As consumer demand for cassette‐tapes and other personal media recording devices
rose in the late 1970s, it didn’t take very long for party DJs to begin integrating these
pre‐releases into their already popular “Party Tapes”. Party Tapes were DJ curated
compilations of live performances that were given away by DJs to promote their
mixing abilities and their events. 39 But as these Party Tapes naturally expanded to
include label and artist provided promotional songs, DJs soon realized there was a
viable black‐market for what would be soon be known as the “Mixtape.”
In the 1990s, as popular music began leaving the clubs and spilling into the streets
and personal media devices, the “Mixtape DJ” became a trusted source of new
music.40 Because fans of the newly popular rap and hip‐hop genres were
accustomed to sharing Party Tapes from their favorite DJs, and because the quality
of the tapes rose via the expansion of Compact Disks and the presence of label/artist
supplied music, the demand for mixtapes in these genres grew dramatically.
Although the barriers to music access and distribution were beginning to dissolve,
(mainly through the proliferation personal media duplication devices) in the mid
37 Universal Music Group v. Augusto, 558 F. Supp. 2d 1055 (9th Cir. 2008)
38 Id. at 1060
39 MTV.com (2007). Mixtape History. Retrieved April 22, 2011, from:
http://www.mtv.com/bands/m/mixtape/news_feature_021003/index8.jhtml
40 Id at 2.
Marvin Barksdale for Hydroshare, Inc. 6

7. 1990s, promotional mixtapes provided the opportunity for labels and artists to once
again promote their music on an influential music consumption platform. Even
further, rights holders were still able to control the distribution of their most
valuable copyrighted music on radio, television, in movies and through commercial
CD sales. Label executive Sean Combs, who was honored in 2005 with the
executive/lifetime achievement honor from the world famous Justo’s Mixtape
Awards41, was at the forefront of the label‐originated mixtape movement in the mid‐
nineties. Nearly a decade ahead of his time, Combs was able to build the successful
Bad Boy Records brand through supplying influencers as well as his niche fan base
with a steady supply of pre‐release singles and exclusive promotional songs. Combs
was the first mainstream recording industry executive to utilize both white label
promo releases and his label’s DJ curated mixtape series to drive album sales and
tour revenue throughout the mid nineties.
By 1999 the symbiotic relationship between Mixtape DJ and record label had nearly
completely dissolved. Observing that the most popular tapes were the releases with
the most exclusives, mixtape DJs began competing for who could acquire the most
unreleased songs. DJs began paying studio workers and other artist affiliates to
steal music from recording sessions, putting them at odds with the same labels that
long supplied them with legal promotional music.
d. The Recording Industry Versus The Mixtape
During the first years of the 21st century, as street mixtapes rose in popularity, recording
sales were in steady decline42. Popular mixtapes now contained the industry’s biggest
singles before they were available for purchase and in some instances before they even
reached the radio. But, although mixtapes were acting as a replacement for commercial
albums in a few genres, the overall decline in sales could be attributed to a perfect storm
of other factors. These include increasing Internet bandwidth, the widespread digitization
of physical media files, and the capabilities of home PC's increasing to better handle
playing and storing digitized audio and video files. This new environment lead to a
revolutionary development, that would eventually turn the mixtape industry on its head,
called Peer-to-Peer file sharing.
Peer-to-peer computing platforms are distributed network applications that partition tasks
between peers, who make a portion of their resources, such as processing power, disk
storage or network bandwidth, directly available to other network participants43. This in
turn made it relatively easy to transfer one or more files from one computer to another
across the Internet through various file transfers and individual file-sharing networks. By
41 Chris Harris, “Mixtape Awards To Honor P. Diddy As Top Executive” MTV News, 8 Mar 2005
42 Alejandro Zentner, "File Sharing and International Sales of Copyrighted Music: An Empirical Analysis
with a Panel of Countries", The B.E. Journal of Economic Analysis & Policy, Vol. 5, Issue 1 (2005)
43 Rüdiger Schollmeier, A Definition of Peer-to-Peer Networking for the Classification of Peer-to-Peer
Architectures and Applications, Proceedings of the First International Conference on Peer-to-Peer
Computing, IEEE (2002).
Marvin Barksdale for Hydroshare, Inc. 7

8. 2003, this relative ease lead an estimated 70 million people to participate in online file
sharing.44 Thus, in response to the proliferation of their copyrighted material on peer-to-
peer networks like Napster, in 2003 the RIAA began an aggressive campaign to enforce
its copyrights in recorded music against alleged infringers around the world. 45
In an extension of the recording industry’s aggressive civil litigation strategy, the labels
soon began to use US criminal law to seek the arrest and prosecution of purveyors of
mixtapes, identified as another source of the illegal proliferation of copyrighted
materials.46 Although the music was now being spread online, mixtape DJs had gained
the reputation as thieves and bootleggers, creating many of the most shared digital music
archives47 and profiting from the creativity of artists through the black market. On
January 16, 2007, Atlanta-area police, working with the RIAA, raided the offices of
Tyree Simmons, professionally known as DJ Drama, and confiscated 81,000 mixtape
CDs, along with computers and recording equipment. Drama, along with protégé DJ Don
Cannon, was also arrested and charged with a felony count of violation of Georgia’s
Racketeering Influenced Corrupt Organization law.48 The state of Georgia requires that
the name of the copyright owner of any recorded music for sale be displayed on the
packaging. According to the complaint, failure by Simmons and Cannon to do so on their
mixtape CDs represented a large-scale, organized and ongoing attempt to engage in
illegal reproduction and distribution of the copyrighted works of others. A conviction
would earn Drama and Cannon one to five years in prison and a fine of anywhere
between $10,000 and $100,000.49
DJ Drama was regarded as one of the industry’s most influential mixtape DJs, and news
of his arrest led to the removal of mixtape products from store shelves and online sites
across the country. Along with earlier raids of small music retailers, the Drama/Cannon
raid increased fear and uncertainty in the mixtape as a promotional tool and led to a
chilling of mixtape production and sales in its current compilative format.50 But,
although the law made it clear that DJs would no longer be able to press and profit
from these compilation mixtapes, as Drama and Cannon argued, the prominence and
success of the top mixtape DJs didn’t come from their ability to steal the newest
44
Ray Delgado, Law Professors Examine Ethical Controversies Of Peer-To-Peer File Sharing. Stanford
Report, March 17, 2004.
45 Paul R. La Monica, “Music Industry Sues Swappers: RIAA Says 261 Cases Pursued For Illegal
Distribution Of Copyrighted Music”, CNN Money, September 8, 2003
46 Horace Anderson, “‘Criminal Minded?’ Mixtape DJs, the Piracy Paradox, and Lessons for the
Recording Industry”, 76 Tennessee Law Review 2 (2008)
47 Id at 2.
48 See Hillary Crosley, DJ Drama Arrested in Mixtape Raid, BILLBOARD, January 17, 2007,
available at
http://www.billboard.com/bbcom/news/article_display.jsp?vnu_content_id=1003533767;
Kelefa Sanneh, With the Arrest of DJ Drama, the Law Takes Aim at Mixtapes, NEW YORK
TIMES, January 18, 2007, at E1.
49 See Nick Marino and S.A. Reid, Two Hip-Hop DJs’ Arrests Spotlight Atlanta as Hotbed For Music
Piracy, Atlanta Journal And Constitution, January 19, 2007, At A1; S.A. Reid, Djs To Appear Today In
Court, Atlanta Journal And Constitution, January 24, 2007 at D6.
50 See Hillary Crosley, Mixed Messages: DJ Drama’s Bust Leaves Future of Mixtapes Uncertain,
Billboard, January 27, 2007, at 8.
Marvin Barksdale for Hydroshare, Inc. 8

9. copyrighted material.51 The artists themselves, as fans of the Mixtape DJ’s ability to
release high quality and influential compilative projects, were now engaging Drama
and Canon to release DJ branded mixtapes consisting entirely of artist supplied
music. 52 Next all it took was the meteoric success of one of the newfound “mixtape
artists” to revitalize and redefine the promotional music market once again.
e. 50 Cent, Freemium, and the Rise of the Modern Street Album
The most important outcome of the Internet Revolution was the lowering of the cost
barriers that historically prevented many creatives from producing and distributing their
own work. The onset of new, cheaper technologies and web infrastructure, created an
influx of new players in visual arts, software, as well as music. Therefore not only were
these industries making less money due to the online proliferation of their once well
protected copyrights, but consumers’ value perception was also declining due to market
overcrowding. In response, media executives enacted a new business model called
“freemium” in order to accommodate customers who were now quickly becoming
accustomed to the free flow of content and information.53 Freemium, a portmanteau
combining the two aspects of the business model: "free" and "premium", works by
offering a basic product or service free of charge (such as software, web services or a
music offering) while charging a premium for advanced features, functionality, or related
products and services.54 Although gaining notoriety through the “open source” and
“shareware” software business models in the early part of the 21st century, music industry
executives like Sean Combs first incorporated this model by releasing label-branded
mixtapes in the mid 90s. Ultimately, this authorized mixtape model would evolve again
with rise of a hip-hop superstar named 50 Cent, whose ascension was propped by a series
of successful freemium “street albums.”
In the tear 2000 Curtis Jackson p/k/a 50 Cent was poised to be another yet forgotten
casualty of the modern music industry. Despite being signed to Columbia Records and
having some niche success with the single “How to Rob” which appeared on the In Too
Deep movie soundtrack, the label refused to agree to release his album. After the severe
drop in sales that same year, although labels and distributers continued to sign acts to
exclusive recording agreements, many of these acts remained “on the bench,” estopped
from selling their music without mutual consent from the label as rights holder. This
created a growing number of “middle class musicians,” with a released single but an
uncertain fan base. Without market confidence, record label executives were unwilling to
spend the resources necessary to release a commercial LP. 50 Cent’s situation was
51 Id.
52 Id.
53 JLM de la Iglesia, JEL Gayo, "Doing business by selling free services". Web 2.0: The Business Model,
2008. Springer
54 Heires, Katherine,"A Business Model VCs Love" Business 2.0 11 October 2001.
http://money.cnn.com/magazines/business2/business2_archive/2006/10/01/8387115/index.htm.
Marvin Barksdale for Hydroshare, Inc. 9

10. further complicated by bad blood with then industry leader Ja Rule, who was politically
freezing him out of radio and magazines. Despite soon being released from his label, 50
continued to record with his team of artists and producers. Believing in the strength of his
music and burgeoning fan base, in Spring of 2002 he released his first mixtape, 50 Cent
Is the Future, with his group G-Unit.
50 Cent’s first official promotional project, 50 Cent is the Future, in many circles is
considered the best mixtape of all time. 55 Revisiting material from larger acts like Jay-Z
and Raphael Saadiq, 50 showcased his ability to rework his own favorite songs into niche
cover-versions that resonated with his core audience. 50 Cent is the Future stood up
against the most popular hiphop releases of 2002 despite being distributed for free and
executive produced by the artist, his manager, and two mixtape DJs instead of a label.
Through this project, 50 Cent was able to create a buzz that recaptured the attention of
radio stations and media outlets around the country, eventually signing a new million-
dollar deal with Aftermath/Shady Records.
50 Cent’s next two “street albums”, building on the success of the first, set the stage for
one of the most successful commercial debut albums of all time. In 2003 he released No
Mercy, No Fear followed by God’s Plan, containing original performances and song-
writing over a mix of classic and popular instrumentals. But in addition to cover songs,
50 and his team decided to add a few original, potential singles to the tracklists including
the song “Wanksta.” Both the mixtapes and the single soared in popularity, helping his
soon to be released album (which contained “Wanksta” as bonus track) debut at number
one on the US Billboard Charts and sell over six million copies.56
50 Cent and his label Shady/Aftermath utilized the freemium model in releasing free
promotional “street albums” that were integral to his meteoric success. These mixtapes
enabled 50 to capture the attention of his market, sign a lucrative recording deal, tour the
world, and eventually release a hugely successful album that was his spring-board to
becoming one of the most successful moguls in the music industry. In essence, 50 Cent
created the promotional blueprint still followed by artists in this decade: use quality free
music releases to galvanize a fan base, tour, sign partnership deals, and (if signed)
encourage a label to invest in the marketing and sales budget required to release a
successful commercial album. Currently, copyright law fails to fairly protect the
freemium business strategy employed by many music copyright owners in the industry by
defaultly restricting the redistribution of these authorized promotional projects.57 By
examining the modern business practices of music copyright owners in light of “open-
source” and “freeware” software case law, the default position of reserving all rights in
freely released promotional works appears ineffective and drastically contrary to their
intent.
55 “Hustler Musik : XXL Presents The Top 20 Street Albums Of All Time” XXL Magazine (September
2006).
56 Gold & Platinum: Searchable Database. Recording Industry Association of America. Retrieved on
2011‐3‐27.
57 See Jensen, supra note 2, at 556.
Marvin Barksdale for Hydroshare, Inc. 10

11. f. Digital Age Case Law Involving the Online Redistribution of Freely
Released Copyrighted Material
Assuming that by allowing users access to copyrighted material released for free online
Hydroshare is engaged in direct copyright infringement, there are three available defenses
to these claims: an implied non-exclusive license for redistribution, equitable estoppel,
and fair use.
i. Implied License in Digital Copyright Law
Although an implied license is a valid defense to claims of copyright infringement, a
copyright owner is not required to expressly grant this permission.58 An implied license
can be found where the copyright holder engages in conduct “from which [the] other
[party] may properly infer that the owner consents to his use.”59 Consent to use the
copyright work need not be manifested verbally and may be inferred based on silence
where the copyright holder knows of the use and encourages it.60 This inferred
permission or lack of objection is equivalent to a nonexclusive license.61 However, this
implied nonexclusive license is revocable where no consideration has been given for the
license.62
In the 2006 case of Field v. Google, the plaintiff, an author named Blake Field, asserted a
claim for infringement against the popular Google search engine for “caching” his freely
distributed poems in their search engine, arguing these actions constituted unauthorized
copying and distribution of his work.63 The Google cache, a repository of web pages,
images, and other content, is assembled by GoogleBot, which locates, analyzes, and
catalogs web content in its searchable index.64 Consequently, when visitors type in a
search term, Google accesses its index using optimized algorithms and returns a
result set in a matter of milliseconds, allowing its users to quickly and effectively
find and preview the content they are searching for. Thus Google saves and utilizes
copyrighted material to help rights holders connect with their potential customers
and vice‐versa.
The Internet industry has developed a set of widely recognized and well‐published
industry standard protocols by which copyright owners can communicate with
search engines such as Google. The principal method for Web site owners is
through specific instructions in “meta‐tags” within the computer code (called
HTML) hat comprises a given page.65 When Googlebot visits a page, it reads through
58 See Effects Assocs., Inc. V. Cohen, 908 F. 2d 555, 558‐59 (9th Cir. 1990).
59 See, e.g., De Forest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241 (1927).
60 See Keane Dealer Servs., Inc. v. Harts, 968 F. Supp. 944, 947 (S.D.N.Y. 1997)
61 See I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996)
62 See Avtec Sys., Inc. v. Peiffer, 21 F.3d 568. 574 n. 12 (4th Cir. 1994)
63 Field v. Google Inc., 412 F. Supp. 2d 1106, 1107 (9th Cir 2006)
64 Id at 1108.
65 Id at 1113.
Marvin Barksdale for Hydroshare, Inc. 11

12. the code, following the instructions provided. i.e. whether to include it in Google’s
Web index cache or not. Website owners also can communicate with search engine
robots by placing a “robots.txt” file on their website, which can also contain text
informing he robot not to cache the site. Both the “no‐archive” meta‐tag and the
robot.txt file have been widely recognized industry standard for years.66
In Field v. Google, the Plaintiff conceded that despite not giving Google explicit
permission to save his copyrighted work, he was long aware of Google’s value added
services to both web site owners and its users, in providing “cached” links for web
pages.67 Furthermore, it was with this knowledge that he created a robot.txt file,
intentionally aiming to get his copyrighted works included in Google’s index and to
have Google provide “cached” links to the Web pages containing the works68. Thus
with knowledge of how Google would use the copyrighted works he placed on the
Internet, and with knowledge that he could prevent such use, Filed instead made a
conscious decision to permit it. Accordingly, the Court ruled that the Plaintiffs
conduct was reasonably interpreted as the grant of a license for Google for that use,
allowing Goggle’s implied license defense.
In the modern recording industry, releasing “freemium” albums has become a
prevalent promotional strategy. Due to the large number of acts that have had great
success through releasing free content online, both artists and labels are now forced
to embrace social, blog, and traditional outlets as viable marketing tools. Just as
Google provides a service that essentially acts as a filter for the wealth of
information available on the Internet, music blogs, influencers, and other websites
act as a filter for the wealth of music being released. Thus, just as Field understood
the benefit of being included in Google’s index and communicated his desire for his
copyrighted material to be “cached” by GoogleBot, accordingly artists and their
teams actively communicate with new and social media outlets, transferring
copyrighted works to the curators of these outlets to be redistributed to their users.
The Internet industry utilizes a set of widely recognized websites by which
copyright owners can make large media files accessible to others, called file‐hosting
services. These websites provide space on a server they own or lease that is
optimized for serving large files to multiple users. One‐click hosts provide artists
aiming to send files over the Internet a low cost, high quality alternative to email
and other services that are unable to meet their needs. Popularized by authors of
Shareware, Freeware, and other Free Software, file hosting services were created to
address the inherent bandwidth costs incurred from offering free downloads. Thus
an artist looking to send music to a website for dissemination would utilize a
hosting site, uploading the files to the host server and then emailing the link to the
intended recipient. Similarly, many artists utilize these links through their own
websites and mass emails to disseminate music to their fan clubs and other support
66 Id.
67 Id at 1114.
68 Id.
Marvin Barksdale for Hydroshare, Inc. 12

13. groups, as hosting sites themselves provide no index, discovery, or organizational
tools.
Since hosting service users do not have access to the site HTML code itself, Internet
industry hosting sites customarily offer options to either mark a file as private or to
individually password protect it. Thus if an artists is attempting to prevent mass
distribution, he can share a file internally so only individuals who log into an
account can access his music, or password protect a file so only those intended
recipients who possess the code have access. But, utilizing these protections to
prevent distribution are contrary to the “freemium” strategy of releasing
promotional projects, and therefore rarely utilized by recording artists. In order to
recoup value from the money spent to produce the music distributed through these
releases, artists look to fully utilize the culture of web 2.0, frequently encouraging
websites and fans alike to redistribute these viral gifts.
Similar to the Plaintiff in Field v. Google, modern recording artists, despite not giving
every blog and website explicit permission to redistribute their promotional
projects, are aware of and benefit from the services of websites like Hydroshare.
These online destinations are vital in acting as filter for the wealth of mixtapes and
promotional projects that are available on the Internet. It is with this knowledge
that copyright owners utilize one click hosting sites to send their free content to
intended recipients, saving the bandwidth costs associated with providing free
downloads to the public at large. By choosing not to employ any of the customary
privacy protections, artists make the conscious decision that this promotional
material be freely shared and redistributed on traditional, blog, and social media.
Thus with knowledge that Hydroshare and other music sites redistribute free
copyrighted works, and that they can easily prevent such uses, artists that promote
and release free promotional projects make a conscious decision to permit this
redistribution. Hydroshare provides its artist users with free a storage solution for
“mixtape” artwork, music, and video and through an implied revocable nonexclusive
license to host and redistribute other free projects, creates a repository for legal
promotional albums aiding potential customers connect with music rights holders
and vice‐versa.
ii. Estoppel in Digital Copyright Law
A plaintiff is estopped from asserting a claim for copyright infringement “if he has aided
the defendant in infringing or otherwise induced it to infringe or has committed cover
acts such as holding out… by silence or inaction.69 To prevail on an estoppel case a
defendant must prove the following four elements: 1. Plaintiff knew of Defendants
allegedly infringing conduct; 2. Plaintiff intended that Defended rely upon his conduct or
69 See Quinn v. City of Detroit, 23 F. Supp. 2d 741, 749 (E.D. Mich. 1998), 2d at 753 (internal quotation
marks omitted, citing 4 Nimmer § 13.07 (1990))
Marvin Barksdale for Hydroshare, Inc. 13

14. acted so that Defendant had a right to believe it was so intended; 3. Defendant was
ignorant of the true facts; and 4. Defendant detrimentally relied on Plaintiff’s conduct.70
In the previously discussed case of Field v. Google, the Court found that all Estoppel
elements were established as a matter of law. First, Field knew of Google’s allegedly
infringing conduct well before any supposed infringement of his works took place.71
Field conceded that he knew that Google would automatically allow access to his works
through “Cached” links when he posted them on the Internet unless he instructed
otherwise.72 Second, Field remained silent regarding his desire not to have “Cached”
links provided to his Web site, and he intended for Google to rely on this silence for his
own benefit.73 Third, Google was not aware that Field did not wish to have Google
provide “Cached” links to his works.74 Fourth and finally, Google’s reliance on
Field’s silence was to its detriment, because if Field communicated his preferences
to Google, the parties would have avoided the lawsuit entirely.75
Reviewing the modern practices of the digital music industry in light of the Field v.
Google holding, artists who promote and release promotional albums for free on the
Internet are estopped from asserting claims of copyright infringement against websites
that redistribute the copyrighted material. First and foremost, these fluid promotional
projects are released with the hope and intention that they will become viral sensations,
exposing the artist to new fans and propelling their career to new heights. In order to
achieve this goal, it has become fundamental that artists encourage new media outlets to
engage in what was historically considered ‘infringing’ activity i.e. posting links to and
redistributing the copyrighted materials. As hosting sites are by nature erratic, although
they have become the industry standard for transferring music files, artists who are
looking for mass free distribution often rely on music websites and fans to disseminate
and re-host their projects. Thus, because free file-hosting sites set limits on total
download numbers, cap the time that links remain active, and terminate links based on
unreliable infringement indicators, Hydroshare and other music sites are able to address
many of the storage concerns of the modern artist. In sum, artists who release their digital
music for free, knowingly and intentionally depend on legal free content destinations to
reliably store and disseminate their large music files, and therefore are estopped from
making claims against them for copyright infringement.
iii. Fair Use in Digital Copyright Law
In a 2003 paper sponsored by the US Library of Congress titled Copyright Issues
Relevant to the Creation of a Digital Archive, Besek concludes that although the law
70 See Carson v. Dynegy, Inc., 344 F.3d 446, 453 (5th Cir. 2003) (citing 4 Nimmer § 13.07 (2002))
71 Field at 1119.
72 Id.
73 Id.
74 Id.
75 Id.
Marvin Barksdale for Hydroshare, Inc. 14

15. contains no specific exceptions for copying, or “harvesting,” publicly available web
content its permissibility would likely depend on whether it qualified as fair use.
“Fair use” of a copyrighted work “is not an infringement of copyright” under the
Copyright Act.76 The fair use doctrine “creates a limited privilege in those other than the
owner of a copyright to use the copyrighted material in a reasonable manner without the
owner’s consent,” 77 and “permits courts to avoid rigid application of the copyright
statute when, on occasion, it would stifle the very creativity which that law is designed to
foster.”78
In analyzing whether a particular use qualifies as a “fair use,” the Copyright Act directs a
Court to analyze at least four factors: 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.79 The Court must “balance these
factors in light of the objectives of copyright law, rather than view them as definitive or
determinative tests.”80 While no one factor is dispositive, courts traditionally have given
the most weight to the first and fourth factors. 81
Once again drawing upon the holdings of the Court in Field v. Google, based on a
balancing of the relevant fair use factors, Hydroshare, by copying and distributing the
copyrighted works of artists, who have made them publicly available on the web, is
engaged in a “fair use of those copyrighted works.
1. Factor One: Purpose and Character of the Use
a. Hydroshare Serves the Purpose of the Releasing
Artist/Copyright Owner, Safely and Reliably
Releasing the Original Works to the Public
According to the United States Supreme Court, the fair use analysis largely turns on one
question: whether the new [use] merely “supersedes the objects” of the original creation .
. . or instead adds something new, with a further purpose or different character, altering
the first with new expression, meaning, or message; it asks, in other words, whether and
to what extent the new work is “transformative” . . . Although such transformative use is
76 17 U.S.C. § 107.
77 Fisher v. Dees, 794 F.2d 432, 435 (9th Cir. 1986).
78 Dr. Seuss Enters., L.P. v. Penguin Books USA Inc., 109 F.3d 1394, 1399 (9th Cir. 1997).
79 17 U.S.C. § 107.
80 See Kelly v. Arriba Soft Corp., 336 F.3d 811, 818 (9th Cir. 2003.
81 Compare Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (focusing primarily on first
factor and whether use is transformative) and Leibovitz v. Paramount Pictures Corp., 137 F.3d 109, 114-15
(2d Cir. 1998) (affirming summary judgment of fair use for parody based primarily on the first fair use
factor) with Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985) (“[The fourth]
factor is undoubtedly the single most important element of fair use.”).
Marvin Barksdale for Hydroshare, Inc. 15

16. not absolutely necessary for a finding of fair use, . . . the goal of copyright, to promote
science and the arts, is generally furthered by the creation of transformative works. 82
In the seminal case of Kelly v. Arriba Soft Corp.83, the Ninth Circuit determined that a
search engine’s use of copyrighted photographs was a transformative fair use based on
the fact that the search engine used the photographs in question to “improv[e] access to
information on the internet” while the original function of the work in question was
artistic.84 Assuming that modern recording artists intend to release their copyrighted
works to serve an artistic function as well, Hydroshare’s cataloging and redistribution of
the freely distributed copyrighted works at issue here, also does not supersede the
originals.
As previously discussed, the industry standard for both mass and private distribution of
music files is through free-one click hosting sites; the largest being Germany’s
RapidShare and Megaupload based in Hong Kong.85 But although these companies view
themselves as “dual-use tool[s] providing connectivity between users and storage
capacity,86” both the MPAA and RIAA have categorized them as rouge websites. In May
2010 the United States Congressional International Anti‐Piracy Caucus and heads of
the Recording Industry Association of America and Motion Picture Association of
America listed these one‐click hosts in a Piracy Watch List containing the a list of
Top Priority Countries and websites that they believe “undermine the ability of
legitimate services to compete and thrive in the global marketplace…”87 Rapidshare
was also listed in an official RIAA response a request from the Office of the US Trade
Representative in November 2010 as inducing its users to infringe on the copyrights
on others88, a stance that was reinforced by the January 2011 study by
MarkMonitor, asserting that file‐hosting services have overtaken BitTorrent and
traditional file‐sharing as the top sites for downloading pirated content89.
By categorizing file hosting services as rouge havens of piracy, both the RIAA and
MPAA are ignoring the holdings in the United States District Court case of Perfect 10
v. Rapidshare90 as well as the rights and needs of modern worldwide copyright
holders. In Perfect 10, the Court utilized Rapidshare’s testimony that it provides
users with unindexed data storage, which presents businesses with an economical
82 See Campbell, 510 U.S. at 579
83 See Kelly.
84 Id at 819.
85 Demetris Antoniades, Evangelos P. Markatos, Constantine Dovrolis, One­Click Hosting Services: A
File­Sharing Hideout, Internet Measurement Conference 2009, 2, November 5, 2009.
86 “MegaUpload Fights Back Against MPAA and RIAA Propaganda” TorrentFreak 13 January 2011,
http://torrentfreak.com/megaupload‐fights‐back‐against‐mpaa‐and‐riaa‐propaganda‐110113.
87 Jared Moya “Congress’ Anti‐Piracy Caucus Unveils List of World’s Most ‘Notorious’ Sites” Zero Paid
News 19 May 2010, http://www.zeropaid.com/news/89178/congress‐anti‐piracy‐caucus‐unveils‐
list‐of‐worlds‐most‐notorious‐sites (Citing “2010 Watch List” Congressional International Anti‐Piracy
Caucus, May 19, 2010)
88 Id.
89 Id.
90 Perfect 10 v. Rapidshare (SDCA 09 CV 2596) May 18, 2010.
Marvin Barksdale for Hydroshare, Inc. 16

17. alternative to buying and maintaining their own storage related hardware, to strike
down the Plaintiffs claims of inducement of copyright infringement. This testimony,
including evidence that the German edition of PC World magazine has twice used
Rapidshare to legally host free anti‐virus software for its readers, speaks directly to
the importance and transformative nature of Hydroshare’s use of copyrighted
materials. Although artist and fan reliance on free storage sites to cheaply
disseminate music to wide audiences has propelled one‐click hosting sites to the
forefront of its war on piracy, US Courts have recognized the legality, importance,
and utility of these services.91 In the modern recording industry artists rely on the
viral distribution and redistribution of their copyrighted material to further their
careers, yet are forced to rely on what the RIAA has deemed “havens for piracy” for
economical storage and distribution services.
While one‐click hosting serves allow thousands of artists and users to upload files in
return for a link they can either forward to others or publish on their website, their
unreliable, unindexed, and illegitimate nature, present Hydroshare an opportunity
to significantly improve access to information on the internet. In acting as a storage
depot and index for copyrighted material legally released on the web with the intention
that it spread virally, there are several reasons Hydroshare’s redistribution qualifies as a
transformative use. First, by storing and redistributing promotional projects publicly
released through one-click hosting sites, Hydroshare provides copyright owners with
dependable distribution that better addresses their needs through multimedia streaming
and analytic capabilities and the needs of their fans by enabling access when the original
upload becomes inaccessible. Second, by indexing virally released promotional projects
currently residing on hosting sites, Hydroshare provides artists and fans a legal
alternative to illegal destinations for copyrighted music. Third, Hydroshare utilizes
several design features to make it clear that it doesn’t intend for its redistributed viral
projects to serve as substitute for commercial releases, including a native opportunity for
users to purchase commercial singles and albums from a given artist. Furthermore,
analogous to Google v. Field, the fact that thousands of copyright owners chose to permit
websites to redistribute their viral releases through externally hosted links and hardware
is further evidence that they do not consider Hydroshare’s redistribution as a substitute
for their own links.92
Because Hydroshare serves different and socially important purposes in offering access
to copyrighted works and encouraging instead of superseding the objectives of the
original creators, Hydroshare’s redistribution of promotional releases of recording artists
falls into the category of transformative.
b. Hydroshare’s Status as a Commercial Enterprise
Does Not Negate Fair Use
When a use is found to be transformative, the “commercial” nature of the use is of less
91 Atari Europe S.A.S.U. v. Rapidshare, OLG Düsseldorf, Ref I‐20 U 59/10 (2010); Capelight Pictures v.
Rapidshare Ref. I‐20 U 166/09; I‐20 U 8/10 (2010); Viacom International, Inc. v. YouTube, Inc., No. 07
Civ. 2103 (2010);
92 Field at 1120
Marvin Barksdale for Hydroshare, Inc. 17

18. importance in analyzing the first fair use factor. 93 Once again drawing from Field v.
Google, while Google is a for-profit corporation, the Court ruled that the fact that Google
is a commercial operation is of only minor relevance to the fair use analysis, noting that
the transformative purpose of Google’s to be considerably more important. Hydroshare,
like Google, aims to aid users in indexing the large amount of content currently being
distributed using the web and use of copyrighted material is serves both the copyright
owner and online community at large.
2. Factor Two: The Nature of the Copyrighted Works
The second fair use factor looks to the nature of the plaintiff’s work. When dealing with
transformative uses, this factor has been described as “not . . . terribly significant in the
overall fair use balancing” 94 and “not much help”95 by several courts. In Kelly, the Court
ruled that this factor weighed slightly in favor of the plaintiff where the copyrighted
photographs at issue were “creative.” However many Courts, including Kelly and Field,
have also noted that copyrighted material intended for public dissemination weighs in the
favor of a fair use.96
Even assuming the copyrighted works at issue are as creative as the works at issue in
Kelly, analogous to Kelly, these recording artists publish their works on the Internet, here
distributing them to the world for free through one-click hosting links premiering on their
Web sites. Moreover, artists send out marketing “blasts” to ensure that music sites
redistribute their new releases, similar to Field, where the Court held that the Plaintiff’s
public intentions for the work balance the creative nature of the work in finding in favor
of fair use.
3. Factor Three: The Amount and Substantiality of the Use
The third fair use factor looks at the amount of the work used. The Supreme Court has
made clear that even copying of entire works should not weigh against a fair use finding
where the new use serves a different function from the original, and the original work can
be viewed by anyone free of charge:
“[W]hen one considers the nature of a televised copyrighted audiovisual
work . . .and that timeshifting merely enables a viewer to see such a work
which he had been invited to witness in its entirety free of charge, the fact
that the entire work is reproduced. . . does not have its ordinary effect of
93 See Campbell, 510 U.S. at 579 and Kelly, 336 F.3 at 818 ((“[Transformative] works thus lie at the heart
of the fair use doctrine’s guarantee of breathing space within the confines of copyright, . . . and the more
transformative the new work, the less will be the significance of other factors, like commercialism, that
may weigh against a finding of fair use.”).
94 See Mattel Inc. v. Walking Mountains Prods., 353 F.3d 792, 803 (9th Cir.12003))
95 See Campbell, 510 U.S. at 586)
96 See Kelly, 336 F.3d at 820; See also Diamond v. Am-Law Publ’g Corp., 745 F.2d 142 (2d Cir. 1984)
(finding fair use for a letter to the editor that was published in a modified form); Salinger v. Random
House, Inc., 811 F.2d1790, 95 (2d Cir. 1987) (describing Diamond as “applying fair use to a letter to the
editor of a newspaper, which, though not previously printed, was obviously intended for dissemination”);
Field, (finding fair use in caching creative works disseminated for free on the internet
Marvin Barksdale for Hydroshare, Inc. 18

19. militating against a finding of fair use.”97
Similarly, the Ninth Circuit has held that “the extent of permissible copying varies with
the purpose and character of the use” and that “[i]f the secondary user only copies as
much as is necessary for his or her intended use, then this factor will not weigh against
him or her.”98 The Ninth Circuit in Kelly thus concluded that the search engine’s use of
entire photographs was of no significance:
“This factor neither weighs for nor against either party because, although
Arriba did copy each of Kelly’s images as a whole, it was reasonable to do
so in light of Arriba’s use of the images. It was necessary for Arriba to
copy the entire image to allow users to recognize the image and decide
whether to pursue more information about the image or the originating
web site. If Arriba only copied part of the image, it would be more
difficult to identify it, thereby reducing the usefulness of the visual search
engine.”99
Similar to the broadcasters in Sony, the photographer in Kelly, and the writer in Field the
promotional music at issue for Hydroshare is released online and available to anyone,
free of charge. Also like the fair uses in Sony, Kelly, and Field the use of entire work
serves multiple transformative and socially valuable purposes, which could not be
effectively accomplished by using only portions of the work. Without allowing access to
the whole of the project, Hydroshare cannot assist Web users and content owners by
offering access to music releases that are otherwise unavailable. Because Hydroshare
uses no more of the works than is necessary in redistribution, the third fair use factor is
neutral, despite the fact that Hydroshare allows access to the entirety of the recording
artists’ works. 100
4. Factor Four: The Effect of the Use upon the Potential
Market for or Value of the Copyrighted Work
The fourth fair use factor considers the effect of the defendant’s use upon the potential
market for the plaintiff’s work: “[A] use that has no demonstrable effect upon the
potential market for, or the value of, the copyrighted work need not be prohibited in order
to protect the author’s incentive to create.”101
The redistributed works on the Hydroshare cloud servers, much like the copyrighted
books in the Google “cache” in the Field case, were initially made freely available to the
public for free and thus similarly there is no potential market for the work. Although
Field contended that Google’s caching harmed the market for his works by depriving him
of potential revenue, the Court held this reasoning to be outside of the scope of the fourth
97 See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 449-50 (1984) (emphasis added) (affirming
as a fair use the “timeshifting” of entire television shows).
98 See Kelly, 336 F.3d at 820‐21.
99 See Id.; see also Mattel, 353 F.3d at 803 n.8 (holding that “entire verbatim reproductions are
justifiable where the purpose of the work differs from the original”).
100 See Sony 464 U.S. at 448; See Kelly, 336 F.2d at 4821. See Field.
101 Sony, 464 U.S. at 450.
Marvin Barksdale for Hydroshare, Inc. 19

20. fair use factor. The Supreme Court has explained that the fourth fair use factor only
considers the impact on markets “that creators of the original works would in general
develop or license others to develop.”102 Thus where there is no likely market for the
challenged use of the plaintiff’s works, the fourth use factor favors the defendant. 103
As previously discussed, in the current music industry hundreds of artists every year look
to release free promotional music projects under what those in digital marketing have
deemed the freemium model. Although these releases help artists set the stage for
upcoming commercial releases, book touring engagements, and sign new deals, for the
most part these artists release these projects for free, looking not to violate any exclusive
recording agreements but also to subsidize the work through viral success. But, despite
freemium’s great potential in our new digital society, the new mixtape model hasn’t been
a widespread success for all artists. Even in the case of widely successful projects,
monetization of free music has proven to be a difficult proposition. It is Hydroshare’s
position that the difficulties in creating a viable “market” for promotional music projects
is due to the limitations of current “mixtape” distribution destinations. One click-hosting
sites, although fast and free, are havens for piracy, employ erratic file termination
policies, dictate advertising, and lack index and search capabilities and mixtape
sites/blogs can’t handle the storage requirements for reliable distribution, don’t track
consumption analytics, and curate music content without legal integrity (i.e. hosting both
unlicensed DJ mixtapes and legal artist authorized free releases). Hydroshare, through its
use of copyrighted free material, addresses these unresolved needs of the modern
recording artist.
By indexing and redistributing authorized promotional projects Hydroshare is
increasing the value of the copyrighted work and bolstering the potential market for the
new industry definition of “mixtape.” First and foremost, indexing these projects with
similar authorized high quality releases gives new credibility and clarity to a segment of
content that suffers from an unfair illegal stigma. Second, through redistributing these
projects and allowing users to stream the associated video, cover image, and music files
at the point of download, Hydroshare enables fans to consume “mixtapes” as the artist
intended: raising consumer perception and project value. Third, by providing project
content owners with robust analytics on consumer behavior, Hydroshare allows artists to
better quantity their viral success, giving them concrete tools for touring and other
negotiations. Fourth, by enabling sponsors to target advertising by user characteristics
and by individual releases, Hydroshare makes it easier for artists to subsidize their free
releases through sharing in the advertising revenue generated by their content.
Because, there is no evidence that Hydsoshare’s use had any impacton the potential
market for the work, and as Hydroshare’s redistribution has a positive impact on the non-
existent market for authorized promotional music releases the fourth factor weighs
strongly in favor of a fair use determination.104
5. Additional Factor: Hydroshare’s Good Faith in
102 See Campbell, 510 US at 592.
103 See Mattel, 353 F.3d at 806.
104 See Kelly, 336 F.3d at 821‐22.
Marvin Barksdale for Hydroshare, Inc. 20

21. Redistributing Promotional Music Releases Weighs In
Favor of Fair Use
The Copyright Act authorizes courts to consider other factors than the four non-exclusive
factors discussed above.105 In particular, the Ninth Circuit has stated that courts may
evaluate whether an alleged copyright infringer has acted in good faith as part of a fair
use inquiry.106 The fact that Hydroshare acts in good faith in only redistributing projects
that were authorized and intended to be released virally lends additional support for a
finding of fair use.
Hydroshare’s fundamental mission is to help artists maximize the value in releasing free
albums, so it only redistributes projects that were clearly released in that manner.
Hydroshare honors industry-standard protocols that artists use in communicating their
release wishes to the world at large, including direct communication, social media, and
press releases. Hydroshare also provides instructions on deploying industry standard
instructions (including the Creative Commons License107) as well as an automatic
mechanism for removing redistributed projects from their cloud servers. Moreover,
Hydroshare has established an automated mechanism that searches for retail songs and
albums from the project’s author, presenting an opportunity to make a commercial
purchase while downloading or streaming the promotional work.
Comparing the activities of the Plaintiff in Field to that of the common recording
artist releasing and promoting the availability of free music for sharing and redistribution
provides further weight in favor of a finding of fair use. In Field, the Court balanced
Google’s “caching” activities with Field’s affirmative steps to include his work in
Google’s search results and ignore the protocols that would have instructed Google not
do so. Deliberate conduct by the Plaintiff is often weighed against Defendant’s good faith
use of the work in findings of fair use.108
In summary, the first fair use factor weighs in Hydroshare’s favor because indexing
and redistributing promotional copies of work intended to be mass distributed is a
transformative use, encouraging the purpose of the work instead of superseding it. The
second factor is neutral, use because although creative in nature, recording artists make
these works available in their entirety for free to the widest possible audience. The third
fair use factor is also neutral, as Hydroshare uses no more of the copyrighted works than
was necessary to serve its transformative purposes. The fourth fair use factor cuts
strongly in favor of fair use in the absence of any evidence of an impact on the current
105 See 17 U.S.C. § 107
106 See Fisher, 794 F.2d at 436‐37 (“Because ‘fair use presupposes “good faith” and “fair dealing,”’
courts may weigh the ‘propriety of the defendant’s conduct’ in the equitable balance of a fair use
determination.)
107 Creative Commons copyright licenses and tools forge a balance inside the traditional “all rights
reserved” setting that copyright law creates. These tools give creators a simple, standardized way to
retain copyright while allowing others to copy, distribute, and make some uses of their work, but
non‐commercially. http://creativecommons.org/licenses/
108 See Campbell, 510 U.S. at 585 n.18; Bill Graham Archives LLC v. Dorling Kindersley Ltd., 75
U.S.P.Q.2d 1192, 1199‐1200 (S.D.N.Y. May 11, 2005) (granting summary judgment of fair use based in
part on defendant’s good faith).
Marvin Barksdale for Hydroshare, Inc. 21

22. market for copyrighted promotional releases and Hydroshare’s premeditated development
of a “mixtape market”. A fifth factor, comparison of the equities, likewise favors fair
use in the case of an artist who has deliberately ignored the mechanisms that would
prevent websites like Hydroshare from redistributing their works. A balance of all these
factors demonstrates that if Hydroshare indexes and redistributes the copyrighted
authorized promotional digital releases of recording artists, Hydroshare’s conduct is a fair
use of those works.
II. Section 512 of the DMCA, 17 U.S.C. § 512, the "safe­harbor" provisions,
shield online service providers, such as hosting service providers and
website operators, from copyright infringement claims made against
them based on the conduct of their customers or users.
a. Definition of Copyright Infringement
Two main pieces of U.S. legislation outline the permissible use of an auditory work:
the Copyright Act of 1976 (Copyright Act)109 and the Digital Millennium Copyright
Act of 1998 (DMCA).110 The Copyright Act protects the rights of original copyright
holders in “musical works” and “sound recordings,” in addition to “literary works”
and “motion pictures.” Sections 106 through 122 of the Copyright Act grants
copyright holders many rights, including the “exclusive right” to reproduce their
work “in copies or phonorecords,” to “prepare derivative works,” to sell, rent, lease,
or lend copies or phonorecords of their work, and to perform or display their work
in public.111 The Copyright Act renders violations of Sections 106 through 122
illegal and copyright infringers will be subject to applicable civil and criminal
penalties. Under the Copyright Act, however, there are limited circumstances where
an individual is immune from liability.112
One of the most pervasive copyright infringement problems in the United States is
the development of sophisticated technology that allows individuals to copy or
reproduce auditory works. The most well known reproductive method is the MPEG
Audio Layer 3 (mp3), a form of “audio compression technology” that “compresses
CD‐quality sound . . . while retaining most of the original fidelity.”
In the Copyright Act, Congress anticipated this use of innovative reproduction
technology when it defined “copies” to include “material objects, other than
phonorecords, in which a work is fixed by any method now known or later
developed” and methods of “perceiv[ing], reproduc[ing], or otherwise
communicat[ing], achieved either directly or with the aid of a machine or device.”113
109 See generally 17 U.S.C. § 101 (2006).
110 See generally H.R. 2281, 105th Cong. (1998)
111 17 U.S.C. § 102(a).
112
See generally Id. §§ 107-112, 117, 119, 121-12248
Id. § 107.
113
17. U.S.C. § 101
Marvin Barksdale for Hydroshare, Inc. 22

23. In the 2009 case between UMG Recording, the largest recording company in the
world, and Veoh Networks, Inc., a video hosting platform backed Michael Eisner and
raising money from Time Warner and Goldman Sachs, UMG sued the defendant for
direct, contributory, and vicarious copyright infringement, and for inducement of
copyright infringement. Like several defendant companies that have developed
software as a means for democratizing the distribution of user‐generated content in
recent years, Veoh agreed with the plaintiff’s assertions that users of Veoh's service
have been able to download videos containing songs for which UMG owns the
copyright, and that Veoh did not obtain UMG's authorization to make those works
available.114 But, in a move that normally frames the substance of current hosting
site infringement litigation, Veoh asserted an affirmative defense under the Digital
Millennium Copyright Act's (“DMCA”) “safe harbor” provisions.
b. DMCA Safe Harbor Provisions for File Hosting Sites
The creation of the DMCA was in response to the growing popularity of the internet,
coupled with reservations of copyright holders who were reluctant to make their
work available on the internet and ISPs who were fearful of liability that could result
from the misuse of the services they provide. In passing the DMCA, Congress sought
to achieve a compromise between the concerns shared by copyright holders and
ISPs. It amended the Copyright Act to (1) include greater civil and criminal
penalties for copyright infringement; (2) addresses technical measures that prevent
unauthorized access to and/or copying of a copyrighted work; and (3) protect
Internet innovation.
In regards to protecting innovation, Congress found that millions of American
Internet users depend on one or more technological intermediaries to transmit or
host information in both their business and personal lives. These intermediaries
include ISPs, mobile telecommunications providers, website hosting companies,
online service providers (such as blog platforms, email service providers, social
networking websites, and video, photo, and music hosting sites), Internet search
engines, and e‐commerce platforms. They provide valuable forums for commerce,
personal expression, community building, political activity, and the diffusion of
knowledge.
The openness of the Internet also means that some individuals will use these online
service providers (i.e. hosting sites) to transmit or post content that is unlawful or
otherwise offensive. Clearly, anyone who creates illegal content should be subject to
penalties provided by criminal or civil law. However, there is a temptation in many
countries to try to control objectionable content by punishing not only the creators
of content but also the intermediaries who transmit or host it. This is known as
“intermediary liability.” It arises where governments (or private individuals through
lawsuits) can hold technological intermediaries such as ISPs and websites
114
UMG Recordings Inc. v. Veoh Networks, Inc. ,665 F. Supp. 2d 1099, 1111 (C. D. Cal. 2009)
Marvin Barksdale for Hydroshare, Inc. 23

24. responsible for unlawful or harmful content created by their users and other third
parties.
In response, Title II of the DMCA adds a new section 512 to the Copyright Act to
create four new limitations on liability for copyright infringement by online service
providers. The limitations are based on the following four categories of conduct by a
service provider: (1) transitory communications; (2) system caching; (3) storage of
information on systems or networks at direction of users; and (4) information
location tools.
i. Eligibility for DMCA Service Provider Liability Limitations
To be eligible for any of the limitations, a service provider must meet two overall
conditions: (1) it must adopt and reasonably implement a policy of terminating in
appropriate circumstances the accounts of subscribers who are repeat infringers;
and (2) it must accommodate and not interfere with “standard technical measures.”
(Section 512(i)). “Standard technical measures” are defined as measures that
copyright owners use to identify or protect copyrighted works, that have been
developed pursuant to a broad consensus of copyright owners and service
providers in an open, fair and voluntary multi‐industry process, are available to
anyone on reasonable nondiscriminatory terms, and do not impose substantial costs
or burdens on service providers. In response, the Hydroshare staff implements a
strict submission and termination policy, only accepting content from the accounts
of verified rights owners and content creators, as well as terminating the media
flagged as infringing on the rights of others.
As each limitation relates to a separate and distinct function, and a determination of
whether a service provider qualifies for one of the limitations does not bear upon a
determination of whether the provider qualifies for any of the other three115,
Hydroshare’s online activities fall into three possible categories: (1) transitory
communications; (2) system caching; and (3) storage of information on systems or
networks at direction of users.
i. Safe Harbor Limitation for Transitory Communications
In general terms, section 512(a) limits the liability of service providers in
circumstances where the provider merely acts as a data conduit, transmitting digital
information from one point on a network to another at someone else’s request. This
limitation covers acts of transmission, routing, or providing connections for the
information, as well as the intermediate and transient copies that are made
automatically in the operation of a network. In order to qualify for this limitation,
the service provider’s activities must meet the following conditions: (1) the
transmission must be initiated by a person other than the provider; (2) the
transmission, routing, provision of connections, or copying must be carried out by
an automatic technical process without selection of material by the service provider;
115 Section 512(n).
Marvin Barksdale for Hydroshare, Inc. 24