GrayZone – Quarterly Digest – April 2010

Headline News | Artists’ Corner | Busts | Worldwide Update | Legal Beagle

Headline News


A federal appeals court has ruled that record labels have the right to demand that ISPs (Internet service providers) hand over the identities of individuals illegally downloading copyrighted music.

On May 3, 2010, a three-judge panel in the US Court of Appeals for the Second Circuit found that a group of record labels’ right to enforce their copyrights superseded an Internet user’s right to remain anonymous. The anonymous defendant “Doe 3” argued on appeal that the allegations in the complaint were not sufficient to overcome his First Amendment right of anonymity. The panel found “no merit in Doe 3’s contentions.”

Arista Records LLC, Sony BMG Music Entertainment, Virgin Records America Inc., Warner Bros. Records Inc. and other major labels filed the original suit in 2008, alleging that 16 individuals known only by their IP (Internet Protocol) addresses had infringed their copyrights. The anonymous defendants downloaded or distributed to the public various music recordings via online file-sharing networks. The labels sought damages and an injunction against further infringement. They also sought authorization to serve a subpoena on the defendants’ ISP, the State University of New York at Albany, in an effort to identify the defendants.

Doe 3 moved to quash the subpoena, saying the First Amendment affords a qualified right to use the Internet anonymously. A magistrate judge denied the motion to quash, and the district judge then rejected Doe 3’s contentions to the contrary as well. According to the ruling, the judges saw “no abuse of discretion in the refusal to quash the subpoena. The First Amendment does not provide a license for copyright infringement.”

“Given the factual detail in the complaint and its exhibit, plaintiffs’ pleading plainly states copyright infringement claims that are plausible,” the panel ruled.

Jennifer Pariser, Senior Vice President of litigation and legal affairs at the RIAA (Recording Industry Association of America) commented on the decision:

“We’re pleased that this decision reaffirms what we’ve known all along: Our process is sound and arguments to the contrary – especially the use of the First Amendment defense to sanitize blatantly illegal activity – have no merit.”

Law 360, May 3, 2010 (Christopher Norton)
Read the Decision: Click Here

Artists’ Corner

JAY-Z Sues David Ortiz for Infringement

Rap mogul JAY-Z has sued Boston Red Sox star David Ortiz for infringing on the name and reputation of his star-studded sports lounge, the 40/40 Club.

The suit, filed on April 15, 2010 in Manhattan Federal Court, claims Ortiz aka “Big Papi” visited the sleek hotspot in the Flatiron District of NYC and liked it so much, he stole the idea for a club of his own. After enjoying his time at the club, Boston’s designated hitter then opened the “Forty-Forty” club in his native Dominican Republic, the $5 million suit claimed.

According to the suit, Ortiz’s use of “Forty-Forty” to name the nightclub in the Dominican Republic violates the Lanham Act, the Trademark Dilution Act, the Anti-Cybersquatting Consumer Protection Act, and various New York state laws. The case was filed by The Name, LLC, a Delaware company that owns the 40/40 trademark, against Ortiz and his company, D. Ortiz C. por A, an entity organized under the laws of the Dominican Republic.

“David Ortiz was at the club at least twice, and certainly knew of it,” according to Jay-Z’s attorney, Peter Raymond, of the firm Reed Smith LLP. Ortiz stopped into the West 25th Street, New York hangout when the Red Sox were in town to play the Yankees and was there during an All-Star Game celebration. Photos of Ortiz enjoying himself at the real 40/40 Club were also submitted.

Attorneys for Jay-Z claim that the website for David Ortiz’s copycat club also “blatantly trades on the goodwill and fame” Jay-Z and his partners have built.

Entertainment Litigation, April 18, 2010 (Hank Fasthoff)
NY Daily News, April 15, 2010 (Alison Gendar)

LIL WAYNE Sued Over ‘Lollipop’

Hip hop star LIL WAYNE is facing legal action over his song “Lollipop.” A little-known Pennsylvania-based rapper, Dirahn Gilliams, claims he should have been credited for writing portions of the hit.

According to the lawsuit filed on April 30, 2010, Gilliams is convinced his track “Grindin’ Like a Goon” was the inspiration for Lil Wayne’s Grammy-winning single. Gilliams’ track was allegedly distributed to record industry executives in 2007.

Gilliams has named Lil Wayne, writer Rez Zamor and producers Darius ‘Deezle’ Harrison and Jim Jonsin in the suit, alleging they illegally used parts of his song for “Lollipop.” Gilliams is demanding an injunction to block further sales of “Lollipop” and “Tha Carter III”, the album it appears on. Gilliams is also seeking monetary damages and lost profits.

The suit comes just a month after Jonsin took legal action against Lil Wayne, alleging he has yet to receive any royalty payments for his work on “Lollipop.” Meanwhile Harrison has also filed a multi-million dollar lawsuit over royalties from Lil Wayne’s track, “Mrs. Officer.”, May 3, 2010

U.S. Busts

2 Q 2010 (Second Quarter) BUSTS

US Breaks Up Asian Smuggling Ring

On March 19, 2010, US authorities brought charges against nine people for running a vast smuggling ring responsible for thousands of counterfeit shoes and handbags from China and Malaysia.

A federal grand jury in Baltimore indicted four Chinese nationals, two Malaysians and three naturalized Americans. Together they face more than 1,000 years in prison and millions of dollars in penalties. For nearly two years, the suspects sent 33 shipments of counterfeit goods, mostly made in China and Malaysia, to the port of Baltimore until December 2009. The goods included 120,000 pairs of counterfeit Nike shoes, 500,000 fake Coach handbags, 10,000 pairs of counterfeit Coach and Gucci shoes and 500 counterfeit Cartier wristwatches, the indictment said.

“Criminal organizations that smuggle and sell counterfeit goods in the United States endanger our economy and rob legitimate industries of their business,” said John Morton, assistant secretary of US Immigration and Customs Enforcement.

The prosecutors alleged that the suspects also laundered $122,943.50 for the illegal operations and said that London authorities had also confiscated 350,000 pounds ($530,000 dollars) in cash. During the operation, one of the suspects sent a sample of fake Viagra pills to an undercover agent, hoping to branch out into sales of the erectile dysfunction drug. The suspects were charged with 72 counts of smuggling, trafficking in counterfeit goods, conspiracy and money laundering.

If convicted on all counts, they together face 1,095 years in prison and $66 million in penalties. The defendants were identified as Malaysian nationals Wai Hong Yong and Eng Cheng Kee, Chinese nationals Hexing Yang, Chan Hong Xu, Lidan Zhang, Kai T. Jaing and US citizens Josephine O. Zhou, Kin Yip Ng and Yenn-Kun Hsieh.

The suspects were arrested across the eastern United States and the Pacific territory of Guam and were brought to Baltimore according to US officials.

Yahoo! News, March 19, 2010 (Associated Press)

Operation Faux Bowl: The ICE Super Bust

A month-long operation executed by federal and local law enforcement authorities in South Florida resulted in the seizure of 8,165 items of counterfeit Super Bowl-related memorabilia and other counterfeit items. The confiscated merchandise was valued at more than $400,000, according to ICE (US Immigration and Customs Enforcement).

The NFL (National Football League) cooperated with law enforcement in an operation dubbed Operation Faux Bowl, which started before the Miami-based Pro and Super Bowls in January 2010 and yielded six arrests.

“Two major games in the same week, in the same city, was a strong magnet for criminals who steal trademarks and knock off trusted brands to sell their substandard wares,” said John Morton, assistant secretary of Homeland Security for Immigration and Customs Enforcement. “ICE made a major dent in these criminals’ plans to profit from fan enthusiasm. We struck a blow for the consumers, the businesses and the American workers who are hurt by this kind of crime.”

Most of the seized items were knockoffs of allegedly official NFL merchandise. Special agents seized counterfeit merchandise in Miami Beach, Miami Gardens, Pompano Beach, Fort Lauderdale, Hollywood, Boca Raton and other south Florida cities.

NBC Sports, February 18, 2010 (Mike Florio)

Worldwide Piracy Update

Australia | Italy | India | JapanMexico | Zambia

The Numbers Don’t Lie: Piracy Still a Global Problem

On April 28, 2010, IFPI (International Federation of the Phonographic Industry) published its Recording Industry in Numbers report to provide a “comprehensive picture of key trends of today’s music business.”

The trade group’s report shows that physical sales were down 12.7% on a global scale to $11.93 billion, a smaller decline than the 15% slump in physical sales for 2008. Trade revenue for global recorded music market totaled $17.03 billion in 2009, a year-over-year decline of 7.2%, according to IFPI.

According to the report, 80% of the global decline in sales occurred in the US and Japan, the two most technology-driven countries in the world, where the transition from physical media has been the most pronounced. In the US alone, digital sales account for nearly half (43%) of the recorded music market. Music sales in Japan were off 10.8% in 2009 to $4.05 billion, and sales in the US slipped 10.7% to $4.63 billion.

However, sales of recorded music were up in 13 markets, while six countries experienced growth in digital sales that was strong enough to offset the physical decline. The six countries were Australia, India, Mexico, South Korea, Thailand and the UK. The total global digital revenue jumped 9.2% to $4.31 billion. Digital music now accounts for 25.3% of all music sales.

Europe was the second-fastest growing region for digital sales in 2009, up by 29.7%, but the region’s digital share of revenue is still below the global average of 13%. The best digital growth was in Australia/New Zealand at 41.4%.

The UK remains the third-largest market, up 1.9% to $1.57 billion. Germany was down 3% to $1.53 billion to put it at number 4. Physical sales there represent 85% of that market, and in dollar terms, IFPI estimates the German music retail market is worth $2.148 billion, just $5 million less than the UK. Following the passage of anti-piracy measures in France, that market stabilized: it slid 2.7% for a total of $947.7 million. The real horror stories in 2009 were Spain (down 14.3%) and Italy (down 17.4%).

Performance rights income rose 7.6% for a worldwide total of $785 million. On a retail basis, IFPI estimates that the global recorded music market was worth $25.44 billion in 2009. SUSAN BOYLE’s “I Dreamed a Dream” was the world’s biggest-selling album last year with sales of 8.3 million.

IFPI chairman and CEO John Kennedy commented that the global music business is continuing to do its part, “investing in talent and developing new business models despite the problems of a market rigged by piracy.” He added, “reducing piracy is critical if these improvements are going to translate into long-term recovery for our global business.”

IFPI press release, April 28, 2010

The Hollywood Reporter, April 28, 2010, April 29, 2010 (Jared Moya)


Game On: Nintendo Battles Piracy

Nintendo has settled a Federal Court lawsuit against an Australian gamer who illegally copied and uploaded to the Web New Super Mario Bros. Wii for the Wii™ console, the company’s hotly-anticipated video game. The file that contained the sought-after game was made available worldwide for unauthorized download on November 6, 2009. This was a week before its official Australian release.

Nintendo reports that legal proceedings began to protect game developers’ innovation and creative rights, as well as to fight the growing global challenge of internet piracy. Australian law states that to copy and distribute games without the copyright holder’s permission is a violation of the Copyright Act. The lawsuit resulted in a settlement whereby the uploader must pay Nintendo $1.5 million in damages, compensating for lost sales revenue due to the infringement.

Once the game had been uploaded, Nintendo used technological forensics to track down the person who illegally copied the file and made it available for distribution. The company secured a search order on November 23, 2009, from the Federal Court for the suspect’s home. Through this search, authorities were able to seize property from the residence which provided further evidence.

Nintendo is focused on guarding its intellectual property rights to protect its own interests, the interests of its customers, and the interests of game development firms. They have vowed to pursue anyone who tries to jeopardize the gaming industry through all means available under the law.

Nintendo press release, February 9, 2010

Italy Offers Access to The Pirate Bay and is Shuttered

Bergamo’s Italian Fiscal Police (GdF) have shut down, a proxy site whose sole purpose was to let online users in Italy access The Pirate Bay.

This legal action followed a February 9, 2010 court order that requires Italian ISPs to block user access to the unlawful Pirate Bay service. In the Court of Bergamo, it was ruled that ISPs in Italy should prevent their subscribers from being able to access the notorious BitTorrent site that makes a huge amount of copyright-infringing files easily available.

Originally, the court order stated that ISPs must act in 2008. However, that verdict was appealed and then overturned. The Italian Supreme Court later ruled that even if an ISP was based outside the country, they could be required to block illegal BitTorrent sites that were used to distribute content that infringed on copyrights. It was ruled that websites that host torrent files play an important role when their users upload and download files, and that this amounts to complicity in a copyright infringement case.

IFPI press release, February 9, 2010

India CEO Arrested for Music Piracy founder and CEO, Anurag Dod, was arrested in Bangalore, India on April 29, 2010. Along with other company executives, Dod was charged with alleged infringement of copyright by engaging in music piracy.

The action was initiated by music label T-Series whose music catalog was allegedly exploited by the website Commenting on the arrest, T-Series VP digital content Neeraj Kalyan said, “ was infringing our copyright under the garb of a search engine. The website was working in nexus with some music pirate websites and was exploiting our content.”

Users of the service were directed to a music player which linked to other pirate websites such as,, and, which acted as a hub for these pirate sites, has been held legally accountable for doing so. Although the music player that was used to play content was based out of India, the company serving the content was based in India. This became a criminal offense according to Kalyan.

In October 2009, was rated as the most preferred music search engine by JuxtConsult, the online market research company in India. started in 2006 and initiated its music search engine in July 2008.

In addition to, T-Series plans to track down other pirate websites exploiting their content and initiating legal action against them. Previous to the recent action against and its CEO, T-Series had initiated legal proceedings against websites such as YouTube, MySpace and Ibibo., April 30, 2010 (Anita Iyer)


Avatar Uploader Arrested

Japan has increased its efforts to toughen the measures against illegal file-sharing. The new P2P surveillance system, part of the new anti-piracy law introduced in January 2010, has produced its first major bust in Shizuoka.

The system helped the High-tech Crime Control Office arrest a 62-year-old man who was accused of uploading two major box-office hits: “Avatar” and “Percy Jackson and the Olympians.” The accused man uploaded “Avatar” in December 2009 after it was allegedly downloaded from another P2P file-sharing website. “Percy Jackson and the Olympians” was uploaded in March 2010.

The uploader has admitted to making about 500 movies available on torrent sites over the last four years. He also said he uploaded the flicks using “Share” software. The movie industry is extremely encouraged by the news and in a recent statement Mike Ellis, the president and managing director of the Motion Picture Association, Asia-Pacific region, thanked the police for their efforts.

P2P On!, April 6, 2010


Major Raids: Two Million Discs Seized

Mexican law enforcement officers and military personnel conducted two major anti-piracy enforcement operations during March 2010.

The first, aimed at a cartel known as “Los Zetas,” led authorities to raid five warehouses and five laboratories. The product seized included 349 burners, 125,000 recorded CD-Rs and more than 200,000 recorded DVD-Rs. In addition, five premises believed to be used for the storage, reproduction and sale of pirate music and films were also raided and eight gang members were arrested. APCM Mexico, the joint music and film industry anti-piracy unit, filed a formal complaint based on the evidence.

The second raid was conducted in Mexico City’s “Tepito” district, widely reputed to be a hub of commercial pirate activity. This operation resulted in the dismantling of two laboratories and 65 warehouses. More than 940,000 recorded DVD-Rs and 1,000,000 recorded CD-Rs were seized in this second operation.

Music Industry News Network, April 7, 2010


Counterfeit CDs and DVDs Destroyed

According to anti-piracy experts in Zambia, a southern African state, efforts must be intensified against piracy that occurs in shops that are inside gas stations around the country. Intellectual property specialist Kingley Nkonde says that it saddens him to see the increase of gas station pirate vendors in Zambia. He made these remarks at an anti-piracy conference held in the Zambian capital of Lusaka. Thousands of pirate DVDs and CDs with a value of more than $34 million were destroyed at the event. They had been confiscated in January 2010, at Lusaka International Airport.

Nkonde believes that once the Zambian Police Service Intellectual Property Unit is decentralized, as planned, the country will see less physical piracy. He also is confident that this will encourage other stakeholders and government enforcement agencies to participate in anti-piracy campaigns.

IFPI press release, April 8, 2010 (Peter Chikwampu)

“Innocent Infringer” Not A Valid Defense

A federal appeals court has ordered a university student to pay the RIAA (Recording Industry Association of America) $27,750 ($750 per track) for file-sharing 37 songs when she was a high school cheerleader.

The February 25, 2010 decision by the 5th US Circuit Court of Appeals reverses a decision made by a Texas federal judge who had ordered defendant Whitney Harper to pay $7,400, or $200 per song. The lower court had granted her an “innocent infringer’s” exemption to the Copyright Act’s minimum of $750 per track because Harper claimed she didn’t know she was violating copyrights and thought file-sharing was akin to internet radio streaming.

The New Orleans-based appeals court, however, ruled that Harper was not eligible for such a defense even though she was between 14 and 16 years old when the infringing activity occurred on the notorious file-sharing site, Limewire. The reason, the court concluded, is that the Copyright Act precludes such a defense if the legitimate CDs of the music in question provide copyright notices. The court stated that “Harper cannot rely on her purported legal naivety” as an innocent infringer defense, and ruled unanimously. Plaintiffs in the case (Maverick Recording, et al. v. Harper) included Arista Records LLC, Maverick Recording Company, Sony/BMG, Univeral Music Group and Warner Bros. Records, Inc.

Harper, now 22 and a Texas Tech senior, said in a 2008 interview that she didn’t know what she did was wrong when she file-shared EMINEM, THE POLICE, MARIAH CAREY and others as a teen. “I knew I was listening to music. I didn’t have an understanding of file-sharing,” she said.

Most of the thousands of RIAA file-sharing cases have settled out of court for several thousand dollars. The RIAA is winding down its 6-year litigation campaign targeting individual file-sharers and instead is working with ISPs (Internet Service Providers) to adopt rules that could cut off or hinder Internet access to repeat copyright infringers., February 26, 2010 (David Kravets)

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Big Names Tangle Over Patent Infringement

As access to digital media continues to grow, big-name technology companies are trying to stay on top by taking each other to court for infringement. Legal battles over patent infringement are unfolding, pitting former allies against each other, and forming new partnerships between companies previously in competition.

Apple, creator of the iPhone and iPad, is at the center of most of these patent infringement battles. The company continues to use its strong patent portfolio to fight iPhone competitors in court.

On March 2, 2010, Apple filed a lawsuit against HTC for infringing on 20 Apple patents related to the iPhone’s user interface, underlying architecture and hardware. The lawsuit was filed with the US International Trade Commission (ITC) and in US District Court in Delaware. “We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it,” said Steve Jobs, Apple’s CEO. Though the lawsuit was filed against HTC, many patent lawyers and analysts believe Apple’s target is Google and the Android operating system, which the company provides to cellphone manufacturers. Apple and Google, once close allies, are now fighting for control of the market for smartphones, seen as the most important media and computing platform of the next decade. The battle has become heated since 2009, when HTC, Motorola and other phone makers began selling Android-based phones that offered an alternative to the iPhone.

On April 30, 2010, Apple was sued for infringing on a patent held by California-based NetAirus Technologies. Filed in the Central District of California Western Division, NetAirus claims that Apple’s iPhone infringes its 380 patent. The patent, issued on September 5, 2006 and held by NetAirus, describes a “Wireless Handset Communication System.” Unlike some patent lawsuits that claim part of a company’s product infringes on its patent, NetAirus seems to claim the entire iPhone concept is infringing on its patent. NetAirus claims that the iPhone, iPhone 3G and iPhone 3GS all infringe on this patent and has asked the court to stop Apple from making the iPhone and is seeking cash damages.

On May 7, 2010, Nokia slapped Apple with a patent infringement suit in the Federal District Court in the Western District of Wisconsin, naming five patents in the suit. According to Nokia, the patents in question relate to technologies for enhanced speech and data transmission, using positioning data in applications and innovations in antenna configurations that improve performance and save space, allowing smaller and more compact devices. Nokia claims, “These patented innovations are important to Nokia’s success as they allow improved product performance and design.” The products named in the suit include Apple’s iPhone and iPad devices.

As the digital marketplace evolves, so too do the devices created to bring users the expansive content. Patent infringement suits are the newest weapon for warring companies in an effort to corner the huge digital media market that is growing daily.

Tech Crunch, Mar 2, 2010, Erick Schonfeld
The Loop, May 4, 2010 (Jim Dalrymple)
OS News, May 7, 2010 (Thom Holwerda)

Quick Bits and Bytes

7,000 ‘Folex’ Watches Steamrolled in Philly

A steamroller crushed 7,000 ‘Folex’ (fake Rolex) watches in Philadelphia under the orders of federal authorities seeking to deter would-be counterfeiters.

On April 26, 2010, customs officials staged the destruction to highlight law enforcement’s role in protecting intellectual property rights. Immigration and Customs Enforcement officials said the watches were seized from Binh Cam Tran, who pleaded guilty in 2009 to charges including trafficking in counterfeit goods. Tran is serving six years in federal prison and has been ordered to pay more than $2.2 million to the Rolex Company.

Authorities say Tran fabricated hundreds of thousands of fake Rolex watches in his home near Philadelphia. Officials seized about 24,000 counterfeit watches and enough parts to create 1 million more.

Odd News, April 28, 2010 (Associated Press)

James Cameron: Innovation Trumps Digital Piracy

Oscar-winning director JAMES CAMERON has said the key to combating digital piracy in the movie industry is to use technology to create an experience that is unmatched anywhere other than the theater. “Avatar,” Cameron’s blockbuster 3D film, has made more money than any other movie in history, topping $2.6 billion at the box office worldwide. The movie was filmed in high-definition 3D video, which requires high bandwidth. The film is also more than three hours long, which should make it harder to distribute via the Internet.

Cameron has aimed to innovate, giving movie-goers a reason to still see films in the theater. Attempting to create a “reinvigorated cinema experience,” he discovered that people will pay to experience the same content in different ways. Not only are they willing to pay $10 or more to see Avatar on the big screen in 3D, but they also will pay to own the DVD and to take it with them on their phone or portable device.

Cameron said the fact that people were still going to the theater to see Avatar nearly four months after it was released supports his conclusion. Typically, DVDs are released after the film has left movie theaters. However, the DVD was released in April 2010, with the movie still playing in cinemas due to its popularity. The movie has also been made available on iTunes., March 25, 2010 (Marguerite Reardon)

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