[ZwillGen’s Marc Zwillinger, Jacob Sommer and Michele Floyd represented Pandora in this case.]
On September 28, 2012, Judge Armstrong of the Northern District of California dismissed a class action complaint (with leave to amend within 14 days) against Pandora for alleged violation of the Michigan Video Rental Privacy Act (“VRPA”), on the basis that the VRPA did not apply to Pandora, because it does not rent, sell, or lease songs when users listen to its radio stations.
Plaintiff Peter Deacon brought the suit on behalf of a class of Michigan residents under a little-known Michigan law, the Video Rental Privacy Act. The VRPA is similar to the federal Video Privacy Protection Act (“VPPA”), 18 U.S.C. 2710, which prohibits the disclosure of video tape rental or sale records, except in certain situations. Importantly, however, the Michigan law applies not only to video, but to the rental, lease, or sale of books and sound recordings as well.
Pandora moved to dismiss the complaint, arguing that Plaintiffs lacked standing and that the VRPA did not apply to an internet radio station like Pandora. The Court first found that Plaintiffs had standing even without an allegation of actual loss because the VRPA does not impose an actual injury requirement and that violation of the statute itself could satisfy Article III standing requirements.
The Court then turned to Pandora’s argument that it did not rent, lease, or sell sound recordings when it streamed them to its users’ computers. As to renting, the Court found that Plaintiff had not alleged sufficient facts to show that Plaintiff paid consideration to Pandora for use of its service, and more importantly, did not demonstrate “use” of the digital files through a “volitional act relating to the temporary song file supplied by Pandora.” Instead, the Court found that Pandora, not its users, “used” the temporary song files solely to facilitate streaming. The Court also rejected Plaintiff’s argument that they “borrowed” the song while it was playing, finding that Plaintiff never returned the song–instead Pandora deleted it. The Court also found that Pandora’s terms of use plainly stated that users could not “use” sound recordings because the terms specifically prohibited copying, storing, editing, preparing derivative works, or altering the digital files in any way.
The Court applied similar reasoning to find that Pandora did not lend sound recordings. As was the case with renting, lending also requires “use” by a volitional act. In addition, Plaintiff did not allege facts demonstrating that the user was required to return the file to Pandora as a lessee would–instead, Pandora deletes it.
The Court similarly rejected Plaintiff’s argument that Pandora “sold” sound recordings when it provided links to the iTunes and Amazon stores where users could purchase songs they listened to. Instead, the Court accepted Pandora’s argument that Apple, via iTunes, and Amazon sold songs to users, not Pandora. Likewise, the fact that Pandora may receive some sort of referral fee did not transform it into a seller.
Finally, the Court agreed with Pandora’s argument that Copyright law was relevant to finding that Pandora did not rent, lend, or sell sound recordings. In doing so, the Court agreed with Pandora that it held only the right to publicly perform digital sound recordings, pursuant to 17 U.S.C. 115. Consequently, Pandora could not, in fact, rent, sell, or lend such recordings. As the Court observed, Pandora’s terms of use prohibits users from engaging in any acts inconsistent with this license.
The Court also dismissed Plaintiff’s claim under the Michigan Consumer Protection Act. In doing so, the Court found that a Plaintiff cannot maintain a class action under the statute unless the Plaintiff suffers loss in the form of actual injury–and only that claiming injunctive relief is not sufficient.
