New lawsuit adds to Grooveshark's troubles

Just when Grooveshark appeared to be putting its legal troubles behind it, the music service is sued once again by one of the major record labels.

In a lawsuit filed on Thursday in a Manhattan federal court, recording company EMI accuses Grooveshark of breach of contract and copyright infringement. The gist of EMI's complaint is that after entering into a licensing agreement with the label in September 2009, Grooveshark fell behind in its monthly payments and also failed to provide sales records.

EMI needed the sales data to accurately know what to charge the service. EMI said because of Grooveshark's failure to pay, the label terminated the deal in March. Nonetheless, Grooveshark continued to distribute or allow users to share music, EMI said in its complaint.

Grooveshark said in a statement: "While we always strive to keep lines of communication open with rights holders, artists and all other interested parties, disagreements inevitably arise, as is true in any business, particularly one that is pushing for innovation and industry change. "We remain confident that we will be able to resolve our dispute with EMI."

What really separates this case from the oodles of copyright infringement cases brought by the labels against Grooveshark and other digital music services over the years is that Grooveshark was licensed. Not only that, EMI said in the suit that Grooveshark agreed that should the deal be terminated, managers would not to seek protection from the safe harbor provision of the Digital Millennium Copyright Act.

"Grooveshark can't invoke the Safe Harbor," EMI said in its complaint, "because it specifically agreed in the settlement agreement and distribution agreement that it would not permit or allow the exploitation of any EMI recordings unless there was an EMI content agreement in place."

Contract says no safe harbor
The DMCA safe harbor protects Web services from responsibility for the copyright violations committed by their users, provided they meet the requirements of the provision. Over the years, the labels have made all kinds of legal claims against Grooveshark and the music service has always said that it is DMCA compliant. Managers say they quickly remove infringing works from their site when notified by copyright owners.

But how the contractual obligation with EMI may affect Grooveshark's DMCA assertion isn't clear.

Last week wasn't a good one for the 5-year-old Grooveshark. The company suffered an embarrassing reversal when it ballyhooed the return of its Android app to Google Play only to see the app banned once again.

In 2011, Google booted the app for violating its policies.

In July, CNET reported that Spring Mountain Capital, an investment firm, had considered acquiring the music service. In addition, records show that Grooveshark had settled some of its pending litigation, including a suit filed against it in January by music publisher Yesh Music.

Grooveshark even put behind it a previous suit brought by EMI.

In that case, Grooveshark failed to make good on a promissory note that was given in response to EMI's allegations that Grooveshark was under-reporting and under-paying EMI for licensed music. EMI has previously said that as far as the promissory note, Grooveshark is up to date with its payments.