The labels argued that MP3tunes was disqualified because it should have known that many of the songs users sideloaded from websites such as rapidshare were infringing. But Judge William Pauley disagreed, arguing that the DMCA imposes no obligation to investigate potentially infringing activity absent a specific complaint from copyright holders. The only exception is links to sites with URLs containing "red flag" words like "pirate" or "bootleg."Mp3tunes was instead found liable for copyright infringement because when notified of infringing files in its users' storage lockers, it did not delete them. This activity is the sort of due diligence that has become standard for online media companies - if anything, the big online media giants like Apple, Amazon and Youtube have become too diligent (to the point where presidential candidates have complained), often refusing to use the fair use provisions of the Digital Millenium Copyright Act that would allow them to withdraw from the legal dispute and let the copyright owners resolve the potential infringements with the infringing users.
EMI also argued that MP3tunes couldn't claim the DMCA safe harbor because it benefitted from its users' infringement and had the ability to control that infringement. But Judge Pauley disagreed. He held that there was no evidence MP3tunes directly profited from users' infringing sideloads. And he held that users, not MP3tunes, controlled which files users placed in their lockers.
More importantly, though, is the fact that the ruling - which will obviously be appealed, as music companies have made clear that they don't like the concept of online music storage - makes online lockers themselves to be non-infringing activity. For fans of music and everybody who loves using their iPod (or other mp3 player - this writer is one of the precious few who owns an old Microsoft Zune), online music lockers are exceptionally useful things, and the fact that they have now been granted some degree of legal protection against copyright infringement litigation is a step in the right direction.