A federal court recently dismissed a lawsuit brought against the online streaming radio service Pandora for disclosure of its users’ listening habits. See Deacon v. Pandora Media Inc., N.D. Cal., No. 11-4674, 9/28/12. The plaintiff alleged that Pandora’s disclosure of his recent listening history, bookmarked songs and artists, and station selection on Pandora.com as well as through his linked Facebook.com profile violated the Michigan Video Rental Privacy Act (“VRPA”) and the Michigan Consumer Protection Act (MCPA). The federal court dismissed the plaintiff’s claims brought under each law.

Pandora allows users to stream music to home computers, mobile phones, and other approved devices; however, users cannot choose the songs they would like to hear. Pandora selects the songs streamed to a user based on the user’s personal preferences. When a song is streamed, it is temporarily downloaded on a user’s computer. As soon as the song is finished, the Pandora service deletes the temporarily saved file.

Under the VRPA, an entity that engages in the business of selling, renting, or lending sound recordings must not publicly disclose information about the lease, purchase, rental, or borrowing of the sound recordings. The plaintiff alleged that Pandora was in the business of renting, lending, and selling sound recordings. The court disagreed. Although the terms “renting” and “lending” are not defined in the VRPA, the court looked to the common definitions of the terms. The court found that “renting” is commonly understood to mean money paid for the periodic use of property. The court found that “use” requires a volitional act. Given the fact that the Pandora user does not choose the songs played via the service, the court found that the songs played via Pandora are not “rented.” The court next turned to the definition of the term “lend.” This term is also not defined by the VRPA; however, it is commonly understood that an item that is “lent” will be returned. As the Pandora service deletes the song once it has played, the court held that Pandora does not lend copies of the songs. The court also held that Pandora does not sell songs through the service. The court finally looked to the Copyright Act for guidance. Given that Pandora only has a license to publicly perform the songs under its license, the court found it could not sell, rent, or lend the tracks since it did not possess that right. After coming to this conclusion, the court dismissed the claims under the VRPA.

After dismissing the VRPA claims, the court looked at the claims based on the MCPA. The plaintiff claimed that Pandora had violated the MCPA’s prohibition on unfair, unconscionable, or deceptive trade practices when it posted its users’ listening habits online without first disclosing this practice to users. Pandora claimed that the MCPA’s safe harbor protected it from liability; but the court held otherwise. However, the claim under the MCPA was still dismissed because the plaintiff had brought the lawsuit as a class action but without alleging any actual damages. The MCPA allows a plaintiff to allege claims without pleading actual damages but the statute does not allow class actions to be brought unless actual damages are plead. The court dismissed the class action but noted that the plaintiff could either bring an individual claim or plead actual damages on behalf of the class.

For more information on this case, please contact Anthony Lupo, Sarah Bruno, or Matthew Mills.