VentureBeat

Facebook Platform’s tremendous growth in popularity over the past few weeks has thrown the company into a thorny legal quagmire concerning copyright and music pirating.

The problem began two weeks ago, when Facebook opened Platform to allow applications built by outside developers. Many of these applications –from iLike, to RockYou to Audio — have different relationships with labels based on the types of services they each provide.

On June 1st, Facebook made a significant modification to its terms of service for developers: It deleted a line that specifically restricted developers from offering “an index” of copyrighted material to other Facebook users.

The latest version of the terms continues to prohibit Platform applications having the “primary purpose of facilitating” copyright violations. But the change is happening in tandem with the success on Facebook of applications like Audio, which pitches itself as an easy way for users to get and play music from a central library (an index) of user-added tracks.

Audio has been one of the most popular apps since Platform launched two weeks ago (our previous coverage here). As of today, it has 475,377 users. These users are submitting songs to the library at a frenetic pace: five to ten new songs per minute; the app also publicly discloses the identity of each user that submits a song.

At issue is whether Audio is violating the law. Warner, Atlantic, Elektra and other record labels recently sued imeem (court filing here), claiming that it knew full-well it was infringing on copyrighted material by offering users the “opportunity to share popular music and music videos for free.”

Facebook is not commenting on changes to its terms of service, nor on any copyright issues.

Numair Fazar, the one-man creator of the Audio, believes he is in the clear. He says Facebook made these changes to the terms to address “sites such as mine that followed the terms of the DMCA.” Before, he says, the terms were so restrictive that “if you followed the DMCA, you still ran afoul of Facebook’s terms of service.”

Audio seems to have been a point of internal controversy: Over the first weekend after Platform’s launch, the app was removed from the Facebook app directory, then reinstated the following week. The reinstatement — and the change in Facebook’s terms of use — occurred around the same time that Audio added a copyright policy to comply with the DMCA law.

There is also a separate, but related technical issue. In addition to on-demand streaming, Audio facilitates MP3 downloads, albeit for those who are able to hack HTML. Facebook’s audio player powers Audio and through it users can still view the HTML source of the Facebook web page containing the music track. They can then search for “.mp3″ to find the URL containing the host location of the track’s mp3 file, then download the file to their hard drives. In fact, I just downloaded and am now listening to the latest hit from hip-hop star Chamillionaire. In other words: free music!

Fazar says he’s notified company developers of this problem and that they’re looking at a way to solve it right now. He points out that Myspace had the same HTML-mp3 issue when it first launched its music player.

Despite the legal issues, Fazar sees himself as a Malibu local and a friend of the music industry, as he mentions in a note on the issue of piracy. He further explains his position in an Audio discussion forum called “Official Message Regarding Audio Legality,” where he said:

“Two points: 1) I’m talking with labels - that’s all I can say right now; 2) if I felt that these discussions were hostile or likely to result in lawsuits, both myself and my friends (hint, hint) at the record labels would make sure Audio was pulled from Facebook.”

Meanwhile, other successful Platform app companies are distancing themselves from copyright issues — and from Audio.

Ali Partovi of iLike (our coverage here) says that what’s great about Platform is “that a music app like ours can dominate without doing anything sketchy or encouraging anybody to break the law.” iLike, which is also a freestanding company, has previously worked out licensing deals with record labels, and is currently the most popular Facebook app, with 2,027,516 users.

Lance Tokuda, cofounder and CEO of RockYou — one of the other most successful companies on Facebook — says that there are difficult issue related to copyrighted material, like music “and iLike is one of the examples of a company that got it right.”

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Comparison of changes in Facebook’s terms of service.

Deleted text in italics.

Version 1:
Revision date: May 24, 2007

Section 2. Conditions of Use
A. Certain General Requirements. Subject to the terms of this Agreement:

9) You will not use the Facebook Platform or any of your Facebook Platform Applications, and your Facebook Platform Application will not be designed:

(vii) to create an index, accessible through the Facebook Site, of copyrighted materials that have been uploaded or otherwise made available by other Facebook Users, or for the primary purpose of facilitating the distribution of copyrighted content without the authorization of the copyright holder;

Version 2:
Revision date: June 1, 2007
(vii) for the primary purpose of facilitating the distribution of copyrighted content without the authorization of the copyright holder;

(currently on: http://developers.facebook.com/terms.php)

[Author Eric Eldon thought he was going to become a professional journalist when he graduated from college two years ago. Instead, he is co-founder of Writewith, a company that makes online word processing work for groups. You can reach him at eric@writewith.com.]