The future of streaming music service Grooveshark is in doubt after a United States District Court issued summary judgment in one of the cases actioned by the major labels. In addition to a full house of copyright infringement charges against the service, its founders were also found liable for direct infringement.

Beleaguered music service Grooveshark is facing its biggest threat yet after a long-running case with the major labels of the RIAA came to a close last evening.

In a ruling by United States District Judge Thomas P. Griesa in the United States District Court in Manhattan, Grooveshark parent company Escape Media and two of the company’s top executives were found liable for infringing the rights of the labels on a grand scale.

The summary judgment is not a pretty read. It summarizes Grooveshark’s history and how the service began with licensed aims in mind, but achieved that by infringing the labels’ rights in the hope of reaching deals later on.

The initial problem was obtaining content to offer to users. The company solved the issue by getting employees to “seed” music to other users via its own P2P sharing software known as Sharkbyte. A 2007 email from co-founder Josh Greenberg to employees reads:

Please share as much music as possible from outside the office, and leave your computers on whenever you can. This initial content is what will help to get our network started—it’s very important that we all help out! If you have available hard drive space on your computer, I strongly encourage you to fill it with any music you can find. Download as many MP3’s as possible, and add them to the folders you’re sharing on Grooveshark. Some of us are setting up special “seed points” to house tens or even hundreds of thousands of files, but we can’t do this alone… There is no reason why ANYONE in the company should not be able to do this, and I expect everyone to have this done by Monday… IF I DON’T HAVE AN EMAIL FROM YOU IN MY INBOX BY MONDAY, YOU’RE ON MY OFFICIAL SHIT LIST.

In 2007, music obtained via Sharkbyte and other means was used to populate Grooveshark’s central music storage library. Internal company emails showed Greenberg, Tarantino and Escape’s senior programmer encouraging employees to bring in and download music so it could be uploaded to the company’s servers.

By 2008 the Grooveshark service carried more than a million tracks, including thousands uploaded by Greenberg, Tarantino and other employees. That service grew by another million tracks and eventually into the streaming service available today.

A year later the service was beginning to receive DMCA takedown notices but according to the decision handed down yesterday, the company had a solution to keep that content online.

“Escape’s senior officers searched for infringing songs that had [been] removed in response to DMCA takedown notices and re-uploaded infringing copies of those songs to Grooveshark to ensure that the music catalog remained complete,” the decision reads.

Furthermore, records show that thousands of the DMCA notices sent by the labels were forwarded internally to employees, including Greenberg and Tarantino, for the music they had personally uploaded. The fact that employees were uploading content became known to the labels following discovery in another case currently before the courts.

While the Court accepted that Escape and its employees uploaded thousands of tracks, the huge numbers claimed by the labels were rejected. In total the Court found that the defendants are liable for uploading ‘just’ 5,977 copyright works.

And, of course, there is the not insignificant number of tracks the company streamed to its users over the course of its operations. Escape’s own records show that it “streamed or publicly performed”, copies of plaintiffs’ copyrighted sound recordings at least 36 million times.

“Each time Escape streamed one of plaintiffs’ song recordings, it directly infringed upon plaintiffs’ exclusive performance rights,” the decision reads.

As a result of Greenberg and Tarantino instructing company employees to upload copyright-protected music to Grooveshark, the Court granted the labels’ motion for summary judgment on its claim for direct copyright infringement.

On the secondary infringement front the Court ruled that Escape Media is liable for the direct infringements of the employees it instructed to upload music.

“[The record labels] advance three theories of secondary liability: (1) vicarious copyright infringement, (2) inducement of copyright infringement, and (3) contributory copyright infringement. The court finds for plaintiffs on all three theories of liability,” the judgment reads.

In respect of Escape’s co-founders, Tarantino and Greenberg, the Court found that they are not only “jointly and severally liable for Escape’s direct and secondary copyright infringement” but also liable for direct infringement due to their own personal uploads of infringing content to Grooveshark.

The judgment concludes with an instruction for the parties to submit proposals on the scope of a permanent injunction against Grooveshark within 21 days. Escape Media has already announced its intention to appeal.