Monthly Archives: April 2011

Local Television Wins: BMI Must Offer AFBL

As I predicted here, Judge Stanton of the Southern District of New York has denied BMI’s motion that its consent decree does not require it to offer television broadcasters a blanket license the fee for which adjusts to reflect the degree to which a television broadcaster publicly performs musical works that it licenses directly from BMI-affiliated music publishers.  As is typical of his opinions, Judge Stanton quickly cut to the crux of the issue–is an adjustable fee blanket license a different kind of license or a traditional blanket license with a different fee structure?  Following the Second Circuit’s opinion in U.S. v. Broadcast Music, Inc. (In re AEI Music Network, Inc., 275 F.3d 168 (2d Cir. 2001), Judge Stanton concluded that an AFBL for broadcasters is still just a blanket license with a carve-out fee structure.

Judge Stanton’s opinion is below
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The (very) Long Arm of the Law

In case that may have far-reaching implications (pun intended), the New York Court of Appeals has interpreted New York’s long-arm statute as extending to out-of-state defendants who upload copyrighted works controlled by New York plaintiffs.

The procedural history is as follows.  Penguin Group, the book publisher, sued an Oregon non-profit American Buddha based on Arizona, which uploaded full copies of several of Penguin’s books to American Buddha’s online “library.”  American Buddha claimed its copies were not infringing under either Section 107 (fair use) or 108 (library copies).  Penguin disagreed and brought suit in the Southern District of New York.  American Buddha moved to dismiss for lack of personal jurisdiction.  Because Penguin did not allege that copies of its books had been downloaded in New York, the only basis for personal jurisdiction would lie under New York’s long-arm statute.  The district court found that American Buddha’s contacts with New York were insufficient to warrant the exercise of personal jurisdiction and granted its motion to dismiss.  Penguin appealed to the Second Circuit.

The Second Circuit, finding that resolution of this issue rested on an interpretation of New York’s long-arm statute, certified the following question to the New York Court of Appeals: “In copyright infringement cases, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?”

The New York Court of Appeals found that the Internet plays a significant role in this case and narrowed and reformulated the certified question to read:

“In copyright infringement cases involving the uploading of a copyrighted printed literary work onto the Internet, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. § 302 (a) (3) (ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?”

Because the plaintiff has the burden of proving the personal jurisdiction of the federal court over the defendant, under New York’s long-arm statute, Penguin had to show (1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce.  Only the third element (did American Buddha’s action cause injury in New York) was at issue.

In finding that Penguin’s injury did occur in New York, the court noted that “the digital environment poses a unique threat to the rights of copyright owners” and that “digital technology enables pirates to reproduce and distribute perfect copies of works — at virtually no cost at all to the pirate” (House Commerce Comm Rep on the DMCA, HR Rep 551, 105th Cong, 2d Sess, at 25).  The court also noted that copyright holders such as Penguin enjoy a wide range of rights and that Buddha’s alleged infringement, if proven, would affect Penguin’s incentive to publish additional works.  These additional harms were found by the court to elevate Penguin’s injury to something more than mere “indirect financial loss.”

While the New York Court of Appeals answered a narrow question, the implications of its answer are far-reaching.  Under this logic, record labels headquartered in New York could make similar arguments against illegal file-sharers who upload allegedly infringing copies outside the state of New York, but the effects of which–including, potentially, a decrease in the incentive to create more music–would be felt in New York.

The Second Circuit decision is below.
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The New York Court of Appeals decision is below.
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iPad App Wars: Viacom v. Time Warner or Time Warner v. Viacom

The disagreement over whether Time Warner’s iPad app is within or without the scope of their license with Viacom will be decided in the federal courts of the Southern District of New York.  The first question, however, will be which court.  On April 4 Viacom filed an infringement suit against Time Warner, which landed on the bench of Judge Buchwald, a Clinton appointee.  On the same day, Time Warner filed a declaratory judgment action against Viacom, which landed on the bench of Judge Sand, a Carter appointee.

By way of background, the disagreement revolves around an iPad app Time Warner released in March that allows subscribers of Time Warner’s cable television services who also subscribe to its broadband internet services to stream linear feeds of Viacom’s programming directly to the subscriber’s iPad.  Time Warner takes the position that distribution to a subscriber’s iPad is equivalent to–and therefore covered by–their existing distribution agreement with Viacom.  While this case has some copyright implications, it will probably be decided on how the court determines the technology of the iPad app overlays the contractual language of Viacom’s existing distribution agreement with Time Warner.

The complaints are below:

Time Warner v. Viacom
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Viacom v. Time Warner
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Do You Infringe in the Land Down Under?

EMI has lost its appeal of a lower court’s decision in Australia finding that the famous Men at Work song “Down Under” infringed the song “Kookaburra Sits in the Old Gum Tree.”

While I profess no familiarity with Australian copyright, it appears that the Australian standard for determining infringement of a musical work is “substantially similar” to the rule in the U.S.  For some reason, however, this court begins its discussion of the test with references to the fifth century Roman emperor Zeno, the fifteenth century Governors of Venice and the Statute of Anne.  Just as in the U.S., the court looks at what portion of the original work was copied, rather than what portion of the allegedly infringing works constitutes allegedly copied parts of the original.  Likewise, the focus is on the quality of the copied portions rather than the quantity.  The judges here determined that 4 notes from “Down Under” were copied from “Kookaburra.”

The decision is below:
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Statutory Damages Go to the Dogs (and Cats) Part Deux: Albums as Compilations and Statutory Damages

In what can only be the universe trying to get me to write more about statutory damages, today I read Judge Wood’s most recent decision in the Limewire case and discovered an interesting article by Wyatt Glynn entitled “Musical Albums as “Compositions”: A Limitation on Damages or a Trojan Horse Set to Ambush Termination Rights?”  The former decision deals with the record labels’ motion seeking entitlement to statutory damages for each individual sound recording infringed by users of Limewire’s file sharing protocol, even if those sound recordings appeared as part of a compilation.  The latter article considers the recent case of Bryant v. Media Rights Prods., Inc., 603 F.3d 135, 141 (2d Cir. 2010) and the potential impact of that decision, which found that the plaintiffs were only entitled to one award of statutory damages because the sound recordings had been issued as albums and were, therefore, “compilations” under the Copyright Act, on terminations of transfer.

In finding that the record labels were entitled to individual awards of statutory damages for each sound recording infringed, Judge Wood distinguished her Limewire case from Bryant by noting that the plaintiffs in Bryant had only issued their recordings as a compilation; i.e., the individual sound recordings had never been issued by the plaintiffs as “singles” but only as a CD.  Only later, when those digital albums were made available on iTunes, were the individual sound recordings available as “singles.”

The calculation of damages in the Limewire case is going to require a MIT math wiz to calculate.  Here is how Judge Wood described the statutory damages available to the record label plaintiffs:

For albums that contain sound recordings that are available only as part of the album, and
sound recordings that are also available as individual tracks, the Court provides the following example for purposes of illustration. Let us assume that Plaintiffs issued (1) an album containing songs A, B, C, and D, and that Plaintiffs also made available (2) songs A and B as individual tracks, but (3) made available songs C and D only as part of the album as a whole. Let us also assume that songs A, B, C, and D were infringed on the LimeWire system during that time period. Plaintiffs would be able to recover three statutory damage awards: one award for song A, one award for song B, and one award for the compilation (of which C and D are a part).

The concern of the author of the article is whether the Second Circuit’s holding in Bryant that albums are “compilations” under § 101 of the the Copyright Act might impact recording artists ability to terminate their copyright transfers under § 203 of the Copyright Act.  For the uninitiated, § 203 provides that an author who has transferred the rights to her copyrighted work may, after 35 years, terminate the assignment of the copyright notwithstanding any agreement to the contrary.  This being the Copyright Act, there is, of course, an exception; there is no right to terminate a transfer for a “work made for hire.”  As the author discusses, whether the “album” as currently constituted today fits the statutory definition of a “compilation” is hotly contested; e.g., if a song is issued first as a single and then as a part of a digital album, is that a “compilation”?  If they are compilations, then record companies can rest easy in the knowledge that they will own the copyrights in those sound recordings until they expire.  If they are not compilations, then record companies face a mass exodus of famous (and very profitable) back catalog in the coming years.

An interesting application of this issue can be found in Arista Records LLC v. Launch Media, Inc. where the Second Circuit held in a case of first impression that the Launchcast personalized Internet radio service was not an “interactive” service under the Copyright Act.  Because the Second Circuit determined that Launch as non-interactive–and, therefore, not infringing–the Court never considered whether the record label plaintiffs were entitled to damages based on individual sound recordings or only on a per-compilation basis.  The Launch brief to the Second Circuit, however, contains a nice encapsulation of how this issue plays itself out in interesting ways. According to their brief (around page 51):

During the trial, plaintiffs stipulated as follows: (1) every copyright at issue
was a single registration for “an album consisting of multiple tracks”; (2) for all
but 11 of the 835 copyrights at issue, the copyright registration was denominated
as a “work made for hire”; (3) for every copyright at issue “the recording artist
whose recordings are the subject of the Certificates were not employees of the
copyright claimants.” … These facts, taken together, lead to the
inescapable conclusion that the registrations at issue were, in fact, for
compilations.

Judge Wood’s Limewire decision is here:
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Wyatt Glynn’s article is available by clicking here.

Launch Media’s Second Circuit brief is here:
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I’m Rick James, Bitch!

The estate of Rick James has filed a class action lawsuit against Universal Music Group (“UMG”) alleging underpayment of royalties due for digital downloads.  The suit relies on the recent 9th Circuit decision in Eminem’s dispute with UMG sublabel Aftermath Records.  F.B.T. Productions, Inc. v. Aftermath Records, 621 F.3d 16 958 (9th Cir. Sept. 3,2010), cert. denied, 79 U.S.L.W. 3370 (March 21, 2011).  In that case, the 9th Circuit found that under Eminem’s recording contract with Aftermath digital downloads should be accounted for as “licensing” income rather than the sale of physical product like CDs.  James’ estate argues that his contract contains similar language, thus requiring UMG to pay at the higher license rate.

The Super Freak case (as I’m sure it will become known) seeks to establish a class pursuant to Federal Rules of Civil Procedure 23(a) and 23(b) comprising “All persons and entities … who entered into UMG production or recording agreements from January 1, 1965 to April 30, 2004 and who … received royalties on … income received by UMG from Music Download Services and Mastertone Providers (hereinafter, the “Class”) at a rate less than the rate provided for licensing income in their contract with UMG.”

The case comes on the heels of a pending settlement in the long-running dispute between the Allman Brothers and Sony in which the Allman Brothers raised similar claims and sought to establish its own class. (See Greg Allman v. Sony BMG Music Entertainment, 06-cv-3252-GBD (SDNY)).  In that case, the Allman Brothers argued that the difference in accounting had the following implications:

CURRENT METHOD
1000 Units Downloaded 1000
Less Net Sales Deduction (15%) (150)
Units Downloaded Credited to Plaintiffs 850
Alleged Total Wholesale Revenue per unit $0.70
Less Mechanical Royalty Payments to publishers per unit ($0.069)
(approx. $0.069 per unit)!
Alleged Wholesale Download Price per unit $0.631
Total Alleged Wholesale Download Price (850 units x .631 per unit) $536.50
Less Container Charge (20%) ($107.50)
Less Audiophile Deduction (50%) ($268.75)
Royalty Base Price $160.25
Royalty Rate (30%)2 x .30
Royalty Owed $45.05
CORRECT METHOD
1000 Actual Units Downloaded 1000
Net Receipts to Sony Music for 1000 units sold at $0.70 per unit $700.00
Less Mechanical Royalty Payments to publishers (approx. $0.069 per unit) ($ 69.00)
$631.00
Royalty Rate (at 50% of net leasing receipts) x .50
Royalty Owed $315.50
1 This factors in a 3/4 statutory mechanical royalty rate of 6.83 cents per unit instead of a full statutory mechanical royalty rate of 9.1 cents per unit, as the former rate is more prevalently used.
2 Note that this Royalty Rate is for The Allman Brothers Band. Specific royalty rates for other Class Members will vary.

The Super Freak Complaint is below:
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Illegal (Movie) File Sharers Beware! We Will Find Out Who You Are!

If you thought it would be hard to fill all those hours you spent reading / complaining about / championing the RIAA’s litigation efforts against illegal file shares, your prayers have been answered.  Over the last year a number of “innovative” lawyers have taken to representing movie producers and distributors in similar actions, with a surprising number involving porn; e.g., Illinois lawyer John Steele who represents Arizona porn producer CP Productions, West Virginia lawyer Ken Ford, the lawyer behind the Adult Copyright Company, and Texas lawyer Evan Stone, who in addition to suing on behalf of gay porn creator Lucas Entertainment is filing suits on behalf of anime producer FUNimation.  The main difference between the RIAA’s strategy and these new suits is volume, volume, volume.  These enterprising plaintiffs have sued more defendants in 2010 alone that the RIAA did during its entire campaign.

Whatever you may think of these massive John Doe suits from an ethical, moral or business model viewpoint, these suits have not been without their share of real legal problems. A critical legal issue in many (all?) of these cases has been the Internet Service Providers’ motions to quash the pre-discovery subpoenas served by the plaintiffs to obtain the identity of the users associated with the IP addresses alleged to have been engaged in the illegal file sharing.

While other judges have been less receptive to these plaintiffs, Judge Beryl Howell of the District Court for the District of Columbia recently denied Time Warner Cable’s motion to quash and ordered TWC to produce the identities of the individuals associated with more than 5,500 IP addresses.

By way of background, the plaintiffs in these three consolidated cases allege that the John Doe defendants each used the BitTorrent file-sharing protocol to illegally download copies of the plaintiffs’ copyrighted movies.  According to the plaintiffs’ BitTorrent is unique (compared to, e.g., Napster) in that it “makes every downloader also an uploader of the illegally transferred file(s). This means that every “node” or peer user who has a copy of the infringing copyrighted material on a torrent network must necessarily also be a source of download for that infringing file.”  [Legally speaking, the illegal copying of the plaintiffs’ works by these John Doe defendants arise out of the same transaction, occurrence, or series of transactions or occurrences, which Judge Howell found met the standard for permissive joinder under FRCP 20(a)(2)(A).]  The plaintiffs hired Guardaley Limited, an anti-piracy firm, to identify the users that were illegally sharing the plaintiffs’ motion pictures, and then provided the plaintiffs with the alleged infringers’ IP addresses, as well as the date and time the alleged infringement activity occurred.  The plaintiffs then filed suit against the John Doe defendants and moved for pre-Rule 26(f) discovery in the form of subpoenas compelling ISPs to identify the individuals associated with those IP addresses.

Most of the commentary about the Judge’s denial of TWC’s motion to quash has centered around this passage:

“If the Court were to consider severance at this juncture, plaintiffs would face significant obstacles in their efforts to protect their copyrights from illegal file-sharers and this would only needlessly delay their cases. The plaintiffs would be forced to file 5,583 separate lawsuits, in which they would then move to issue separate subpoenas to ISPs for each defendant’s identifying information. Plaintiffs would additionally be forced to pay the Court separate filing fees in each of these cases, which would further limit their ability to protect their legal rights. This would certainly not be in the “interests of convenience and judicial economy,” or “secure a just, speedy, and inexpensive determination of the action.” Lane v. Tschetter, No. 05-1414, 2007 WL 2007493, at *7 (D.D.C. July 10, 2007) (declining to sever defendants where “parties joined for the time being promotes more efficient case management and discovery” and no party prejudiced by joinder).”

Commentators have focused on that fact that Judge Howell appears to be more concerned with the (economic) efficiencies of the plaintiffs rather than the interests of the unnamed John Doe defendants.   (For example, amicus in the case argued the unnamed defendants have a First Amendment interest in anonymous Internet speech.)

To me, the more interesting quote from the opinion is the following, dealing with TWC’s complaint that it would be too burdensome to respond to so many IP look-up requests: “The overbreadth that Time Warner complains of is due to the large number of Time Warner’s customers allegedly engaging in infringing activities and prompting the plaintiffs’ need for their identifying information. This, however, does not render the subpoenas overbroad in terms of the information requested about each defendant.”  The not-so-subtle jab at TWC reminds me of the comments of Paul McGuinness, U2’s manager, when he criticized ISPs for having profited off of their customers illegally sharing music (and increasingly now video).  It is hard to feel sorry for TWC when TWC creates and profits from the environment that enables this massive file sharing to occur.

Since this ruling and publicity that has followed it, it has been revealed that Judge Howell used to lobby for the RIAA, this implication being she was biased.  Reading her opinion, I think she had some sympathy for the plaintiffs, but her argument that it is judicially economical to identify all of the defendants in one suit and then allow those named defendants to object to joinder and/or personal jurisdiction makes some sense to me.

The documents are below.

TWC’s Motion to Quash
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EFF Amicus in Support of TWC
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Plaintiffs’ Response to EFF
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Opinion
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