Tag Archives: Litigation

Are You Sirius?

As readers of this blog will recall, aging rockers Flo & Eddie filed three separate lawsuits alleging that Sirius XM has infringed certain state- or common law copyrights of a class of owners of sound recordings fixed prior to 1972. Sirius XM has filed a motion to transfer the California case, which was transferred from state to federal court, and the Florida case to the Southern District of New York.  While this legal maneuver is relatively uninteresting, the motion does indicate at least one defense that is likely to feature prominently in this and the related case filed by the so-called “major” record companies, – titled Capitol Records, LLC et al. v. Sirius XM Radio Inc., No. BC520981 – in California state court raising similar issues: laches.

Laches, an equitable defense based on the doctrine of estoppel, is the unreasonable delay in pursuing a right or claim that prejudices the opposing party.  According to Sirius XM’s motion,

Plaintiff apparently has become aggrieved by the distinction drawn by Congress in withholding copyright protection from its Pre-1972 Recordings; thus now, after decades of inaction while a wide variety of music users, including radio and television broadcasters, bars, restaurants and website operators, exploited those Pre-1972 Recordings countless millions of times without paying fees, it asserts a purported right under the law of various states to be compensated by Sirius XM for comparable unlicensed uses. Plaintiff’s multiple court filings constitute a form of lawsuit lottery in search of an elusive new state-law right that would radically overturn decades of settled practice.

The laches defense raises a number of interesting issues.  For example, since at least the late 1980s, almost all terrestrial radio stations have used digital copies stored on servers to originate performances; i.e., the days of “disc jockeys” spinning vinyl have been gone for decades.  Presumably, under Flo & Eddie’s complaint, these terrestrial radio broadcasters needed a license to make copies of Pre-72 recordings and, potentially, to perform them.

Terrestrial radio stations have been simulcasting performances over the internet for nearly 20 years, presumably implicating the right of performance by digital audio transmission that Flo & Eddie allege exist under certain state laws for Pre-72 recordings.  Has SoundExchange, which collects and distributes royalties under certain statutory licenses for the public performance of sound recordings by digital audio transmission, been collecting royalties from these terrestrial radio broadcasters and remitting such payments to Pre-72 artists?  Because federal copyright doesn’t apply to Pre-72 recordings, if SoundExchange were collecting such royalties it would owe the terrestrial radio simulcasters a refund. If SoundExchange hasn’t, why hasn’t Flo & Eddie sued terrestrial radio?

Flo & Eddie will undoubtedly respond that they had no way of knowing that they weren’t getting paid by Sirius XM until the most recent Copyright Royalty Board proceeding, at this pre-72 recordings were a significant issue.

[The allegations raised by SoundExchange against Sirius XM that Sirius XM was inappropriately deducting revenue from its royalty calculation to account for Pre-72 recordings are inapplicable in the context of a per-song royalty, where each Pre-72 recording can be identified and appropriately excluded from royalty calculations.  Per-song royalties have existed since at least 2008.]

The motion is here.

Athletes and Tattoos

In the aftermath of the copyright infringement litigation involving Hangover 2 and Mike Tyson’s face tattoo, the NFL Players Association is apparently urging players to obtain releases from tattoo artists to prevent future infringement actions.

According to this article in Forbes, the NFLPA is worried that this current batch of heavily inked players – some of whom use their art as their image – will encourage tattoo artists to sue the NFL, advertisers or video game makers for unauthorized reproduction of their art.

Bamboozled! UMG’s Inter-Company Accounting At Issue

The legal battle between brothers Mark and Jeff Bass, the Detroit producers credited with grooming rapper Eminem in his early days, and Aftermath Entertainment, the American record label founded by Dr. Dre and distributed through Universal Music Group’s Interscope Records, has grown to include the inter-company accounting practices of large, multinational record labels.

History

A brief history is in order.  The Bass brothers, working under their nom de rap Funky Bass Team a.k.a. F.B.T. Productions, signed fellow Detroiter Marshall Mathers (a.k.a. Eminem), to a recording contract in 1995.  In 1998 and 2000, F.B.T. signed agreements with Aftermath to (first) distribute and (later) own all of Eminem’s sound recordings in exchange for between 12% – 20% of the retail price of copies of Eminem’s records sold (“Records Sold” provision) or 50% of the net revenue Aftermath obtained by licensing Eminem’s master recordings (“Masters Licensed” provision).

[Side Note: It is quite common in recording contracts for royalties paid on records sold to be lower than royalties paid of masters licensed; see, e.g., here.]

When an audit of Aftermath revealed that F.B.T. was receiving royalties for permanent downloads and ringtone sales under the Records Sold provision (and not the more lucrative Masters Licensed provision), F.B.T. filed suit in 2007.  After a jury found that Aftermath had been correctly accounting to F.B.T. (i.e., digital downloads were Records Sold), F.B.T. appealed.  The 9th Circuit reversed and held, as a matter of law, that digital downloads and ringtones were licensed to various third parties such as iTunes who, in turn, distributed over the Internet.

The agreements also provide that “notwithstanding” the Records Sold provision, F.B.T. is to receive a 50% royalty on “masters licensed by [Aftermath] . . . to others for their manufacture and sale of records or for any other uses.” The parties’ use of the word “notwithstanding” plainly indicates that even if a transaction arguably falls within the scope of the Records Sold provision, F.B.T. is to receive a 50% royalty if Aftermath licenses an Eminem master to a third party for “any” use. A contractual term is not ambiguous just because it is broad. Here, the Masters Licensed provision explicitly applies to (1) masters (2) that are licensed to third parties for the manufacture of records “or for any other uses,” (3) “notwithstanding” the Record Sold provision. This provision is admittedly broad, but it is not unclear or ambiguous.

The 9th Circuit remanded the case back the Central District of California for a trial on damages, which was supposed to begin in April, 2012.

[Another Side Note: If you wonder how Richard S. Busch, a commercial litigator from Tennessee, ends up representing the Bass brothers, I have a theory.  Busch represented Bridgeport Music, a publishing company that owns or controls much of the catalog of George Clinton, and Westbound Records, a record company that released several albums of Clinton’s famous funk band Funkadelic, in a series of cases in the Middle District of Tennessee over alleged unlicensed sampling.  In a controversial landmark decision, Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), the 6th Circuit held that the unlicensed use of a two-second guitar chord from Funkadelic’s song “Get Off Your Ass and Jam” in gangster rap group N.W.A.’s song “100 Miles and Runnin’” constituted copyright infringement.  In its decision, the 6th Circuit wrote: “Get a license or do not sample. We do not see this as stifling creativity in any significant way.”   It turns out that prior to working with Eminem, Mark and Jeff Bass worked as a production team for George Clinton and his label Westbound Records.]

Present Dispute

The present dispute involves whether F.B.T. can supplement the complaint they filed in 2007 on the eve of a second trial, which was to commence on April 24, 2012.  F.B.T. claims that Aftermath’s expert report, served on February 7, 2012, revealed for the first time that Aftermath was receiving only 29% of the revenue generated from foreign sales of downloads and ringtones under an inter-company agreement with its foreign affiliates.  Because under the 9th Circuit’s decision Aftermath is to pay F.B.T. 50% of revenue (under the Masters Licensed provision), it makes an enormous difference whether that calculation includes 100% of revenue generated by the foreign sales or just the 29% of revenue Aftermath recognizes on its books.

In opposing F.B.T.’s motion for leave to file a supplemental complaint under FRCP 15(d), Aftermath argued, in part, that a prior partial summary judgment ruling had already decided the issue of foreign revenue.  In rejecting Aftermath’s argument, Judge Gutierrez noted that

Defendants largely rely on a single sentence from their summary judgment brief for the proposition that the issue they wanted determined was clear: “In audits conducted post-dating the trial, F.B.T. has contended it is entitled to 50% of what is received by any company affiliated with Universal Music Group, anywhere – including 50% of the ‘receipts’ of foreign distribution companies.” Mem. ISO Defs. Mot. for Summ. J., 20:21-25. In light of Defendants’ current position on revenue sharing with foreign affiliates, the import of this sentence now seems clear. However, at the time, FBT did not seem to understand the reference. In opposition, FBT stated in a footnote that the “significance of this sentence is not clear.” Opp. to Defs. Mot. for Summ. J., Dkt. # 710, at 17:24-28 n.11.

Judge Gutierrez went on to complain

[The] Court is deeply troubled by Defendants’ argument. While it is hard to see what FBT could gain by feigning ignorance, it is now quite apparent what Defendants could hope to gain by bamboozling the Court and Plaintiffs on this issue. Defendants’ current stance makes it appear as though Defendants carefully inserted the issue into the motion for summary judgment before they had notified FBT or the Court of what percentage of the revenues from foreign sales of permanent downloads and mastertones would be paid to FBT. An attempt to dupe the Court into a premature ruling will not serve as the basis to deny FBT an opportunity to challenge Defendants’ accounting practices.

So, F.B.T. now has until July 6 to filed its amended complaint.  The parties will then get to conduct further discovery on the issue of inter-company accounting.  Looks like a trial won’t be happening until the end of this year or early next.

Judge Gutierrez’ opinion is below:
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Brilliant Article DMX’s Rate Cases against ASCAP and BMI

I ran across the below article by Carly Olson, a 3L at Northwestern, about DMX’s rate proceedings against ASCAP and BMI.  Ms. Olson wisely (and prophetically) concludes that the Second Circuit should affirm the district court opinions in DMX’s favor.  I couldn’t agree more.  And, thankfully, neither could the Second Circuit!

Check out the article here.

What Can Mr. Brainwash Teach Us About Girl Talk?

Thierry Guetta, a/k/a Mr. Brainwash, is back in court for allegedly using photographs of famous musicians without authorization.  This time, however, he’s managed to drag Google into his mess.

By way of background, Guetta was sued in 2010 in the Central District of California by Gene Friedman, a photographer who took one of the most iconic photographs in hip hop, featuring Run DMC:
Guetta made several derivative works, which he commercialized on t-shirts and postcards, including:

and

To create the Broken Records Work, Guetta caused a digital image of the Photograph to be altered so as to remove most of the detail from its subjects, leaving an outline of the group’s features. … Guetta then had the image projected onto a large piece of wood and painted the image onto the wood.  Thereafter, Guetta glued more than 1,000 pieces of broken phonograph records onto the painted wood. The result was a three-dimensional image of Run-DMC created entirely from broken records. (Defendant’s Motion for Summary Judgment)

and
Guetta claimed that his derivative works were either transformative (and, therefore, fair use under § 107) or did not use copyrightable portions of Friedman’s original (and, therefore, could not constitute infringement).

In this case, the District Judge disagreed with Guetta.  Regarding the question of whether the portions of the photograph copied were copyrightable, Judge Pregerson concluded the Friedman “selected and arranged the subjects. Although the court believes that no more is
required, the court also notes that [Friedman] made related decisions about light and shadow, image clarity, depth of field, spatial relationships, and graininess that were all represented in the copyrighted Photograph. [Friedman] also selected the background
and perspective of the Photograph, and all of these particular artistic decisions commulatively result in the Photograph.”  Having found the photo copyrightable, Judge Pregerson quickly concluded that Guetta had, indeed, infringed Friedman’s copyright.

Regarding Guetta’s claim that his use was fair because the works were transformative, Judge Pregerson again disagreed, concluding that “[Guetta] has not offered a transformative alternative use of the Photograph image. Both [Friedman] and [Guetta] are artists, and the image was used by both in works of visual art for public display. Although the statements made by those respective artworks and the mediums by which those respective statements were made differ, the use itself is not so distinct as to render Defendant’s use a transformation of Plaintiff’s copyright.”

Judge Pregerson’s opinion is below.

Now, Guetta finds himself a defendant again, this time being sued by the estate of James Marshall for allegedly doing exactly the same thing with Marshall’s photographs as he did with Friedman’s; i.e., taking the photo and manipulating it to look different, while still being able to recognize the artist-subject matter. (Marshall v. Guetta, 12-cv-3423-SJO (C.D. Cal.).  So why is Google on the hook?  According to the complaint,  Google held an event to launch its music service at Guetta’s studio, where Guetta installed a backdrop using blown-up derivative works of Marshall’s photos of John Coltrane and Jimi Hendrix.

Here is a side-by-side comparison of Marshall’s original photo and Guetta’s:

The Google event at Guetta’s studio with the allegedly infringing art in the background :

And, what does all this have to do with Girl Talk?  Peter Friedman argued here that the reason mash-up artist Girl Talk has not been sued by the record labels is because the argument that Girl Talk “transformed the copyrighted materials sufficiently that his work constitutes non-infringing fair use is just too good.”  Judge Pregerson’s opinion appears to undercut such arguments.  For example, Guetta’s transformation was such that the underlying work was still identifiable (i.e., Guetta’s intent was for viewers to recognize his art as depicting Run DMC or Coltrane or Hendrix, thus capturing the essence of the original photo).  The same is obviously true for Girl Talk, who relies on listeners’ recognition of the underlying songs to make his music more popular.  Extending Pregerson’s logic, both Girl Talk and the recording artists he samples are are “artists” and though “the statements made by those respective artworks and the mediums by which those respective statements were made differ, the use itself is not so distinct as to render Defendant’s use a transformation of Plaintiff’s copyright.”

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What is Hip? Suing Your Record Label for 50% of Digital Download Revenue!

Oakland, California-based Tower of Power has filed a class action lawsuit against Warner Music Group claiming to represent a class of plaintiffs whose recording agreements entitled them to 50% of revenue for digital downloads.  According to the complaint, which is provided below,

The WMG Agreement provided a significantly higher percentage of royalties under the licensed equation than under the sold equation. In general, the sold equation provides for royalties often percent (10%) (depending on the popularity of the artist, album and price the record was sold at; i.e., the more popular the artist, or the more expensive the album, the higher the royalty rate) while the licensed equation provides for royalties of fifty percent (50%) of net receipts. As a result, a recording artist or producer is paid a significantly lower percentage of the total money received by Defendant for their commercial exploitation of the artist or producer’s master recordings under the sold equation than under the licensed equation.

While I understand the strategic play, class certification is always hard in these circumstances, as even small differences in contractual language may have important implications for the applicable royalty rate.

What is clear is that these suits are going to become more and more common.

Complaint:
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No, Seriously.

Alfred Matthew “Weird Al” Yankovic is suing Sony for $5mm.  In addition to several  audit-related claims regarding alledgedly unauthorized recoupments and/or deductions, Weird Al has joined the ranks of Eminem, the Allman Brothers, Rick James, and others in claiming that Sony should have paid 50% of revenue for digital download sales.  According to the complaint, which is provided below, Weird Al’s 2002 agreement with Sony specifies that “notwithstanding any other royalty provision …, Sony will credit [Weird Al’s] royalty account with an amount equal to fifty percent (50%) of the Net Receipts from any royalty, fee, or other payment received by [Sony] directly attributed to a Master licensed by us for use (A) in the manufacture and/or distribution of Phonograph Records.” (internal citations omitted).  According to the complaint, “Phonograph Records” is defined in his agreement with Sony as including permanent music downloads, mastertones and ringtones.

Like several other suits, this case is being brought by Richard Busch of Nashville’s King and Ballow, who has cut quite a lucrative niche for himself after winning the landmark Eminem case before the 9th Cir.

Stay tuned…

Complaint:
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Mega-Hot – Megaupload Case Sparks Disney’s Summary Judgment Against Hotfile

The ripple effects of the federal government’s criminal copyright infringement case against piratical website Megaupload and its larger-than-life founder Kim Dotcom continue.  First, Disney used the indictment in its motion for summary judgment against Hotfile and its owner

Disney’s MSJ is below:
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Then Carpathia, the hosting company that leased Megaupload more than 1,100 servers on which 25 petabytes of Megaupload files are hosted, filed a motion in the government’s suit alleging it is paying $9,000 per day to maintain Megaupload’s files. According to its motion,

The parties who have so far claimed some interest in the data on the Mega Servers include: (1) Mega, which claims to need the data preserved for its defense and so that it may be returned to its customers; (2) the United States government, which has disclaimed a need for the data but objects to the transfer of ownership of the Mega Servers from Carpathia to Mega; (3) the Electronic Frontier Foundation (the “EFF”), which claims to represent the interests of end users who have non-infringing content stored on the Mega Servers and has requested that the data be preserved in order to facilitate its return to Mega users who have not engaged in copyright infringement; and (4) the Motion Picture Association of America (the “MPAA”), which, on behalf of its member studios, asserts a copyright interest in certain data purportedly located on the Mega Servers, has requested that Carpathia preserve the data in order to facilitate potential civil claims against Mega and the other Defendants in this action, and has indicated that it objects to any transfer of the data to third-parties

Carpathia is asking the court to use its discretion “under Fed. R. Crim. P. 16 and enter a protective order either: (1) allowing Carpathia to reprovision the Mega Servers after a brief period of access has elapsed; (2) requiring one or more of the parties to this action to take possession of the Mega Servers in exchange for reasonable compensation to Carpathia; or (3) requiring any and all interested parties to compensate Carpathia for the substantial costs of transporting and continuing to maintain the Mega Servers until the conclusion of this action.”

Carpathia’s motion is below:
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Now a civil action has been filed by Microhits, which claims to own “federally registered copyrights on sound recordings featuring the musical performances of the legendary Billie Holiday, Nat King Cole, Marvin Gaye, Frank Sinatra, AI Martino, Donny Hathaway, Rod Stewart, Muddy Waters, Howlin’ Wolf, Lightnin’ Hopkins, Junior Wells, Nina Simone, Louis Armstrong, Jerry Lee Lewis, Herbie Mann, and Bob James as well as such well-known modern artists as Missy Elliott, Christina Aguilera, Vanessa Hudgens” and Valcom, which claims to own “federally registered copyrights which includes feature films and television programs starring Denzel Washington, Bill Murray, Jackie Chan, Charlton Heston, Ronald Reagan, George C. Scott, Martin Sheen, Judy Garland, Bela Lugosi, John Carradine, Roy Rogers, Richard Chamberlain, Martin Landau, January Jones, Ryan Seacrest and many others.”  The plaintiffs are represented by the law firm Dunlap, Grubb and Weaver, the infamous plaintiff’s firm that brought mass John Doe lawsuits against BitTorrent users.

The Complaint is below:
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Kew-kew-kew-kew! Roscoe’s Owner Personally Liable for $204,000 Judgment for Unlicensed Public Performance

The Ninth Circuit, in an unpublished opinion, has affirmed a Central District of California’s granting of summary judgment in favor of music publishers whose works were publicly performed without proper license.  Range Road Music, Inc. v. East Coast Foods, Inc., 10-55691 (9th Cir., January 12, 2012).  The facts of the case are straightforward and similar to hundreds of other cases publishers bring against small businesses each year for unlicensed public performance.  In May, 2008, an investigator visited Roscoe’s House of Chicken & Waffles in Long Beach, California.  The investigator heard a band perform at least 4 songs and a DJ play another 4 songs from CDs.  Roscoe’s failed to obtain the necessary public performance licenses to perform these songs and the publishers filed suit for copyright infringement.

The defendants in this case, East Coast Foods, Inc. and Herbert Hudson, argued that the allegedly infringing performances actually occurred at The Sea Bird Jazz Lounge, which is located at the same address but operated as a separate business and owned by a separate company, Shoreline Foods, Inc..  Hudson, the sole officer and director of East Coast Foods and President of Shoreline Foods, was sued in his individual capacity.

The plaintiff publishers argued that East Coast Foods and Hudson were vicariously liable for the copyright infringement that occurred at The Sea Bird.  A defendant can be vicarious liable for copyright infringement if he “exercises the requisite control over the direct infringer and … derives a direct financial benefit from the direct infringement.” (at p. 5).  The District Court found that Hudson, as the sole officer and director of East Coast, did control the premises where the infringing performances occurred and did derive a financial benefit through the sale of food and liquor and was, therefore, vicariously liable for the copyright infringement that took place at Roscoe’s / Sea Bird.

In total, the District Court awarded the plaintiff publishers $203,728.22, which included $4,500 for each of the 8 infringements ($36,000) and attorneys’ fees and costs in the amount of $167,728.22.  Because he was found vicariously liable, Mr. Hudson is personally responsible for satisfying the entire $204,000 judgment.

The Ninth Circuit opinion is here:
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The District Court’s granting of summary judgment is here:
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The District Court’s award of fees is here:
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Mega Uploaded! Feds Shutter Site and Arrest Dot Com!

Regular readers will recall my recent post about Megaupload Ltd. v. Universal Music Group, Inc., 11-cv-6216-CW (N.D. Cal. Dec. 16, 2011), in which the alleged piratical website operator Megaupload moved ex parte for a temporary restraining order against record label UMG for “sabotaging [Megaupload’s promotional video] campaign through abuse of the notice and takedown procedures of the” DMCA.

Apparently, the Depart. of Justice has already made up its mind about Megaupload, filing a five-count indictment–including allegations of copyright infringement, conspiracy to commit money laundering and racketeering–and having four employees arrested in New Zealand, including Kim Dotcom, Megaupload’s outspoken leader.  Although Megaupload is headquartered in Hong Kong, some of the alleged pirated content was hosted on leased servers in Ashburn, Va., which the Feds used to claim jurisdiction in the Eastern District of VA.  The website, which claimed to have 50 million daily users and ranked in the top 20 most visited websites, was shuttered as well.  Visitors to the site were greeted with the following:

The Indictment is here
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