Court Partially Voids Deal Between Prince's Estate and Universal Music

In re: The Estate of Prince Rogers Nelson, Deceased, No. 10-PR-16 in the Carver County District Court June 2017.

A Minnesota judge voided a portion of Universal Music Group’s $31 million deal with Prince’s estate, ordering the estate to refund Universal Music Group’s advanced payment.

After determining that the exclusive licensing agreement made back in January included rights that were already guaranteed to Warner Bros. through previous agreements, Prince’s estate asked the court to rescind the agreement so they could ensure no overlapping occurred. The court determined that rescinding the agreement was in everyone’s best interest as opposed to long and expensive litigation. 
 

Beastie Boys & UMG Awarded Attorney's Fees In TufAmerica Copyright Action

TufAmerica, Inc. v. Diamond et al., No. 12-cv-3529 (S.D.N.Y. filed Mar. 9, 2016).

The Court awarded the Beastie Boys and their label, UMG, attorney's fees under section 505 of the Copyright Act, after they successfully defeated plaintiff's infringement claims at summary judgment.  The question at summary judgment was whether Plaintiff had standing (they did not), and the Court found that awarding fees furthered the objectives of the Copyright Act by deterring the filing and pursuit of lawsuits in which chain of title has not been properly investigated by the plaintiff.   The court reduced the Beastie Boys' lawyer's fees by 10% for some vague billing entries and duplicative work; 15% was reduced from the label's lawyer's fees based on vague and sparse entries.  Beastie Boys and UMG were also awarded costs.  The totals were:
  • Beastie Boys: approx. $591k fees, approx. $11k costs
  • UMG: appox. $234k fees, approx $8k costs

DMCA Safe Harbor Does Not Apply To Pre-1972 Recordings, N.Y. Appellate Court

UMG Recordings, Inc. v. Escape Media Group, Inc.2013 NY Slip Op 02702 (1st Dep't Apr. 23, 2013).  Decision here.  

Plaintiff is UMG, and defendant is the service "Grooveshark"  As described by the Court, "Users of Grooveshark can upload audio files (typically songs) to an archive maintained on defendant's computer servers, and other users can search those servers and stream recordings to their own computers or other electronic devices. "

In its answer, Grooveshark asserted as its fourteenth affirmative defense that pre-1972 recordings sat within the safe harbor of section 512(c) of the DMCA. UMG moved, inter alia, to dismiss that defense pursuant to CPLR 3211(b). The motion court denied plaintiff's motion, relying heavily on Capitol Records, Inc. v MP3tunes, LLC (821 F Supp 2d 627 [SDNY 2011]), in which the United States district court tackled precisely the same issue and found that the DMCA embraced sound recordings fixed before February 15, 1972.  The Appellate Court reversed.

First, the Court found that applying the DMCA to pre-1972 recordings would violate Section 301(c) of the Copyright Act.  "Had the DMCA never been enacted, there would be no question that UMG could sue defendant in New York state courts to enforce its copyright in the pre-1972 recordings, as soon as it learned that one of the recordings had been posted on Grooveshark. However, were the DMCA to apply as defendant believes, that right to immediately commence an action would be eliminated. Indeed, the only remedy available to UMG would be service of a takedown notice on defendant. This is, at best, a limitation on UMG's rights, and an implicit modification of the plain language of section 301(c). The word "limit" in 301(c) is unqualified, so defendant's argument that the DMCA does not contradict that section because UMG still retains the right to exploit its copyrights, to license them and to create derivative works, is without merit. Any material limitation, especially the elimination of the right to assert a common-law infringement claim, is violative of section 301(c) of the Copyright Act."  Continuing, the Court found "there is no reason to conclude that Congress recognized a limitation on common-law copyrights posed by the DMCA but intended to implicitly dilute section 301(c) nonetheless. ... Congress explicitly, and very clearly, separated the universe of sound recordings into two categories, one for works "fixed" after February 15, 1972, to which it granted federal copyright protection, and one for those fixed before that date, to which it did not. Defendant has pointed to nothing in the Copyright Act or its legislative history which prevents us from concluding that Congress meant to apply the DMCA to the former category, but not the latter."

Second, the Court rejected Grooveshark's argument that the very purpose of the DMCA will be thwarted if it is deemed not to apply to the pre-1972 recordings. "The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation. As stated above, it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress intended for the DMCA only to apply to post-1972 works."


Pre-1972 Recordings Subject To DMCA

UMG Recordings, Inc. v. Escape Media Group, Inc., No. 100152/2010 (Sup. Ct., N.Y. Co. July 10, 2012) (Kapnick, J.S.C.).

New York State Court holds that the "safe harbor" provisions of the DMCA extend to common law copyright claims relating to pre-1972 recordings.

Plaintiff moved to dismiss defendant's "safe harbor" affirmative defense under the DMCA [17 U.S.C. 512(c)(1)].  Section 301(c) of the Copyright Act makes clear that the copyrights of pre-1972 recordings are not protected by the federal Copyright Act, and the Court analyzed whether the DMCA may provide a defense or "safe harbor" to internet service providers facing New York State common law copyright infringement claims (as opposed to claims under the federal act).  The Court observed that only one court has considered the issue (Capitol Records, Inc. v. MP3Tunes, 821 F. Supp.2d 627, 640 (SDNY 2011), and concluded that "there is no indication in the text of the DMCA that Congress intended to limit the reach of the safe harbors provided by the statute to just post-1972 recordings."  In response to a report by the Register of Copyrights that "it is for the Courts to interpret the applicable statute and decide the issues raise by this motion.  This Court is not attempting to extend the Copyright Act to pre-1972 recordings, but, nonetheless, does find, based on the relevant language of the statutes...that the safe harbor provisions codified by section 512(c)(1) of the DMCA is applicable to pre-1972 recordings."  Accordingly, plaintiff's motion to dismiss the DMCA affirmative defense was denied.

However, the Court did dismiss defendant's affirmative defense based on the Communications Decency Act of 1996 (the "CDA") [47 U.S.C. 230].  Lastly, the Court dismissed defendant's counter-claim for violation of a New York State anti-trust statute, the "Donnelly Act" (NY General Business Law 340), but denied plaintiff's motion to dismiss the counter-claims for tortious interference with contract and business relations.

Veoh Protected By Safe Harbor; 9th Cir.

UMG Recordings Inc. et al. v. Veoh Networks Inc. et al., No. 09-56777 (9th Cir. filed 12/20/2011) [Doc. 39]

Veoh Networks (Veoh) operates a publicly accessible website that enables users to share videos with other users. Universal Music Group (UMG) is one of the world’s largest recorded music and music publishing companies, and includes record labels such as Motown, Def Jam and Geffen. In addition to producing and distributing recorded music, UMG produces music videos. Although Veoh has implemented various
procedures to prevent copyright infringement through its system, users of Veoh’s service have in the past been able, without UMG’s authorization, to download videos containing songs for which UMG owns the copyright. UMG responded by filing suit against Veoh for direct and secondary copyrightinfringement. The district court granted summary judgment to Veoh after determining that it was protected by the Digital Millennium Copyright Act (DMCA) “safe harbor” limiting service providers’ liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c). The 9th Circuit agreed, and accordingly affirmed.

"We ... hold that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one’s services could be used to share infringing material, is insufficient to meet the actual knowledge requirement under [the statute]".

UMG's Venue And Transfer Motions Denied In Digital Class Action

Rick James v. UMG Recordings, No. 11-1613 (related case No. 11-2431) (N.D. Cal. filed Nov. 1, 2011) (Doc. 34).

Plaintiffs in two related cases filed putative nationwide class actions against UMG Recordings, Inc. Plaintiffs seek to represent a class of recording artists, music producers, and other royalty participants. The complaints allege that UMG has failed to properly account for and pay its recording artists and music producers for income it has received, and continues to receive, from the licensees of its recorded music catalog for the sale of digital downloads and ringtones.

Defendants moved to dismiss for improper venue. The Court concluded that under the circumstances, it would be unreasonable to transfer the action based on the forum selection clause contained in a 1977 contract. "Assuming arguendo that the forum selection clause is valid and enforceable, that clause only governs the claims brought under the 1977 agreement. In analogous circumstances, courts have found it unreasonable to enforce a forum selection clause that applied to some but not all of the plaintiff’s claims."

Alternatively, defendant moved to transfer venue pursuant to 28 U.S.C. § 1404(a), contending
that the Central District of California is a more convenient venue. The primary dispute was whether transfer will serve the convenience of the parties and witnesses. The Court concluded that defendant had not met its burden that the case should be transferred.

Defendant also moved to dismiss plaintiffs’ claims under California Business & Professions Code
§ 17200. In both cases, plaintiffs allege that UMG knowingly breached its contracts with recording artists and music producers, and that “UMG either knew, recklessly disregarded, or should have known that its collection of income from Music Download Services and Mastertone Providers was in connection with a license agreement and the royalties payable to Plaintiff and the Class should have been accounted for and paid on that basis.” The Court concluded that plaintiffs stated a claim under § 17200, and that the questions raised by defendants’ motions are better suited for determination on a full factual record (i.e., at summary judgment).

Lastly, a third-party ("The Tubes") sought to intervene. The Court denied the motion because the proposed intervenors assert claims “parallel” to those already pending before the Court, and thus their interest are already represented. "If plaintiffs in these cases, who the Court notes are represented by the same counsel as The Tubes, believe that The Tubes should be added
as a class representative, plaintiffs may seek to amend the complaints."

Bob Marley Recordings Are Works Made For Hire

Fifty-Six Hope Road Music Ltd. v. UMG Recordings, 08 CIV. 6143 (DLC), NYLJ 1202472502152, at *1 (SDNY, Decided September 10, 2010)

"This dispute concerns the ownership of the renewal term copyrights in certain pre-1978 sound recordings embodying the performances of Jamaican reggae artist, Bob Marley (the "Sound Recordings"). The Sound Recordings were created pursuant to exclusive recording agreements between Bob Marley and the predecessor-in-interest to defendant UMG Recordings, Inc. ("UMG"). The plaintiffs—Bob Marley's widow, Rita Marley, as well as nine of Bob Marley's children (together with Rita Marley, the "Adult Beneficiaries"), and their wholly-owned company, Fifty-Six Hope Road (collectively, the "Plaintiffs")—allege that the renewal term copyrights in the Sound Recordings reverted to them under the Copyright Act of 1909 upon Bob Marley's death in 1981. Plaintiffs also assert claims for underpayment of royalties against UMG. Plaintiffs and UMG have cross-moved for partial summary judgment. For the following reasons, UMG's motion is granted in part and Plaintiffs' motion is denied."

The Court analyzed Marley's recording agreements, distinguished a Copyright Act "author" from a common-dictionary-usage "author," and after considering various factors determined that Bob Marley's recordings are "works made for hire" under the Copyright Act of 1909.

The royalties claim concerns digital downloads - the Court found that contract ambiguities precluded summary judgment

Label Defeats 'Inadvertent] Privilege Disclosure Claim

Fifty-Six Hope Road Music, Ltd. v. UMG Recordings, Inc., No. 08-cv-6143, NYLJ 2/10/2010 "Decision of Interest" (S.D.N.Y. decided Feb. 1, 2010).

Plaintiffs claim privileged documents (attorney client and work product) were inadvertently produced to Defendant by a non-party witness pursuant to a subpoena.

At the heart of plaintiffs' application was their contention that they "retained" the non-party to act as their "representative" in the litigation. In this role, plaintiffs disclosed to the non-party "numerous confidential communications" between plaintiffs and their counsel, which plaintiffs contend are protected by the attorney client privilege and the work-product doctrine. Plaintiffs maintain that the nonparty was included on these communications based on plaintiffs' "understanding and expectation" that he would keep the communications confidential.

The Court found that Plaintiffs failed to meet their burden of establishing that the privilege should apply to the documents at issue because, inter alia, Plaintiff did not demonstrate that the non-party was their representative or agent.

Denying Summary Judgment to RIAA in Veoh

In the federal case UMG Recordings v. Veoh Networks, UMG's motion for summary judgment has been denied. UMG moved for partial summary judgment determining that Veoh was not entitled to the "safe harbor" afforded by the Digital Millennium Copyright Act. The District Court disagreed.

Decision.

UMG Recordings, Inc. v. Veoh Networks, Inc., No. 2:07-cv-05744-AHM-AJW (C.D. Cal., decided Dec. 29, 2008) [Doc. 293]

Fair Use and DMCA Take-Downs

Lenz v. Universal Music Publishing, Inc., No. 07-CV-03783, 2008 BL 247967 (N.D. Cal. Oct. 28, 2008), denying defendants Universal Music Publishing, Inc. and Universal Music Publishing Group’s (collectively, “Universal”) request for certification for interlocutory appeal in a case involving an allegedly infringing YouTube video.

Although Universal sought certification of a controlling question of first impression on the issue of fair use and a copyright owner’s obligations with regard to the Digital Millennium Copyright
Act (DMCA) takedown notice procedures, the court found the question did not provide substantial grounds for difference of opinion, nor that a resolution of the question would materially advance the litigation at this stage.

[More from Bloomberg.]

The court, in an earlier decision held that the DMCA requires consideration of fair use prior to sending a takedown notice. Universal then filed the instant motion, seeking certification for
interlocutory appeal pursuant to 28 U.S.C. § 1292(b) of the issue of “whether 17 U.S.C. § 512(c)(3)(v) requires a copyright owner to consider the fair use doctrine in formulating a good
faith belief that ‘use of the material in the manner complained of is not authorized by the copyright owner, its agent or the law.’” The court denied Universal’s motion for interlocutory appeal.

Antitrust Claims Against Majors Dismissed

In re Digital Music Antitrust Litigation, No. 06 MDL 1780, 10/17/08 N.Y.L.J. "Decision of Interest" (S.D.N.Y. decided Oct. 9, 2008) (Preska, J.)

Plaintiffs sought to represent a nation-wide class of buyers of "digital music" on claims that defendant recording companies conspired to artificially fix prices on digital music (both CDs and Internet music). Defendants, the major record labels (EMI, SonyBMG, UMG, anmd Warner) allegedly fixed a high price for, and restrained availability of Internet music - by imposing the same price and use restrictions (i.e., DRM) on their sale thereof - which "buoyed" the price of CDs.

Plaintiffs' second consolidated amended complaint dismissed under the pleading standards of Bell Atlantic v. Twombly. Plaintiffs' first claim was for violation of section 1 of the Sherman Antitrust Act. The court concluded it was unreasonable to infer that defendants' adoption of DRM and parallel price arose from their membership in joint ventures that were created to distribute Internet Music. Other circumstantial evidence also did not justify an inference that defendants' parallel conduct resulted from an illegal agreement under the Sherman Act. For example, the court found there was no "antitrust record" based on investigation by government agencies, including the NY Attorney General. Nor would"mere participation in an industry trade association" yield an inference of improper inter-firm communication.

Similarly dismissed as predicated on the same allegations were state antitrust claims, consumer protection claims, and the unjust enrichment count.

Gangsta Life Style

50 Cent, UMG and several of its record labels were sued in an assault and battery action (New York Sup.Ct) for promoting a "gangsta lifestyle" by a 14-year-old boy who says friends of the rapper assaulted him.

The lawsuit was filed by James Rosemond and his mother Cynthia Reed, saying the defendants are responsible for the assault because they encourage artists to pursue violent, criminal lifestyles. Plaintiff James Rosemond was allegedly surrounded, confined, and threatened by defendants Tony Yayo, Lowell Fletcher, and Does 1 and 2 because he was wearing clothing bearing the name "Czar Entertainment."

Has there ever been a successful "violence in music/movies/video-games" suit? An obvious distinguishing aspect of this case is that Plaintiff was allegedly assaulted by the Defendants, rather than the artists merely promoting/advocating/inciting action. How is the 1st Amendment implicated?

[Cynthia Reed as mng of James Rosemond an infant under the age of 18 years v. Marvin Bernard aka Tony Yayo individually and dba G-Unit; Lowell Fletcher; Curtis Jackson aka 50 Cent individually and dba G-Unit; G-Unit Records Inc.; Interscope Records Inc.; Shady Records Inc.; Universal Music Group Inc.; Violator Records LLC; Violator Management; Chris Lighty; Does 1-2. Filed 4/9/2008; No. 08-105092]

Trade Secrets Case Against UMG (NY)

A global leader in the arts management business, IMGA, filed suit in New York Supreme Court, New York County, against Universal Music Group, International Entertainment Consultancy Services Ltd., and a Universal employee arising from a scheme by defendants to "surreptitiously: (1) misappropriate IMGA's confidential and proprietary information; (2) conspire among themselves, and with others, to unlawfully compete with IMGA; (3) wrongfully steal clients from IMGA; and (4) assist and cause others to breach their fiduciary duties to IMGA."

As alleged, IMGA and IECS entered into a written consulting agreement in March 2007 wherein IECS agreed, among other things, to advise and assist IMGA "in relation to the development and implementation of IMGA Artist's activities, operations and opportunities." The agreement contained an exclusivity clause, a non-solicitation clause (12 month duration), a non-compete clause (same), and various definitions of IMGA's confidential and proprietary information, which IECS agreed to keep "in trust for the sole benefit of IMGA" and in the strictest confidence. Additionally, the agreement contained various remedies for breach of the consulting agreement, e.g., agree that IMGA will be irreparably harmed and entitled to injunctive relief. (Can parties agree to that?)

Thereafter, IMGA alleges that IECS "surreptitiously conspired with Universal and [the Universal employee] to steal IMGA's proprietary information, business opportunities, and clients, in particular, opportunities and clients in the music, touring, event management and promoting area. Each of defendants and their co-conspirators are doing so in order to form a new joint venture by and among them that will exploit opportunities that belong exclusively to IMGA, and to unfairly gain for themselves a competitive advantage."

Based on the above, Plaintiff asserted the following causes of action:

-Misappropriation of Trade Secrets (including IMGA's proprietary and confidential nformation)
-Breach of Fiduciary Duties – including duties of loyalty and confidentiality
-Breach of Contract, to wit: IECS agreed to perform services exclusively form IMGA; IECS agreed not to furnish any services to any company during the term of the agreement; IECS failed to keep all proprietary information in trust for the sole benefit of IMGA; IECS used and disclosed proprietary information in violation of the non-disclosure provisions, and breach of the non-solicitation and non-competition clauses.
-Tortious Interference with Contractual Relations (solely against Universal and its
employee)

IMG Artists, LLC v. Int'l Entertainment Consultancy Servs. Ltd., No. 08-600549 (Sup.Ct., N.Y. Co. complaint filed Feb. 25, 2008).

Online Common Law Copyright Infringement (P2P)


In UMG Recordings, Inc. v. Veoh Networks, Inc., No. 08-600558 (Sup.Ct., N.Y. Co. complaint filed Feb. 25, 2008), major label UMG sued on-line company Veoh for common-law copyright infringement under New York law for alleged infringement of Pre-1972 recordings. "The need for New York to protect UMG's property rights in the Pre-1972 Recordings is particularly urgent because UMG's property is being taken and virallly distributed over the Internet by [Veoh]." (Compl. at 4.) Is this the first case in New York state to describe certain on-line distribution patterns as viral?

As plaintiff notes, pre-1972 sound recordings are subject to protection under New York State law. Capitol Records, Inc. v. Naxos of American, Inc., 4 N.Y.3d 540, 830 N.E.2d 250 (2005). But given that the complaint lacks any claims for copyright infringement of plaintiff's interests in post-1972 sound recordings under the federal Copyright Act, is this a test-case? Presumably, post-1972 recordings are available (e.g., synched to videos) on Veoh.

Let's examine the allegations:


Veoh's use of the Pre-1972 Recordings in violation of UMG's rights under New York law is part of Veoh's strategy to become one of the Internet's most popular and valuable 'video sharing' websites, and to thereby attract advertising dollars and tens of millions of dollars of venture capital investment and increase the value of its services...the harm that Veoh causes to UMG, including in the new, developing, and crucial Internet market, is enormous.

Veoh's website is later described as "where thousands of audiovisual works copied by Veoh are available for immediate viewing, downloading, and other forms of so called 'sharing.'"

Many of the audiovisual works on Veoh's website embody the Pre-1972 Recordings...that are synchronized with commercial works such as television programs, documentaries, and other expensive, professionally-made videos. The Pre-1072 Recordings that are embodied in the audiovisual works on Veoh's website are integral to those audiovisual works and to their appeal and popularity.

...

Veoh refuses to employ simple safeguards available to it and used by various of its competitors to avoid unlawful copying and distribution of works owned by others...

So, in sum: the alleged infringement arises out of Pre-1972 recordings synced to videos (whether such synchronization was authorized is not alleged), and Veoh is doing nothing to stop it. As the complaint alleges, "Defendants' conduct is...a classic attempt to 'reap where they have not sown'..."

In fact, the complaint uses such buzz words as "encourage, induce, and enable members" -- indicating a contributory infringement theory under state law. Thus, it appears that plaintiff is positioning this case to be the State's parallel to federal jurisprudence on P2P contributory infringement. (Grokster.) However, without 17 USC 101 et seq., Plaintiff is relying on common law copyright infringement and misappropriation, and unjust enrichment.

And being outside the scope of the federal Copyright Law, they may have valid claims for punitive/exemplary damages, in addition to profits and injunctive relief.

But, it is curious that Plaintiff's make allegations regarding Veoh's failure to apply safe-guards. Whereas defendants might have refuge in the Copyright Act's "safe-harbor" provisions (DMCA), is the same protection available under state copyright law? And if not, what leverage does that provide digital content producers in their claims against ISPs, at least with respect to pre-1972 recordings?

[Request a copy of the complaint.]

Everyday (I Have the Blues)

Last week, William "Count" Basie's testamentary trust (as successor in interest) and a number of other musical luminaries filed a complaint in New York State Supreme Court, New York County (Manhattan) against the Universal Music Group seeking both damages and equitably relief arising out of UMG's "continuous systematic and callous disregard of the plaintiff's rights." Additionally, the complaint alleges breach of contract, and the issuing of false statements "with the hope of suppressing" plaintiff's earnings (i.e., royalties). Copies of the complaint are available upon request.

[The William Basie testamentary trust as successor in interest to William "Count" Basie; the estate of Sarah Vaughan; Keep Swingin' Inc. as successor in interest to Woody Herman; Patti Page; Kitty Kallen; John Mills obo The Mills Brothers; The Claire and Lester Brown testamentary trust as successor in interest to Les Brown; the estate of Jerry Murad; the estate of Sister Rosetta Tharpe; Marcia Laine as successor in interest to Frankie Laine; Tony Martin; the estate of Benny Goodman; Dick Hyman; Richard Hayman v. UMG Recordings Inc.; Universal Music Group Inc.; filed 2/14/2008; case no. 08-600461]

Like a Rolling Stone - EMI Takes Another Hit

Billboard and Rolling Stone Magazine report:

THE ROLLING STONES, whose recording deal with EMI is approaching the end, have signed a one album deal with Universal Music for the soundtrack to the film "Shine a Light", directed by Martin Scorsese.

The band currently owns its post-1971 catalogue, but it appears the EMI was the distributor. If the Rolling Stones leave, it will be a major blow to EMI - who have recently, in addition to their other financial problems, lost two other big acts: Paul McCartney and Radiohead. The Wall Street Journal eloquently referred to the situation as a "vote of no confidence by a marquee act"

iTunes, So 5 Minutes Ago

Pepsi announced that it will offer 100 million free downloads from Amazon.com, marking a "change of teams" away from iTunes. The promotion will begin at the Super Bowl next month, and all songs will be in mp3 format (i.e., without DRM).

However, not all the majors are participating due to pricing issues, including UMG. Typically, Amazon pays labels approx. $0.70, but under the promotion record companies will be paid approx. $0.40 per song.

To quote Dave Chappelle, as Rick James "What did the 5 fingers say to [iTunes]? Slap!"