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The U. S. District Court for the Southern District of New York ruled against LimeWire and its parent company, Lime Group, finding them liable for inducement of copyright infringement based on the use of their service by subscribers. 

U.S. District Judge Kimba Wood issued the 59-page decision Wednesday, siding with the 13 record companies that sued Lime Wire LLC and founder and Chairman Mark Gorton through the RIAA claiming copyright infringement and unfair competition.lime_220x147

In finding the company liable, Wood opined that LimeWire had optimized its application to "ensure that users can download digital recordings, the majority of which are protected by copyright," and that the company actively "assists users in committing infringement."  Wood also found that the defendants knew their technology was being used to download copyrighted tunes and took no "meaningful steps" to prevent the infringement. In addition, Lime Wire marketed its software to people "predisposed to committing infringement" and assisted those people, the judge ruled.

Major labels, as represented by the RIAA, were predictably thrilled with the outcome.  "This definitive ruling is an extraordinary victory for the entire creative community.  The court made clear that LimeWire was liable for inducing widespread copyright theft," RIAA chairman and CEO Mitch Bainwol relayed.

Lime Wire Chief Executive George Searle issued a statement saying the company "strongly opposed the court’s recent decision."  The statement continued:

"Lime Wire remains committed to developing innovative products and services for the end-user and to working with the entire music industry, including the major labels, to achieve this mission," Searle said.

Searle did not say whether Limewire would appeal the ruling.

The Recording Industry Association of America proclaimed the decision was "an important milestone" in the battle against online copyright infringement, because Gorton was found personally liable, in addition to the company of which mitch-bainwol-riaa he was the chairman.  Personal liability against a corporate director is rare.

"The court has sent a clear signal to those who think they can devise and profit from a piracy scheme that will escape accountability," Mitch Bainwol, chairman and chief executive of the RIAA, said in a statement.

LimeWire, launched in 2000, is one of the largest remaining commercial peer-to-peer services left on the Web. The company claims to have more than 50 million monthly users.  The company has managed to defend itself against major label legal action for years.  

In issuing her opinion, Wood relied heavily on the 2005 Grokster ruling, in which the Supreme Court said that a file-sharing service was liable when customers were induced to use it for swapping songs and movies illegally.  The test established by the Supreme Court in MGM v. Grokster for provider liability is whether the company actively induced users to commit infringing activities.  While LimeWire argued that it did not, Judge Wood noted that the company actively  “markets LimeWire to users predisposed to committing infringement.”

The record companies that sued Lime Wire included Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers.

By guest author, Cory Greenwell, Esquire*

“The customer is always right” has long been a mantra of the business world. Over the last ten years, consumers within the entertainment and software industries have begun to demand instant access to products off all types. Products such as the Apple iPod®, Sony PSP® and the Amazon Kindle® among countless similar products have created an ever-increasing demand for instant access to media content. As a result, the increase of digital distribution of media content has grown, with iTunes alone accounting for more than $5 billion dollars in the US and the industry continues to grow. As a direct result of the increase in volume of the digital distribution of media content, the distribution of physical media, such as compact discs that are customarily subject to sales tax fell sharply in 2007. The paradigm shift has resulted in a major sector of the entertainment industry acquiring virtually tax-freConstitution2e status or consumers.

In the 1992 landmark decision in Quill v. North Dakota, 504 U.S. 298 (1992), the court found that states cannot require out-of-state retailers to collect taxes from customers who live in states where the retailer does not have a related physical presence or “substantial nexus”. The basis for the decision was to give a “safe harbor” for businesses wishing to avoid the burdens of complying with the numerous state tax laws by transacting business online.

Seventeen states, including Tennessee, have updated their tax code and now impose a tax on digital downloads. The legality regarding the taxation of digital media appears to have been resolved in favor of taxation. After Quill, the responsibility rests on the individual consumer to report the transaction on their annual tax return and pay the appropriate amount of sales tax. Some reports indicate that nationwide state and local governments will have lost more than $500,000,000 in uncollected taxes by 2011.

The court in Quill recognized the importance of the emerging e-commerce sector and declared that alternative means to require retailers to collect sales tax, namely that 1) Congress may require retailers to collect sales tax or 2) States may require retailers to collect taxes provided that Congress has provided a mechanism by which to reduce the burden of retailers to comply with the tax laws of the several states.

Since the Quill decision, twenty-two states including Tennessee have joined together under the “Streamlined Sales Tax Agreement” to create a uniform tax code to reduce the burden of complying with the law of the several states. Among other things, the SSTA have created uniform rules regarding digital media. The National Conference of State Legislatures has called for Congress in its next session to review the Sales Tax Fairness and Simplification Act (H.R. 3396) which gives those states that have complied with the Streamlined Sales Tax Agreement the authority to require out-of-state retailers to collect sales tax for online purchases.

Rather than waiting on Congressional action, New York has attempted to circumvent the requirement of a physical location within the state by interpreting their law to include any “affiliate”. In the case of Amazon, affiliates include anyone who advertises on the website. This interpretation, if adopted by the several states, would negate the benefit of the safe harbor by exposing the online retailer to liability throughout the nation.

In conclusion, as the law presently stands, states may tax digital media, however it cannot require out of state retailers to collect taxes. If Congress adopts the legislation proposed by the members of the Streamlined Sales Tax Agreement as anticipated, the Quill case no longer prevents states from requiring retailers to collect sales tax.

Cory Greenwell *Jonathan “Cory” Greenwell is an intellectual property lawyer who practices in Louisville, Kentucky at the firm of Greenebaum Doll & McDonald.  Cory is the co-founder of the website Backseat SandBar and was featured on the WFPK 91.9 feature, “Off the Record.”

The interview that I gave to DigimusicTV.com is becoming viral.  Metacafe has it in three parts:

Barry Shrum Entertainment Attorney Part 1 

Barry Shrum Entertainment Attorney Part 2 

Barry Shrum Entertainment Attorney Part 3 

For those reLORiPhoneaders sporting new iPhones, Blackberrys, Windows Mobile smartphones or even for those diehard Palm fans who own Treos, Law on the Row is extremely pleased to announce that it is going mobile!  The new mobile version loads faster on smaller devices with more limited web browsers.  Just type in the following URL on your mobile device:  http://lawontherow.mofuse.mobi.  You enjoy the same great content, without some of the photos and links.  It’s a great way to keep up with articles on the road.  Enjoy!

By the way, for fellow bloggers, you can create your own mobile website using your RSS feed at www.mofuse.com.

On August 4, 2008, the Second Circuit court of appeals overturned a lower courts opinion that Cablevision’s Remote Storage” Digital Video Recorder (“RS-DVR”) system violated the Copyright Act by infringing plaintiffs’ exclusive rights of reproduction and public perfCartoon Network ormance.  The full 44-page opinion is available at Cartoon Network, LLP, et al. v. Cablevision.  In my humble yet fully animated opinion, the Second Circuit’s opinion was not at all well reasoned nor, for that matter, even common sense — I believe it misinterprets at three very important areas of the Copyright Act and interpretation thereof:

When is a work “Fixed” According to Section 101

Through a system of buffers, Cablevision’s RS-DVR will allow customers who do not own stand alone DVR’s to record programming, which resides on Cablevision’s servers, and “time-shift” it to view it at a later date.  Certainly a great concept, but one which, in my opinion, should require authorization from the owners of the copyrights. 

In arriving at its conclusion, the court determined that the buffer used to process the steam of data only “copies” the data for a duration of 1.2 seconds, before transferring it to another buffer used to reconstruct a copy of the program for any customer who has asked to view it at a later time.  The court concluded that this “embodiment,” i.e. the copy, was transitory in duration and therefore not “fixed” pursuant to Section 101 of the Copyright Act.  Therefore, the copyright owners’ right of reproduction was not violated.  This is clearly erroneous reasoning:

The definition of “fixed” in Section 101 of the Copyright Act states, in its entirety:

A work is “fixed” in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. A work consisting of sounds, images, or both, that are being transmitted, is “fixed” for purposes of this title if a fixation of the work is being made simultaneously with its transmission.

In arriving at its determination, the Second Circuit focused on its condensed version of the definition, i.e. a work is “fixed” when its embodiment “. . . sufficiently permanent or stable to permit it to be . . . reproduced . . . for a period of more than transitory duration.”  The court concluded, based on this shortened version of the definition, that the “language plainly imposes two distinct but related requirements, i.e. an “embodiment requirement” and a “duration requirement.”

The Second Circuit’s error is grammatical in nature:  it misinterprets the language of the definition of “fixed” by assuming that the phrase “for a period of more than transitory duration” modifies the words “permanent or stable” when in fact it actually modifies the antecedent phrase “permit it to be perceived, reproduced or otherwise communicated.”  This is certainly the case with regard to the RS-DVR – it fixes the copies for in sufficiently permanent state in one buffer (i.e. the 1.2 seconds) to permit them to be reproduced in another buffer for a period of more than transitory duration.  Thus, the court got it wrong.

Without getting into too much detail, the court also incorrectly analyzes a 9th Circuit cases, MAI Systems and its progeny which correctly apply the definition of fixed to a copy of a work created in RAM memory for a period of minutes.  The effect of this misinterpretation is to put legal practitioners in the precarious position of trying to determine at what point between 1.2 seconds and 2 minutes does a reproduction arrive at a “more than transitory” state.

Ironically, the Second Circuit ignores the U.S. Copyright Office’s analysis of this precise issue in its 2001 report on the Digital Millennium Copyright Act which elaborated that a work was fixed “unless a reproduction manifests itself so fleetingly that it cannot be copied, perceived or communicated.”  This clarification is in line with my earlier interpretation that the phrase “more than transitory in duration” modifies the communication or perception, not the embodiment itself.  The Second Circuit stated that, in its mind, the U.S. Copyright Office’s interpretation “reads the ‘transitory duration’ language out of the statute.”  To the contrary, however, it is the correct interpretation in that it incorporates the transitory duration requirement into the appropriate section of the definition.

Finally, the Second Circuit completely ignores the last sentence of the definition, to wit:  A work . . . is “fixed” for purposes of this title if a fixation of the work is being made simultaneously with its transmission.”  In this instance, the court readily admitted that an unauthorized copy of the work was stored, i.e. “fixed” on Cablevision’s servers simultaneously with its transmission.

When is an infringer not an infringer?

In extending recent trends by some circuits to weaken the strict liability component of the Copyright Act, the Second Court refused to find that Cablevision was a direct infringer.  Instead, it rules that the customer is the direct infringer in this instance of digital recording, showing his or her intent to make a copy when he or she presses the record button on the remote.  The court reasons as follows:

In this case . . . the core of the dispute is over the authorship of the infringing conduct.  After an RS-DVR subscriber selects a program to record, and that program airs, a copy of the program–a copyrighted work–resides on
the hard disks of Cablevision’s Arroyo Server, its creation unauthorized by the copyright holder. The question is who made  this copy. If it is Cablevision, plaintiffs’ theory of direct infringement succeeds; if it is the customer, plaintiffs’ theory fails because Cablevision would then face, at most, secondary liability, a theory of liability expressly disavowed by plaintiffs.

Emphasis mine.  The first thing to note about the court’s conclusion is that it realizes, right off the bat, that the copy created on the servers of Cablevision is an infringement.  In its mind, however, the only question is who made the copy.  Now, that, of course, flies directly in the face of a host of copyright concepts which I will not address here, but suffice it to say that this is problematic.

But, for the moment, let’s just examine how the court ultimately determines who had the “volition” to infringe in this specific case:

There are only two instances of volitional conduct in this case: Cablevision’s conduct in designing, housing, and maintaining a system that exists only to produce a copy, and a customer’s conduct in ordering that system to produce a copy of a specific program. In the case of a VCR, it seems  clear–and we know of no case holding otherwise–that the operator of the VCR, the person who actually presses the button to make the recording, supplies the necessary element of volition, not the person who manufactures, maintains, or, if distinct from the operator, owns the machine. We do not believe that an RS-DVR customer is sufficiently distinguishable from a VCR user to impose liability as a direct infringer on a different party for copies that are made automatically upon that customer’s command.

The court then continues its analysis by example, offering the examples of a retailer who owns a photocopier and rents it out to the public as reinforcement of its conclusion, finding that because the retailer would not be liable for infringement, neither should Cablevision.   Despite the fact that there is case law holding that such a retailer WOULD, in fact, be liable for infringement, the Second Circuit errs in failing to see the difference between a VCR in the analog world, a single, stand-alone device used express by the customer, and a process devised by a company which makes infringement as simple as pressing my record button on my remote.  The court does not find this a “sufficient” distinction.  The court’s error in logic is apparent in this prose when it examines a 6th Circuit case on the issue:

In determining who actually “makes” a copy, a significant difference
exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct.

Is this 2001 Space Odyssey?  Did H.A.L. take over when I wasn’t looking?  Who programmed the system?  

If this were not enough, the Second Circuit then performs a great deal of legal gymnastics to support its finding:  First, it examines the video on demand process to illustrate that Cablevision does not have control over the transmissions being recorded by theCablevision subscribers in the RS-VCR system.  Are they for real?  Ever heard of apples and oranges.  The VOD system is a fully licensed process which is, dare we say it, nothing like the RS-VCR system.  Secondly, the Second Circuit uses the distinction between “active” and “passive” infringement under the Patent Act to jump to the almost humorous, if it weren’t so wrong, conclusion that:

If Congress had meant to assign direct liability to both the person who actually commits a copyright-infringing act and any person who actively induces that infringement, the Patent Act tells us that it knew how to draft a statute that would have this effect.

Every intellectual property attorney worth his or her salt knows that the Copyright Act and the Patent Act are very limited in their usefulness for purposes of using one to interpret the other.  That’s why it’s said that the Copyright Act is a strict liability statute, whereas, the Patent Act is not so much.

When is work “publicly performed”?

The final error committed by the court is in its analysis of whether the buffered copy delivered to individual customers was “publicly performed.” In this regard, the Second Circuit concluded:

under the transmit clause, we must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is “to the public.” And because the RS-DVR system, as designed, only makes transmissions to one subscriber using a copy made by that subscriber, we believe that the universe of people capable of receiving an RS-DVR transmission is the single subscriber whose self-made copy is used to create that transmission.

Again, the Second Circuit has to do a hatchet job on the definition of “public performance” in order to arrive at this convoluted conclusion.  The definition of “public performance” in the Copyright Act is actually found in the “publication” definition of Section 101.  It states, in its entirety:

To perform or display a work “publicly” means — 

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Emphasis mine.  Whereas the Second Circuit zeroed in on the phrase “to the public” in making its determination, the definition clearly intends to define public performance as any process that allows the public, in general, the ability to receive the transmission, whether or not it is in the same place or the same time.  Its not very difficult to see the fallacy of the Second Circuit’s reasoning.   The Cablevision RS-DVR clearly does precisely what the definition anticipates, it creates multiple copies stored in the buffers for individual subscribers in multiple places, who then view the (buffered) transmissions at different times. 

While this seems simple, the Second Circuit jumps through numerous irrational hoops to arrive at the idea that:

the transmit clause directs us to identify the potential audience of a given transmission, i.e., the persons “capable of receiving” it, to determine whether that transmission is made “to the public.”

Nothing in the statute dictates this conclusion, to the contrary, the legislators probably thought that the word “public” was generic enough to not need interpretation. 

The effect of this ruling, at least for now, is that anyone can make digital copies of any copyrighted work on their servers for purposes of transmitting to an individual customer, so long as that individual customer makes a request for it, and there is no implication of the performance rights.

This is a fine example of a court “reasoning” the meaning completely out of a statute. 

Conclusion

If it is not obvious by now, I think this is one of the most poorly reasoned and drafted opinions by a Circuit Court that I have read in a long time.  If there is a bright side, it is that the effect of this decision is primarily that it overturns the grant of a summary judgement by the lower court.  From a broader perspective, however, and the more unfortunate result is that, because of the concept of stare decisis, this reasoning can now be cited in other cases in other jurisdictions across the country as good law.  So, unfortunately, we entertainment attorneys will be dealing with the negative impact of this decision for some time to come, until perhaps some higher court, in this case the Supremes, decides to rectify it.

When is the last time you heard of someone getting a really “big break” in the music industry through any contest, other than perhaps American Idol?  That’s because most artists and songwriters are not discovered through contests, they are discovered through relationships in the industry. 

Yet, there are literally hundreds of such contests out there promising thousands of dollars in prizes or a opening slot for a well-known band, or a recording label or songwriting deal — everything but the kitchen sink! 

I don not, by any means, mean to say that all contests are rip-offs.  There are, in fact, many legitimate contestsSongwriters_And_Poets_Critique in which songwriters and entertainers may participate.  I do mean to recommend, however, that you do a bit of research and exercise some good judgment prior to sending your submission off into the digital divide.

First, there are some very simple questions to ask yourself initially as you examine these “one in a lifetime opportunities.  Look at the source or sponsor of the contest.  Often times, their reputation proceeds them.  Have you ever personally heard of the contest sponsor?  What are the credentials of the sponsoring entity?  Have you read about them in any public forum such as a magazine, news article, or online resource?  What successes have they achieved in songwriting and/or the music industry, if any?  Who are the judges?  What are their credentials.  Are there any major advertising sponsorships associated with the contests?   What are the prizes?  Are they substantial?  Answers to most, if not all, of these questions can be derived through a simple online search.

Let’s say you’ve done all of the above research and determined that the contest is sponsored by none other than MTV?  To most songwriters and artists, there could be no greater sponsor than MTV, correct?  But before acting too hastily, let’s move into the second phase of analysis, i.e., taking a look at the RULES.

Now, assume that you determined that since MTV was the sponsor, it must be a great opportunity, so you jump right in with both feet, or in this case, your best demo tape!  A chance to open for a great headline act is waiting for the lucky winner!  Unfortunately, if you did not read the fine print, you just agreed to the following:

release and hold harmless Sponsor Entities against any and all claims, injury or damage arising out of or relating to participation in this Contest and/or the use or misuse or redemption of a Grand Prize and for any claims based on publicity rights, defamation, invasion of privacy, copyright infringement, trademark infringement or any other intellectual property related cause of action. . . . (emphasis added)

This language comes straight from the rules and regulations in a ongoing “Rock the Revolution” contest sponsored by mtv2.com.  See the Rules and Regulation page.  This is typical hold harmless clause, which effectively negates any rights or claims you may have otherwise had to bring a civil action against MTV in the event that you are injured as a result of the contest.

In addition, MTV also states in their terms of agreement that:

The approximate retail value (the “ARV”) of the Grand Prize is $150.00. Any difference between the ARV and the actual value, if any, will not be rewarded. If, for any reason, the Grand Prize related event is delayed, cancelled or postponed, MTV reserves the right, but is not obligated, to cancel or modify the Contest in its discretion and may award a substitute prize of equal or greater value.

This effectively means that you could end up getting only $150 as the “grand prize winner” if the concert is canceled for any reason by the headlining act.  A corollary effect  net effect is that, at most, your damages in a civil lawsuit probably would be limited to $150, the agreed retail value (i.e., by agreeing to their terms, you and MTV agreed to this amount).

Finally, by simply clicking the “I Agree” button on your web browser without first reading the fine print, you also agreed to grant MTV a non-exclusive right, among other things, to record your submission by virtue of the fact that you are a finalist?  See this clause from a real contest:

Finalists and Winner agree that by entering into this Contest they are granting  MTVN. . . the non-exclusive, irrevocable right and license to exhibit, broadcast, copy, reproduce, encode, compress, encrypt, incorporate data into, edit, rebroadcast, transmit, record, publicly perform, create derivative works of, and distribute and synchronize in timed relation to visual elements, the Submission Materials and/or any portions or excerpts thereof, in any manner, an unlimited number of times, in any and all media, now known or hereafter devised, throughout the world, in perpetuity. . . .

While this is non-exclusive license, meaning that you can issue other non-exclusive licenses to third parties, it does give MTV pretty broad rights to use your submission in almost any form they want.  This doesn’t necessarily mean that you shouldn’t participate in this contest, it is just something you should certainly understand and use in weighing your decision.

Believe it or not, this grant is pretty tame compared to the language of other contests I have reviewed for clients.  I’ve seen situations where a contestant ostensibly assigns the copyright in a song submitted for a contest to the sponsor.  So beware.  Make sure there is something in the rules that indicates that you are not transferring any rights or licenses in the submission.

These are just few examples of some of the lawyerly devices that can be utilized in the rules and regulations of a contest, particularly an online contest which a “click agreement” in place.  Before you submit your intellectual property, it is probably worth the money to pay a few hundred dollars to an entertainment attorney to advise you as to what the legal ramification are for you and/or your band.

 

There is a great deal of talk these days about the concept of “freeconomics,” spurned by the fact that most teenagers and college students are still ripping music and sharing it online.  Most recently, the major record labels commissioned a study from two think tanks, The Leading Question and Music Ally, which resulted in a five recommendations for the music industry, including “bundling” of product.  Another of the points was “Free doesn’t mean no money.”  How original.  And oh, by the way, IT DOES ACTUALLY MEAN THAT!  You can read the full article about the study here.

Dollar Bill Let me start out by observing an old adage, which still holds true in life, that you tend to “get what you pay for.”  I’ve always believed in that adage.  There is generally a direct correlation in the amount of sawbucks you shell out to the quality of the product you receive.   When I cook, for example, I use the freshest ingredients.  I spare little expense.  Sure, I try to find bargains, but if you skimp on the quality of your ingredients, you always skimp on taste.  I have always resisted the impulse to buy meat on clearance!

What about “free” goods?  Just think about how many junk e-mails you receive every day offering you a “free” iPhone, or a “free” laptop, or a free whatever. . . the list goes on and on.  Don’t you automatically just delete those?  Of course you do — because everyone knows these types of things are given out for free:  first, someone is actually paying for those goods; secondly, you have to subscribe to a certain number of paying offers in order to actually receive the “free” iPhone or laptop.  There is another adage:  nothing is life is free.   Fact of the matter is, if I wanted an iPhone, I’d go out and buy it.

Now, let’s turn our attention to “freeconomics” and honestly call it what it really is:  freakenomics!  Again, nothing in life is free. 

Nonetheless, we are lead by these researchers to examine Google and its model of giving out free software as an example of how the music industry can give away music and still achieve a profit.  This analogy is wrong on so many levels, but I’ll just point out one basic incongruity:  the software developers that are writing software for Google work for the conglomerate under a work for hire agreement – Google does not have to compensate multiple rights owners.  It owns the entire product. 

This is not so with a musical composition/sound recording combination.  That is bundle that is not so readily united.  The record label generally owns the sound recording of a musical composition, but does not always own the underlying music compositions.  There may be multiple owners of the underlying compositions which have to be compensated – multiple songwriters and multiple publishers.  The producer also must be compensated.  The musicians who play on the record have to be compensated, not to mention their union fees and retirement fund.  The engineers who work on the project are compensated. The artist has to be compensated for their performance.  The people who master the product must be compensated. 

What the simplistic – dare I say naive – five point plan laid out by the record “think tank” overlooks is that in order to accomplish the equivalent of something like a Google in the music industry, one has to completely rewrite the industry.  While this is not a new idea, it is also not an idea that can be accomplished in today’s copyright structure nor within the current orientation of the music industry.  Hundreds of years of practice have to be completed abolished for the Google model to work in the music industry.

Let’s look an entity that has actually tried to make such a paradigm shift:  MySpace.  It is most definitely the place where independent artists go to get their music heard.  The music is generally free.  How many artists have you listened to on MySpace in the last month?  I’m in the industry, and I have listened to maybe two, but only because I received a specific request to do so. 

How many artists on MySpace actually make a lucrative living doing what they are doing there?  Again, the music is free isn’t it?  Freecomonics will get us something akin to the quality of music that you find on MySpace in general.  There is no realistic way to sift the wheat from the chaff. 

The instant you stop rewarding the songwriters and artists that create the music — removing a real incentive for creating their art full time — the sooner you’ll find a void in the really high quality music.  Yes, there are some who say that artists will produce art regardless of whether they receive compensation, because that is what they do.  However, this is not historically accurate in music or any of the arts.  If you find an artist who is thriving, you will generally find a source of money, whether it be selling the artwork to a famous benefactor or having financial muscle behind him or her. 

In music, the major labels have historically been the finders and funders of the talent.  They spend a lot of money discovering, developing and marketing the talent.  For the most part, it is the major label product that gets traded on the P2P networks.  That is one factor that is often overlooked.  What the general public wants to hear, and shares on P2P, is generally the music that is marketed heavily – generally by the major labels.  That will not change until someone constructs a better way to get music heard by the public in general. 

So, I believe if you remove the economic component of music, you will ultimately eliminate the talent altogether.  Otherwise, the talented will have to get day jobs to support their art and the art will most certainly diminish and/or suffer.

Let’s turn to some of the other suggestions made by The Leading Question and Music Ally:

(1)  Music needs to be bundled with other products and entertainment packages.  They conclude that “music needs to move away from per unit sales and become more of a service than a product.”  Can we say YAWN class?  The record labels cannot break themselves of the idea that people want a package deal.  We don’t.  We want ala carte!  The sooner that the industry comes to this realization, the better off they will be.  Isn’t this what the labels have been feeding us for years?  This is but the “record album” in another iteration.  Buy this collection of 10 songs, 2 of which are what you actually want and 8 of which bite!  Come on guys, hasn’t the digital revolution taught you anything?  Wake up and smell the single downloads.  That IS what the consumer wants.  Build a model that incorporates the single download.  Don’t build a model that ignores it.

(2)  Labels needs to experiment with new release schedules and formats.  Seriously?  Again, the think tanks suggest that “single . . . releases have run [their] course.”  Ditto what I said above.  Check out the success of iTunes, emusic, Amazon, etc. etc.  Check out what happens on P2P networks when a new digital single is released.  The single is NOT a thing of the past.  Now, granted, I agree that digital only releases and new pricing models are going to be part of the new model — couldn’t any fourth graders could tell you that?  But again, people want their music ala carte.  They want good music.  They don’t want the bundles, the fillers, the parasitical crap that the industry wants to latch onto what they really want.

(3)  Change the charts.  Yes, people actually get paid to say this stuff!  The conclusion is that the charts don’t make sense anymore because fewer people are buying music.  In fairness, I understand this one to some degree. But, has anyone noticed that Billboard already tracks digital downloads?  Has anyone noticed any of the other p2p tracking devices, such as Big Champagne, just to name one.  Sure they have and so have the major labels.  In fact, that is in part where many of the researchers get their data.  No doubt, the tracking of general overall consumption should be an important factor in consideration.  While we are at it, why not pay more attention to the portion of the market called baby boomers.  The older generation that buys music, but rarely gets consulted when discussing these issues.

(4)  Trust the DJ.  Next to the CD format, the other big thing the record industry has a hard time letting go of is the radio format.  The record industry likes to control the advise given about music so that they control what the listener “wants” to hear.  The think tanks concludes that “the instant and massive availability of music on demand means you need a trusted guide like John Peel more than ever.”  I disagree with this conclusion because I believe that this “advisor model” is antiquated.   These days, most people rely more on social networking – either virtual or real — and trending algorythms to determine what music they enjoy.  I don’t know of any teenager that listens to terrestrial radio any more.  For them, a DJ is someone at a wedding reception and they are not likely to take advise from that person. 

Yet, the file sharing continues and, more importantly, so does the need for change.  Now that I have ranted a little about the suggestions made by these industry think tanks, let me say that I do, in fact, appreciate their efforts to come up with solutions to the declining music industry.  I wholly agree with what the managing director of Music Ally, Paul Brindley says in the article, that the

“business models need to change radically if the music business is to stand any chance of halting the current decline in sales.”  Without a doubt, something truly has to be done or the industry will fail.

As I heard one venture capitalist put it, for him to consider an investment in the music industry, it must be a paradigm shifting, industry changing business model.  These suggestions by The Leading Question and Music Ally just don’t quite rise to that level, in my humble opinion.  In my opinion, the ultimate solution will be a fair priced – but not free – digital download model.  The most important component that is missing thus far, and that is critical, is a means of getting the music heard by the general population.  We have many services which may be close, but as of yet, we are not quite there.

You say you want a revolution

Well, you know

We all want to change the world . . .

 

You say you’ve got a real solution

Well, you know

We’d all love to see the plan

You ask me for a contribution

Well, you know

We are doing what we can

 

But if you want money

for people with minds that hate

All I can tell is, brother, you’ll have to wait

 

Don’t you know it’s gonna be alright?

 

-John Lennon

Perhaps John Lennon said it best:  if you push people hard enough and long enough, they will revolt.  The question is, has the RIAA gone too far for too long? A recent motion filed in their case against students at the University of Maine may very well answer that question.

The RIAA named numerous “John Doe” students in their complaint in Arista Records v. Does 1-27, as is their practice in all of their lawsuits.   The RIAA’s purpose of naming the John Doe defendants is so that they may obtain an ex parte (i.e., without the other party being notified) order from the Judge requiring the targeted university to provide the various students’ name, address, and, particularly, their IP address.

Student lawyers at the University school of law Cumberland Legal Clinic have filed a motion for Rule 11 sanctions against the RIAA claiming that this practice improperly seeks to circumvent the student’s rights under the Family Educational Rights and Privacy Act, §1232g(b)(2)(B) (“FERPA”), gain publicity for its cause, and coerce students into settling for “nominal” amounts in the $3-5000 range.

Rule 11 of the Federal Rules of Civil Procedure allows sanctions against an attorney who signs a pleading without properly investigating the facts and the law and does so with an improper purpose.

The motion also questions whether the joinder of plaintiffs and defendants under the RIAA-type lawsuits is proper because the actions do not, in fact, arise out of the same transaction.  Rule 20 of the Federal Rules of Procedure provides that multiple plaintiffs can join in one action if “they assert any right to relief jointly, severally, or in the alternative with respect or arising out of the same transaction, occurrence, or series of transactions or occurrences…and any question of law or fact common to all plaintiffs will arise in the action.” Fed. R. Civ. P. 20(a).  Similarly, multiple defendants can be joined in one action if “any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transaction or occurrences . . . and any question of law or fact common to all defendants will arise in the action.” Id.  The student motion alleges that the RIAA does not, in fact, believe that all of these copyright infringements arise out of the same facts, but join together against multiple defendants for the sole purpose of trimming litigation and discovery costs.

In this case, the student lawyers are seeking more than just monetary damages under this Rule 11 motion:  they also seek dismissal of the complaint and a permanent injunction preventing the RIAA from filing “fishing expedition” type complaints against “unconnected” defendants in the future.  These types of injunctions may be applied in jurisdictions other than the one in which it was issued, so in theory such an order may be applied to thwart lawsuits in other Federal courts across the country.

This in one ruling that should be very interesting.

 

The concept of “fair use” is a very misunderstood concept.  The first common misunderstanding that people espouse is that the concept of “fair use” is a right or privilege granted by copyright law.  It is not.  Secondly, many people mistakenly believe that so long as they do not make any money from an infringing use of copyrighted material, then the use is a fair use.  This is also an incorrect assumption. 

Fair use is not a right or a privilege to be exercised at one’s whim.  Rather, the doctrine is an “equitable rule of reason” that may be used as an affirmative d

efense in a copyright infringement action.  The purpose of the rule is to balance the equities between the desire to protect and therefore encourage the creation of new ideas and the desire to encourage the free exchange of speech in the marketplace of ideas.  The tension was described by Justice Souter as “simultaneously protect[ing] copyrighted material and allow[ing] others to build upon it.”  Nonetheless, the thing to remember is that application of the fair use defense is declared by judicial fiat in the context of a copyright infringement action.  It is applied on a case-by-case analysis of the factual situation.  Thus, fair use is not a presumptive right or privilege that may be exercised by the infringing party.

There are four factors weighed by the Supreme Court in making a determination of whether a derivative work constitutes a “fair use.”  These factors are (1) the nature of the work itself; (2) whether or not the work is commercial in nature; (3) the amount of the copyright work that is used; and (4) the effect of the use on the potential market or value of the copyright at issue. Folsom v. Marsh, 9 F. Cas. 342 (C.C.D. Mass. 1841), codified at §107 of the 1976 Copyright Act.

The nature of the work refers to the “nature” of the unauthorized derivative work, not the original copyright work.  In order for such an unauthorized use of copyrighted material to be entitled to the“fair use” defense, the new creation must transform the original copyrighted material.  A “transformative work” is defined by the U.S. Supreme Court as one that “adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.”  See, Campbell v. Acuff Rose Music, Inc., 510 U.S. 569 (1994).   While all factors must be considered, this is perhaps one of the more critical factors in the analysis.  Merely modulating the pitch of a song or inverting the sequence of a chord progression would probably not be considered transformative.   A very good example of a derivative work that is transformative in nature is Alice Randall’s The Wind Done Gone, the same story as Margaret Mitchell’s Gone with the Wind, but told from the perspective of a mulatto slave who is the half-sister of Scarlet O’Hara, the main character in the original work.  See Suntrust v. Houghton Mifflin Co., 252 F.3d 1165 (11th Cir 2001) per curiam, opinion at 268 F.3d 1257.  In that case, the Eleventh Circuit extended the protection of a musical parody in Acuff Rose to the novel.

With regard to the second factor as to whether a use is commercial in nature, it should be noted that this does not necessarily mean that the new creation has to generate profits.  If the new work create a significant fan, donor and/or advertiser base, those factors tend to lead to a conclusion that it is commercial in nature.  A person simply does not have the “right” to use copyrighted works in any manner as long as no profit is generated from the use.   It is also evident that this factor does not mean that simply because a derivative use does in fact generate profits, that it is by default not a fair use.  In Acuff Rose, 2 Live Crew’s parody version of Roy Orbison’s Oh Pretty Woman had sold over 250,000 copies, yet was still considered a “fair use.”  The thing to be remembered is that this is but one of the factors.

The third factor is fairly easy to evaluate: the more material “borrowed” from the copyrighted source, the less likely the infringer is to have a “fair use” defense.  Again, another misconception is that there is a bright line test for fair use:  that a few measures of a song, a couple of lines from a poem, a few hundred words of a paragraph, or a few paragraphs from a book, are considered fair use.  This misconception has no basis in either the Copyright Act or the case law interpreting it.  It is merely folklore.  The factor, as used by the courts, is more of a sliding scale based, again, on the quantity of the material used from the copyrighted work as compared to the total material.

Finally, the last factor weighs the impact on the infringing use on the potential market and value of the copyright.  This was an integral part of the Supreme Court’s ruling in Acuff Rose that 2 Live Crew’s parody of Roy Orbison’s Oh Pretty Woman did not impact the potential market for the original.   The more a derivative work negatively impacts the potential market for and value of the copyright, the less likely it will a “fair use.”

In summary, as you may have noticed, the fair use doctrine is by no means a bright line test.  Each “fair use” defense is, by its very nature, evaluated on a case by case analysis in the context of a copyright infringement action.  Fair use is not something to be relied on as a presumptive right.

I received a call from one of my readers to address the topic of whether a songwriter has the ability to restrict the use of his or her composition in the instance it is being used in advancing a cause opposite to that espoused by the songwriter.  This was spawned, of course, by the recent allegations of Tom Scholz, lead member of the group Boston, that his 1970’s mega-smash “More than a Feeling” was being used by Mike Huckabee, whose views were oppBostonosite those held by Scholz.  It is an interesting inquiry, and one that has simple solutions, mostly based in contract law.

There are two contract concepts that are usually incorporated into standard music publishing agreements which impact this issue:  one is the concept of droit or moral rights and two is the restrictions on exploitation.  I’ll address them in reverse order.

Grant of Rights

Typically, when a songwriter assigns his copyright in a song to a music publisher, there is grant language contained in the agreement expressly establishing the rights he or she is granting to the music publisher.  In that contract language, there is typically a clause that reads something like this:

The Publisher shall have the right to administer, use and exploit all interests in the Compositions . . . provided, however, that the approval of Writer shall be required for the use of any Composition:

             (i)    in any motion picture which Publisher has actual knowledge of an “X” or equivalent rating; 

             (ii)    in any advertisement or other promotion for  tobacco, firearms or personal hygiene products; or

             (iii)    in connection with religious or political purposes.

As you can plainly see, in this instance at least, the music publisher would be contractually required to obtain the approval of the writer prior to authorizing the use of the composition in a political rally, among other things. 

If this type of language is not included in the songwriter agreement, or if the grant language included in the songwriter’s agreement is, in general, more broadly worded, then the rights of the songwriter to restrict the use of the song would be greatly impaired.

Droit or Moral Rights

The other legal concept which comes in to play, both from an historic perspective and contractually, is the concept of droit or “moral” rights, although it is important to realize up front that this concept is most often applied, in the U.S. at least, to works of visual art, not musical compositions. 

First, in connection to the copyright concept, don’t infuse the the word “moral” with the ethical connotations generally associated with in in the United States.  The use in this concept is much more in the sense of an embodiment of a type of something, i.e., the Monet painting is the moral equivalent of impressionist art.  As used in this sense, it refers to the ability of the creator of a copyright to control the “embodiment” of his work, or its “integrity.”  The French-derived word “Droit” is, perhaps, more to the point when discussing copyright:  it means “a legal right.” 

So, in the United States at least, the phrase “droit” or “moral rights” generally refers to the right of the copyright creator to prevent third parties from taking credit for, revising, altering, or distorting his or her creation, regardless of who owns the work, i.e., regardless of whether the copyright has been assigned or transferred. 

In contrast, the concept has generally received much broader application in European states.  France, for example, recognizes four moral rights: 

  1. the right of disclosure;
  2. the right to correct or withdraw works previously disclosed to the public;
  3. the right of attribution; and
  4. the right of integrity (the right to “respect” the work).

When the U.S. joined the Berne Convention, Congress attempted to bring its copyright laws into line with those of the other signatory companies by passing Visual Artists Rights Act of 1990 (VARA) codified generally at 17 U.S.C. §§106, 106A, and 113.   As implied earlier, however, this statute applies solely to visual arts and not musical compositions.  Nonetheless, the concept of droit or moral rights may be invoked when dealing with the misappropriation of a songwriter’s musical composition.

In addition to copyright law, there a several other legal concepts which may be implicated in this situation.  For example, if a person is somehow giving false attribution to a creative work, e.g., attempting to pass off an creator’s work as his or her own, that person may be liable under the concept of “unfair competition,” which is barred by the Lanham Act (15 U.S.C. §1051).  Or, if the creation is widely recognized as a work of the creator, any distortion or alteration of the creation may constitute trademark “dilution” under trade dress laws and statutes.   More generally, if authorship of a work is somehow falsely attributed, the creator may have a state action for defamation against the person responsible for the false attribution.  If a person uses the identity of an songwriter, or the compositions, for his or her own benefit without permission, a violation the songwriter’s right of publicity may have occurred.  Thus, there may be several remedies available in this type of situation.

In the US, however, it is accepted practice that if a person can waive a right, such a waiver will be in a contract.  This is no exception.  Again, there is language in most songwriting agreements which “waives all droit or moral rights” in the copyright.  Such a waiver would likely nullify any of these general legal remedies available to the songwriter.

As always, I highly recommend that any songwriter contemplating a deal with a music publisher contact a reputable entertainment attorney.

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