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).

RIAA Responds to California Joinder Ruling

In response to a California federal judge rejecting joinder of John Does 2-5 in a P2P suit filed by the RIAA, the RIAA has simply increased the number ofcases it files in California.

In the California Central District, for example, there were 19 cases filed on February 21, 2008 by the RIAA against individual Does, each numbered "1" through "19" in the caption.

Judicial economy?

[In no particular order...

John Doe # 16Case Number: 2:2008cv01181
John Doe # 4Case Number: 2:2008cv01157
John Doe # 14Case Number: 2:2008cv01172
John Doe # 18Case Number: 2:2008cv01190
John Doe # 7Case Number: 2:2008cv01160
John Doe # 2Case Number: 2:2008cv01155
John Doe # 17Case Number: 2:2008cv01182
John Doe # 11Case Number: 2:2008cv01166
John Doe # 19Case Number: 2:2008cv01192
John Doe # 13Case Number: 2:2008cv01170
John Doe # 8Case Number: 2:2008cv01163
John Doe # 9Case Number: 2:2008cv01164
John Doe # 1Case Number: 2:2008cv01154
John Doe # 10Case Number: 2:2008cv01165
John Doe # 5Case Number: 2:2008cv01158
Doe # 6Case Number: 2:2008cv01159
John Doe # 15Case Number: 2:2008cv01180
John DoeCase Number: 2:2008cv01156
John Doe # 12Case Number: 2:2008cv01168]

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.]

Big Day Out for the RIAA

With the numbers still being counted, it looks like February 21, 2008 was a big day for the RIAA, with the filing of between 28 and 34 separate John Doe law-suits in various federal courts.

Call for Information

Dear Readers,

Anyone with information regarding Roswell Records, Inc. et al. v. Marvel Studios, Inc., No. 2:08 Civ. -1136-CAS-CT (C.D.Cal. filed Feb. 20, 2008), drop us a line. It appears to be a suit involving the Foo Fighters and Marvel (of comic book fame) arising out of "substantial excerpts" of the tunes "Best of You" and "Free Me," both off the 2005 album In Your Honor, used in a teaser for the upcoming animated series Wolverine and the X-Men. But, OTCS wants details. Anyone?

Hmmm, "Foo Fighters" -- sounds like a good action-hero name, doesn't it?

Cross-Blogination

Trademark guru Marty Schwimmer's thoughts on the distribution of low marginal cost goods and services (e.g., online music).

Co-Authorship Dispute Over Composition Performed by System of a Down

In Maxwood Music Limited v. Malakian et al., case no. 1:08-cv-01730-RWS (S.D.N.Y. complaint filed Feb. 21, 2008), the assignee of copyright interests in various compositions by Casey Chmielinksi p/k/a/ Casey Chaos seeks a declaratory judgment against System of a Down members and related publishing companies.

The dispute arises out of the hit song "B.Y.O.B", the first single on the System of a Down album entitled Mezmerize, and winner of the 2005 GRAMMY Award for "Best Hard Rock Performance". (Notably, Chaos recieved a certificate from the National Academy of Recording Arts and Sciences recognizing his participation as a songwriter of the GRAMMY Award-winning song.)

The complaint alleges that Chaos and Daron Malakian, lead guitarist of the System of a Down, collaborated on an independent project entiled "Scars on Broadway", during which the two wrote approximately 14 songs. "At all times, Malakian and Chaos considered themselves the sole co-authors of 'Scars on Broadway' and each of the individual compositions written for it, including the Composition [B.Y.O.B.], and intended that they be joint authors of those musical works." (Compl. para. 14). However, the project was "put...on hold while they each returned to their own music for their respective bands." (Id. at 17.)

Unbeknownst to Chaos, B.Y.O.B. was later recorded by System of a Down and released as a single to promote Mezmerize, an album that has sold millions worldwide.

Chaos was not listed in the credits for the Single or the Album as a co-author of the Composition. Upon the release of the Album, however, Malakian's publishing company [Sony] filed a registration with the Copyright Office for the Composition that explicitly listed Chaos as an author together with Malakian.
...

Sony also registered Chaos as a co-author with the relevant public performance societies in the United States and United Kingdom that collect royalties for songwriters generated from public performances of their compositions.

(Id. at 21-22.)

Based on the above, Plaintiff (as assignee of Chaos' copyright interests) seeks a declaratory judgment that B.Y.O.B. was co-authored by Chaos and Malakian, without the participation of any other party; further, plaintiff seeks a declaration that Chaos owned (and Plaintiff now owns by virtue of an assignment) an equal and undivided 50% share of B.Y.O.B. Lastly, plaintiff seeks an accounting.

The theme from plaintiff's complaint is clear: if Chaos was not an equal-share co-author, why was he listed with both the Copyright Office and the public performance societies as a co-author?

An interesting aside - why did defendants consent to personal jurisdiction in the Southern District of New York?