SESAC Can't Escape Antitrust Claims

Meredith Corp. v. SESAC LLC, No. 09 Civ. 9177 (PAE)., 2014 BL 57263 (S.D.N.Y. Mar. 03, 2014).

The issue in this putative class action is whether SESAC's licensing practices since 2008 have violated federal antitrust law. Plaintiffs are groups of local television stations.  They sue SESAC aand allege that, in practice, they must obtain licenses for some music in SESAC's repertory. That is because SESAC's repertory is large and includes works so ubiquitous that some are inevitably embedded in shows that the stations acquire and wish to air.  Plaintiffs contend that, since 2008, SESAC, with its affiliates' assent, has taken steps to make illusory any alternative to the blanket license it sells, which conveys the right to play the music of all SESAC affiliates.  Having insulated this product from competition and forced local television stations to acquire it, plaintiffs allege, SESAC has set an exorbitant price for that "all or nothing" license, even though stations have no interest in buying the rights to the entirety of SESAC's repertory. Plaintiffs assert that SESAC and its affiliates have thereby violated § 1 of the Sherman Act, 15 U.S.C. § 1, by combining to unlawfully restrain trade; and § 2 of the same Act, 15 U.S.C. § 2, by conspiring to monopolize the market for the performance rights to the musical works within SESAC's repertory.  Plaintiffs also assert a monopolization claim against SESAC under § 2.

SESAC moved for summary judgment. The Court denied the motion as to all three counts, except that on the § 1 claim, the Court granted summary judgment to defendants in two ways that narrowed that claim. Specifically, the Court rejected plaintiffs' (1) per se theory of liability; and (2) claim of an agreement to restrain trade among all 20,000-plus SESAC affiliates, as opposed to among only the far smaller subset (under 1%) of affiliates who were party to a supplemental affiliation agreement with SESAC.

The Court first reviewed the history of antitrust litigation involving the PROs' licensing practices. The Court then considered the § 1 claim, assessing whether (1) the conduct plaintiffs assail is amenable to per se condemnation; (2) there is adequate evidence of concerted action among SESAC's affiliates to restrain trade; and (3) the evidence would support a conclusion that the anti-competitive effects of SESAC's conduct outweighed its pro-competitive tendencies, i.e., whether a jury could find harm to competition. The Court then considered the § 2 claims, addressing first the monopolization claim and then the claim of a conspiracy to monopolize.

Publisher Not Liable For Contributory Liability In Sampling Case Because Lacked Knowledge

Prior v. Warner/Chappel, No. 13-4344 (C.D. Cal. Feb. 20, 2014).

The court dismissed plaintiff's contributory copyright infringement claim against defendant music publisher because the complaint failed to allege the defendant "knew or had reason to know that [the song] included an unauthorized, infringing sample...".  Moreover, the complaint failed to plausibly allege how the defendant knew that the directly infringing defendants would infringe as a result of the publisher's licensing of the song.

NAPSTER Trademark Action Continues In California

Rhapsody Int'l, Inc. v. Lester & Napster.fm, Index No. C 13-05489 CRB (N.D. Cal., Feb. 24, 2014).

The Court denied defendants' motions to dismiss the trademark infringement case, concerning the mark NAPSTER, for failure to state a claim, lack of jurisdiction and improper venue.  The Court found that plaintiff stated a claim for trademark infringement, dilution, cybersquatting, unfair competition, and unfair business practices.  The Court also found that plaintiff made a prima facie showing of personal jurisdiction, and that transfer to Virginia for defendants' convenience was insufficient to warrant transfer.

Blacked Eyed Peas Not Liable For Infringement In Absence Of Access And Lack Of Similarity

Pringle v. Adams, No. 12-55998 (9th Cir. Feb. 21, 2014).

The 9th Circuit affirmed summary judgment for the defendants -- the Black Eyed Peas and related parties -- in a copyright infringement case.  The Court found: "The evidence in support of Plaintiff, however, raises only the barest possibility that Defendants had access to [the song], and Plaintiff does not argue that there is a 'striking similarity' between [the song] and Defendants’ allegedly infringing work."  The 9th Circuit also affirmed sanctions against plaintiff for violating a court order regarding service of process on one of the defendants.

Cross-Border Licensing In Europe One Step Closer To Reality

BNA reports that the European Parliament approved (by a vote of 640-18 with 22 abstentions) a system that will allow online music services to get licenses that cover multiple EU member states.  Currently, licensing rights must be obtained in each of the EU member states.  Further approval is required before becoming law.

11th Circuit Clarifies Author's Standing When Publisher Registers Copyright As Author's Assignee

Smith v. Casey, No. 13-12351 (11th Cir. Jan. 22, 2014) (decision here).

At issue in this appeal is whether the author of a musical composition who assigned his rights in exchange for royalties may rely for purposes of standing to sue for infringement under the Copyright Act on a registration his publisher filed.  The 11th Circuit found that the lower court erred in concluding that the estate lacked statutory standing to sue for copyright infringement.

The basic facts are this.  Around the same time a song called "Spank" was recorded, Harrick Music, Inc. (Harrick Music), a publishing company affiliated with the record label Sunshine Sound, registered a copyright for the musical composition “Spank,” identifying Smith as composer and itself as claimant.  Harrick Music checked a box on the registration indicating the song was not a composition made for hire.  In the ensuing years, Smith acquiesced in Harrick Music’s administration of the “Spank” composition copyright, but, he alleged, the company never remitted a cent to him. According to the complaint, neither did Sunshine Sound. Under Smith's Recording Agreement with Sunshine and the form songwriter’s agreement attached to it,
however, Smith was owed percentage royalties for the song’s exploitation in exchange for assigning his rights to it. So on November 28, 2011, shortly before his death, Smith through counsel sent a cease-and-desist letter revoking Harrick Music’s authority to administer “Spank.” And Smith also filed with the Copyright
Office four Notices of Termination, seeking to formally record his revocation. Despite this, the defendants continued to commercially exploit the composition, and thereafter Smith's estate sued for infringement of the composition (not the sound recording).

Two defendants (not Sunshine or Harrick) moved to dismiss, and the district court concluded Smith lacked statutory standing to pursue his copyright claim and sua sponte dismissed that count with prejudice as to all of the defendants.  Harrick Music, not Smith or his estate, had registered the copyright, the district court noted, and registration was a necessary precondition to filing suit for infringement.

On appeal, the 11th Circuit first examined sections 411 and 501 of the Copyright Act: "The 1976 Copyright Act’s legislative history explains that Congress intended 'beneficial owner,' as the term is used in § 501(b), to 'include . . . an author who had parted with legal title to the copyright in exchange for percentage
royalties based on sales or license fees.'"  Continuing,

Under this definition, the estate has a sufficient ownership interest for standing under § 501(b). According to Smith’s allegations, he never signed any agreement giving Harrick Music the right to exploit the “Spank” copyright. But even were we to treat Smith’s agreement to permit Sunshine Sound to execute the form songwriter’s contract appended to his Recording Agreement as acquiescence to its terms for the “Spank” composition, Smith still would only have assigned his rights to the musical composition in exchange for royalties. Thus, he has at least a beneficial interest that satisfies § 501(b) of the Copyright Act.

The twist was that Harrick, not Smith, had filed the registration.  Nonetheless, the 11th Circuit found that "The district court’s construction of § 411(a) was too narrow. Harrick Music registered a claim to copyright in the 'Spank' composition, specifically identifying Smith as the composer and informing the Copyright Office the work was not made for hire. Nothing in § 411(a) indicates that a composer who has agreed to assign his legal interest in a composition, along with the right to register it, in exchange for royalties, may not rely on the registration his assignee files. Where a publisher has registered a claim to copyright in a work not made for hire, we conclude the beneficial owner has statutory standing to sue for infringement."  (Emphasis added).

Although the 11th Circuit reversed on the standing issue, it found that the District Court properly dismissed plaintiff's declaratory judgment claim.

Summary Judgment Denied Where Question Of Fact Concerning Plaintiff's Interest In Song

Mayimba Music v. Sony Corp. of Am. et al., No. 12-cv-1094 (S.D.N.Y. Jan. 16, 2014) [Doc. 30].

The Court denied defendants' motion for summary judgment, finding that Plaintiff just "barely" had an issue for the jury, to wit: whether Plaintiff, alleged assignee of the song, still maintained an interest in the copyrighted song, which Plaintiff alleged was used without its permission in a song ultimately recorded by Shakira.  There was conflicting testimony and documentary evidence.