Apple Succeeds In Having Certain Audio Distribution Patents Deemed Unpatentable As Obvious

Apple Inc. v. Sightsound Technologies, LLC, Related Case Nos. CMB2013-00023 and CMB2013-00020 (PTAB Oct. 7, 2014) [Papers 101 and 105, respectively].

Apple succeeded in having the PTAB hold that certain claims in patents relating to a "system and associated method for the electronic sales and distribution of digital audio or video signals" are unpatentable.  The PTAB concluded that certain claims would have been obvious based on existing publications by non-parties, pursuant to 35 USC 103(a).  However, Apple did not succeed in establishing that the claims were anticipated under 35 USC 102(a).

Judge Finds Liability In Shakira Infringement Trial

Mayimba Music, Inc. v. Sony Corp. of Am. et al., No. 1:12-cv-01094-AKH (SDNY filed 08/19/14) [Doc. 104].

This is an infringement action alleging that a Shakira song infringes the copyright in a musical composition.  After a bench trial, the Court found: (a) that plaintiff, as exclusive licensee, had standing; (b) there was no proof of laches; (c) the Shakira song was an unlawful copy of plaintiff's song; and (d) the US distributors were liable for infringement.  The next stage was determining damages, or alternatively a permanent infringement.

New Suits Against Labels

Two suits were filed yesterday in SDNY against various record labels:

Grant v. Warner Music Group Corp. and Atlantic Recording Corp., No. 13-cv-4449 (alleging violation of the Fair Labor Standards Act concerning failure to pay employees minimum wages and overtime compensation).

Slip-N-Slide Records Inc. v. The Island Def Jam Music Group, No. 13-cv-4450 (seeking an accounting, declaratory judgment and claiming breach of fiduciary duty relating to defendant's agreement to manufacture and distribute sound recordings of plaintiff's artists).

ReDigi Loses - Court Examines "Reproduction" & Distribution; Finds No "First Sale" For Digital Music

Capitol Records v. ReDigi, No. 1:12-cv-00095-RJS (S.D.N.Y filed 03/30/13) [Doc. 109].

The Court was faced with the question of whether the unauthorized transfer of a digital music file over the Internet – where only one file exists before and after the transfer – constitutes reproduction within the meaning of the Copyright Act. The Court holds that it does.  "Because the reproduction right is necessarily implicated when a copyrighted work is embodied in a new material object, and because digital music files must be embodied in a new material object following their transfer over the Internet, the Court determines that the embodiment of a digital music file on a new hard disk is a reproduction within the meaning of the Copyright Act."  Continuing, "the fact that a file has moved from one material object – the user’s computer – to another – the ReDigi server – means that a reproduction has occurred.  Similarly, when a ReDigi user downloads a new purchase from the ReDigi website to her computer, yet another reproduction is
created. It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created."

The Court also concluded that absent the existence of an affirmative defense, the sale of digital music files on ReDigi’s website infringes Capitol’s exclusive right of distribution.

The Court then considered ReDigi's affirmative defenses: fair use, and first sale.  With respect to fair use, "On the record before it, the Court has little difficulty concluding that ReDigi’s reproduction and distribution of Capitol’s copyrighted works falls well outside the fair use defense".  In sum, "ReDigi facilitates and profits from the sale of copyrighted commercial recordings, transferred in their entirety, with a likely detrimental impact on the primary market for these goods. Accordingly, the Court concludes that the fair use defense does not permit ReDigi’s users to upload and download files to and from the Cloud Locker incident to sale."

Turning to the first sale defense, the Court also disagreed.  First, the court found that "first sale" does not apply to the reproduction right, but only to the distribution right.  Second, the Court found that the music files were not lawfully made (they were unlawful reproductions) under the Copyright Act, and therefore not entitled to the first sale defense.

Third, the Court found that the first sale doctrine is limited to physical items. "Here, a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk. But to sell that song on ReDigi, she must produce a new phonorecord on the ReDigi server. Because it is therefore impossible for the user to sell her “particular” phonorecord on ReDigi, the first sale statute cannot provide a defense. Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era".  The Court did note, however, that digital music on an iPod, computer or CD would be protected by the first sale doctrine ("Section 109(a) still protects a lawful owner’s sale of her “particular” phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded. While this limitation clearly presents obstacles to resale that are different from, and perhaps even more onerous than, those involved in the resale of CDs and cassettes, the limitation is hardly absurd – the first sale doctrine was enacted in a world where the ease and speed of data transfer could not have been imagined.")

Having made those determinations, the Court then found ReDigi directly and secondarily liable for copyright infringement of Plaintiff's reproduction and distribution rights.  Summary judgment was granted in Plaintiff's favor, except on its claims relating to Plaintiff's performance and display rights and common law infringement.

Distribution, Not Only Copying, Sufficient For Copyright Claim

Marshall v. Huffman, No. 10-1665 (N.D. Cal. filed Aug. 20, 2010) [Doc. 133].

This action concerns a song recorded by Mariah Carey, and claims against Carey and a music executive for unauthorized exploitation of Plaintiff's song.  Defendant moved to dismiss, arguing that plaintiff failed adequately to allege his copyright claim, because plaintiff fails to allege that defendant “copied” plaintiff’s work, and because the allegation that Huffman “distributed” plaintiff’s copyrighted work without permission is insufficient to support the copyright infringement claim since it is devoid of supporting facts.  Defendant's was "not well taken."  The Court found that a claim for copyright infringement can be based on allegations of unauthorized distribution of a copyrighted work. See 17 U.S.C. § 106(3) (exclusive rights protected by Copyright Act include right to distribution of copyrighted work). The complaint adequately explained the facts supporting the improper distribution allegations: it alleged that defendant distributed without permission plaintiff’s song “Are You the One,” in violation of the Copyright Act.  Motion to dismiss DENIED.

Default Judgment Entered Against Distributing Agent Originally Appearing Thru Counsel

Jeepster Recordings Ltd. v. World's Fair Label Group Inc., 09 Civ. 2155, NYLJ 3/2/10 "Decision of Interest" (S.D.N.Y. decided Feb. 22, 2010).

Plaintiff and Defendant entered into an agreement under which Defendant would become Plaintiff's North American distribution agent. Plaintiff alleges that Defendant failed to meet is distribution, accounting, and sales obligations, and withheld contractually obligated royalties owed to Plaintiff.

After the action commenced, Defendant's counsel withdrew and Defendant did not obtain alternative counsel. Thereafter, Plaintiff moved for default judgment seeking to recover monies that were allegedly improperly retained in breach of the distribution agreement.

"In this case, the allegations in the Complaint, coupled with [Defendant]'s failure to retain counsel and prosecute the case, support the entering of a default judgment and a finding that Defendant is liable for breach of the distribution agreement. "

Continuing:

"Although [Defendant] initially appeared, it has failed to retain counsel and has indicated that it does not intend to. As a corporate entity, [Defendant] can only appear through counsel. [Cit. om.]. The failure to retain counsel thus constitutes a failure to appear for further proceedings. Even though default judgments are generally disfavored, [Defendant]'s conduct indicates that it had the capability to defend itself, and its withdrawal and cessation of prosccution was willful and voluntary. While [Defendant] filed an answer and conducted some discovery, it did not raise any meritorious defenses. Finally, a denial of default judgment would prejudice [Plaintiff] because it has actively pursued its claims to recover monies under its agreement with [Defendant], and has not contributed to the default."

NY State Action Re: Distribution of Music

In New York Supreme Court, New York County, plaintiff distributor of physical music formats brings contract action for failure to pay proceeds from the sales and distribution of music. Alleged damages: $416,000.

Red Distribution LLC v. Brater Myer Consulting Inc. dba Rawkus Records LLC dba Rawkus Records dba Brater Myer Consulting LLC; Brater Myer Consulting Inc. dba Rawkus Records LLC dba Rawkus Records; Rawkus Records LLC dba Rawkus Records dba Brater Myer Consulting Inc. dba Brater Myer Consulting LLC; Brian Brater; Jarret Myer. No. 08-117338; filed12/30/2008

First Sale Doctrine & MP3s: Bopaboo

Bopaboo.

A new digital music service is getting lots of attention for proposing to help consumers sell their used MP3s in much the same way people once unloaded second-hand albums.

Bopaboo has generated splashy headlines recently for coming up with what on the surface seems like a good idea. Music fans have always exercised their first-sale rights, which under copyright law, allows them to sell their unwanted CDs, tapes, and albums without permission from the copyright owner. Why can't they do the same with digital music?

Cnet article.

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.

Popcuts

A novel way to sell music online: Popcuts.

From their website:

"Every time a song you bought sells, you get a cut of the proceeds. Earlier buyers get more, so it pays to be a trendspotter."

Rolling Stone describes it as "stock market-like method to lure people toward its service."

How it works: Popcuts takes in a 10-20 percent cut of each purchase, then leaves it to the artist to decide their own percentage. From there, the rest of the earnings go towards the users’ accounts.

But currently their catalog has only 200 obscure artists and roughly 700 songs.

Coldplay Single - Free for a Week

Beginning tomorrow (4/29/08) and lasting for a one week period, Coldplay will offer at no cost on their website the first single on their new album. On May 6th, the single will be available as a conventional "pay to download" track.

Why only a one week free-trial? The free-download period coincides with the beginning of radio-release. Isn't the first week likely to be the week when demand for the single is highest?

[Billboard article.]

One More Cup of Coffee

Starbucks is "refocusing" their Hear Music and entertainment business on distribution of "digital wares".

AdAge article here.

Cell Phone Distribution Model

"Nokia will offer free 12-month access to music from artists of Sony BMG, the world's second-biggest label, to buyers of its particular music phones" [Yahoo News]

Notably, users can keep all the music they download.

Section 115

General Counsel from Copyright Office.

Amend it? " Most important musical issue for digital music distribution".

Another look at it. Look at business models of digital music distribution. Limited download v interactive streams. All implicate copies. Is that delivery as defined in scope of license? Server copies. Steaming copies.

Important because royalty judges are hearing on new rates. Novel question of law is whether interactive streaming a digital phono record delivery? No. on demand digital transmission : should they be eligible for royalty rate?

Everything depends on definition of digital phono record delivery.

Notice of proposed rule making forthcoming.

Apple and "Subscription" - In the Same Sentence?

The Financial Times reports:

Apple is in discussions with the big music companies about a radical new business model that would give customers unlimited access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices.

Called an "all you can eat" model. Who knew the record industry was turning into an Old Country Buffet?

Amazon Faces False Attribution Claim in Infringement Suit For Unauthorized Digital Downloads

In Taylor v. Amazon.com et al., No. 2:08-cv-00061-wks (D. Vermont filed Mar. 17, 2008), the core of plaintiff's claim is:

Defendants have placed on their website and have offered for sale MP3 files of the thirteen sound recordings Plaintiff created which QuiXote Music pressed and marketed [with authorization from plaintiff, pursuant to a written agreement] ... The page on Defendants' website falsely indicates the copyright in [sound recording and composition] as being "(c) 2008 QuiXote". [However,] the compact discs pressed and marketed [with written authorization] by QuiXote Music beginning in 2001 bear multiple clear indications that the copyright in [the sound recordings and compositions] belong to Plaintiff.

Nowhere on the compact discs pressed and marketed by QuiXote Music is there any representation that the copyright in Cheshire Tree Suite belongs to QuiXote Music. On information and belief, QuiXote Music has never represented that it owns the copyright in [the sound recording and compositions]. [Eds: This may explain why QuiXote, the European based manufacturer and distributor of the album, is not a party to this suit.]

Thus, notwithstanding the basic infringement allegation (unauthorized sale of the sound recording via defendants' online digital music store), the central theme of Plaintiff's complaint is a moral rights theory of false attribution. In addition to the above quoted material, the theme of a moral rights claim as central to this action is buttressed by plaintiff's allegations of "deliberate misstatement of copyright ownership", and reference to the Berne Convention as a source of protection.

Nonetheless, Plaintiff's demand for relief is limited to an injunction prohibiting Defendants "from the infringement and unauthorized use of Plaintiff's copyright."

Several Observations and Comments:

(1) Plaintiff does not specify whether the sound recordings and/or compositions are registered. Rather than list (or include as an exhibit) any SR registration number, Plaintiff merely alleges that the works "are protected under the Untied States Code, including without limitation the Copyright Act of 1976 and the Digital Millennium Copyright Act." If unregistered, Plaintiff's claim has a fatal problem (17 U.S.C. 411). (Alternatively, her demand for fees and statutory damages may be barred, 17 U.S.C. 412. Homkow v. Musika Records Inc., No. 04 Civ. 3587, N.Y.L.J. "Decision of the Day", Mar. 17, 2008 (S.D.N.Y. decided Feb. 25, 2008)). Notable, however, is the filing of an AO Form 121 mailed to the Register of Copyright pursuant to 17 U.S.C. 508. This form, entitled "Report on the Filing or Determination of an Action or Appeal Regarding a Copyright", presumably was filed with the relevant Registration Numbers, i.e., not left blank? (However, a search of the Copyright Office's public catalogue did not find any relevant SRs.)

(2) What is the process by which digital music stores obtain information regarding copyright ownership?

(3) Where is the European label? Review of Plaintiff's agreement with QuiXote Music would seem highly relevant to whether Plaintiff granted the label authorization to distribute the sound recordings in intangible electronic or digital form, e.g., MP3?

NIN: "Navigating the Digital Wilderness"

Jeff Leeds, "Nine Inch Nails Fashions Innovative Web Pricing Plan", The New York Times (Mar. 4, 2008):

Nine Inch Nails has responded to the wash of free music on the Internet, but with its own tactic: the band has uploaded tracks from its new album directly to an unauthorized file-sharing network even as it offered more elaborate versions for up to $300.
...

The band decided to offer the music with a Creative Commons license, a new type of intellectual-property copyright. It allows creators to reserve certain rights and, in effect, authorize various unpaid uses of their products. In this instance the band is allowing virtually any noncommercial use of its music.

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.]

Record Distribution Deals - Change of Ownership Clause

Regarding the Disney label's agreement with EMI for the exclusive global distribution of albums recorded by 'tween band the Jonas Brothers, Rolling Stone reports "Disney’s international distribution contract with EMI expires at year’s end, but the Company That Mickey Built is already looking into a “change-of-ownership” clause that would allow them to opt out earlier."

Though both Disney and EMI deny the rift, it is interesting that the agreement contained such a clause. Compare Bonnie Greenberg, Distribution Companies and Record Labels in 9 ENTERTAINMENT INDUSTRY CONTRACTS: NEGOTIATING AND DRAFTING GUIDE para. 167.01 form 167-1 para. 8(D), (F) (Donald C. Farber ed., 2007).

Radiohead Authorizes Unauthorized Remix of "In Rainbows"

Radiohead - again challenging industry standard! Rolling Stone reports "Amplive’s remixed version of Radiohead’s In Rainbows has finally gotten the green light from the Oxford quintet after the band initially denied its release." And from Amplive,

After a cease & desist put the breaks on Amplive's Radiohead In Rainbows remix project, the online music community reasonably wondered if the tracks would ever see the light of day. Well, here they are. While the Oakland producer/DJ acknowledges that he probably should have contacted Radiohead (who were not involved in the project) to seek approval prior to making his interpretations publicly available, an agreement has been reached between all involved parties and Amplive has been granted permission to release Rainydayz Remixes for free to the general public. Effective immediately, the eight-track record is available here.

So, to clarify. Radiohead releases an album, initially online in a pay-your-own-price scheme and subsequently in physical (traditionally priced) formats, all without label support. A remix of the album is created without authorization from Radiohead. A cease & desist letter is issued. The cease & desist letter is abandoned. The remix is distributed WITH authorization, for free, online.

Why did Radiohead change their mind and grant authorization? If the remix is distributed on-line for free, is there a licensing fee and if yes, on what is it based?