Entertainment and Media Litigation Update

The "Dancing Baby" Case—Ninth Circuit Rules That "Fair Use" Must First Be Considered Before Sending Takedown Notices Under the DMCA

Why it matters: On September 14, 2015, the Ninth Circuit ruled in Lenz v. Universal Music Corp. that, prior to sending a takedown notice under the Digital Millennium Copyright Act, a copyright holder must first evaluate whether the alleged unauthorized performance constituted "fair use." Moreover, the Court held that the failure of the copyright holder to conduct such a prior "fair use" analysis raises a "triable issue" as to whether the notice was sent in good faith. Known as the "Dancing Baby" case, the decision is being viewed as a blow to copyright holders attempting to police widespread online infringement of their works.

Detailed discussion: On September 14, 2015, the Ninth Circuit held in Lenz v. Universal Music Corp. that, prior to sending a takedown notice under the Digital Millennium Copyright Act (DMCA), a copyright holder must first evaluate whether the alleged infringement constituted "fair use," and that a failure to perform such an analysis will raise triable issues of fact as to the good faith intent of the copyright holder in sending the notice.

The Lenz case revolves around a 29-second YouTube video of two young children rocking out to the song "Let's Go Crazy" by the recording artist Prince. The video, titled "Let's Go Crazy #1," was uploaded to YouTube by the children's mother, Stephanie Lenz, on February 7, 2007. In the video, Lenz asks her then 13-month-old son "what do you think of the music?" to which he responds by bopping up and down—hence the "Dancing Baby" moniker. The facts show that, at the time Lenz posted the Dancing Baby video to YouTube in 2007, Universal Music Corp. was Prince's music publishing administrator responsible for enforcing his copyrights. As part of its enforcement measures, Universal's then head of business affairs, Robert Allen, assigned a legal assistant to monitor YouTube on a daily basis for videos that incorporated Prince's songs. When encountering such a video, Allen testified that the assistant "evaluated whether [the video in question] 'embodied a Prince composition' by making "significant use of … the composition, specifically if the song was recognizable, was a significant portion of the video or was the focus of the video." If the video met any of these "guidelines," specifically the "focus" one, Allen said that they would notify YouTube that the video should be removed. As a harbinger of things to come, the Court at this point in the recitation of facts specifically noted that "[n]one of the video evaluation guidelines explicitly include consideration of the fair use doctrine."

Determining that the Prince song "Let's Go Crazy" was indeed the focus of Lenz's Dancing Baby video, the legal assistant included it, along with over 200 other videos, in a takedown notification sent to YouTube pursuant to Section 512(c)(3)(A)(v) of the DMCA. As required by that section, the takedown notification contained a statement as to Universal's "good faith belief that the above-described activity is not authorized by the copyright owner, its agent, or the law."

After receiving Universal's takedown notification, the facts show that YouTube removed the Dancing Baby video and sent Lenz an email notifying her of that fact on June 5, 2007. Two days later, Lenz sent a counter-notification to YouTube seeking to restore the Dancing Baby video to the service pursuant to Section 512(g)(3) of the DMCA, to which Universal filed a protest (the Court again noted at this point that Universal's protest failed to mention fair use considerations). After more back and forth, YouTube reinstated the Dancing Baby video in mid-July 2007. Lenz initially sued Universal in the Northern District of California in July 2007, alleging tortious interference among other causes of action, and much legal action ensued. However, it is the cause of action in her Second Amended Complaint filed on April 18, 2008—which alleged that Universal "knowingly materially misrepresented" Lenz's infringement in its takedown notice in violation of Section 512(f) of the DMCA—that was the subject of the Ninth Circuit's opinion. The matter was certified for interlocutory appeal after the district court denied both Lenz's and Universal's summary judgment motions with respect to the Section 512(f) claim in January 2013.

In the majority opinion written by Judge Richard C. Tallman, the Ninth Circuit began its analysis by framing the Section 512(f) issue upfront, stating that it "boils down to a question of whether copyright holders have been abusing the extrajudicial takedown procedures provided for in the DMCA by declining to first evaluate whether the content qualifies as fair use." The Court concluded that they have, and held that the DMCA "requires copyright holders to consider fair use before sending a takedown notification, and that failure to do so raises a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law."

In reaching this holding, the Court first reviewed the applicable takedown and put-back provisions of the DMCA, including Section 512(c)(3)(A)(v), which requires a takedown notice to include in relevant part a statement as to the sender's "good faith belief that the use of the material in the manner complained of is not authorized by . . . the law." The Court noted that the issue of whether fair use is an "authorization under the law" for purposes of this provision is "one of first impression in any circuit across the nation," and concluded that "the statute unambiguously contemplates fair use as a use authorized by the law." As support for this conclusion, the Court looked to Section 107 of the Copyright Act, which codifies a four-step test for determining fair use and, per the Court, provides that "the fair use of a copyrighted work is permissible because it is a non-infringing use."

The Court rejected Universal's argument that fair use is an affirmative defense that excuses otherwise infringing conduct and therefore cannot be "authorized by the law," stating that "[g]iven that [Section 107] expressly authorizes fair use, labeling it as an affirmative defense that excuses conduct is a misnomer." Even if fair use were to be classified as an affirmative defense, however, the Court continued that for purposes of the DMCA, "fair use is uniquely situated in copyright law so as to be treated differently than traditional affirmative defenses. We conclude that because [Section 107] created a type of non-infringing use, fair use is 'authorized by the law' and a copyright holder must consider the existence of fair use before sending a takedown notification under Section 512(c)."

The Court then moved on to determine whether "a genuine issue of material fact exists as to whether Universal knowingly misrepresented that it had formed a good faith belief the [Dancing Baby] video did not constitute fair use," and concluded that it did. The Court made clear that this line of inquiry looked not to whether a court would find that the Dancing Baby video constituted a fair use but rather "whether Universal formed a good faith belief that it was not." The Court cited Ninth Circuit precedent to establish that a copyright holder's good faith belief in this context need only be subjective, not objective. Noting that the parties had presented opposing fact-based arguments during the summary judgment phase in the lower court as to whether Universal had the requisite good faith belief needed under Section 512(f) to send the takedown notice (Lenz said no because there was no evidence Universal ever considered fair use; Universal said yes because its procedures were tantamount to a consideration of fair use although not labeled as such), the Court held that "[b]ecause the DMCA requires consideration of fair use prior to sending a takedown notification, a jury must determine whether Universal's actions were sufficient to form a subjective good faith belief about the video's fair use or lack thereof."

The Court then examined the actions a copyright holder might take in order to justify a jury finding the existence of subjective good faith belief in this context. For example, the Court clarified that the actions "need not be searching or intensive" nor do they "require investigation of the allegedly infringing conduct." The Court stated that "[w]e are mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age" and noted "without passing judgment, that the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA's requirements to somehow consider fair use." Citing from various amicus briefs submitted by industry groups in support of Universal, the Court went on to provide a helpful road map: "For example, consideration of fair use may be sufficient if copyright holders utilize computer programs that automatically identify for takedown notifications content where: '(1) the video track matches the video track of a copyrighted work submitted by a content owner; (2) the audio track matches the audio track of that same copyrighted work; and (3) nearly the entirety . . . is comprised of a single copyrighted work.'" The Court went on to state that a copyright holder may then "employ individuals … to review the minimal remaining content a computer program does not cull."

The Court then considered two other issues raised in the summary judgment motions, which were whether at trial Lenz could (1) argue that the "willful blindness" doctrine applied in the context of Universal's "knowing misrepresentation" of the existence of its good faith belief in the takedown notice (short answer: she couldn't, based on her inability in the summary judgment phase to present evidence meeting the first threshold factor of the doctrine, i.e., evidence from which a juror could infer that Universal was aware of a "high probability" the Dancing Baby video constituted fair use; Lenz could, however, proceed on an actual knowledge theory); and (2) seek nominal damages even though her harm might be unquantifiable (short answer: she could). The Court then affirmed the district court's order denying the parties' cross-motions for summary judgment. The case, which had been stayed pending resolution of the interlocutory appeal, will now return to the district court for further proceedings.

The Court summed up its ruling as follows: "Copyright holders cannot shirk their duty to consider—in good faith and prior to sending a takedown notification— whether allegedly infringing material constitutes fair use, a use which the DMCA plainly contemplates as authorized by the law. That this step imposes responsibility on copyright holders is not a reason for us to reject it." Judge Milan D. Smith, Jr. concurred in part and dissented in part with the majority opinion, and concurred in the judgment. In relevant part, Judge Smith's dissent centers around his construing the "plain text" of Section 512(f) to prohibit a copyright holder from misrepresenting that a work itself is infringing, not, as the majority opinion held, from misrepresenting the copyright holder's diligence in forming a good faith belief about that infringement. Judge Smith also disagreed that there was any material factual dispute about whether Universal first considered fair use before sending the takedown notice—he believed it did not—and thus his view was that Universal could be found liable under Section 512(f) for "knowingly misrepresenting" the Dancing Baby video's infringement on that basis without ever having to address the "willful blindness" question.

Click here to read the Ninth Circuit's 9/14/15 opinion in Lenz v. Universal Music Corp. et al., No. 13-16106 (9th Cir. 2015).

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Google Seeks to Compel Studios to Respond to Third-Party Subpoenas in Case Against Mississippi AG Alleging Speech Suppression and Retaliation

Why it matters: On June 1, 2015, Google filed a motion in the Southern District of New York seeking to compel Fox, NBC and Viacom to comply with third-party subpoenas it had served on them in connection with litigation alleging speech suppression and retaliation that Google had brought against Mississippi Attorney General Jim Hood in the Southern District of Mississippi in 2014. The studios filed a motion in opposition on June 15, 2015, primarily claiming that the documents sought by the subpoena were irrelevant to the underlying litigation, but before any ruling on the matter the case was transferred to the Southern District of Mississippi for resolution—a hearing is currently scheduled for October 16 , 2015 before District Court Judge Henry Wingate, the judge overseeing the Google-Hood litigation.

Detailed discussion: On June 1, 2015, Google, Inc. filed a motion in the Southern District of New York against Twenty-First Century Fox, Inc., NBCUniversal Media, LLC and Viacom, Inc. seeking to compel them to comply with third-party subpoenas issued in connection with litigation it had brought in the Southern District of Mississippi in 2014 against Mississippi Attorney General Jim Hood. To briefly recap the facts of Google's underlying case against AG Hood (as set forth in Google's motion to compel): On December 19, 2014, Google filed a Complaint for Declaratory and Injunctive Relief in the Southern District of Mississippi against AG Hood alleging, among other things, that AG Hood had "violated Google's rights under the First, Fourth, and Fourteenth Amendments by pursuing a retaliatory and overbroad investigation aimed at silencing Google's protected speech and the speech of others." Google had filed its complaint after AG Hood had served it with a 79-page Civil Investigative Demand (CID), which followed his two-year effort to get Google to remove "objectionable" content (such as content encouraging sales of illegal drugs and pornography) from its search engine, YouTube and its other online services. On March 2, 2015, Judge Henry Wingate of the Southern District of Mississippi issued a preliminary injunction against AG Hood, concluding that there "was 'compelling evidence' that the Attorney General's CID was issued in 'bad faith' with retaliatory intent and that there is a 'substantial likelihood' that Google will prevail on its claims that the Attorney General was violating Google's First and Fourth Amendment rights." Judge Wingate therefore enjoined AG Hood from enforcing the CID or taking any further action against Google pending a final decision on Google's "substantially meritorious" claims. The judge also set an expedited case schedule and limited time for discovery.

This is where Fox, NBC and Viacom come in. Although not parties to its lawsuit with AG Hood, Google claimed in its June 1 motion to compel that "the architects of [AG Hood's] campaign against Google appear to be interested parties that have spent years pursuing an anti-Google agenda," including Fox, NBC and Viacom. The impetus for this claim was a December 16, 2014 article in The New York Times reporting that documents obtained by the newspaper (including some obtained through the Sony hack) disclosed that "lobbyists for Viacom, Fox, and NBC and others had been engaged in an extensive and secret anti-Google campaign with state attorneys general" as they sought to halt the distribution of pirated content online. Other press reports followed. Google cited to all of the articles to support its claims that, following the defeat of the "Stop the Online Piracy Act" legislation in 2012, Fox, NBC and Viacom, among others, began to "aggressively lobby" state attorneys general to go after Google for what they claimed was "Google's indulgence of copyright infringement." According to Google, these lobbying efforts were "funneled through various entities, most notably the Motion Picture Association of America ('MPAA')," of which Fox, NBC and Viacom are members, but also the Digital Citizens Alliance (which Google described as a "supposed consumer rights organization heavily funded by the MPAA") and lobbyists at Jenner & Block. Google claimed that "these and other parties formed a large 'AG Working Group'" that became very influential with the state attorneys general, particularly AG Hood. Press reports uncovered documents allegedly revealing that the AG Working Group "formulated a list of demands to be sent to Google by AG Hood …, actually wrote letters to Google that AG Hood sent, dictated the timing of his investigative escalations, tried to recruit other government officials to support him, and even prepared the 79-page CID at the center of the case."

Given all of this, Google claimed that it had issued "narrowly drawn" third-party subpoenas to Fox, NBC and Viacom "for information about behind-the-scenes maneuvering that fomented AG Hood's violations of Google's Constitutional and federal rights," including email and other communications that are "directly related to AG Hood's actions against Google." Google claimed that it filed the motion to compel because, to date, Fox, NBC and Viacom supposedly had "produced nothing," delayed delivery on the "few documents" they had agreed to produce and lodged "meritless" relevance and privilege claims as to the others.

On June 15, 2015, Fox, Viacom and NBC filed a motion in the Southern District of New York opposing Google's motion to compel. In it they identified themselves as "well-known media companies in the business of creating and distributing motion pictures and television shows." As such, in order to protect their investments, they admittedly "engage in a wide range of measures to curb rampant online piracy, including, among other things, issuing takedown notices to remove infringing material, initiating civil litigation around the world to enforce copyrights and obtain injunctive relief, working cooperatively and in good faith with Internet service providers, advertisers, payment processors and others to make piracy less attractive, and petitioning government officials, including law enforcement agencies, to investigate and bring civil and criminal enforcement actions related to conduct that affects their copyrighted works." With respect to Google specifically, these measures included sending "millions of takedown requests each month asking Google to remove links to infringing content from its search engine" and "exercis[ing] their rights to petition government officials regarding Google's role in facilitating and profiting from the piracy of their content." The studios argued that, to the extent that "Google paints itself as the victim of these efforts, the opposite is true." In fact, they argued, Google was the aggressor through its "unnecessary and overbroad" third-party subpoenas and motions to compel, seeking to drag Fox, Viacom and NBC as well as other content providers into the lawsuit with AG Hood—forcing them to expend time and manpower in costly discovery—and chill their exercise of the "protected First Amendment activity" of asking law enforcement officials for assistance in their piracy battle. Moreover, they argued that the sought-after documents were irrelevant to the underlying litigation with AG Hood, which principally involved questions of law (such as whether the suit is preempted by the Digital Millennium Copyright Act or other federal laws), and that even Judge Wingate questioned their relevance during the preliminary injunction proceedings, pointing out that although "'Google constantly has stated in its papers that [AG Hood's investigation] seems to have been pushed by the Hollywood industry,' the Court could not 'think of why it would be germane to a ruling by the court.'"

Much additional legal wrangling ensued, but on August 1, 2015, the Southern District of New York granted Google's motion to transfer (filed on June 4, shortly after the filing of the motion to compel) to the Southern District of Mississippi for resolution. In parallel proceedings, Google had filed a motion to compel on June 1, 2015 in the District of Columbia in connection with third-party subpoenas it had served on the MPAA, Jenner & Block and the Digital Citizens Alliance; those parties filed a motion in opposition on June 15, 2015, and, before any rulings, Google's motion to transfer those proceedings to the Southern District of Mississippi was similarly granted on August 3, 2015. As of yet, Judge Wingate has not ruled on any of the motions to compel—the hearing is currently scheduled for October 16, 2015.

Click here to read Google's 6/1/15 "Memorandum of Law in Support of Google Inc.'s Rule 45 Motion to Compel Compliance with Subpoena" in the case of Google Inc. v. Twenty-First Century Fox, Inc., NBCUnivesral Media, Inc. and Viacom, Inc. (S.D.N.Y. case closed, transferred to S.D. Miss.).

Click here to read the 6/15/15 "Memorandum of Law in Opposition to Google Inc.'s Rule 45 Motion to Compel Compliance with Subpoena" in the case of Google Inc. v. Twenty-First Century Fox, Inc., NBCUniveral Media, Inc. and Viacom, Inc. (S.D.N.Y. case closed, transferred to S.D. Miss.)

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What Constitutes a "True" Threat on Facebook? Supreme Court Takes on the Issue in Elonis v. United States

Why it matters: In Elonis v. United States, the U.S. Supreme Court addressed for the first time the issue of what constitutes a threat in Facebook posts for purposes of a federal statute that makes it a crime to transmit threats in interstate commerce. In holding that the "reasonable person" test is not sufficient, and that the poster's state of mind must be considered as well, the Court arguably leaves an unclear standard for future courts to grapple with.

Detailed discussion: On June 1, 2015, in a 7-2 opinion written by Chief Justice John C. Roberts, the U.S. Supreme Court handed down its opinion in Elonis v. United States. The issue for the Court to decide in Elonis was whether death and bodily harm threats posted by Anthony Douglas Elonis on his Facebook page that were directed at his estranged wife, police, co-workers and a neighborhood kindergarten class constituted a crime under 18 U.S.C. Sec. 875(c), which provides that any individual who "transmits in interstate or foreign commerce any communication containing any threat to … injure the person of another" is guilty of a felony and faces up to five years in prison. The Third Circuit affirmed the district court jury's opinion that said yes, based on the "reasonable person" test—i.e., whether a reasonable person would find the language threatening. The Court reversed, holding that the reasonable person test was not enough to prove criminal liability under 18 U.S.C. Sec. 875(c) and that the mental state of the person making the threats must be considered as well. Justice Roberts made a point of saying that "given our disposition here," the Court specifically was not addressing any First Amendment free-speech issues.

To briefly recap the facts, after his wife left him in 2010, Elonis began to post (under the pseudonym "Tone Dougie") what he claimed were rap lyrics that contained "graphically violent language and imagery" concerning his estranged wife, co-workers, police and a kindergarten class at a neighborhood school. When challenged by other Facebook users, Elonis (outside of his "Tone Dougie" persona) claimed that his posts were "therapeutic" and an artistic outlet (to help him "deal with the pain"), and that the lyrics were "fictitious" with no intentional "resemblance to real persons." His wife disagreed, testifying that she felt "extremely afraid for [her] life," and obtained a three-year restraining order from a state court. Elonis, as "Tone Dougie," continued to post violent "rap lyrics" and began invoking his "freedom of speech" rights. A grand jury indicted Elonis for making threats in violation of 18 U.S.C. Sec. 875(c). At his jury trial in district court, Elonis testified that his posts were meant to emulate the rap lyrics of artist Eminem, which often contain "fantasy" language about killing his ex-wife, and that he didn't "intend" to threaten anyone. The government countered with testimony from Elonis's estranged wife and co-workers that "they felt afraid and viewed Elonis's posts as serious threats." Elonis requested a jury instruction that "the government must prove that he intended to communicate a true threat," which the district court denied and instead approved a jury instruction with the "reasonable person" test. In closing arguments, the government emphasized that it was "irrelevant" whether or not Elonis intended the postings as threats, telling the jury that "it doesn't matter what he thinks." The jury convicted Elonis of four of the five counts against him, and he was sentenced to almost four years in prison. Elonis appealed his conviction to the Third Circuit, arguing that the jury should have been "required to find that he intended his posts to be threats." The Third Circuit denied his appeal, holding that "the intent required by Section 875(c) is only the intent to communicate words that the defendant understands, and that a reasonable person would view as a threat."

The Court disagreed, and reversed. Justice Roberts, writing for the majority, began the Court's analysis by stating that 18 U.S.C. Sec. 875(c) "requires that a communication be transmitted and that the communication contains a threat. It does not specify that the defendant must have any mental state with respect to those elements. In particular, it does not indicate whether the defendant must intend that his communication contain a threat." After hearing arguments from both sides, the Court acknowledged that "neither Elonis nor the Government has identified any indication of a particular mental state requirement in the text of Section 875(c)." The Court went on to state, however, that "[t]he fact that the statute does not specify any required mental state does not mean that none exists." The Court looked to case law precedent to find that, in criminal cases and under statutes that impose criminal liability, there is a "presumption in favor of a scienter requirement" as opposed to civil liability tort cases where the reasonable person test applies. The Court thus concluded that it was "error" for the jury to be instructed that the government need only prove that "a reasonable person" would regard Elonis's posts as threats. Stating that a mental state of the person making the threat must be considered as well, the Court cited precedent to find that "[u]nder Section 875(c), 'wrongdoing must be conscious to be criminal.'"

The Court went on to hold that "the mental state requirement in Section 875(c) is satisfied if the defendant transmits a communication for the purpose of issuing a threat, or with knowledge that the communication will be viewed as a threat." The Court left open whether "recklessness" would be sufficient to prove intent under Section 875(c), which both Justice Alito (concurring in part and dissenting in part) and Justice Thomas (dissenting) took the majority to task for in their separate opinions. Justice Roberts said that Justice Alito was "wrong" to suggest that "we have not clarified confusion in the lower courts," stating that "[o]ur holding makes clear that negligence is not sufficient to support a conviction under Section 875(c) contrary to the view of nine Courts of Appeals." Noting that there was no circuit split on the issue of whether recklessness was sufficient to prove mental state under Section 875(c)—indeed "no Court of Appeals has even addressed that question"—the Court "decline[d] to be the first appellate tribunal to do so."

The Court's holding in Elonis may have impacted the recent conviction after jury trial of another Facebook poster in U.S. v. Bradbury, who was found guilty under a different statute from the one at issue in Elonis, 18 U.S.C. Sec. 844(e), for "willfully" making a threat, or "maliciously conveying" false information (knowing it to be false) "to kill, injure, or intimidate any individual … by means of fire or an explosive." The defendant in that case, Samuel Bradbury, had posted a message on Facebook in June 2014 threatening, together with his "band of anarchists," to bomb a courthouse in Indiana. Bradbury argued that he was just "blowing off steam" and that everything in the post was fake and not meant as a threat. Moreover, he claimed that the statute was overbroad and violated his First Amendment free speech rights. Interestingly, the judge overseeing the case, Judge Philip P. Simon of the Northern District of Indiana, allowed the jury to hear (over the government's objection) the testimony of a so-called "social media expert" called by Bradbury who testified about "the general behavior of Facebook users."

The jury convicted Bradbury on July 2, 2015—a full month after the Elonis decision. At Judge Simon's request, the parties had filed pretrial briefs on June 11 and June 22 about the Elonis decision and what impact, if any, it should have on the jury instructions in the Bradbury case, but it is unclear from the record how Judge Simon ruled or how the jury was instructed on the issue. On July 28, Bradbury moved for a new trial (not on Elonis or jury instruction grounds), which was denied by Judge Simon on August 14. Bradbury is currently awaiting sentencing, after which an appeal (perhaps on Elonis and/or jury instruction grounds) may ensue. We got a sense of Judge Simon's thinking on the matter, however, when he denied Bradbury's motion to dismiss on May 22, 2015, which cleared the way for Bradbury's jury trial. Judge Simon noted in that opinion that "[d]eciding when something is a 'true threat' and when it is mere hyperbole is dicey business. A lot of people spout off online via Twitter, Facebook and other social media. That, of course, is their First Amendment right. But determining when the comments cross the line from permissible First Amendment expression to true threats is difficult. The line is hazy, and the question becomes does speech have to be threatening to a reasonable person who may hear or read the comment or is it the intent of the person making the statement that matters? In other words, is the standard an objective or subjective one? The Supreme Court is grappling with those very questions right now in the case of Elonis v. United States." Judge Simon concluded that in the case before him, "the 7th Circuit, at least currently, [does not] require specific intent. Until the Supreme Court says otherwise, perhaps through Elonis, I am bound to follow and apply an objective standard when determining whether a statement constitutes a threat."

Click here to read the 6/1/15 U.S. Supreme Court opinion in Elonis v. United States, No. 13-983 (U.S. 2015).

Click here to read the 5/22/15 Northern District of Indiana opinion in United States v. Bradbury, No. 2:14-cr-71 PS (N.D. Indiana 2015).

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Opening a Pandora's Box—Pandora Ordered to Pay ASCAP and BMI Drastically Disparate Rates in Parallel Rate Case Decisions

Why it matters: Within a few weeks of each other in May 2015, the Second Circuit and a Southern District of New York court handed down opinions setting drastically different license rates that Internet radio service Pandora must pay to stream the music of artists represented by performing rights organizations ASCAP and BMI, respectively. On May 6, 2015, the Second Circuit affirmed the lower court's March 2014 determination, after a lengthy bench trial, that Pandora pay ASCAP a license fee of 1.85% of revenues. On May 28, 2015, also after a lengthy bench trial, Southern District of New York Judge Louis L. Stanton ordered Pandora to pay BMI a license fee of 2.5% of revenues. The strikingly different rates set by the courts in these parallel rate cases are illustrative of the problem the music industry is grappling with as it tries to monetize new forms of distribution. As Judge Stanton said in his opinion, "[t]he fact (not usual when traditional business models are evolving and shifting) is that Pandora cannot be accurately characterized as in any specific category for which rates have been established."

Detailed discussion: What is the correct rate that "new media" Internet radio service Pandora Media, Inc. should pay to secure public performance licenses from the performing rights organizations American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) to stream their respective members' music? This was the subject of two recent parallel "rate case" decisions in May 2015. On May 6, 2015, in Pandora Media, Inc. v. American Society of Composers, Authors and Publishers, Universal Music Publishing, Inc., Sony/ATV Music Publishing LLC and EMI Music Publishing, the Second Circuit affirmed a Southern District of New York judge's March 2014 order that Pandora pay ASCAP a license fee of 1.85% of revenue for the period January 1, 2011to December 31, 2015. A few weeks later on May 28, 2015, after a lengthy bench trial in the case of Broadcast Music, Inc. v. Pandora Media, Inc., Southern District of New York Judge Louis L. Stanton ordered Pandora to pay BMI a license fee of 2.5% of revenues for the period January 1, 2013 to December 31, 2016, which, according to BMI's attorney, represented "a 43% increase over the flat license fee of 1.75% of revenues Pandora was previously paying to BMI." The disparate rates set by the two parallel rate cases are further indicative of the general confusion in both the music industry and the courts about the best way for the performing rights organizations to monetize new media distribution.

Both the Second Circuit in the Pandora-ASCAP case and Judge Stanton in the Pandora-BMI case began their opinions with a general discussion of the performing rights organizations and the judicially administered consent decrees to which they are parties arising from years-long antitrust litigation with the government. Both opinions also discuss, in varying degrees of detail (the Pandora-BMI opinion, at 60 pages, is exceedingly thorough), the rise of the online music industry and the advent of digital streaming service Pandora in 2005, as well as the realization around 2010 by some of the major music publishers represented by ASCAP and BMI that the "licensing framework" of the performing rights organizations was not keeping up with this new form of distribution. This realization and the negotiations that followed led to major music publishers EMI Music Publishing, Inc., Sony/ATV Music Publishing, LLC and Universal Music Publishing, Inc., over the period from 2011-2013, making piecemeal "partial withdrawals" of the digital streaming public performance license rights from ASCAP and BMI in order to license them directly to Internet services such as Pandora at rates that more accurately reflected the marketplace. In 2013, both the district court in the Pandora-ASCAP case and Judge Stanton in earlier proceedings in the Pandora-BMI case addressed the legality of this partial withdrawal of rights from the performing rights organizations. The district court in the Pandora-ASCAP case had granted Pandora's motion for summary judgment on the issue in 2013, and the Second Circuit affirmed, holding that the "plain language" of the ASCAP consent decree "unambiguously precludes ASCAP from accepting such partial withdrawals" and thus "[t]he partially withdrawn works at issue remain in the ASCAP repertory." In his opinion in the Pandora-BMI case, Judge Stanton stated that he had reached the same conclusion when the partial withdrawal issue came before him in 2013, going one step further to say that it was "all in or all out": "When music publisher copyright holders exercise their right to withdraw their digital rights and revoke BMI's authority to license those compositions to Pandora and other new media services, those compositions no longer qualify for inclusion in BMI's repertory and BMI can no longer license them to Pandora or any other applicant. Thus, the publisher loses the whole list of BMI licensees for that composition."

A review of the "partial withdrawals" history was deemed necessary because the resultant direct licenses (with higher license rates) between the music publishers and Pandora figured prominently in Judge Stanton's rate decision in the Pandora-BMI case in that they were proffered by the publishers as marketplace "benchmarks" for Judge Stanton to consider in setting the proper licensing rate between Pandora and BMI. By contrast, the lower court judge in the Pandora-ASCAP case had denied ASCAP's request for additional discovery with respect to Pandora's more recent licenses for potential use as "benchmarks," and the Second Circuit held that the judge did not abuse her discretion in doing so. In both of the rate cases, Pandora had argued that the direct licenses should be disqualified as benchmarks because Pandora "had no alternative" but to enter into them, and thus the higher license rates were agreed to "under duress." Judge Stanton noted that, while the district court judge in the Pandora-ASCAP case had found this argument to be persuasive, he did not.

Thus, Judge Stanton found that, in determining whether a rate of 2.5% of revenues was "reasonable," he had to take into account "benchmarks" consisting of the rates "set in (or adjusted from) contemporaneous similar transactions." To this end, he analyzed the benchmarks proffered by both sides for review. BMI proffered the (1) direct license agreements with major music publishers Sony, EMI and Universal that called for agreed license rates ranging from 2.25% to 5.85% of revenues (Judge Stanton found that the direct licenses with Sony and Universal for the 2014 calendar year were the "best benchmarks because they are the most recent indices of competitive market rates") and (2) license agreements with Pandora's competitors, entered into between 2010 and 2013, which ranged in license rates from 2.5% to 4.6% of revenues. For its part, Pandora primarily argued that the "best and most comparable" benchmark was its long-standing license agreement with BMI that called for a rate of 1.75% of revenues.

In addition to the benchmarks, Judge Stanton stated that "one must also be aware of conditions in the music industry at the time of the particular transactions." In reviewing these conditions, Judge Stanton found that "[t]here is an unambiguous body of evidence that the prevailing BMI and ASCAP rates were believed to be too low. The publishers made their unprecedented withdrawals from the [performing rights organizations] because of their convictions that what those [performing rights organizations] were obtaining was well below what could be obtained through free market negotiations." The judge further noted that "[o]nce the rate negotiations were freed from the overhanging control of the rate courts, the free-marked licenses reflect sharply increased rates."

Based on all of the foregoing, Judge Stanton found that "[t]he evidence presented at trial shows that BMI's proposed license fee of 2.5% of Pandora's gross revenue is reasonable, and indeed at the low end of the range of fees of recent licenses." How does that square with the 1.85% rate affirmed by the Second Circuit earlier that month in the Pandora-ASCAP case? For one thing, it does not appear that the lower court judge in the Pandora-ASCAP case considered any of the higher-rate direct licenses between Pandora and the music publishers as benchmarks in setting the rate at 1.85% (buying into Pandora's argument that the direct licenses were entered into under duress and should thus be disqualified). Moreover, the Second Circuit's standard of review of the district court judge's decision was limited to one of "reasonableness," and the Second Circuit concluded after a review of the record that "the district court did not commit clear error in its evaluation of the evidence or in its ultimate determination that a 1.85% rate was reasonable for the duration of the Pandora-ASCAP license. We likewise conclude that the district court's legal determinations underlying that ultimate conclusion—including its rejection of various alternative benchmarks proffered by ASCAP—were sound." Interestingly, on June 26, 2015, Pandora appealed the Pandora-BMI case to the Second Circuit, where, presumably, the same standard of "reasonableness" will be applied to Judge Stanton's decision. It will be interesting to see how, if at all, the Second Circuit reconciles the two rate cases.

After the BMI decision was announced, ASCAP's President and Chairman Paul Williams said that "[t]his decision is welcome news for music creators, but make no mistake, Pandora will stop at nothing in their ongoing effort to shortchange songwriters. ASCAP and the music community must continue to fight for the urgent reforms needed to enable all songwriters, composers and music publishers to obtain fair compensation for the use of our music." David Israelite, president of the National Music Publishers Association, commented that, while the 2.5% rate was "still a small fraction of what music creators deserve, this decision sends a clear message that Pandora cannot continue to get away with growing its business on the backs of struggling songwriters—who deserve to be paid fair market for their work."

Click here to read the 5/6/15 Second Circuit opinion in Pandora Media, Inc. v. American Society of Composers, Authors and Publishers, Universal Music Publishing, Inc., Sony/ATV Music Publishing LLC and EMI Music Publishing, Nos. 14-1158-cv (L), 14-1161-cv (Con), 14-1246-cv (Con).

Click here to read the 5/28/15 district court opinion in Broadcast Music, Inc. v. Pandora Media, Inc., No. 13-cv-4037 (LLS) (S.D.N.Y. 2015).

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Second Circuit Rules No Separate Copyright Interest for Film's Director

Why it matters: On June 29, 2015, the Second Circuit in 16 Casa Duse, LLC v. Merkin et al. held that a film's director does not own a separate copyright interest in the film. In so doing, the court followed the Ninth Circuit's recent en banc decision (reversing its own panel) in Garcia v. Google et al., which came to the same conclusion with respect to an actor's performance in a film.

Detailed discussion: On June 29, 2015, the Second Circuit in the case of 16 Casa Duse, LLC v. Merkin et al. upheld the district court's grant of summary judgment and preliminary injunction in favor of the plaintiff film production company and held that the defendant film director did not own a separate copyright interest in the film. In so doing, the court specifically agreed with the conclusion that the Ninth Circuit, sitting en banc, reached on May 18, 2015, in Garcia v. Google et al., when it reversed the earlier decision of its own panel to hold that an actor in a film did not hold a separate copyright interest in her performance (see our discussion of the Garcia decision in our June 2015 newsletter). Also part of the suit but not addressed here, the court reversed the district court's grant of summary judgment in favor of the plaintiff with respect to state tortious interference with business relations claims and remanded the case to the district court for further proceedings on that issue.

To briefly recap the relevant facts, in September 2010, Robert Krakovski, the principal of Brooklyn-based film production company 16 Casa Duse, LLC asked Alex Merkin to direct a short film he was financing and producing titled Heads Up. Merkin agreed, and Krakovski and Merkin informally agreed on a fee of $1,500 for Merkin's services. In February 2011, Krakovski sent Merkin a draft work-for-hire "Director Employment Agreement" that contained a provision that Casa Duse owned all rights, including the copyright, in the film. Merkin never signed the agreement, ignoring Krakovski's numerous requests that he do so. Nevertheless, production on the film began in May 2011 and, during the three days of filming, Merkin "performed his role as director by advising and instructing the film's cast and crew on matters ranging from camera angles and lighting to wardrobe and make-up to the actors' dialogue and movement." In June 2011, Krakovski gave Merkin a hard drive containing the raw film footage and asked him to help edit it. Because Merkin had never signed the work-for-hire Director Employment Agreement, Krakovski and Merkin entered into a "Media Agreement" under which Merkin would edit the film but not exploit any of the footage without Casa Duse's permission. Afterwards, Krakovski emailed Merkin seeking to amend the terms of the Media Agreement so as to "clarify" that Casa Duse had not relinquished any of its rights contained in the work-for-hire agreement. Merkin responded by "clarifying" that he would not give up "any creative or artistic rights" he had in the film, which rights were his property and not the property of Casa Duse. Much legal wrangling ensued. Over the next four months, negotiations broke down, with Merkin refusing to return the raw footage to Krakovski, claiming it was his property, and "forbidding" Krakovski to make use of it. In the meantime, Krakovski hired another editor to edit the raw footage into a film. In January 2012, unbeknownst to Krakovski, Merkin registered a copyright in the raw footage of the film with the U.S. Copyright Office. In March 2012, Krakovski began submitting Heads Up to film festivals and organized a screening and reception (subsequently canceled) for the film at the New York Film Academy. Merkin began sending "cease and desist" letters to festival organizers and the Academy, prompting Krakovski to file a complaint in the Southern District of New York in May 2012 seeking relief under both the federal copyright and state tortious interference laws. On May 18, 2012, the district court granted a preliminary injunction against Merkin interfering with Krakovski's use of the film, and on September 27, 2013, the district court granted Krakovski's motion for summary judgment on the grounds that, inter alia, Merkin did not own a separate copyright in the film or the raw footage. The parties appealed to the Second Circuit.

The court began its analysis by stating up front that "[t]his case requires us to answer a question of first impression in this Circuit: May a contributor to a creative work whose contributions are inseparable from, and integrated into, the work maintain a copyright interest in his or her contributions alone? We conclude that, at least on the facts of the present case, he or she may not." After establishing that Merkin was neither a "joint author" of nor "work-for-hire" on the film, the court first looked to the applicable provisions of the federal Copyright Act and determined that, based on the facts of the case, Merkin's "contributions to the film did not themselves constitute a 'work of authorship' amenable to copyright protection." The court cited to legislative history and to interpretations issued by the Copyright Office to support this conclusion.

The court then looked to the Ninth Circuit Garcia case, noting that a three-judge panel had initially held "to the contrary" with respect to the actor in that case who was seeking to claim a copyright interest in her performance in a film, finding that "copyright protection may subsist in an actor's performance in a motion picture" because her performance exhibited a "minimal degree of creativity" that was "fixed" in a tangible medium as part of the completed film. However, the court emphasized that the panel's decision was reversed by the Ninth Circuit sitting en banc on May 18, 2015, which had concluded that the actor's " 'theory of copyright law would result in [a] legal morass … [making] Swiss cheese of copyrights.' "

The court agreed with the Ninth Circuit's en banc decision reversing its panel, stating that "[f]ilmmaking is a collaborative process typically involving artistic contributions from large numbers of people, including—in addition to producers, directors, and screenwriters—actors, designers, cinematographers, camera operators, and a host of skilled technical contributors. If copyright subsisted separately in each of their contributions to the completed film, the copyright in the film itself, which is recognized by statute as a work of authorship, could be undermined in any number of individual claims." The court stated that, while the various contributors to a film may make "original creative expressions" that are arguably "fixed in the medium of film footage," that alone is not sufficient, holding that "[a]uthors are not entitled to copyright protection except for the 'works of authorship' they create and fix."

The court went on to state that "[o]ur conclusion in the present case does not suggest that motion picture directors such as Merkin may never achieve copyright protection for their creative efforts," noting that the director can be the sole or joint author of the film and secure copyright protection in that way. In addition, the court noted that authors of "freestanding works" that are incorporated into a film, such as a dance performance or song, can secure copyright protection for them. The court concluded, however, that "a director's contribution to an integrated 'work of authorship' such as a film is not itself a 'work of authorship' subject to its own copyright protection."

With respect to the raw footage of the film, the court agreed with the district court that Merkin didn't hold a copyright interest in that either. The court found that Casa Duse was the "dominant author" of the film in all of its stages and "[t]he record does not reflect any developments that occurred between the creation of the raw film footage and Casa Duse's attempts to create a finished product that would alter this analysis." Thus, the court concluded that "Casa Duse, not Merkin, owns the copyright in the finished film and its prior versions, including the disputed 'raw film footage.'"

Click here to read the Second Circuit's opinion in 16 Casa Duse, LLC v. Alex Merkin et al., No. 13-3865 (6/29/15).

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Tennessee District Court Holds No Right of Publicity for Student Athletes

Why it matters: On June 4, 2015, a district court judge for the Middle District of Tennessee dismissed the putative class action lawsuit brought against various broadcasters, college athletic conferences and licensors by eight current and former college student athletes who claimed, among other things, that the defendants were profiting off of the use of the student athletes' names, images and likenesses without permission in violation of Tennessee's right of publicity laws. In dismissing the lawsuit with prejudice, the judge ruled in relevant part that there is no right of publicity under Tennessee statutory or common law for participants in sporting events.

Detailed discussion: On June 4, 2015, District Court Judge Kevin H. Sharp of the Middle District of Tennessee dismissed with prejudice a putative class action lawsuit brought by eight current and former National Collegiate Athletic Association (NCAA) football bowl subdivision players and Division 1 college basketball players against "a host of conferences, networks, and licensors" including ESPN, CBS, ABC, NBC, Fox, the Pacific-12 Conference and the Big 12 Conference, to name just a few. The student athlete plaintiffs had alleged in their suit that the defendants "profited from the broadcast and use of those student athletes' names, likenesses and images without permission" in violation of Tennessee's right of publicity statute. The student athlete plaintiffs also alleged various claims against the defendants under the federal antitrust laws, the subject of numerous cases at present, including in the Ninth Circuit in O'Bannon v. NCAA, but we focus here on the state statutory and common-law right of publicity claims.

Judge Sharp began his analysis with a discussion of the NCAA and its rules. Though not named in the suit as a defendant, the court noted that the student athletes alleged the NCAA to be part of the conspiracy and thus "tacitly" conceded that "any discussion of the alleged unlawfulness must acknowledge [the NCAA's] existence and the role it plays in college sports." The court reviewed that NCAA rules dictate that intercollegiate sports are limited to "amateur" athletes, who may lose their amateur status if, in relevant part, they use their athletic skill (directly or indirectly) for pay "in any form." Relevant to the student athlete plaintiffs' right of publicity claims, in order to participate in NCAA sports, student athletes are required to sign a form that allows the NCAA to use the student athlete's name or picture "to 'generally promote' NCAA championships or other NCAA events, activities or programs." The student athlete plaintiffs further alleged that the defendants and the NCAA have multi-billion-dollar contracts, yet "the student athlete receives nothing or, at most, the cost of attendance" and the restrictive NCAA and Conference rules "have deprived student athletes from realizing the commercial value of their images."

Judge Sharp then turned to a review of the applicable law, acknowledging that Sixth Circuit precedent holds that "Tennessee's common law … embodies an expansive view of property. Unquestionably, a celebrity's right of publicity has value. It can be possessed and used. It can be assigned, and it can be the subject of a contract." Further, "Tennessee's common law acknowledges a 'property right in the use of one's name, photograph or likeness.' " In addition to this common-law right of publicity, the judge noted that the Tennessee legislature enacted the Tennessee Personal Rights Protection Act (TPRPA) in 1984, which "was intended to 'create an inheritable property right for those people who use their names or likenesses in a commercial manner, such as an entertainer or sports figure—someone who uses his or her name for endorsement purposes.' "

Judge Sharp agreed with the defendants' claim that the TPRPA governed over any common-law right of publicity precedent because courts in Tennessee had previously ruled the TPRPA and common law to be "co-extensive," and the Tennessee Supreme Court had ruled that, in the event of a conflict between any statute and common law, " 'the provisions of the statute must prevail.' " Further, the judge found it persuasive that the Student Plaintiff Athletes were unable to cite to any "case from any court in Tennessee that recognizes a right of publicity in connection with sports broadcasts." Judge Sharp found this to be "unsurprising," because a review of case law from other federal and state courts found that "virtually all courts in jurisdictions that have decided the matter under their respective laws" have come to the same conclusion. The student athlete plaintiffs had cited to a 2014 Northern District of California case, In re NCAA Student Athlete Name and Likeness Litig., as support for this argument, but the court deemed that case to be the "sole exception" and easily differentiated it as "no help" to the student athlete plaintiffs, stating that "[t]he only value that case has for present purposes … is that there might be a right of publicity under Minnesota law for sports broadcast, itself a dubious proposition given a more recent interpretation of that state's case law." The judge noted that the In re NCAA Student Athlete case involved the sole issue of "whether the NCAA violated federal antitrust law by conspiring to restrain competition in the market for the commercial use of the players' names, images and likenesses" and that that court specifically did not address the student athletes' rights of publicity other than, as noted above, to make a dicta statement about players domiciled in Minnesota possibly being able to make a claim under that state's right of publicity laws. More importantly, the judge pointed out that the plaintiffs in the In re NCAA Student Athlete case had specifically conceded with respect to players domiciled in Tennessee that "Tennessee recognizes no right of publicity in sports events."

Judge Sharp next stated that the student athlete plaintiffs "fared no better" under the TPRPA, which provides in relevant part that "[i]t is deemed a fair use and no violation of an individual's rights shall be found … if the use of a name, photograph, or likeness is in connection with any news, public affairs or sports broadcast or account." The court pointed to this language as "clearly" conferring "no right of publicity in sports broadcast, or with respect to any advertisement if the advertisement is in connection with such a broadcast."

Judge Sharp thus dismissed the student athlete plaintiffs' right of publicity claims (the first and second causes of action in their complaint) with prejudice because "Plaintiffs' allegations do not set forth a plausible claim for relief, either under common law or the TPRPA."

After next reviewing the student athlete plaintiffs' federal antitrust claims and dismissing those with prejudice as well, the judge concluded with a somewhat rueful statement that showed great sympathy for the student athlete plaintiffs but emphasized that his hands were tied: "College basketball and football, particularly at the Division I and FBS levels, are big business. Of that there can be little doubt. Many believe that 'amateur' when applied to college athletes today is a misnomer—an artificial label and anathema, placed on players, like Plaintiffs, whose efforts on the court and field lead to untold riches for others, such as defendants. Cogent arguments have been raised that it is time student athletes share in the bounty, above and beyond any scholarships they may receive. In this case, however, the Court is not called upon to address the larger picture of whether, as a matter of recognition, equity or fundamental fairness, student athletes should receive 'pay for play.' Nor is it the Court's task to pass on the wisdom of the NCAA's eligibility rules that bar compensation, or whether those rules capture reality, given the present nature and environment of college sports. The Court expresses no opinion on those issues. Rather, the Court's sole task is to determine whether present Plaintiffs have alleged sufficient facts or stated a viable claim that they are entitled to monetary compensation because they play in televised games. The Court finds that Plaintiffs have not done so under any of the theories they set forth."

The student athlete plaintiffs filed an appeal to the Sixth Circuit on July 1, 2015. We will await the outcome and report back.

Click here to see the 6/4/15 opinion in Javon Marshall, et al. v. ESPN Inc., et al., No. 3:14-01945 (M.D. Tenn.).

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Blurred Lines—The Sequel: Post-Trial Rulings Edition

Why it matters: On July 14, 2015, the federal judge in the landmark Blurred Lines copyright infringement case issued rulings on various post-trial motions that had been filed by both sides in the conflict. While denying the motion filed by "Blurred Lines" co-composers Robin Thicke and Pharrell Williams seeking a new trial or other declaratory relief from the March 10, 2015, jury verdict against them, the judge did grant their request for remittitur, or relief from an excessive jury damage award, which served to reduce the almost $7.4 million in damages awarded by the jury to Marvin Gaye's children by approximately $2 million, to $5.4 million. In addition, the judge agreed that Gaye's children are entitled to 50% of the royalties from the song "Blurred Lines" going forward.

Detailed discussion: On July 14, 2015, District Court Judge John A. Kronstadt for the Central District of California ruled on numerous post-trial motions that had been filed by both sides in the landmark copyright infringement case of Pharrell Williams, et al. v. Bridgeport Music, Inc., et al. To briefly recap, after a seven-day trial, on March 10, 2015, a federal jury found recording artists and co-composers Robin Thicke and Pharrell Williams liable for copyright infringement, finding that their song "Blurred Lines" unlawfully copied portions of deceased artist Marvin Gaye's song "Got to Give It Up." The jury awarded Gaye's adult children damages aggregating almost $7.4 million, consisting of $4 million in actual damages plus profit amounts found to have been received by Thicke (approximately $1.8 million) and Williams (approximately $1.6 million). The jury found co-composer Calvin Harris, Jr. and Interscope Records, Universal Music Group and other companies involved in the song's manufacture and distribution, also part of the suit, not liable for copyright infringement.

On May 1, 2015, Thicke, Williams and Williams' music publishing company filed a motion seeking a new trial and/or other declaratory relief, and remittitur (relief from an excessive jury verdict). Also on May 1, the Gaye parties filed motions with the court, seeking (1) declarations or judgments as a matter of law that not only the Thicke parties but also Harris and the Interscope parties were liable for copyright infringement, (2) injunctive relief or, in the alternative, ongoing royalties from the continued distribution of "Blurred Lines" and (3) prejudgment interest.

Judge Kronstadt first addressed the portion of the Thicke parties' motion seeking a new trial and/or other declaratory relief. After reviewing the applicable law and applying it to the facts, Judge Kronstadt held that "[t]he Thicke Parties have not shown any evidentiary or instructional error that warrants either a new trial or other relief. The verdict of the jury was supported by substantial evidence. The Thicke Parties have not demonstrated that the verdict was against the clear weight of the evidence, based upon false evidence, or reflects a miscarriage of justice. For these reasons, the Thicke Parties' request for judgment as a matter of law, declaratory relief or a new trial is DENIED."

Judge Kronstadt next addressed the Thicke parties' request for remittitur, or relief from an excessive jury award. First, he cited Supreme Court and Ninth Circuit case precedent regarding the applicable law of remittitur before tackling the award of $4 million in actual damages that the Thicke parties argued, among other things, was "excessive and not supported by the evidence." The judge noted that, at trial, the following facts were stipulated by the parties: (1) total profits for the song "Blurred Lines" were $16,675,690, (2) Thicke was credited with $5,658,214 of those profits, consisting of artist royalties of $4,253,645 and publishing revenues of $1,404,569, (3) Williams was credited with $5,153,457 of those profits, consisting of producer royalties of $860,333 and publishing revenues of $4,293,124 and (4) Harris was credited with $704,774 of those profits, consisting of artist royalties of $25,412 and publishing revenues of $679,362. Combined, the amount of publishing revenues attributed to all three artists was $6,377,055, which amount was net of professional fees paid to accountants, lawyers and managers. The Gaye parties' accounting expert testified at trial, however, that the amount of combined publishing revenues without subtraction of the professional fees was "a little bit over $8 million." It was this higher $8 million figure that was used in a clarification to the jury in response to their question about how actual damages are calculated: "The parties agreed that approximately $8 million was received by the writers of 'Blurred Lines' in publishing revenue. In calculating actual damages, it is the $8 million you should take into consideration. If you decide to consider awarding profits, you should not take into consideration the same $8 million." The Thicke parties argued post-trial that the $8 million amount in the response was "grossly inaccurate" because it was inclusive of the professional fees paid out and that the stipulated amount of $6,377,055 in publishing revenues for the three composers was the proper amount that should have been used. The judge agreed. Applying the "hypothetical license" royalty rate of 50% to the lower stipulated amount of $6,377,055, he found that the greatest amount of actual damages that could have been awarded by the jury was $3,188,527.50 and reduced the actual damages award to this amount.

The judge next found that the award of profits from Williams was excessive (he found that the award of profits from Thicke was appropriately calculated). Noting that the stipulated amount of producer's royalties attributable to Williams was $860,333, the jury awarded the Gaye parties profits from Williams of $1,610,455.31 or "approximately 187% of the amount of the producer royalties to which the parties stipulated." The judge rejected the Gaye parties' arguments (raised post-trial) that Thicke and Williams were "practical partners" and thus their royalties should be combined in determining the profit award. Applying an approximate 40% royalty rate to the stipulated amount of Williams' producer royalties, the judge reduced the amount of profits awarded from Williams to $357,630.96. Thus, the total amount of the remittitur in favor of the Thicke parties came to $2,064.296.85.

The judge next turned to the Gaye parties' motions. He first considered their motion for declaratory relief, which he granted in full. The judge declared as a matter of law that the Thicke parties "infringed the Gaye Parties' copyright in the musical composition 'Got to Give It Up' in 'Blurred Lines.' " He found the declaration to be warranted because "to the extent the jury verdict did not do so, a declaration would put the Thicke Parties and others on notice of the legal consequences of the continued use and exploitation of 'Blurred Lines.' " The judge next considered the liability for copyright infringement of Harris and the Interscope parties. Even though the jury had found them not liable, the Gaye parties argued that this was due to improper jury instructions regarding the liability of distributors of infringed works. The judge agreed, ruling that "[i]t was error not to instruct the jury that the distribution of infringing works constitutes copyright infringement .… Therefore, the verdict of no liability as to [Harris and the Interscope Parties] was plainly erroneous, and the Gaye Parties are entitled to a judgment as a matter of law against Harris and the Interscope Parties." The judge also issued a declaration, for purposes of clarity in light of the song's continued exploitation, that Harris and the Interscope parties were liable for any infringement of "Got to Give It Up" in "Blurred Lines" going forward. The judge concluded by finding judgment in favor of the Gaye parties and against the Thicke parties, Harris and the Interscope parties, declaring as a matter of law that "any past and ongoing reproduction, preparation of derivative works, distribution, sale or other transfer of ownership, rental, lease, lending or public performance of 'Blurred Lines,' or authorization of any of these activities, by [Thicke, Williams, Harris, or the Interscope Parties] infringes the Gaye Parties' copyright in 'Got to Give It Up.' "

The judge then considered the Gaye parties' motion for injunctive relief or, in the alternative, ongoing royalties from the continued exploitation of "Blurred Lines." While the judge denied their request for injunctive relief, he found that the Gaye parties were entitled to a "running royalty" of 50% of the songwriter and publishing revenue of "Blurred Lines" going forward, commencing on the date judgment in the case was entered. Finally, the judge ruled that the Gaye parties were entitled to prejudgment interest from March 10, 2015 (the day of the jury's verdict) through the date judgment was entered at the statutory rate.

Richard Busch, one of the attorneys for the Gaye parties, stated that they were "thrilled with the decision by the Court not only affirming the decision of the jury that Mr. Thicke and Mr. Williams committed copyright infringement, but also the decision holding Mr. Harris and [the Interscope Parties] liable as well, and ordering that the defendants pay the Gaye family 50 percent of all publishing revenue from 'Blurred Lines' going forward. As far as the reduction in damages, we are reviewing that, and the Court's analysis on that issue, and will be discussing internally our options." Countered Howard King, one of the attorneys for the Thicke parties, "[w]hile we certainly respect the diligence and care devoted by the Court throughout these proceedings, we must agree to disagree on the conclusions. We look forward to exercising our further remedies and ultimately achieving clarity on the difference between inspiration and copyright infringement."

Click here to read the 7/14/15 opinion in Pharrell Williams, et al. v. Bridgeport Music, et al., LA CV13-06004 (JAK).

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