Labels Avoid Unfair Competition Counterclaims In Piracy Case For Lack Of Standing

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UMG Recordings Inc. v RCN Telecom Services, LLC, CV1917272MASTJB, 2021 WL 2810145, [DNJ June 30, 2021]

Plaintiffs record companies, suing for contributory and vicarious copyright infringement, alleged that an internet service provider (ISPs), RCN, encouraged and profited from widespread copyright infringement by their end users. The defendants counterclaimed, alleging that the record labels and a a technology company engaged in the business of detecting online copyright infringement. (Rightscorp) violated violated California's Unfair Competition Law (“UCL”) by “sending millions of unsupported emails accusing RCN's customers of BitTorrent-based copyright infringement, while intentionally destroying the evidence necessary to determine whether any of those accusations were true.”

The court held that the counterclaim was not subject to heighted. “RCN alleges that Counterclaim Defendants engaged in unfair business practices that conceal potential acts of fraud, including spoliation of evidence and sending large volumes of infringement notices without verifying their accuracy.”

However, the Court concluded that the defendants lacked standing. “… RCN has not pled a cognizable economic injury under the UCL. RCN asserts a number of claimed injuries based on Counterclaim Defendants’ alleged conduct, none of which is sufficient to confer standing.” For example, RCN received notifications from various entities, and RCN failed to allege “that it created its DMCA System specifically because of Rightscorp's infringement notifications or that Rightscorp's infringement notifications imposed any additional costs on RCN.” Further, the court held that RCN’s legal costs were not a recognizable injury - RCN failed to explain how they went outside the Noerr-Pennington doctrine.

MP3Tunes Decision on Counterclaims

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Defendant's counterclaims Dismissed:

DMCA claim
New York's GBL 349 (re: consumer protection)
Common law unfair competition
California Business and Professional Code 17200

Defendant's counterclaims NOT dismissed:

Declaratory judgment claim that it is a service provider protected by the safe-harbor provision of 17 USC 512 (of the DMCA)

[No. 1:07-cv-09931-WHP-FM (Doc. 73 filed Mar. 4, 2009).]

Arista v Usenet.com - Chock full of Fed R Civ P

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United States District Court (SDNY) Judge Baer's recent decision in Arista Records LLC v. Usenet.Com Inc., No. 07 Civ. 8822, 12/05/08 NYLJ "Decision of Interest" (S.D.N.Y. Nov. 24, 2008) is chock full of federal civil procedure issues. The decision, which granted plaintiff's motion to dismiss or strike Usenet's counterclaims for declaratory judgment, addressed the following issues:

Rule 12(f) - striking redundant pleadings
Rule 8(c)(2) - mistakenly labeling a defense a counterclaim
Rule 12(b)(6) - failure to state a claim
Rule 12(b)(1) - jurisdiction
Rule 41(a) - once answer filed, court has discretion to determine the proper terms of dismissal and whether it is with prejudice (concerning defendant's fear that if plaintiffs were to voluntarily dismiss their complaint, Usenet would be threatened with future litigation by plaintiffs)

The crux of the decision concerns counterclaims. The Court held that counterclaims are viable only when they present an independent case or controversy; counterclaims will be dismissed if they are merely a "mirror image" of the complaint. Therefore, because Usenet's DMCA safe-harbor counterclaims could not stand on their own without the complaint (i.e., the DMCA does not create an affirmative cause of action, but rather a defense), then they were dismissed. Moreover, the court noted, the counterclaims were not factually distinguishable because Usenet had not made any independent factual allegations. (The Court similarly dismissed Usenet's counterclaim seeking a declaratory judgment that its activities do not constitute inducement of copyright infringement, contributory infringement, or vicarious copyright infringement: this counterclaim, too, was a mirror image of plaintiff's copyright infringement claim.)

Lastly, the Court found that Usenet's argument that it would be precluded from recovering costs and attorneys' fees if its counterclaims are were dismissed was without merit. Pursuant to Section 505 of the Copyright Act, the Court would have discretion to award costs and attorneys' fees, irrespective of any counterclaims, if Plaintiff's claims were ultimately to fail.

Fool's Game

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A month ago, OTCS reported that Michael Bolton et al. was sued by his money manager for breach of contract.

In a bizarre twist, and with probable implications under New York's Civil Practice Law and Rules (i.e., the CPLR), Michael Bolton (and many of the defendant's from the original action) have filed a summons with notice in New York Supreme Court, New York County -- the very same jurisdiction where the original suit was filed -- against Executive Monetary Management, Plaintiff in the original action, for alleged breach of fiduciary duty, fraud, and fraudulent concealment. Damages alleged are $5 mil.

Why is this being filed as a separate suit, rather than as counterclaims or affirmative defenses in the original action under CPLR 3018(b) and 3019? What are the implications for these claims not being asserted in the Answer of the original action, especially if they arise out of the same transaction? Litigators: this one's for you!

[Stowaways LLC; The Second Time Around LLC; MBO Tours Inc.; MBO Productions Inc.; Passion Realty LLC; MB Swings II LLC; Montaigne Records LLC; Passion Films Inc.; M Bolton Entertainment LLC; Bolton Power Blues LLC; Michael Bolton; Mr. Bolton's Music Inc.; Is Hot Music Ltd.; Passion Music Inc.; Bona Justitia Music Inc. v. Executive Monetary Management Inc. Filed 1/14/2008; Case no. 08-600111]