Toto Loses Breach Of Contract Claim Against Label For Digital Download Royalties

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Toto, Inc. v. Sony Music Entertainment, No. 1:12-cv-01434-RJS (S.D.N.Y. filed Oct. 8, 2014) [Doc. 117].

In this breach of contract action concerning royalties for digital downloads (and master and ringtones) payable by the record label to the 80's band "Toto", the Court granted the record label summary judgment finding that the proper royalty rate had been paid.  The Court applied New York law to interpret the relevant recording agreements, and found that one provision (the "Audiophile Provision" in 1986 and 2002 amendments) supplied the applicable royalty rate for the sale of downloads through digital retailers, regardless of whether the downloads were sold by the record company or unaffiliated third-party licensees.  The dispute turned on the meaning of the terms "Licensee" and "lease", which had different royalty rates.  Toto argued the term "lease" referred to a license to any party, regardless of whether that party is affiliated with the record company; the record company argued that the term "lease" referred to a special license whereby a third party incorporates the recordings into its own product, such as a compilation record.  The Court found that the inclusion of the record company's affiliates in the contractual definition of "licensee" did not limit the scope of that term; the definition included the term "without limitation".  Accordingly, digital retailers were licensees, and industry custom defined the term "lease" as a limited license to a third party to incorporate recording into their own unique product.  However, the Court found that the record company did not have a declaratory judgment claim because the dispute was "far more hypothetical than real."  The declaratory judgment dispute arose from Toto's threat to sue the label for breach of the implied covenant of good faith and fair dealing if the label ceased distributing Toto's records through certain retailers.

Radio Station Not Liable On Claims Based On Number Of Podcast Downloads

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Cmty. Music Ctrs. of Atlanta, LLC v. JW Broad., Inc., 2013 ILRC 2580, 2013 WL 4516739 (Ga. Ct. App. 2013).

Plaintiff advertised its music education services on defendant's radio station, but failed to pay.  The radio station sued for "open account", and the plaintiff counter-claimed for breach of contract and fraud.  The crux of plaintiff's claims was that the radio station misrepresented the exposure it would provide through podcast downloads.  According to plaintiff, the radio station failed to fulfill its promise that there would be “hundreds of thousands of downloads” of the program plaintiff sponsored and, as a result, plaintiff did not receive the advertising exposure it had bargained for.

The court found that the radio station was not liable on the breach of contract claim because the plaintiff failed to present any evidence to show that the radio station promised that there would be a certain number of future downloads of the program.  Instead, the radio station "promoted the program's national popularity by stating that it 'has received hundreds of thousands of downloads,' in other words, in the past".  The fraud claim similarly failed because the plaintiff sought, not a certain number of downloads, but, rather, to sponsor a radio show for a specific time period.  Any prediction regarding future download statistics would be conjecture, falling short of fraud.

Chubby Checker TM Claims Survive But State Law Claims Preempted By CDA

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Evans et al. v. Hewlett Packard Co. et al., No. 3:13-cv-02477-WHA (N.D. Cal. filed 08/15/13) (Doc. 67).

Plaintiff is the artist known as "Chubby Checker" and various entities that own related trademarks.  This case concerns a software application called “The Chubby Checker” that is offered for sale/download on defendants' web-based store.  The app purports to estimate the size of a man’s genitals based on his shoe size.

The Court held that Plaintiff stated a claim for federal and common law trademark infringement.  The crux of defendants’ argument was that the complaint only attempts to plead claims for contributory infringement and not for direct infringement. To be liable for contributory infringement, defendants argue that they must have had actual knowledge of the infringement and yet continued to sell the app. Defendants urge that the complaint fails to allege either that defendants knew of the infringement or that defendants continued to sell the app after receiving plaintiffs’ cease-and-desist letter.  However, the Court disagreed, finding: "Construed favorably to the plaintiffs, these allegations are sufficient to permit an inference that defendants knew, or could have reasonably deduced that the owner of the Chubby Checker mark would never have consented to license the mark for such a vulgar purpose."

However, the Court held that Plaintifffs' state-law claims — violation of Pennsylvania’s unfair competition and trademark laws and Pennsylvania’s and California’s right of publicity statutes — were preempted by Section 230 of the Communications and Decency Act (47 U.S.C. 230).  The Court found that defendants were internet service providers that host third-party content and not content providers, and defendants therefore enjoyed the broad immunity provided under Section 230 of the CDA from all state claims relating to publishing content created by third parties.

1st Cir Affirms $675,000 Jury Award For Unauthorized Downloads/Distributions

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Sony BMG Music Entertainment v. Tenenbaum, No. Case: 12-2146 (1st Cir. filed 6/25/2013) [Doc. 00116547502].

From the decision:
Joel Tenenbaum illegally downloaded and distributed music for several years. A group of recording companies sued Tenenbaum, and a jury awarded damages of $675,000, representing $22,500 for each of thirty songs whose copyright Tenenbaum violated. Tenenbaum appeals the award, claiming that it is so large that it violates his constitutional right to due process of law. We hold that the award did not violate Tenenbaum's right to due process, and we affirm.
The two issues on appeal were: (1) what is the correct standard for evaluating the constitutionality of an award of statutory damages under the Copyright Act; and (2) did an award of $675,000 violate defendant's right to due process?  On issue one, the Court held that the correct standard was that announced in St. Louis, I.M. & S.Ry. Co. v. Williams, 251 U.S. 63 (1919), that a statutory damage award violates due process only "where the penalty prescribed is so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable."  On issue two, the Court found that the award did not violate defendant's due process rights.

Class Action Brought Against eMusic

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Dabaghian v. eMusic.com, No. 651794/2013 (Sup. Ct., N.Y. Co. filed 5/20/2013).

Plaintiff brought a class action for breach of contract, breach of warranty and violations of N.Y. Gen. Bus. Law.  Plaintiff alleges that eMusic sells music download cards that represent that a specific number of songs can be purchased for a fixed price.  Plaintiff allegedly purchased such a card that advertised 30 songs for $15.  However, plaintiff allegedly was only able to download 16 songs before the card was depleted.  Plaintiff alelges that eMusic failed to disclose it had switched to a monetary based credit system where each song is individually priced.  Under this system, a song may cost 89 cents, and allegedly only rarely costs 50 cents.  Accordingly, Plaintiff alleges it is impossible to purchase 30 songs for $15.

Trademark Denied; YouTube Clip Not Proper Specimen

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In re Rogowski, 2012 ILRC 3251 (TTAB Dec. 11, 2012).

The TTAB affirmed a refusal to register a mark because a screen shot of a YouTube webpage that showed a trademark applicant playing music did not clearly indicate that the video could be downloaded, and thus the specimen failed to show that the mark was “used in commerce.”

As found by the TTAB:


The submitted specimen, however, does not show the required correspondence between the mark and the identified goods being offered for sale or transport in commerce. We acknowledge the advent and certainly the trend of music being offered in downloadable formats or the equivalent thereof in lieu of the traditional trade channels for tangible sound recordings, e.g., CDs being sold via retail or online stores. But we nonetheless find dispositive that applicant's specimen does not include a “download” or similar link to put the consumer on notice that the identified goods (“audio recordings featuring music”) are indeed available for download or the equivalent thereof. We view this failing as being similar to on-line retailing situations in which a webpage specimen fails to show a means for ordering the goods or service. See, e.g., In re Osterberg, 83 USPQ2d 1220, 1224 (TTAB 2007) (webpage specimen did not directly provide a means for ordering applicant's goods); In re Genitope Corp. 78 USPQ2d 1819, 1822 (TTAB 2006) (same). Cf. In re Dell Inc., 71 USPQ2d 1725, 1727 (TTAB 2004) (website specimen for downloadable computer software acceptable when it includes method to download, purchase or order the software). See also, In re Sones, 590 F.3d 1282, 93 USPQ2d 1118, 1124 (Fed. Cir. 2009) (“Relevant factors include, for example, whether Sones’ webpages have a ‘point of sale nature….’”) (citation omitted).

We further acknowledge applicant's intent and his assertion that viewers of his uploaded videos on YouTube may use third party software such as RealPlayer to record the audio portions of the videos and ultimately transfer this music file to an MP3 player or other devices and formats. However, on the record before us, in the absence of a “download” link or the equivalent thereof, applicant's specimen on its face fails to show use of his mark in commerce for the identified goods

Downloads Not Public Performances; Fees Must Be Recalculated

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US v. American Society of Composers, Authors and Publishers, 09-0539-cv (L), NYLJ [web_id_#], at *1 (Court, Decided September 28, 2010) [LINK]

"This case presents two distinct questions that arise from the transmittal of musical works over the Internet: First, whether a download of a digital file containing a musical work constitutes a public performance of that musical work; and, second, whether the district court, acting in its capacity as the rate court, was reasonable in its assessment of the blanket license fees of Yahoo! Inc. and RealNetworks, Inc. (collectively, "the Internet Companies") to publicly perform any of the millions of musical compositions in the American Society of Composers, Authors and Publishers ("ASCAP") repertory.

For the reasons set forth below, we affirm the district court's ruling that a download of a musical work does not constitute a public performance of that work, but we vacate the district court's assessment of fees for the blanket ASCAP licenses sought by the Internet Companies and remand for further proceedings."

2d Cir Finds Antitrust Suit Stated Against Record Labels For Online Sales

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The United States Circuit Court, Second Circuit, holds that plaintiffs' antitrust complaint alleging a conspiracy by major record labels to fix the prices and terms under which their music would be sold over the Internet states a claim for violation of Section 1 of the Sherman Act under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The amended complaint contains "enough factual matter (taken as true) to suggest that an agreement was made," id. at 555, and therefore states a claim.

"The present complaint succeeds where Twombly's failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among defendants," Judge Katzmann said.

The defendants "agreed to launch MusicNet and pressplay, both of which charged unreasonably high prices and contained similar DRMs", and the entities did not "dramatically" drop "their prices for Internet Music (as compared to CDs), despite the fact that all defendants experienced dramatic cost reductions in producing Internet Music."

Starr v. Sony BMG, No. 08-5637-cv, NYLJ 1/14/2010 "Decision of the Day" (2d Cir. decided Jan. 13, 2010).

Buy Concert Ticket, Get Full Catalog

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The band No Doubt is offering purchasers of full-priced concert tickets a free download of the band's entire catalog. [Rolling Stone article.]

Assuming a band has not signed a record deal with a major ticket company (e.g., Ticketmaster), how is the deal between the band's record label and the concert promotor structured? In other words, how does the record company collect revenue for download of sound recordings?

Broadband Fee for Unlimited Downloads

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Instead of fighting file-sharing, the local government of the Isle of Man announced a proposal this month that the 80,000 people who live on there would be able to download unlimited amounts of music — perhaps even from notorious peer-to-peer pirate sites. To make this possible, broadband subscribers would pay a nominal fee of as little as £1, or $1.38, a month to their Internet service providers.

[New York Times]

iTunes Goes DRM-Free on Remaining Majors

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Apple reportedly has signed a deal with three more major labels (Sony, Universal and Warner Music) to bring more DRM-free MP3s to iTunes.

As part of the deal, Apple will reportedly be more lax on their strict price fix, breaking MP3s into three tiered pricing: Older catalog tracks,79-cents; newer songs, 99-cents; and hit songs, more.

[Rolling Stone]

Napster - DRM Free

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Napster, who has a sale catalogue of 6 million songs, today stripped DRM from all paid downloads on its digital music service in favor of unprotected MP3s.

The company has support from all 4 major labels. (Given Napster's legal history with the labels, it's kind of ironic, right?)

Notably, customers cannot (yet) replace their previously purchased DRM-laden files with the new unprotected versions. Does the media-upgrade strategy correlate to other historical "upgrades": LP to tape, tape to CD, CD to...errr...minidisc? Will consumers purchase DRM-free copies of songs they previously downloaded with DRM?

[Billboard article.]

Coldplay Single - Free for a Week

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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.]

Ch-ch-ch-changes!

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(a) U2 + LiveNation = a 12-year global contractual relationship (including concert promotion, merchandising and the band’s website; album distribution and publishing will still be handled by Universal...for now).

(b) Amazon + Grand Theft Auto IV = gamers able to download music discovered via the game's 150 song soundtrack and play on portable devices.

U2 Manager - Achtung Baby!

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Rolling Stone reports that U2 manager Paul McGuinness "called for an end to illegal music downloading and placed much of the blame squarely at the feet of Internet service providers. He also called out record labels for their lack of foresight and governments for not holding ISPs responsible for what pumps through their wires."

Understandably, McGuiness wants to secure the financial future of the band. And yes, U2 should not only strive to be great at music, but also great at business too.

But, being great at business is not analogous to clinging to the old model of the music business. Adapt. Otherwise, you still haven't found what you're looking for.

QTrax - What's Up With This?

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In the early morning hour, our friends from blog Down By The Hipster sent OTCS this link, asking "whats up with this?"

Why, it's QTRAX, who on their website boast "free and legal music downloads". But, all is not as it seems over at this "authorized" P2P network. Rolling Stone reports that supposed deals between QTrax and the major labels has been "greatly exaggerated."

Nonetheless, QTrax represents the music industry's recognition that ad-supported, free, on-demand downloads are the next wave. The problem, though, is monetization. A distribution model like QTrax is similar to traditional radio: user's get their music for free in exchange for listening to advertisements. But unlike radio, a service like QTrax is on-demand and permanent. The incentive of having your song on the radio -- creating buzz and/or demand for listeners to purchasers to PURCHASE their own copy for later on-demand and permanent enjoyment -- is simply not present.

Perhaps that is why the labels pulled out?

More MP3 Choice - Yahoo!

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Yahoo! is in preliminary discussions with major recording labels to offer a DRM-free (i.e., without copyright protection software) digital music down-load service. Amazon and iTunes: look out!

It is not yet clear whether Yahoo! will follow an a la carte purchase model, or a free-download/ad-supported model. OTCS opines that an ad-supported model would be a major shift in the digital download market. Given the death of the subscription model, is ad-supported "free" downloading the nail in the a la carte model's coffin? Time will tell.