Case Developments Impacting the Music Industry 11/18/16

Panel Speakers:

Paul LiCalsi, Robins Kaplan LLP – Moderator Cynthia S. Arato, Shapiro Arato LLP Ross Bagley, Pryor Cashman LLP Brian D. Caplan, Reitler Kailas & Rosenblatt LLC

The panel will examine four significant developments in case law in 2016 and how they have and may affect Music Industry litigation.

I. Awarding Attorneys’ Fees Under Section 505 of the Copyright Act: Has Anything Been Resolved After Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979(2016).

In Kirtsaeng, the Supreme Court revisited the issue of Section 505 attorneys’ fees. Usually Supreme Court decisions give significant clarity to open issues or conflicting precedents that exist between the federal circuit court of appeals. A strong argument can be made that the court in Kirtsaeng did not provide litigants with a new framework or guidelines when assessing a prevailing party’s entitlement to attorneys’ fees under the Copyright Act. Continuing to apply the five Fogerty factors that were established by the court in 1994, the Supreme Court determined that “substantial weight” had to be given to the reasonableness of a litigant’s position in the litigation, but that a district court must also take into account and assess all other relevant factors.

II. DMCA: EMI Christian Music Group, Inc. v. MP3tunes, LLC, No. 14-4369 (2d Cir. 2016)

In a lengthy decision by Judge Raymond Lohier issued on October 25, 2016, the U.S. Court of Appeals for the Second Circuit addressed numerous aspects of infringement claims EMI Music Publishing and Capitol Records have litigated since 2007 against defendants Michael Robertson and his now-bankrupt online music company MP3tunes, LLC, which operated the file-storing and sharing websites MP3tunes.com and sideload.com.

First, the Second Circuit held that the district court erred in concluding that MP3tunes had reasonably implemented a policy to terminate users who repeatedly infringed copyrights by posting links to songs on sideload.com and therefore vacated the district court’s summary judgment decision that MP3tunes was entitled to the “safe harbor” provisions of the Digital Millennium Copyright Act (“DMCA”) which limits a service provider’s liability for infringing conduct engaged in by third parties using an Internet service. The Second Circuit reasoned that because copyright infringement is a strict liability claim, the district court’s distinction between the intent of users who repeatedly uploaded infringing material from their own computers and users who repeatedly linked to or downloaded infringing material found “no support in the text, structure or legislative history of the DMCA.” Adopting EMI’s position, the court concluded that “all it takes to be a ‘repeat infringer’ is to repeatedly upload or download copyrighted material for personal use.” Because plaintiffs had offered evidence on summary judgment that MP3tunes and Robertson did not make any efforts to connect known infringing activity to users who repeatedly created links to or copied pirated content, and that Robertson and other MP3tunes executives were themselves repeat infringers, the Second Circuit remanded the issue.

Following the district court’s 2011 decision on summary judgment, EMI pursued its infringement claims in a four week jury trial in early 2014 resulting in a $42 million verdict for copyright infringement against Robertson and MP3tunes. The district court subsequently reduced the judgment to $12 million, nullifying the jury’s finding that Robertson and MP3tunes had sufficient knowledge of piracy for liability with respect to certain broad categories of songs on sideload.com, including songs downloaded in MP3 format before January 2007 and songs by the Beatles.

Reinstating the jury’s $42 million verdict, the Second Circuit explained that the jury’s finding that Robertson and MP3tunes knew that these works were not authorized for download was reasonable and therefore MP3tunes was not entitled to a DMCA safe harbor. The Second Circuit held that although under the DMCA MP3tunes had no duty to affirmatively monitor its websites for pirated content, once it had obtained “red flag” knowledge of such content it had an obligation to remove it. The Second Circuit also held that plaintiffs did not need to show awareness of unauthorized content with respect to each work for liability. Rather, evidence of Robertson’s general knowledge that major labels had not offered songs in MP3 format until 2007 and that songs by the Beatles were not legally distributed online prior to 2010 was sufficient.

The Second Circuit’s decision also addressed other important aspects of copyright law including statutory damages where a sound recording and underlying composition are separately owned, liability for automated display of album cover art, damages for individual songs that were also marketed within albums, Robertson’s secondary liability for MP3tunes’ and its employees’ conduct, as well as the district court’s exercise of personal jurisdiction over Robertson as a California resident and the CEO and owner of MP3tunes, LLC.

III. High Water Mark for Transformative Use?: TCA Television v. McCollum, ___ F.3d ___, 2016 WL 5899174 (2d Cir. 2016)

On October 11, 2016, the Second Circuit held that a play’s inclusion of Abbott and Costello’s iconic “Who’s on First?” comedy routine was not a transformative fair use.

In 2015, the heirs of William “Bud” Abbot and Lou Costello filed a copyright infringement lawsuit against the producers of “Hand to God,” a critically acclaimed play about a high school student, Jason, in a religious Southern town and his evil sock puppet Tyrone. In one of the play’s early and pivotal scenes, Jason performs a minute-long excerpt of “Who’s on First” with Tyrone, to impress a girl. The girl thinks the routine is funny and when she asks Jason if he wrote it, he says yes, which the audience knows is not true. After this gets a big laugh, it becomes clear that Jason cannot control Tyrone. The sock puppet “outs” Jason as a liar, calls the girl stupid, and vulgarly divulges Jason’s physical desire for her. The scene foreshadows darker and more disturbing exchanges between Jason and the puppet that will occur as the play proceeds. The producers of the play moved to dismiss the suit on the ground that the use of the routine was a “transformative” fair use as a matter of law and the district court agreed. As announced by the Supreme Court in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575 (1994) the test for transformative use looks at “whether the new work merely ‘supersede[s] the objects’ of the original creation” or whether it “instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message[.]”

The district court found that the use was transformative because the scene gave the audience an understanding of Jason’s psyche in the context of an overall dark play and therefore used the routine for a dramatic purpose that differed from its vaudeville origins. As the court explained, “the contrast between Jason's seemingly soft- spoken personality and the actual outrageousness of his inner nature, which he expresses through the sock puppet, is, among other things, a darkly comedic critique of the social norms governing a small town in the Bible Belt.”

The Second Circuit disagreed. It held that “the critical inquiry is whether the new work uses the copyrighted material itself for a purpose, or imbues it with a character, different from that for which it was created.” While the overall purpose of the play was quite different than that of the comedy routine, that was not enough. As the Second Circuit explained, “[t]he Play may convey a dark critique of society, but it does not transform Abbott and Costello’s Routine so that it conveys that message.” In addition, while the routine was used to show Jason lying, “the particular subject of the lie—the Routine—appears irrelevant to that purpose.” Rather, the play could have used any other famous literary work for that purpose. Accordingly, the defendants’ use of “Who’s on First?” had “no bearing on the original work” and lacked the required “justification to qualify for a fair use defense.”

Arguably, the Second Circuit did not need to reach the fair use question, as it affirmed the district court’s dismissal of the case on the alternative ground that plaintiffs did not own the copyright in dispute. Although the Second Circuit explained that it was appropriate to resolve the fair use question before reaching the alternative ground, it is possible that the panel wanted to address the defense to comment on the prior, controversial decision of Cariou v. Prince, 714 F.3d 694, 707 (2d Cir. 2013). Cariou involved the appropriation art of Richard Prince. He created a series of art works, tilted Canal Zone, incorporating Cariou’s photographs of the Rastafarian community in Jamaica. Prince's works involved copying and altering the original photographs, including increasing them in size, blurring or sharpening, adding content (sometimes in color), and sometimes compositing multiple photographs together or with other works taken by the plaintiff. Cariou found that 25 of the works were transformative and remanded the case to the trial court for reconsideration of the remaining five. The panel noted that Cariou has been criticized and it characterized it as the “high water mark” of transformative use.

IV. Circuits Split on de minimis Defense on Sound Recording Sampling: VMG Salsoul, LLC v. Ciccone, 824 F.3d 871(9th Cir. 2016)

For over ten years Bridgeport Music Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005) , with its ruling that the “de minimis” defense was not available in cases involving the sampling of sound recordings, stood as the sole circuit level authority on the issue. That court had held that under 17 U.S.C. 114(b) the sampling of a sound recording, no matter how trivial or unrecognizable to the ordinary listener, constituted copyright infringement. This year the Ninth Circuit in VMG Salsoul v. Ciccone frontally attacked Bridgeport - explicitly creating a split in the circuits and thereby inviting Supreme Court review- by finding the Sixth Circuit’s reasoning erroneous and holding that nothing in the Copyright Act suggests that sound recordings should be treated differently than any other work, and that the “de minimis” exception indeed was available as a defense. The panel will explore the reasoning in VMG Salsoul and how the case may affect sample licensing practices in the music industry.

Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

A district court, in exercising its authority under the Copyright Act to award a 136 S.Ct. 1979 reasonable attorney's fee to the prevailing Supreme Court of the United States party, should give substantial weight to Supap KIRTSAENG, dba Bluechristine99, Petitioner the objective reasonableness of the losing v. party's position; but the court must also give due consideration to all other circumstances JOHN WILEY & SONS, INC. relevant to granting fees, and it retains No. 15–375. discretion, in light of those factors, to make an | award even when the losing party advanced a Argued April 25, 2016. reasonable claim or defense; abrogating Bond | v. Blum, 317 F.3d 385, Hogan Systems, Inc. Decided June 16, 2016. v. Cybresource Int'l, Inc., 158 F.3d 319. 17 U.S.C.A. § 505. Synopsis Background: Following remand in copyright infringement 4 Cases that cite this headnote action brought by a textbook publisher, 133 S.Ct. 1351, the United States District Court for the Southern [2] Copyrights and Intellectual Property District of New York, Donald C. Pogue, J., 2013 Attorney fees WL 6722887, denied motion for attorney fees by the A district court may not award attorney's prevailing defendant, a student who imported and resold fees in a copyright case as a matter of copyrighted textbooks published abroad. The United course; rather, a court must make a more States Court of Appeals for the Second Circuit, 605 particularized, case-by-case assessment. 17 Fed.Appx. 48, affirmed, and certiorari was granted. U.S.C.A. § 505.

6 Cases that cite this headnote Holdings: The Supreme Court, Justice Kagan, held that: [3] Copyrights and Intellectual Property [1] district court, in exercising its authority under the Attorney fees Copyright Act to award a reasonable attorney's fee to In awarding attorney's fees to a prevailing the prevailing party, should give substantial weight to party in a copyright case, a court may not treat the objective reasonableness of the losing party's position, prevailing plaintiffs and prevailing defendants abrogating Bond v. Blum, 317 F.3d 385, and Hogan any differently; defendants should be Systems, Inc. v. Cybresource Int'l, Inc., 158 F.3d 319, and encouraged to litigate meritorious copyright defenses to the same extent that plaintiffs are [2] when awarding attorney fees, district court was encouraged to litigate meritorious claims of required on remand to give substantial weight to the infringement. 17 U.S.C.A. § 505. reasonableness of the publisher's litigating position, but also take into account all other relevant factors. Cases that cite this headnote

Vacated and remanded. [4] Copyrights and Intellectual Property Attorney fees Nonexclusive factors that inform a court's fee-shifting decisions in a copyright case West Headnotes (17) include frivolousness, motivation, objective unreasonableness, and the need in particular [1] Copyrights and Intellectual Property circumstances to advance considerations of Attorney fees

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

compensation and deterrence. 17 U.S.C.A. § 505. Cases that cite this headnote

4 Cases that cite this headnote [10] Copyrights and Intellectual Property Attorney fees [5] Copyrights and Intellectual Property Attorney fee awards under the Copyright Act Attorney fees should encourage the types of lawsuits that The Copyright Act's attorney fee provision promote the Act's purposes of encouraging grants courts wide latitude to award attorney's and rewarding authors' creations while also fees based on the totality of circumstances in enabling others to build on that work. 17 a case. 17 U.S.C.A. § 505. U.S.C.A. § 505.

3 Cases that cite this headnote 1 Cases that cite this headnote

[6] Courts [11] Copyrights and Intellectual Property Discretion of court in general Attorney fees In a system of laws, discretion is rarely without If some court confuses the issue of liability limits. for copyright infringement with that of reasonableness, its attorney fee award should Cases that cite this headnote be reversed for abuse of discretion. 17 U.S.C.A. § 505. [7] Federal Civil Procedure Cases that cite this headnote Discretion of court A motion to a court's discretion is a motion, not to its inclination, but to its judgment; and [12] Copyrights and Intellectual Property its judgment is to be guided by sound legal Attorney fees principles. Objective reasonableness of the losing party's position in a copyright case can be only Cases that cite this headnote an important factor in assessing attorney fee applications—not the controlling one. 17 [8] Copyrights and Intellectual Property U.S.C.A. § 505. Nature of statutory copyright 3 Cases that cite this headnote Copyright law ultimately serves the purpose of enriching the general public through access to creative works. U.S.C.A. Const. Art. 1, § 8. [13] Copyrights and Intellectual Property Attorney fees Cases that cite this headnote In any given copyright case, a court may award attorney fees even though the losing [9] Copyrights and Intellectual Property party offered reasonable arguments or, Nature of statutory copyright conversely, deny fees even though the losing party made unreasonable ones. 17 U.S.C.A. § The Copyright Act achieves its purpose of 505. enriching the general public through access to creative works by striking a balance 6 Cases that cite this headnote between two subsidiary aims: encouraging and rewarding authors' creations while also enabling others to build on that work. 17 [14] Copyrights and Intellectual Property U.S.C.A. § 101 et seq. Attorney fees

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

A court may order fee-shifting in a copyright case because of a party's litigation * misconduct, whatever the reasonableness of *1981 Syllabus his claims or defenses. 17 U.S.C.A. § 505. In Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. ––––, 1 Cases that cite this headnote 133 S.Ct. 1351, 185 L.Ed.2d 392 this Court held that petitioner Supap Kirtsaeng could invoke the Copyright Act's “first-sale doctrine,” see 17 U.S.C. § 109(a), as [15] Copyrights and Intellectual Property a defense to the copyright infringement claim filed by Attorney fees textbook publisher John Wiley & Sons, Inc. Having won A court may order fee-shifting in a copyright his case, Kirtsaeng returned to the District Court to seek case to deter repeated instances of copyright more than $2 million in attorney's fees from Wiley under infringement or overaggressive assertions of the Copyright Act's fee-shifting provision. See § 505. The copyright claims, even if the losing position District Court denied Kirtsaeng's application because, it was reasonable in a particular case. 17 reasoned, imposing a fee award against a losing party that U.S.C.A. § 505. had taken reasonable positions during litigation (as Wiley had done) would not serve the Act's purposes. Affirming, 2 Cases that cite this headnote the Second Circuit held that the District Court was correct to place “substantial weight” on the reasonableness of [16] Copyrights and Intellectual Property Wiley's position and that the District Court did not abuse Attorney fees its discretion in determining that the other factors did not outweigh the reasonableness finding. Although objective reasonableness of a party's position carries significant weight when Held : awarding attorney fees in a copyright case, courts must view all the circumstances of 1. When deciding whether to award attorney's fees under a case on their own terms, in light of the § 505, a district court should give substantial weight Copyright Act's essential goals. 17 U.S.C.A. § to the *1982 objective reasonableness of the losing 505. party's position, while still taking into account all other 3 Cases that cite this headnote circumstances relevant to granting fees. Pp. 3–11.

(a) Section 505 states that a district court “may ... [17] Federal Courts award a reasonable attorney's fee to the prevailing party.” Determination of damages, costs, or Although the text “clearly connotes discretion” and interest; remittitur eschews any “precise rule or formula,” Fogerty v. Fantasy, In determining whether to award attorney Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455, fees to student who prevailed in textbook the Court has placed two restrictions on that authority: publisher's copyright infringement action First, a court may not “award[ ] attorney's fees as based on student's importation and resale a matter of course,” id., at 533, 114 S.Ct. 1023; and of copyrighted textbooks published abroad, second, a court may not treat prevailing plaintiffs and district court was required on remand to give prevailing defendants differently, id., at 527, 114 S.Ct. substantial weight to the reasonableness of the 1023. The Court also noted “several nonexclusive factors” publisher's litigating position, but also take for courts to consider, e.g., “frivolousness, motivation, into account all other relevant factors. 17 objective unreasonableness[,] and the need in particular U.S.C.A. § 505. circumstances to advance considerations of compensation and deterrence,” id., at 534, n. 19, 114 S.Ct. 1023 and left Cases that cite this headnote open the possibility of providing further guidance in the future, id., at 534–535, 114 S.Ct. 1023.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

This Court agrees with both Kirtsaeng and Wiley that one. In deciding whether to fee-shift, district *1983 additional guidance respecting the application of § 505 is courts must take into account a range of considerations proper so as to further channel district court discretion beyond the reasonableness of litigating positions. Pp. 1988 towards the purposes of the Copyright Act. In addressing – 1989. other open-ended fee-shifting statutes, this Court has emphasized that “in a system of laws discretion is rarely 2. While the Second Circuit properly calls for district without limits,” and it has “found” those limits by looking courts to give “substantial weight” to the reasonableness to “the large objectives of the relevant Act.” Flight of a losing party's litigating positions, its language at Attendants v. Zipes, 491 U.S. 754, 759, 109 S.Ct. 2732, times suggests that a finding of reasonableness raises 105 L.Ed.2d 639. In accord with such precedents, this a presumption against granting fees, and that goes too Court must determine what approach to fee awards under far in cabining the district court's analysis. Because the § 505 best advances the well-settled objectives of the District Court thus may not have understood the full Copyright Act, which are to “enrich[ ] the general public scope of its discretion, it should have the opportunity to through access to creative works” by striking a balance reconsider Kirtsaeng's fee application. On remand, the between encouraging and rewarding authors' creations District Court should continue to give substantial weight and enabling others to build on that work. Fogerty, 510 to the reasonableness of Wiley's position but also take into U.S., at 527, 526, 114 S.Ct. 1023. Fee awards should thus account all other relevant factors. Pp. 1988 – 1989. encourage the types of lawsuits that advance those aims. Pp. 1984 – 1986. 605 Fed.Appx. 48, vacated and remanded.

(b) Wiley's approach—to put substantial weight on the KAGAN, J., delivered the opinion for a unanimous reasonableness of a losing party's position—passes this Court. test because it enhances the probability that creators and users (i.e., plaintiffs and defendants) will enjoy the substantive rights the Act provides. Parties with strong Attorneys and Law Firms positions are encouraged to stand on their rights, given E. Joshua Rosenkranz, New York, NY, for Petitioner. the likelihood that they will recover fees from the losing (i.e., unreasonable) party; those with weak ones are Paul M. Smith, Washington, DC, for Respondent. deterred by the likelihood of having to pay two sets of fees. By contrast, Kirtsaeng's proposal—to give special Elaine J. Goldenberg for the United States as amicus consideration to whether a suit meaningfully clarified curiae, by special leave of the Court, supporting the copyright law by resolving an important and close legal respondent. issue—would produce no sure benefits. Even accepting that litigation of close cases advances the public interest, Sam P. Israel, Eleonora Zlotnikova, Sam P. Israel, P.C., fee-shifting will not necessarily, or even usually, encourage New York, NY, E. Joshua Rosenkranz, Annette L. parties to litigate those cases to judgment. While fees Hurst, Lisa T. Simpson, Thomas M. Bondy, Andrew D. increase the reward for a victory, they also enhance the Silverman, Christopher J. Cariello, Orrick, Herrington & penalty for a defeat—and the parties in hard cases cannot Sutcliffe LLP, New York, NY, for Petitioner. be confident if they will win or lose. Paul M. Smith, Matthew S. Hellman, Ishan K. Bhabha, Jenner & Block LLP, Washington, DC, for Respondent. Wiley's approach is also more administrable. A district court that has ruled on the merits of a copyright case Opinion can easily assess whether the losing party advanced an unreasonable position. By contrast, a judge may not Justice KAGAN delivered the opinion of the Court. know whether a newly decided issue will have broad legal [1] Section 505 of the Copyright Act provides that a significance. Pp. 1986 – 1988. district court “may ... award a reasonable attorney's fee to the prevailing party.” 17 U.S.C. § 505. The question (c) Still, objective reasonableness can be only a substantial presented here is whether a court, in exercising that factor in assessing fee applications—not the controlling authority, should give substantial weight to the objective

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770... reasonableness of the losing party's position. The answer, doctrine allows the resale of foreign-made books, just as as both decisions below held, is yes—the court should. it does domestic ones. See Kirtsaeng v. John Wiley & Sons, But the court must also give due consideration to all other Inc., 568 U.S. ––––, ––––, 133 S.Ct. 1351, 1355–1356, 185 circumstances relevant to granting fees; and it retains L.Ed.2d 392 (2013). discretion, in light of those factors, to make an award even when the losing party advanced a reasonable claim or Returning victorious to the District Court, Kirtsaeng defense. Because we are not certain that the lower courts invoked § 505 to seek more than $2 million in attorney's here understood the full scope of that discretion, we return fees from Wiley. The court denied his motion. Relying the case for further consideration of the prevailing party's on Second Circuit precedent, the court gave “substantial fee application. weight” to the “objective reasonableness” of Wiley's infringement claim. See No. 08–cv–07834 (S.D.N.Y., Dec. 20, 2013), App. to Pet. for Cert. 18a, 2013 WL 6722887, *4. In explanation of that approach, the court stated that I “the imposition of a fee award against a copyright holder Petitioner Supap Kirtsaeng, a citizen of Thailand, came to with an objectively reasonable”—although unsuccessful the United States 20 years ago to study math at Cornell —“litigation position will generally not promote the University. He quickly figured out that respondent John purposes of the Copyright Act.” Id., at 11a (quoting Wiley & Sons, an academic publishing company, sold Matthew Bender & Co. v. West Publishing Co., 240 F.3d virtually identical English-language textbooks in the two 116, 122 (C.A.2 2001) (emphasis deleted)). Here, Wiley's countries—but for far less in Thailand than in the United position was reasonable: After all, several Courts of States. Seeing a ripe opportunity for arbitrage, Kirtsaeng Appeals and three Justices of the Supreme Court had asked family and friends to buy the foreign editions in agreed with it. See App. to Pet. for Cert. 12a. And Thai bookstores and ship them to him in New York. according to the District Court, no other circumstance He then resold the textbooks to American students, “overr[o]de” that objective reasonableness, so as to reimbursed his Thai suppliers, and pocketed a tidy profit. warrant fee-shifting. Id., at 22a. The Court of Appeals affirmed, concluding in a brief summary order that “the Wiley sued Kirtsaeng for copyright infringement, claiming district court properly placed ‘substantial weight’ on the that his activities violated *1984 its exclusive right to reasonableness of [Wiley's] position” and committed no distribute the textbooks. See 17 U.S.C. §§ 106(3), 602(a) abuse of discretion in deciding that other “factors did not (1). Kirtsaeng invoked the “first-sale doctrine” as a outweigh” the reasonableness finding. 605 Fed.Appx. 48, defense. That doctrine typically enables the lawful owner 49, 50 (C.A.2 2015). of a book (or other work) to resell or otherwise dispose of it as he wishes. See § 109(a). But Wiley contended that the We granted certiorari, 577 U.S. ––––, 136 S.Ct. 890, 193 first-sale doctrine did not apply when a book (like those L.Ed.2d 783 (2016), to resolve disagreement in the lower Kirtsaeng sold) was manufactured abroad. courts about how to address an application for attorney's fees in a copyright case. 1 At the time, courts were in conflict on that issue. Some thought, as Kirtsaeng did, that the first-sale doctrine permitted the resale of foreign-made books; others II maintained, along with Wiley, that it did not. And this Court, in its first pass at the issue, divided 4 to 4. See Section 505 states that a district court “may ... award Costco Wholesale Corp. v. Omega, S.A., 562 U.S. 40, 131 a reasonable attorney's fee to the prevailing party.” S.Ct. 565, 178 L.Ed.2d 470 (2010) (per curiam ). In this It thus authorizes fee-shifting, but without specifying case, the District Court sided with Wiley; so too did a standards that courts should adopt, or *1985 guideposts divided panel of the Court of Appeals for the Second they should use, in determining when such awards are Circuit. See 654 F.3d 210, 214, 222 (2011). To settle appropriate. the continuing conflict, this Court granted Kirtsaeng's petition for certiorari and reversed the Second Circuit [2] [3] [4] In Fogerty v. Fantasy, Inc., 510 U.S. 517, in a 6–to–3 decision, thus establishing that the first-sale 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994), this Court

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770... recognized the broad leeway § 505 gives to district courts substantial weight to the reasonableness of a losing party's —but also established several principles and criteria to position will best serve the Act's objectives. See Brief for guide their decisions. See id., at 519, 114 S.Ct. 1023 Respondent 24–35. By contrast, Kirtsaeng favors giving (asking “what standards should inform” the exercise special consideration to whether a lawsuit resolved an of the trial court's authority). The statutory language, important and close legal issue and thus “meaningfully we stated, “clearly connotes discretion,” and eschews clarifie[d]” copyright law. Brief for Petitioner 36; see id., any “precise rule or formula” for awarding fees. Id., at at 41–44. 533, 534, 114 S.Ct. 1023. Still, we established a pair of restrictions. First, a district court may not “award[ ] [6] [7] We join both parties in seeing a need for some attorney's fees as a matter of course”; rather, a court must additional guidance respecting the application of § 505. make a more particularized, case-by-case assessment. In addressing other open-ended fee-shifting statutes, this Id., at 533, 114 S.Ct. 1023. Second, a court may not Court has emphasized that “in a system of laws discretion treat prevailing plaintiffs and prevailing defendants any is rarely without limits.” Flight Attendants v. Zipes, 491 differently; defendants should be “encouraged to litigate U.S. 754, 758, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989); see [meritorious copyright defenses] to the same extent that *1986 Halo Electronics, Inc. v. Pulse Electronics, Inc., ––– plaintiffs are encouraged to litigate meritorious claims of U.S. ––––, ––––, 136 S.Ct. 1923, 1931, ––– L.Ed.2d ––––, infringement.” Id., at 527, 114 S.Ct. 1023. In addition, 2016 WL 3221515 (2016) ante, at 8. Without governing we noted with approval “several nonexclusive factors” standards or principles, such provisions threaten to to inform a court's fee-shifting decisions: “frivolousness, condone judicial “whim” or predilection. Martin, 546 motivation, objective unreasonableness[,] and the need U.S., at 139, 126 S.Ct. 704; see also ibid. (“[A] motion to in particular circumstances to advance considerations of [a court's] discretion is a motion, not to its inclination, compensation and deterrence.” Id., at 534, n. 19, 114 S.Ct. but to its judgment; and its judgment is to be guided by 1023. And we left open the possibility of providing further sound legal principles” (quoting United States v. Burr, guidance in the future, in response to (and grounded on) 25 F.Cas. 30, 35 (No. 14,692d) (C.C.Va.1807) (Marshall, lower courts' evolving experience. See id., at 534–535, 114 C. J.))). At the least, utterly freewheeling inquiries often S.Ct. 1023; Martin v. Franklin Capital Corp., 546 U.S. 132, deprive litigants of “the basic principle of justice that like 140, n., 126 S.Ct. 704, 163 L.Ed.2d 547 (2005) (noting that cases should be decided alike,” Martin, 546 U.S., at 139, Fogerty was not intended to be the end of the matter). 126 S.Ct. 704—as when, for example, one judge thinks the parties' “motivation [s]” determinative and another [5] The parties here, though sharing some common believes the need for “compensation” trumps all else, ground, now dispute what else we should say to district Fogerty, 510 U.S., at 534, n. 19, 114 S.Ct. 1023. And so courts. Both Kirtsaeng and Wiley agree—as they must— too, such unconstrained discretion prevents individuals that § 505 grants courts wide latitude to award attorney's from predicting how fee decisions will turn out, and thus fees based on the totality of circumstances in a case. See from making properly informed judgments about whether Brief for Petitioner 17; Brief for Respondent 35. Yet both to litigate. For those reasons, when applying fee-shifting reject the position, taken by some Courts of Appeals, laws with “no explicit limit or condition,” Halo, ––– U.S. see supra, at 1984, n. 1, that Fogerty spelled out the at, ––––, ––– S.Ct., at ––––, ante, at 8, we have nonetheless only appropriate limits on judicial discretion—in other “found limits” in them—and we have done so, just as words, that each district court should otherwise proceed both parties urge, by looking to “the large objectives of as it sees fit, assigning whatever weight to whatever the relevant Act,” Zipes, 491 U.S., at 759, 109 S.Ct. 2732 factors it chooses. Rather, Kirtsaeng and Wiley both call, (internal quotation marks omitted); see supra, at 1985 – in almost identical language, for “[c]hanneling district 1986. court discretion towards the purposes of the Copyright Act.” Brief for Petitioner 16; see Brief for Respondent 21 [8] [9] [10] In accord with such precedents, we must (“[A]n appellate court [should] channel a district court's consider if either Wiley's or Kirtsaeng's proposal well discretion so that it ... further[s] the goals of the Copyright advances the Copyright Act's goals. Those objectives Act”). (And indeed, as discussed later, both describe are well settled. As Fogerty explained, “copyright law those purposes identically. See infra, at 1986.) But at ultimately serves the purpose of enriching the general that point, the two part ways. Wiley argues that giving public through access to creative works.” 510 U.S., at 527,

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

114 S.Ct. 1023; see U.S. Const., Art. I, § 8, cl. 8 (“To By contrast, Kirtsaeng's proposal would not produce promote the Progress of Science and useful Arts”). The any sure benefits. We accept his premise that litigation statute achieves that end by striking a balance between of close cases can help ensure that “the boundaries of two subsidiary aims: encouraging and rewarding authors' copyright law [are] demarcated as clearly as possible,” creations while also enabling others to build on that thus advancing the public interest in creative work. Brief work. See Fogerty, 510 U.S., at 526, 114 S.Ct. 1023. for Petitioner 19 (quoting Fogerty, 510 U.S., at 527, 114 Accordingly, fee awards under § 505 should encourage the S.Ct. 1023). But we cannot agree that fee-shifting will types of lawsuits that promote those purposes. (That is necessarily, or even usually, encourage parties to litigate why, for example, Fogerty insisted on treating prevailing those cases to judgment. Fee awards are a double-edged plaintiffs and prevailing defendants alike—because the sword: They increase the reward for a victory—but also one could “further the policies of the Copyright Act enhance the penalty for a defeat. And the hallmark of every bit as much as” the other. 510 U.S., at 527, 114 hard cases is that no party can be confident if he will S.Ct. 1023.) On that much, both parties agree. Brief for win or lose. That means Kirtsaeng's approach could just Petitioner 37; Brief for Respondent 29–30. The contested as easily discourage as encourage parties to pursue the issue is whether giving substantial weight to the objective kinds of suits that “meaningfully clarif[y]” copyright law. (un)reasonableness of a losing party's litigating position— Brief for Petitioner 36. It would (by definition) raise the or, alternatively, to a lawsuit's role in settling significant stakes of such suits; but whether those higher stakes and uncertain legal issues—will predictably encourage would provide an incentive—or instead a disincentive— such useful copyright litigation. to litigate hinges on a party's attitude toward risk. Is the person risk-preferring or risk-averse—a high-roller or a The objective-reasonableness approach that Wiley favors penny-ante type? Only the former would litigate more in passes that test because it both encourages parties with Kirtsaeng's world. See Posner, An Economic Approach strong legal positions to stand on their rights and deters to Legal Procedure and Judicial Administration, 2 J. those with weak ones from proceeding with litigation. Legal Studies 399, 428 (1973) (fees “make[ ] the expected When a litigant—whether plaintiff or defendant—is value of litigation less for risk-averse litigants, which will clearly correct, the likelihood that he will recover fees encourage [them to] settle[ ]”). And Kirtsaeng offers no from the opposing (i.e., unreasonable) party gives him an reason to think that serious gamblers predominate. See, incentive to litigate the case all the way to the end. The e.g., Texas Industries, Inc. v. Radcliff Materials, Inc., holder of a copyright that has obviously been infringed 451 U.S. 630, 636, n. 8, 101 S.Ct. 2061, 68 L.Ed.2d has good reason to bring and maintain a suit even if 500 (1981) (“Economists disagree over whether business the damages at stake are small; and likewise, a person decisionmakers[ ] are ‘risk averse’ ”); CIGNA Corp. v. defending against a patently meritless copyright claim has Amara, 563 U.S. 421, 430, 131 S.Ct. 1866, 179 L.Ed.2d 843 every incentive to keep fighting, no matter that attorney's (2011) (“[M]ost individuals are risk averse”). So the value fees in a protracted suit might be as or more costly than of his standard, unlike Wiley's, is entirely speculative. 2 a settlement. Conversely, when a person (again, whether plaintiff or defendant) has an unreasonable litigating What is more, Wiley's approach is more administrable position, the likelihood that he will have to pay two sets of than Kirtsaeng's. A district court that has ruled on the fees discourages *1987 legal action. The copyright holder merits of a copyright case can easily assess whether the with no reasonable infringement claim has good reason losing party advanced an unreasonable claim or defense. not to bring suit in the first instance (knowing he cannot That is closely related to what the court has already done: force a settlement and will have to proceed to judgment); In deciding any case, a judge cannot help but consider and the infringer with no reasonable defense has every the strength and weakness of each side's arguments. By reason to give in quickly, before each side's litigation costs contrast, a judge may not know at the conclusion of a mount. All of those results promote the Copyright Act's *1988 suit whether a newly decided issue will have, as purposes, by enhancing the probability that both creators Kirtsaeng thinks critical, broad legal significance. The and users (i.e., potential plaintiffs and defendants) will precedent-setting, law-clarifying value of a decision may enjoy the substantive rights the statute provides. become apparent only in retrospect—sometimes, not until many years later. And so too a decision's practical impact (to the extent Kirtsaeng would have courts separately

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 7 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770... consider that factor). District courts are not accustomed claims or defenses. See, e.g., Viva Video, Inc. v. Cabrera, to evaluating in real time either the jurisprudential or the 9 Fed.Appx. 77, 80 (C.A.2 2001). Or a court may do so on-the-ground import of their rulings. Exactly how they to deter repeated instances of copyright infringement or would do so is uncertain (Kirtsaeng points to no other overaggressive assertions of copyright claims, again even context in which courts undertake such an analysis), but if the losing position was reasonable in a particular case. we fear that the inquiry would implicate our oft-stated See, e.g., Bridgeport Music, Inc. v. WB Music Corp., 520 concern that an application for attorney's fees “should not F.3d 588, 593–595 (C.A.6 2008) (awarding fees against result in a second major litigation.” Zipes, 491 U.S., at a copyright holder who filed hundreds of suits on an 766, 109 S.Ct. 2732 (quoting Hensley v. Eckerhart, 461 overbroad legal theory, including in a subset of cases in U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)). which it was objectively reasonable). Although objective And we suspect that even at the end of that post-lawsuit reasonableness carries significant weight, courts must view lawsuit, the results would typically reflect little more than all the circumstances of a case on their own terms, in light educated guesses. of the Copyright Act's essential goals.

[11] Contrary to Kirtsaeng's view, placing substantial [17] And on that score, Kirtsaeng has raised serious weight on objective reasonableness also treats plaintiffs questions about how fee-shifting actually operates in the and defendants even-handedly, as Fogerty commands. Second Circuit. To be sure, the Court of Appeals' framing No matter which side wins a case, the court must assess of the inquiry resembles our own: It calls for a district whether the other side's position was (un)reasonable. court to give “substantial weight” to the reasonableness of And of course, both plaintiffs and defendants can (and a losing party's litigating positions while also considering sometimes do) make unreasonable arguments. Kirtsaeng other relevant circumstances. See 605 Fed.Appx., at 49– claims that the reasonableness inquiry systematically 50; Matthew Bender, 240 F.3d, at 122. But the Court favors plaintiffs because a losing defendant “will virtually of Appeals' language at times suggests that a finding always be found to have done something culpable.” of reasonableness raises a presumption against granting Brief for Petitioner 29 (emphasis in original). But that fees, see ibid.; supra, at 1983 – 1985—and that goes too conflates two different questions: whether a defendant in far in cabining how a district court must structure its fact infringed a copyright and whether he made serious analysis and what it may conclude from its review of arguments in defense of his conduct. Courts every day relevant factors. Still more, district courts in the Second see reasonable defenses that ultimately fail (just as they Circuit appear to have overly learned the Court of see reasonable claims that come to nothing); in this Appeals' lesson, turning “substantial” into more nearly context, as in any other, they are capable of distinguishing “dispositive” weight. As Kirtsaeng notes, hardly any between those defenses (or claims) and the objectively decisions in that Circuit have granted fees when the losing unreasonable variety. And if some court confuses the party raised a reasonable argument (and none have denied issue of liability with that of reasonableness, its fee award fees when the losing party failed to do so). See Reply Brief should be reversed for abuse of discretion. 3 15. For these reasons, we vacate the decision below so that the District Court can take another look at Kirtsaeng's [12] [13] [14] [15] [16] All of that said, objectivefee application. In sending back the case for this purpose, reasonableness can be only an important factor in we do not at all intimate that the District Court should assessing fee applications—not the controlling one. As reach a different conclusion. Rather, we merely ensure we recognized in Fogerty, § 505 confers broad discretion that the court will evaluate the motion consistent with on district courts and, in deciding whether to fee-shift, the analysis we have set out—giving substantial weight to they must take into account a range of considerations the reasonableness of Wiley's litigating position, but also beyond the reasonableness of litigating positions. See taking into account all other relevant factors. supra, at 1985. That means in any given case a court may award fees even though the losing party offered reasonable * * * arguments (or, conversely, deny fees even though the losing party made unreasonable ones). For example, a The judgment of the Court of Appeals is vacated, and the court may order fee-shifting *1989 because of a party's case is remanded for further proceedings consistent with litigation misconduct, whatever the reasonableness of his this opinion.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 8 Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016) 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770...

All Citations It is so ordered. 136 S.Ct. 1979, 195 L.Ed.2d 368, 84 USLW 4420, 2016 Copr.L.Dec. P 30,937, 118 U.S.P.Q.2d 1770, 44 Media L. Rep. 1877, 14 Cal. Daily Op. Serv. 6228, 2016 Daily Journal D.A.R. 5835, 26 Fla. L. Weekly Fed. S 251

Footnotes * The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50 L.Ed. 499. 1 Compare, e.g., Matthew Bender & Co. v. West Publishing Co., 240 F.3d 116, 122 (C.A.2 2001) (giving substantial weight to objective reasonableness), with, e.g., Bond v. Blum, 317 F.3d 385, 397–398 (C.A.4 2003) (endorsing a totality-of-the- circumstances approach, without according special significance to any factor), and with, e.g., Hogan Systems, Inc. v. Cybresource Int'l, Inc., 158 F.3d 319, 325 (C.A.5 1998) (presuming that a prevailing party receives fees). 2 This case serves as a good illustration. Imagine you are Kirtsaeng at a key moment in his case—say, when deciding whether to petition this Court for certiorari. And suppose (as Kirtsaeng now wishes) that the prevailing party in a hard and important case—like this one—will probably get a fee award. Does that make you more likely to file, because you will recoup your own fees if you win? Or less likely to file, because you will foot Wiley's bills if you lose? Here are some answers to choose from (recalling that you cannot confidently predict which way the Court will rule): (A) Six of one, half a dozen of the other. (B) Depends if I'm feeling lucky that day. (C) Less likely—this is getting scary; who knows how much money Wiley will spend on Supreme Court lawyers? (D) More likely—the higher the stakes, the greater the rush. Only if lots of people answer (D) will Kirtsaeng's standard work in the way advertised. Maybe. But then again, maybe not. 3 Kirtsaeng also offers statistics meant to show that in practice, even if not in theory, the objective reasonableness inquiry unduly favors plaintiffs; but the Solicitor General as amicus curiae has cast significant doubt on that claim. According to Kirtsaeng, 86% of winning copyright holders, but only 45% of prevailing defendants, have received fee awards over the last 15 years in the Second Circuit (which, recall, gives substantial weight to objective reasonableness). See Reply Brief 17–18; supra, at 1983 – 1985. But first, the Solicitor General represents that the overall numbers are actually 77% and 53%, respectively. See Tr. of Oral Arg. 41. And second, the Solicitor General points out that all these percentages include default judgments, which almost invariably give rise to fee awards—but usually of a very small amount—because the defendant has not shown up to oppose either the suit or the fee application. When those cases are taken out, the statistics look fairly similar: 60% for plaintiffs versus 53% for defendants. See id., at 42. And of course, there may be good reasons why copyright plaintiffs and defendants do not make reasonable arguments in perfectly equal proportion.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page1 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 August Term, 2015 5 6 (Argued: May 11, 2016 Decided: October 25, 2016) 7 8 Docket Nos. 14‐4369‐cv(L), 14‐4509‐cv(XAP) 9 10 ______11 EMI CHRISTIAN MUSIC GROUP, INCORPORATED, PRIORITY 12 RECORDS LLC, BEECHWOOD MUSIC CORPORATION, COLGEMS‐EMI 13 MUSIC, INCORPORATED, EMI APRIL MUSIC, INC., EMI BLACKWOOD 14 MUSIC, INC., EMI FULL KEEL MUSIC, INC., EMI GOLDEN TORCH 15 MUSIC CORPORATION, EMI LONGITUDE MUSIC, EMI VIRGIN 16 MUSIC, INC., EMI VIRGIN SONGS, INC., CAPITOL RECORDS, LLC, 17 18 Plaintiffs‐Counter‐Defendants‐Appellees‐Cross‐Appellants, 19 20 EMI AL GALLICO MUSIC CORPORATION, EMI ALGEE MUSIC 21 CORPORATION, EMI FEIST CATALOG, INC., EMI GOLD HORIZON 22 MUSIC CORP., EMI GROVE PARK MUSIC, INCORPORATED, EMI 23 HASTINGS CATALOG, INCORPORATED, EMI MILLS MUSIC, 24 INCORPORATED, EMI MILLER CATALOG, INCORPORATED, EMI 25 ROBBINS CATALOG, INCORPORATED, EMI U CATALOG, INC., EMI 26 UNART CATALOG INC., JOBETE MUSIC COMPANY, 27 INCORPORATED, SCREEN GEMS‐EMI MUSIC, INCORPORATED, 28 STONE AGATE MUSIC, STONE DIAMOND MUSIC 29 CORPORATION, 30 31 Plaintiffs‐Appellees‐Cross‐Appellants, 32 33 v. 34 35 MP3TUNES, LLC, 36 37 Defendant‐Counter‐Claimant‐Cross‐Appellee,

CERTIFIED COPY ISSUED ON 10/25/2016 Case 14-4369, Document 266, 10/25/2016, 1891111, Page2 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 2 MICHAEL ROBERTSON, 3 4 Defendant‐Appellant‐Cross‐Appellee.* 5 6 ______7 8 Before: 9 10 CABRANES, STRAUB, and LOHIER, Circuit Judges. 11 12 In this appeal, we principally address one requirement of the Digital 13 Millennium Copyright Act (“DMCA”) safe harbor: that an internet service 14 provider “adopt[] and reasonably implement[]” a policy to terminate 15 “repeat infringers.” 17 U.S.C. § 512. The plaintiffs, all record companies 16 and music publishers, brought this copyright infringement suit against 17 MP3tunes, LLC and its founder and Chief Executive Officer Michael 18 Robertson. The plaintiffs alleged that two websites created by MP3tunes— 19 MP3tunes.com, which primarily served as a locker service for storing 20 digital music, and sideload.com, which allowed users to search for free 21 music on the internet—infringed their copyrights in thousands of sound 22 recordings and musical compositions. After the parties filed cross‐motions 23 for summary judgment, the United States District Court for the Southern 24 District of New York (Pauley, J.) determined, among other things, that 25 MP3tunes had a reasonably implemented repeat infringer policy. A jury 26 ultimately returned a verdict in favor of the plaintiffs that was partially 27 overturned by the District Court. We AFFIRM in part, VACATE in part, 28 REVERSE in part, and REMAND for further proceedings. 29 30 ANDREW H. BART (Frank P. Scibilia, M. Mona 31 Simonian, Ross M. Bagley, Pryor Cashman LLP, 32 New York, NY, Luke C. Platzer, J. Douglas 33 Wilson, Jenner & Block LLP, Washington, DC, on 34 the brief), Jenner & Block LLP, New York, NY, for 35 Plaintiffs‐Appellees‐Cross‐Appellants. 36

* The Clerk of Court is directed to amend the official caption to conform with the above. 2

Case 14-4369, Document 266, 10/25/2016, 1891111, Page3 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 IRA S. SACKS (Mark S. Lafayette, Jamie B. Shyman, 2 Patricia M. Carlson, on the brief), Akerman LLP, 3 New York, NY, for Defendant‐Appellant‐Cross‐ 4 Appellee. 5 6 LOHIER, Circuit Judge:

7 In this appeal we principally consider the requirement of the Digital

8 Millennium Copyright Act (“DMCA”) safe harbor that an internet service

9 provider “adopt[] and reasonably implement[]” a policy to terminate

10 “repeat infringers.” 17 U.S.C. § 512. Plaintiffs‐appellees‐cross‐appellants

11 are all record companies and music publishers. They filed this copyright

12 infringement lawsuit against MP3tunes, LLC and its founder and Chief

13 Executive Officer Michael Robertson,1 alleging that two internet music

14 services created by MP3tunes infringed their copyrights in thousands of

15 sound recordings and musical compositions. The two services are

16 MP3tunes.com, which primarily operated as a locker service for storing

17 digital music, and sideload.com, which allowed users to search for free

18 music on the internet.

19 On summary judgment, the United States District Court for the

20 Southern District of New York (Pauley, J.) granted partial summary

1 MP3tunes declared bankruptcy approximately two years before this case proceeded to trial. It is not a party to this appeal. 3

Case 14-4369, Document 266, 10/25/2016, 1891111, Page4 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 judgment to the defendants, holding that MP3tunes had a reasonably

2 implemented repeat infringer policy under § 512. A jury ultimately

3 returned a verdict in favor of the plaintiffs, but the District Court partially

4 overturned the verdict.

5 For reasons we explain below: (1) we VACATE the District Court’s

6 grant of partial summary judgment to the defendants based on its

7 conclusion that MP3tunes qualified for safe harbor protection under the

8 DMCA because the District Court applied too narrow a definition of

9 “repeat infringer”; (2) we REVERSE the District Court’s grant of judgment

10 as a matter of law to the defendants on claims that MP3tunes permitted

11 infringement of plaintiffs’ copyrights in pre‐2007 MP3s and Beatles songs

12 because there was sufficient evidence to allow a reasonable jury to

13 conclude that MP3tunes had red‐flag knowledge of, or was willfully blind

14 to, infringing activity involving those categories of protected material; (3)

15 we REMAND for further proceedings related to claims arising out of the

16 District Court’s grant of partial summary judgment; and (4) we AFFIRM

17 the judgment in all other respects.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page5 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 BACKGROUND

2 I. MP3tunes.com and Sideload.com

3 Robertson founded MP3tunes in 2005. It is undisputed that, by then,

4 Robertson was familiar with both the online music industry and copyright

5 litigation, having previously run the music site MP3.com, against which a

6 copyright infringement judgment was entered in 2000. See UMG

7 Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349, 350 (S.D.N.Y. 2000).

8 While recruiting for MP3tunes several years later, Robertson emphasized,

9 “[T]his will be VERY big news. Major labels selling MP3s. MP3.com guy

10 back to rejuvenate MP3 business. Largest copyright infringer of all time

11 back at it again. Lots of juicy press angles.”2

12 MP3tunes.com was MP3tunes’s first project. Initially, customers

13 could visit MP3Tunes.com and purchase MP3 versions of music created by

14 musicians who were not associated with major record labels. In 2005

15 MP3tunes.com added a “locker storage” service, which charged users a fee

16 to store music on the MP3tunes server. A user who uploaded songs to her

2 An MP3, otherwise known as an MPEG‐1 Audio Layer 3, is a common digital audio compression algorithm used to make an audio file smaller without significantly reducing sound quality. See Recording Indus. Ass’n of Am. v. Diamond Multimedia Sys., Inc., 180 F.3d 1072, 1074 (9th Cir. 1999). 5

Case 14-4369, Document 266, 10/25/2016, 1891111, Page6 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 “locker” (through LockerSync, a free plugin on the site) could play the

2 music through other internet‐enabled devices.

3 MP3tunes owned and operated a second website, sideload.com, that

4 allowed users to search for free music on the internet. Sideload.com

5 offered a free plug‐in to enable users to “sideload” (or upload directly to

6 their MP3tunes lockers) free songs that they found on sideload.com. Songs

7 sideloaded into users’ lockers were then added to sideload.com’s index of

8 searchable songs. This meant that the more songs users sideloaded from

9 the internet, the more free music became available through the website.

10 MP3tunes’s executives, including Robertson, used their own accounts with

11 MP3tunes to store sideloaded songs.

12 Users of MP3tunes.com could store a certain amount of music

13 through the service for free and could purchase additional storage space

14 for tiered fees, while storage associated with sideloaded songs did not

15 count against the free storage limit. Partly as a result, sideload.com

16 became “the most effective partner in driving traffic to [MP3tunes’s] locker

17 service.” Joint App’x 1930. At Robertson’s direction, MP3tunes strove to

18 expand sideload.com’s catalog by encouraging users to upload songs to

Case 14-4369, Document 266, 10/25/2016, 1891111, Page7 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 the sideload.com index. For example, members of MP3tunes’s staff were

2 encouraged to upload songs from their own accounts, even when those

3 songs came from websites that appeared to contain infringing material.

4 Robertson directed MP3tunes employee Sharmaine Lindahl to provide

5 MP3tunes employees a list of sites featuring free MP3s “for sideloading

6 purposes.” Joint App’x 1241. Lindahl observed that one of the sites on the

7 list “look[ed] to be mainly pirated music.” Joint App’x 1239. MP3tunes

8 also encouraged repeated sideloading among MP3tunes.com users by

9 creating a “Sideload Hall of Fame” consisting of the “top 25 Sideloaders

10 with accounts at MP3tunes.com.”

11 In October 2006 MP3tunes added a cover art feature. When a user

12 began to “sync” or upload a song to her locker and cover art was not part

13 of the music file, MP3tunes’s software would “automatically go check

14 for . . . cover art” provided on Amazon.com and download the cover art to

15 MP3tunes’s servers. Although MP3tunes had two agreements with

16 Amazon, an Amazon operations analyst testified at trial that the copying

17 of cover art violated the agreements. The analyst explained that “there

18 was no reference to Amazon around th[e] cover image[s]” and that the

Case 14-4369, Document 266, 10/25/2016, 1891111, Page8 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 display of the cover art therefore “was not being used for the primary

2 purpose of driving traffic to Amazon,” as the agreements required.

3 II. Procedural History

4 In 2010 the parties cross‐moved for summary judgment. The District

5 Court granted the plaintiffs’ summary judgment motion on certain claims

6 that are not the subject of this appeal, including the claims of direct

7 infringement by Robertson for the songs he personally sideloaded. The

8 District Court also granted the defendants summary judgment on other

9 claims on the ground that MP3tunes qualified for safe harbor protection

10 under the DMCA and that the safe harbor barred the plaintiffs’ state‐law

11 claims for infringement of recordings “fixed” before February 15, 1972.3

12 The District Court also addressed § 512(i)(1)(A)’s requirement that a

13 service provider “adopt[] and reasonably implement[] . . . a policy that

14 provides for the termination in appropriate circumstances of

15 subscribers . . . who are repeat infringers.” The District Court held that

3 A recording is “fixed” in this context when it is embodied in a permanent or stable medium that can be perceived, reproduced, or otherwise communicated. 17 U.S.C. § 101; see also Copyright Office, Copyright Registration for Sound Recordings, Copyright Circular #56, at 1 (the copyright law of the United States defines “sound recordings” as “works that result from the fixation of a series of musical, spoken, or other sounds”). 8

Case 14-4369, Document 266, 10/25/2016, 1891111, Page9 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 MP3tunes had such a policy because it “demonstrated that it has a

2 procedure for responding to DMCA takedown notifications and does not

3 interfere with copyright owners’ ability to issue such notices.” Capitol

4 Records, Inc. v. MP3tunes, LLC, 821 F. Supp. 2d 627, 639 (S.D.N.Y. 2011).

5 As proof of the existence and effectiveness of the procedure, the District

6 Court pointed out that MP3tunes had “terminated the accounts of 153

7 users who allowed others to access their lockers and copy music files

8 without authorization.” Id. Finally, in a separate ruling related to

9 Robertson’s motion for summary judgment, the District Court determined

10 that it had personal jurisdiction over Robertson because “MP3tunes did a

11 significant amount of business with New York customers and Robertson

12 exercised extensive control over MP3tunes.” Special App’x 76.

13 Prompted by our subsequent decision in Viacom International, Inc.

14 v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012), the District Court partially

15 reconsidered its ruling that MP3tunes qualified for safe harbor protection

16 under the DMCA. Whether MP3tunes was barred from the DMCA’s safe

17 harbor protection (because it was willfully blind to or had red‐flag

Case 14-4369, Document 266, 10/25/2016, 1891111, Page10 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 knowledge of infringing activity), it held, actually presented a question of

2 fact that a jury had to decide, not a question of law.

3 The case thereafter proceeded to trial before a jury, which returned a

4 verdict for the plaintiffs and awarded them approximately $48 million,

5 $7.5 million of which constituted punitive damages against Robertson.

6 The District Court then granted judgment as a matter of law as to some of

7 the claims. It reversed the jury’s finding that MP3tunes was willfully blind

8 or had red‐flag knowledge regarding several different categories of songs

9 on the ground that there was insufficient evidence of willful blindness or

10 red‐flag knowledge. Finally, it reduced the punitive damages award

11 against Robertson to $750,000 on the ground that the $7.5 million punitive

12 damages award violated due process.

13 This appeal and cross‐appeal followed.

14 DISCUSSION

15 I. The Plaintiffs’ Appeal

16 The plaintiffs challenge three rulings made by the District Court:

17 first, that MP3tunes reasonably implemented a repeat infringer policy and

18 was eligible for DMCA safe harbor protection for pre‐ and post‐1972

Case 14-4369, Document 266, 10/25/2016, 1891111, Page11 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 songs; second, that the jury’s finding of red‐flag knowledge or willful

2 blindness with respect to certain categories of songs was wrong as a matter

3 of law; and third, that the plaintiffs were entitled to only one award of

4 statutory damages for songs where the copyright to the musical

5 composition and the copyright to the sound recording were owned by

6 different holders.

7 We address each of these challenges.

8 A. “Reasonably Implemented” Repeat Infringer Policy

9 The DMCA shields a service provider from liability for the

10 infringing acts of its users if the provider satisfies certain conditions. One

11 of those conditions requires that a service provider “adopt[] and

12 reasonably implement[] . . . a policy that provides for the termination in

13 appropriate circumstances of subscribers and account holders of the

14 service provider’s system or network who are repeat infringers.” 17 U.S.C.

15 § 512(i)(1)(A). The plaintiffs argue that MP3tunes never reasonably

16 implemented a repeat‐infringer policy because it failed to track users who

17 repeatedly created links to infringing content in the sideload.com index or

Case 14-4369, Document 266, 10/25/2016, 1891111, Page12 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 who copied files from those links, which appeared on multiple takedown

2 notices sent to MP3tunes.

3 In addressing this argument, we answer two questions: first,

4 whether certain MP3tunes users qualified as “repeat infringers”; and

5 second, if so, whether MP3tunes reasonably implemented a policy directed

6 at them.

7 We begin with the first question. The District Court held that “[t]he

8 purpose of subsection 512(i) is to deny protection to websites that tolerate

9 users who flagrantly disrespect copyrights.” Capitol Records, 821 F. Supp.

10 2d at 637. For the purposes of § 512(i)(1)(A), it defined a “repeat infringer”

11 as a user who posts or uploads infringing content “to the internet for the

12 world to experience or copy” knowing that the conduct infringes another’s

13 copyright. Id. at 638. In contrast, the District Court believed, a user who

14 downloads or copies “songs from third‐party sites for their personal

15 entertainment” could not be a “repeat infringer.”4 Id. The District Court

4 The District Court explained that, unlike users who upload infringing content, users who download “content for their personal use and are otherwise oblivious to the copyrights of others . . . like MP3tunes users who sideload content to their lockers for personal use, do not know for certain whether the material they download violates the copyrights of others.” Id. 12

Case 14-4369, Document 266, 10/25/2016, 1891111, Page13 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 thus concluded that only users who upload infringing content are “blatant

2 infringers that internet service providers are obligated to ban from their

3 websites.” Id.

4 We reject this definition of a “repeat infringer,” which finds no

5 support in the text, structure, or legislative history of the DMCA.

6 Starting with the text, we note that the DMCA does not itself define

7 “repeat infringers.” But “where a statute does not define a term, we give

8 the term its ordinary meaning.” Laurent v. PricewaterhouseCoopers LLP,

9 794 F.3d 272, 281 (2d Cir. 2015) (quotation marks omitted). In this context,

10 we take “repeat” to mean “a person who does something . . . again or

11 repeatedly,” Oxford English Dictionary (3d ed. 2009), while an “infringer”

12 is “[s]omeone who interferes with one of the exclusive rights of a . . .

13 copyright,” Infringer, Black’s Law Dictionary (10th ed. 2014). Copyright

14 infringement is a strict liability offense in the sense that a plaintiff is not

15 required to prove unlawful intent or culpability, see Cartoon Network LP,

16 LLLP v. CSC Holdings, Inc., 536 F.3d 121, 130 (2d Cir. 2008); Shapiro,

17 Bernstein & Co. v. H. L. Green Co., 316 F.2d 304, 308 (2d Cir. 1963), and a

18 user does not have to share copyrighted works in order to infringe a

Case 14-4369, Document 266, 10/25/2016, 1891111, Page14 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 copyright, cf. Arista Records, LLC v. Doe 3, 604 F.3d 110, 124 (2d Cir.

2 2010). In the context of this case, all it takes to be a “repeat infringer” is to

3 repeatedly upload or download copyrighted material for personal use.

4 We turn next to the structure and context of the DMCA, interpreting

5 the term “repeat infringer” against the backdrop of the statute as a whole.

6 It is important to recall that the DMCA imposes certain requirements on

7 service providers in exchange for limitations on liability. It would make

8 little sense to link that limitation on liability to the knowledge of users.5

9 Indeed, the DMCA explicitly relieves service providers from having to

10 affirmatively monitor their users for infringement—something that would

11 likely be required should MP3tunes have to ascertain its users’ knowledge.

12 See 17 U.S.C. § 512(m)(1) (“Nothing in this section shall be construed to

5 The Nimmer treatise on copyright law similarly links the term “repeat infringer” more directly to the knowledge of service providers rather than users. See 4 Nimmer on Copyright § 12B.10. The treatise defines an “infringer” for the purposes of § 512(i)(1)(A) as follows: “either a party who has been adjudicated to have committed copyright infringement, or a party about whom the service provider has actual knowledge that s/he has engaged in infringement.” Id. § 12B.10[B][3][c]. The treatise cautions that a service provider has to have done more than just receive a copyright holder’s takedown notices in order to be charged with knowledge of infringement. Id. In this case, as will become clear, we need not decide whether takedown notices suffice on their own to prove that the provider was aware of infringement. 14

Case 14-4369, Document 266, 10/25/2016, 1891111, Page15 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 condition the applicability of [the DMCA safe harbors] on a service

2 provider monitoring its service or affirmatively seeking facts indicating

3 infringing activity.”); Viacom, 676 F.3d at 41 (“[T]he safe harbor expressly

4 disclaims any affirmative monitoring requirement—except to the extent

5 that such monitoring comprises a ‘standard technical measure’ within the

6 meaning of § 512(i).”); S. Rep. 105‐190, at 52 (1998); H.R. Rep. 105‐551(II), at

7 61 (1998) (“[T]he Committee does not intend [the repeat‐infringer policy

8 requirement] to undermine the principles of new subsection (l) or the

9 knowledge standard of new subsection (c) by suggesting that a provider

10 must investigate possible infringements, monitor its service, or make

11 difficult judgments as to whether conduct is or is not infringing.”).

12 The legislative history also confirms our view that the District

13 Court’s definition of “repeat infringer” as limited to willful infringement is

14 too narrow. The Senate and House reports accompanying the DMCA

15 recognize a difference between inadvertent and willful infringement. But

16 both reports also assert that a “repeat infringer” requirement is meant to

17 deter those “who repeatedly or flagrantly abuse their access to the Internet

18 through disrespect for the intellectual property rights of others.” S. Rep.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page16 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 105‐190, at 52 (1998); H.R. Rep. 105‐551(II), at 61 (1998) (emphasis added).

2 In other words, the legislative history of the DMCA indicates that a

3 “repeat infringer” does not need to know of the infringing nature of its

4 online activities, or to upload rather than download content.

5 Finally, none of our sister circuits has adopted the District Court’s

6 definition of “repeat infringer” to include only those who willfully infringe

7 copyrights. To the contrary, the Seventh Circuit has suggested that the

8 term covers users of file‐sharing services who are “ignorant or more

9 commonly disdainful of copyright.” See In re Aimster Copyright Litig.,

10 334 F.3d 643, 645 (7th Cir. 2003).

11 Our view of what Congress meant by the term “repeat infringer”

12 leads us to conclude that the District Court improperly granted summary

13 judgment. Prior to trial, there was clearly enough disputed evidence

14 relating to MP3tunes’s policy regarding infringers to conclude that

15 summary judgment was inappropriate. To show that it reasonably

16 implemented such a policy, MP3tunes proffered evidence at the summary

17 judgment stage that it terminated 153 users who shared locker passwords.

18 In response, though, the plaintiffs demonstrated that MP3tunes did not

Case 14-4369, Document 266, 10/25/2016, 1891111, Page17 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 even try to connect known infringing activity of which it became aware

2 through takedown notices to users who repeatedly created links to that

3 infringing content in the sideload.com index or who copied files from

4 those links. See Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1110 (9th Cir.

5 2007) (“[A] substantial failure to record webmasters associated with

6 allegedly infringing websites may raise a genuine issue of material fact as

7 to the implementation of the service provider’s repeat infringer policy.”).

8 Furthermore, the plaintiffs presented evidence that MP3tunes

9 executives were encouraged to and did personally sideload songs from

10 blatantly infringing websites. See Pls.’ Mem. Law Supp. Mot. Summ. J.

11 (07‐cv‐9931 Docket No. 207) 12–14 (citing an email encouraging employees

12 to sideload from a website containing “pirated” music). The same

13 executives made the songs available to sideload.com users. There was also

14 evidence that MP3tunes was capable of cataloging the sideloads of each

15 MP3tunes user. A jury could reasonably infer from that evidence that

16 MP3tunes actually knew of specific repeat infringers and failed to take

17 action.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page18 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 A reasonable jury alternatively could have determined that

2 MP3tunes consciously avoided knowing about specific repeat infringers

3 using its services, even though the infringement was rampant and obvious.

4 In Viacom, we held that “the willful blindness doctrine may be applied, in

5 appropriate circumstances, to demonstrate knowledge or awareness of

6 specific instances of infringement under the DMCA.” 676 F.3d at 35.

7 Thus, at trial the plaintiffs could prevail by demonstrating that MP3tunes’s

8 failure to track users who created links to infringing content identified on

9 takedown notices or who copied files from those links evidenced its willful

10 blindness to the repeat infringing activity of its users.

11 Our conclusion that the District Court improperly granted partial

12 summary judgment to MP3tunes on the basis of its policy regarding

13 “repeat infringers” is not inconsistent with the DMCA’s provision

14 declaring “that safe harbor protection cannot be conditioned on ‘a service

15 provider monitoring its service or affirmatively seeking facts indicating

16 infringing activity.’” Id. at 41 (quoting 17 U.S.C. § 512(m)(1)). Based on

17 the available evidence, a reasonable jury could have concluded that it was

18 reasonable for MP3tunes to track users who repeatedly created links to

Case 14-4369, Document 266, 10/25/2016, 1891111, Page19 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 infringing content in the sideload.com index or who copied files from

2 those links. See Aimster, 334 F.3d at 655 (“The common element of

3 [DMCA] safe harbors is that the service provider must do what it can

4 reasonably be asked to do to prevent the use of its service by ‘repeat

5 infringers.’”). After all, MP3tunes had already tracked and removed 153

6 users “who allowed others to access their lockers and copy music files

7 without authorization,” Capitol Records, 821 F. Supp. 2d at 639; by

8 comparison, requiring MP3tunes to extend that policy to users who

9 sideloaded infringing content may not be an unreasonably burdensome

10 request. Furthermore, doing so would not require MP3tunes to “monitor”

11 or “affirmatively seek facts” about infringing activity in a manner

12 inconsistent with § 512(m)(1) because it already had adequate information

13 at its disposal in the form of takedown notices provided by EMI as to

14 which links were allegedly infringing. Cf. Perfect 10, 488 F.3d at 1112–13

15 (declining to hold that the defendant service provider failed to implement

16 its repeat infringer policy in a reasonable manner based on its receipt of

17 takedown notices that did not substantially comply with § 512(c)(3)

18 because the service provider would have had to “cobble together adequate

Case 14-4369, Document 266, 10/25/2016, 1891111, Page20 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 notice” and would therefore be “unduly burden[ed]”). MP3tunes would

2 simply have had to make use of information already within its possession

3 and connect that information to known users. While the defendants could

4 yet make the case at trial that it was unreasonable under the circumstances

5 to ask MP3tunes to identify users who repeatedly infringed plaintiffs’

6 copyrights by sideloading music files, no evidence available at the

7 summary judgment stage compelled that conclusion as a matter of law.

8 For these reasons, we vacate the District Court’s grant of summary

9 judgment and remand for further proceedings.6

10 B. Red‐Flag Knowledge and Willful Blindness

11 We turn next to the District Court’s determination that the jury’s

12 finding of red‐flag knowledge or willful blindness with respect to certain

13 categories of songs was wrong as a matter of law. We start with the

6 In its summary judgment ruling, the District Court also held that MP3tunes was eligible for DMCA protection for pre‐1972 sound recordings, which are protected by state rather than federal copyright law. The plaintiffs challenge this decision on appeal, but their challenge is foreclosed by our recent decision in Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78 (2d Cir. 2016). In Vimeo, we held that “the safe harbor established by § 512(c) protects a qualifying service provider from liability for infringement of copyright under state law.” Id. at 93.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page21 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 proposition that even if a service provider has a reasonably implemented

2 repeat infringer policy, it relinquishes the DMCA’s safe harbor if it, first,

3 has “actual knowledge that the material or an activity using the material

4 on the system or network is infringing” or “in the absence of such actual

5 knowledge, is [] aware of facts or circumstances from which infringing

6 activity is apparent,” and second, “upon obtaining such knowledge or

7 awareness, [does not] act[] expeditiously to remove, or disable access to,

8 the material.” 17 U.S.C. § 512(c)(1)(A); see also 17 U.S.C. § 512(d)(1). At

9 trial, the plaintiffs contended that MP3tunes was “aware of facts or

10 circumstances from which infringing activity was apparent”—or in other

11 words had “red‐flag knowledge” or willful blindness, see Viacom, 676

12 F.3d at 31, 35, with respect to several categories of songs. The jury found

13 that MP3tunes had knowledge as to four categories of files: (1) those stored

14 on domains identified in takedown notices as having ten or more

15 infringing files; (2) sideloads of MP3s before January 2007; (3) certain

16 sideloads by MP3tunes executives; and (4) works by the Beatles. The

17 District Court upheld the jury’s finding of red‐flag knowledge with respect

18 to certain songs and subsets of songs but granted the defendants judgment

Case 14-4369, Document 266, 10/25/2016, 1891111, Page22 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 as a matter of law as to two categories of songs that are the subject of our

2 review: MP3s from major labels issued before 2007, and all songs by the

3 Beatles.

4 We have already explained that the DMCA does not impose “an

5 amorphous obligation to take commercially reasonable steps in response to

6 a generalized awareness of infringement.” Viacom, 676 F.3d at 31

7 (quotation marks omitted). Accordingly, “[o]n the issue of disqualifying

8 knowledge . . . the burden falls on the copyright owner to demonstrate that

9 the service provider acquired knowledge of the infringement, or of facts

10 and circumstances from which infringing activity was obvious, and failed

11 to promptly take down the infringing matter, thus forfeiting its right to the

12 safe harbor.” Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78, 95 (2d Cir.

13 2016). In other words, a copyright owner must point to a defendant’s

14 “actual knowledge or awareness of facts or circumstances that indicate

15 specific and identifiable instances of infringement.” Viacom, 676 F.3d at

16 32.

17 With this principle in mind, we conclude that the trial evidence in

18 this case, viewed in the light most favorable to the plaintiffs, see Izzarelli v.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page23 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 R.J. Reynolds Tobacco Co., 731 F.3d 164, 167 (2d Cir. 2013), showed that

2 MP3tunes and Robertson knew that major music labels generally had not

3 even authorized their music to be distributed in the format most widely

4 available on sideload.com, let alone authorized it to be shared on the

5 internet. In particular, Robertson apparently knew that major record labels

6 had not offered songs in MP3 format until 2007. In January 2007, in

7 connection with MP3tunes’s MP3 sale model, for example, Robertson

8 admitted that “popular acts have never before sold tracks in MP3

9 formats.” Joint App’x 3145–46. With respect to MP3s sideloaded before

10 2007, therefore, the jury reasonably could have concluded that MP3tunes

11 and Robertson were aware of “facts and circumstances that make

12 infringement obvious.” Vimeo, 826 F.3d at 98.

13 What prompted the District Court to conclude otherwise? In

14 granting judgment as a matter of law to the defendants on this issue, the

15 District Court explained that barring MP3tunes from the DMCA safe

16 harbor “would require Defendants to actively conduct routine searches

17 and eliminate material likely to be infringing.” Capitol Records, Inc. v.

18 MP3tunes LLC, 48 F. Supp. 3d 703, 716 (S.D.N.Y. 2014). It therefore

Case 14-4369, Document 266, 10/25/2016, 1891111, Page24 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 understandably concluded that imposing such a duty clashed with the

2 DMCA’s “express . . . disavowal of a duty to affirmatively monitor.” Id.

3 Under the circumstances of this case, we respectfully disagree with the

4 District Court’s assessment, primarily for three reasons.

5 First, we think the jury could reasonably have found, based on the

6 evidence presented, that MP3tunes had the ability to search sideload.com

7 for MP3s sideloaded before a certain date. Indeed, at trial an expert for the

8 plaintiffs described how he obtained a list of MP3s sideloaded before

9 January 26, 2007. Joint App’x 1800–02. His testimony demonstrated that

10 searching through libraries of MP3 songs was a common function of

11 MP3tunes’s business.

12 Second, the jury was clearly instructed, and we presume it

13 understood, that MP3tunes had no continuing, affirmative duty to monitor

14 its servers for infringement. The jury could comply with that instruction

15 and still find that MP3tunes was required to disable access to pre‐2007

16 songs by “act[ing] expeditiously to remove, or disable access to” the pre‐

17 2007 songs “upon obtaining such knowledge or awareness.” 17 U.S.C.

18 § 512(c)(1)(A)(iii). The jury was permitted to conclude that a time‐limited,

Case 14-4369, Document 266, 10/25/2016, 1891111, Page25 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 targeted duty—even if encompassing a large number of songs—does not

2 give rise to an “amorphous” duty to monitor in contravention of the

3 DMCA. Viacom, 676 F.3d at 31; see also id. at 34 (suggesting that a

4 reasonable jury could find red‐flag knowledge with respect to groups of

5 clips).

6 The same is true of the Beatles songs. The jury heard evidence that

7 Robertson was unaware of any legal online distribution of Beatles tracks

8 before 2010, other than one track used within a video game. Robertson

9 furthermore admitted that he authored a 2009 e‐mail that showed he was

10 aware of the plaintiffs’ position that “[the] Beatles have never authorized

11 their songs to be available digitally.” Joint App’x 3165. MP3tunes was

12 further made aware through user emails that Beatles songs such as

13 “Strawberry Fields Forever” were on sideload.com’s index. The jury could

14 have reasonably concluded that MP3tunes had red‐flag knowledge of, or

15 was willfully blind to, the infringing nature of the Beatles tracks on its

16 servers and failed to “act[] expeditiously” to remove them. 17 U.S.C.

17 § 512(c)(1)(A)(iii).

Case 14-4369, Document 266, 10/25/2016, 1891111, Page26 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 Third, the jury could reasonably have found that MP3tunes

2 conceived of and was designed to facilitate infringement based in part on

3 evidence presented at trial that MP3tunes “actively encourage[ed]

4 infringement” and that Robertson and MP3tunes executives “personally

5 used [sideload.com] to download infringing material.” Columbia Pictures

6 Indus., Inc. v. Fung, 710 F.3d 1020, 1043 (9th Cir. 2013). Although such

7 evidence might not alone support a separate finding of red‐flag knowledge

8 or willful blindness as to users, see Vimeo, 826 F.3d at 99, the jury could

9 certainly rely on it in deciding whether MP3tunes was entitled to the

10 DMCA safe harbor, see Fung, 710 F.3d at 1040 (holding that “aspects of the

11 inducing behavior that give rise to liability are relevant to the operation of

12 some of the DMCA safe harbors and can, in some circumstances, preclude

13 their application”). Indeed, the jury could reasonably have understood

14 Robertson to have admitted on cross‐examination that sideload.com “was

15 premised on the notion that everything that was on the internet that was

16 not locked down could be sideloaded into the site.” Joint App’x 2342.

17 And in editing sideload.com’s Frequently Asked Questions (“FAQs”),

18 Robertson emphasized that the site should tell users that its music is “legal

Case 14-4369, Document 266, 10/25/2016, 1891111, Page27 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 to download” because “[s]ideload.com does not store any music, but

2 rather links to files publicly available [in] other places on the net.” Joint

3 App’x 3017.

4 For these reasons, we reverse the District Court’s ruling vacating the

5 jury verdict with respect to red‐flag knowledge and willful blindness for

6 pre‐2007 MP3s and Beatles songs.7

7 C. Statutory Damages

8 The plaintiffs also challenge the District Court’s decision to allow

9 only one award of statutory damages where the copyrights to the sound

10 recording and to the musical composition are owned by separate plaintiffs.

11 Section 504(c) of Title 17 provides that a “copyright owner may elect . . . to

12 recover, instead of actual damages and profits, an award of statutory

13 damages for all infringements involved in the action, with respect to any

14 one work” in an amount of up to $30,000 if the infringer acted innocently

15 or of up to $150,000 if the infringer acted willfully. “For the purposes of

16 [§ 504(c)], all the parts of a compilation or derivative work constitute one

7 We note that, should it be found on remand that MP3Tunes did not reasonably implement a repeat infringer policy and is therefore ineligible for DMCA safe harbor protection at all, the jury’s finding of red‐flag knowledge or willful blindness as to the above categories of songs would not be required to impose liability. 27

Case 14-4369, Document 266, 10/25/2016, 1891111, Page28 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 work.” 17 U.S.C. § 504(c)(1); see Xoom, Inc. v. Imageline, Inc., 323 F.3d

2 279, 285 (4th Cir. 2003), abrogated on other grounds by Reed Elsevier, Inc.

3 v. Muchnick, 559 U.S. 154 (2010). A derivative work is “a work based

4 upon one or more preexisting works, such as a . . . sound recording.” 17

5 U.S.C. § 101. If “there are several different versions of plaintiff’s work,

6 each of which commands a separate copyright,” but “the defendant’s work

7 incorporates material covered by each of those copyrights,” the Copyright

8 Act “provides for but a single statutory damages award.” 5 Nimmer on

9 Copyright § 14.04[E][1][b].

10 As noted, the District Court held that the plaintiffs could recover

11 only one statutory damages award for a musical composition and its

12 corresponding sound recording, even where the composition and the

13 recording were owned by separate plaintiffs. In doing so, it agreed with

14 those district courts that have concluded that infringement of a musical

15 composition and its corresponding sound recording entitles a plaintiff to

16 only one statutory damages award. See, e.g., Spooner v. EEN, Inc., No. 08‐

17 CV‐262‐P‐S, 2010 WL 1930239, at *4 (D. Me. May 11, 2010); see also

18 Reservoir Media Mgmt., Inc. v. Craze Prods., No. 1:13‐cv‐1847 (GHW),

Case 14-4369, Document 266, 10/25/2016, 1891111, Page29 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 2015 WL 5692105, at *7 (S.D.N.Y. Sept. 28, 2015) (citing with approval

2 Judge Pauley’s reasoning in Capitol Records, but declining to decide

3 whether the plaintiffs were entitled to multiple statutory damages awards

4 for a musical composition and its corresponding sound recording). Other

5 courts, meanwhile, have explained that multiple statutory damages can be

6 awarded when the copyrights to the sound recording and the musical

7 composition are owned by different plaintiffs. See, e.g., Teevee Toons, Inc.

8 v. MP3.com, Inc., 134 F. Supp. 2d 546, 548 (S.D.N.Y. 2001) (concluding that

9 “where . . . the plaintiffs owning the copyrights on the musical

10 compositions are separate from the plaintiffs owning the copyrights on the

11 sound recordings, each may recover statutory damages”).

12 A plain reading of the Copyright Act’s text supports the District

13 Court’s conclusion. See Patry on Copyright § 22:186 (“Sound recordings

14 are defined in section 101 as a species of derivative work of the underlying

15 musical composition, and, as such, both fall within the one work, one

16 award rule for statutory damages that only award[s] for infringement of

17 both works . . . regardless of whether there are different owners.”).

Case 14-4369, Document 266, 10/25/2016, 1891111, Page30 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 Both the House Report and the Senate Report accompanying the

2 Copyright Act reinforce this point:

3 Subsection (c)(1) [of 17 U.S.C. § 504] makes clear . . . that, 4 although they are regarded as independent works for other 5 purposes, “all the parts of a compilation or derivative work 6 constitute one work” for th[e] purpose [of assessing 7 statutory damages]. Moreover, although the minimum and 8 maximum amounts are to be multiplied where multiple 9 “works” are involved in the suit, the same is not true with 10 respect to multiple copyrights, multiple owners, multiple 11 exclusive rights, or multiple registrations. This point is 12 especially important since, under a scheme of divisible 13 copyright, it is possible to have the rights of a number of 14 owners of separate “copyrights” in a single “work” 15 infringed by one act of a defendant.

16 H.R. Rep. No. 94‐1476, at 162 (1976); S. Rep. No. 94‐473, at 144

17 (1975). In our view, then, Congress did not intend for separate

18 statutory damages awards for derivative works such as sound

19 recordings, even when the copyright owner of the sound recording

20 differs from the copyright owner of the musical composition.

21 In sum, the District Court’s decision to permit only one

22 award of statutory damages for the musical composition and

23 corresponding sound recording comports with both the plain text

24 and the legislative history of the Copyright Act. We therefore

25 affirm that part of the judgment.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page31 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 II. Robertson’s Appeal

2 Robertson’s cross‐appeal challenges several rulings of the

3 District Court, some relating to the liability of MP3tunes and some

4 relating to his own personal liability. We address each challenge in

5 turn.

6 A. MP3tunes’s Liability

7 i. Red‐Flag Knowledge and Willful Blindness

8 Robertson challenges the District Court’s ruling on red‐flag

9 knowledge and willful blindness. In particular, he argues that the District

10 Court erred in upholding the jury’s verdict of red‐flag knowledge and

11 willful blindness with respect to songs sideloaded from personal file

12 storage sites and student‐run college webpages with what are alleged to be

13 “obviously infringing” URLs.8

14 “The hypothetical ‘reasonable person’ to whom infringement must

15 be obvious is an ordinary person—not endowed with specialized

8 Robertson also asserts that the District Court was wrong to conclude that MP3tunes had red‐flag knowledge of the infringement of “Strawberry Fields Forever.” Because we reverse the District Court’s determination regarding red‐flag knowledge or willful blindness with respect to all Beatles songs, including “Strawberry Fields Forever,” we need not address this argument. 31

Case 14-4369, Document 266, 10/25/2016, 1891111, Page32 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 knowledge or expertise concerning music or the laws of copyright.”

2 Vimeo, 826 F.3d at 93–94. That said, “[i]t is . . . entirely possible that an

3 employee of the service provider . . . may well have known that [a] work

4 was infringing, or known facts that made this obvious.” Id. at 97. “If the

5 facts actually known by an employee of the service provider make

6 infringement obvious, the service provider cannot escape liability through

7 the mechanism of the safe harbor.” Id.

8 The trial evidence supported the plaintiffs’ argument that Robertson

9 and MP3tunes executives knew that personal file storage sites and college

10 student webpages were distributing infringing files. There was also

11 evidence that Robertson himself sideloaded from personal websites, and

12 that other MP3tunes executives regularly sideloaded from these sites. The

13 jury could therefore conclude that MP3tunes knew that songs from sites

14 with personal file storage or college URLs were available on sideload.com

15 and that those sites were “obviously infringing,” yet failed to act on that

16 information. For these reasons, we affirm the District Court’s order

17 denying judgment as a matter of law with respect to this category of songs.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page33 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 ii. Direct Liability for Infringement of Cover Art

2 At trial, the jury found that MP3tunes was liable for directly and

3 willfully infringing all 296 works of cover art associated with the plaintiffs’

4 songs and albums. The District Court partially upheld that jury verdict

5 when it ruled on Robertson’s motion for judgment as a matter of law,

6 although it granted the motion and vacated the verdict as to some of the

7 cover art. On appeal, Robertson contends that the entire verdict relating to

8 cover art infringement should have been vacated. We disagree.

9 “[V]olitional conduct is an important element of direct liability.”

10 Cartoon Network, 536 F.3d at 131. The District Court instructed the jury as

11 follows: “When a person or company itself copies, distributes, publicly

12 performs, or displays the copyrighted work without authorization or other

13 defense, it is considered a ‘direct infringement.’ In order to be a direct

14 infringer, a person or company must have engaged in a volitional act that

15 causes the alleged copying.” Joint App’x 4380. Robertson asserts that

16 MP3tunes could not have engaged in a “volitional act” with respect to the

17 cover art infringement because the retrieval of that art was not directed by

Case 14-4369, Document 266, 10/25/2016, 1891111, Page34 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 MP3tunes but rather obtained from Amazon.com at the direction of the

2 user when the user selected a song.

3 The record contradicts Robertson on this point. MP3tunes’s

4 employees testified that the company’s LockerSync system was designed

5 to retrieve one aspect of a copyrighted work (the album art) whenever a

6 user uploaded another aspect of a copyrighted work (the song). In other

7 words, the system retrieved a copyrighted item that a user did not request,

8 frequently without the user’s knowledge of the copyrighted nature of the

9 item. This constituted enough evidence, in our view, that copying of the

10 cover art was directed by MP3tunes, not users.9 And a jury reasonably

11 could also infer that each of the 296 images had been downloaded from

12 Amazon.com at least once because the evidence presented at trial showed

13 that each image was actually downloaded several times.

14 Robertson follows up by arguing that the plaintiffs’ cover art

15 copyrights themselves are invalid. First, he contends, the plaintiffs

16 improperly used a Form SR (also used for the corresponding sound

9 For the same reason, we reject Robertson’s argument that MP3tunes was entitled to DMCA protection under § 512(c) for cover art infringement. As Robertson acknowledges, the subsection covers only “infringement of copyright by reason of the storage at the direction of a user.” 17 U.S.C. § 512(c)(1) (emphasis added). 34

Case 14-4369, Document 266, 10/25/2016, 1891111, Page35 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 recording) to register the cover art copyrights. We reject that argument.

2 Pursuant to 37 C.F.R. § 202.3, the SR class “includes all published and

3 unpublished sound recordings,” and “[c]laims to copyright in literary,

4 dramatic, and musical works embodied in phonorecords may also be

5 registered in this class under paragraph (b)(4) of this section” if certain

6 conditions are met. Because visual works are not explicitly listed as a

7 category that can also be included in SR copyrights, Robertson argues that

8 the plaintiffs’ registration of cover art on Forms SR renders their cover art

9 copyrights invalid. But a few years ago the Copyright Office issued a

10 circular that expressly sanctioned the use of a Form SR to register both the

11 recording and associated images. See Copyright Office, Copyright

12 Registration for Sound Recordings, Copyright Circular #56, at 3 (Aug.

13 2012) (providing instructions for how to fill out a Form SR “if the claim

14 includes artwork, photographs, and/or liner notes”). The Copyright

15 Office’s interpretations of the Copyright Act are entitled to some deference

16 insofar as we deem them to be persuasive. See Morris v. Bus. Concepts,

17 Inc., 283 F.3d 502, 505–06 (2d Cir. 2002). Here, we are persuaded by the

18 Copyright Office’s apparent view that there is no logical distinction

Case 14-4369, Document 266, 10/25/2016, 1891111, Page36 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 between “literary” works and “visual” works associated with a sound

2 recording such that the former is properly registered on a Form SR but the

3 latter is not.

4 Robertson separately claims that the copyrights are invalid because

5 the Forms SR fail to list the authors of the cover art. But the forms were

6 registered as works‐for‐hire, which do not require a separate identification

7 of artists. Moreover, a certificate of registration with inaccurate

8 information is invalid only if, among other things, the registrant knew it

9 was inaccurate. 17 U.S.C. § 411. There is no evidence on this record that

10 the certificates of registration at issue here were inaccurate. And, even if

11 there were, there is no evidence that the plaintiffs knew the copyrights

12 inaccurately described authorship.

13 iii. Liability for Infringement by MP3tunes Executives

14 In addition to finding MP3tunes liable for its own infringement and

15 for the infringement of its users, the jury held MP3tunes liable for the

16 sideloading activity of three MP3tunes executives (Emily Richards,

17 Douglas Reese, and Mark Wooten) under a theory of respondeat superior.

18 Robertson argues that there was insufficient evidence that these employees

Case 14-4369, Document 266, 10/25/2016, 1891111, Page37 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 acted within the scope of their authority and in furtherance of MP3tunes’s

2 business when downloading the challenged songs.

3 We think there was sufficient evidence for a rational jury to

4 conclude that MP3tunes was liable under a respondeat superior theory.

5 Among other evidence admitted at trial, Reese wrote an email asserting

6 that “we [MP3tunes employees] would see[d] the [sideload.com] index

7 with higher quality tracks.” Joint App’x 2049. An MP3tunes employee

8 testified that she and other MP3tunes employees “specifically sought out

9 websites on the Internet to locate files and sideload them into the Sideload

10 index,” and that they all did so “as employees of MP3tunes.” Joint App’x

11 2057. Robertson directed that the same employee provide other MP3tunes

12 employees a “list of some sites featuring free MP3s” “for sideloading

13 purposes.” Joint App’x 1957. There was also ample evidence from which

14 a juror could reasonably have inferred that these executive sideloads were

15 performed from MP3tunes’s offices. And it was clearly in MP3tunes’s

16 interest to increase the number of quality songs on sideload.com by using

17 its employees to expand the index.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page38 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 B. Robertson’s Liability

2 i. Personal Jurisdiction

3 Robertson challenges the District Court’s personal jurisdiction ruling

4 on various grounds. We review a District Court’s ruling on personal

5 jurisdiction de novo. See Bank Brussels Lambert v. Fiddler Gonzalez &

6 Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002).

7 Relying on Walden v. Fiore, 134 S. Ct. 1115 (2014) and Daimler AG

8 v. Bauman, 134 S. Ct. 746 (2014), Robertson argues as an initial matter that

9 the District Court erred in imputing MP3tunes’s contacts with New York

10 to him. But Robertson was no mere employee of MP3tunes. He was its

11 founder and CEO, and he exercised extensive control over MP3tunes’s

12 day‐to‐day activities. According to one MP3tunes employee, “no one

13 made any final decisions other than Michael.” Joint App’x 1173. Under

14 these circumstances, it was appropriate for the District Court to consider

15 the scope of MP3tunes’s activities in New York in evaluating whether it

16 could exercise personal jurisdiction over Robertson. See Retail Software

17 Servs., Inc. v. Lashlee, 854 F.2d 18, 23 (2d Cir. 1988). “[T]his is not a case

Case 14-4369, Document 266, 10/25/2016, 1891111, Page39 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 where an individual defendant who is unaffiliated with a corporation is

2 being haled into court by a large multinational corporation.” Id.10

3 Robertson also argues that, in any event, he and MP3tunes

4 combined lacked sufficient “minimum contacts” as required by the Due

5 Process Clause. But Robertson was aware both that MP3tunes had at least

6 400 users located in New York and that his company provided services to

7 New York customers. Under these circumstances, the District Court’s

8 exercise of personal jurisdiction over Robertson comported with due

9 process. He knew, in other words, that MP3tunes had “purposefully

10 Neither Daimler nor Walden compels a different conclusion. Daimler addressed general jurisdiction, not specific jurisdiction, and Robertson does not dispute that there is an “affiliation between the forum [of New York] and the underlying controversy” such that only specific jurisdiction is needed over Robertson. Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 170 (2d Cir. 2013) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). The Supreme Court expressly declined to “pass judgment on invocation of an agency theory in the context of general jurisdiction.” Daimler AG, 134 S. Ct. at 759‐60. Meanwhile Walden held that a defendant’s relationship with a forum state “must arise out of contacts that the ‘defendant himself’ creates with the forum State.” 134 S. Ct. at 1122 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). But the Court in Walden emphasized only that personal jurisdiction cannot arise from contacts between the plaintiff or third parties and the forum State. Id. It left unaddressed the role of a corporation’s activities in evaluating a court’s personal jurisdiction over its top executive, including where the executive is, as here, intimately involved with all aspects of the company’s operation. 39

Case 14-4369, Document 266, 10/25/2016, 1891111, Page40 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 avail[ed] [it]self of the privilege of conducting activities within [New

2 York], thus invoking the benefits and protections of its laws.” See Chloé v.

3 Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 171 (2d Cir. 2010) (quoting

4 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). “[J]urisdiction

5 is appropriate in New York because [MP3tunes] has developed and served

6 a market for its products there.” Id. That MP3tunes served a national

7 market, as opposed to a New York‐specific market, has little bearing on

8 our inquiry, as attempts to serve a nationwide market constitute “evidence

9 of [the defendant’s] attempt to serve the New York market, albeit

10 indirectly.” Kernan v. Kurz‐Hastings, Inc., 175 F.3d 236, 243 (2d Cir. 1999);

11 see Chloé, 616 F.3d at 171.

12 Finally, Robertson insists that the District Court should have

13 required the plaintiffs to establish that the District Court had personal

14 jurisdiction over him by a preponderance of the evidence at a hearing or at

15 trial. But we are not persuaded that the District Court erred in

16 determining that it had personal jurisdiction over Robertson without

17 holding a hearing or putting that issue to the jury. On a summary

18 judgment motion, a judge may “properly examine[] the record to

Case 14-4369, Document 266, 10/25/2016, 1891111, Page41 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 determine if there [are] undisputed facts that could resolve the

2 jurisdictional issue.” Ball v. Metallurgie Hoboken‐Overpelt, S.A., 902 F.2d

3 194, 197 (2d Cir. 1990). Robertson did not challenge the facts that the

4 District Court deemed most persuasive in finding personal jurisdiction:

5 that he had engaged in previous litigation with record companies in New

6 York based on similar infringing activities; that MP3tunes had a number of

7 users in New York; and that Robertson had extensive control over

8 MP3tunes. See Joint App’x 1135. For these reasons, we conclude that the

9 District Court did not err in determining at the summary judgment stage

10 that it could exercise personal jurisdiction over Robertson.

11 ii. Vicarious and Contributory Liability

12 In addition to attacking the District Court’s exercise of personal

13 jurisdiction over him, Robertson argues that there was insufficient

14 evidence to support the jury’s finding that he was vicariously or

15 contributorily liable for MP3tunes’s infringements. In the same vein, he

16 adds that the District Court’s jury instructions regarding vicarious and

17 contributory liability were erroneous.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page42 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 We start with Robertson’s challenge to the jury’s vicarious liability

2 finding and the District Court’s jury instructions. Vicarious liability for

3 copyright infringement may arise only when the defendant had the “right

4 and ability to supervise [that] coalesce[d] with an obvious and direct

5 financial interest in the exploitation of copyrighted materials.” Softel, Inc.

6 v. Dragon Medical & Sci. Commc’ns, Inc., 118 F.3d 955, 971 (2d Cir. 1997)

7 (alteration in original) (quoting Shapiro, 316 F.2d at 307). An increase in

8 subscribers or customers due to copyright infringement qualifies as an

9 “obvious and direct financial interest.” See Shapiro, 316 F.2d at 307. With

10 these principles in mind, we conclude that the District Court did not err

11 when it instructed the jury that an “obvious and direct financial interest . . .

12 may be established where infringing material acts as a ‘draw’ to attract

13 subscribers to a defendant’s business, even if it is not the primary, or even

14 a significant draw.” Joint App’x 2423–24; see also Owen v. Thermatool

15 Corp., 155 F.3d 137, 139 (2d Cir. 1998).

16 And here there was ample evidence to support the jury’s finding,

17 aided by a proper instruction, that Robertson was vicariously liable for

18 copyright infringement. Among other things, an MP3tunes employee

Case 14-4369, Document 266, 10/25/2016, 1891111, Page43 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 testified that she and other employees “used Sideload marketing efforts to

2 try to get people to sign up for lockers” and emphasized the availability of

3 free music on sideload.com “in connection with trying to get users to

4 purchase lockers.” Joint App’x 2059. Meanwhile, Robertson sought to use

5 sideload.com to attract free users to MP3tunes whom MP3tunes could

6 thereafter “upsell” to premium lockers. Joint App’x 2337. There was also

7 evidence that Robertson, through a trust, was the near‐exclusive funder of

8 MP3tunes and thus had an “obvious and direct financial interest” in

9 infringement that drew subscribers to MP3tunes.com. Cf. Softel, 118 F.3d

10 at 971. The jury thus had sufficient evidence to find Robertson vicariously

11 liable in this case.

12 Robertson’s challenge to the jury’s contributory liability finding

13 fares no better. A contributory infringer is “one who, with knowledge of

14 the infringing activity, induces, causes or materially contributes to the

15 infringing conduct of another.” Gershwin Publ’g Corp. v. Columbia

16 Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). “[O]ne who

17 distributes a device with the object of promoting its use to infringe

18 copyright, as shown by clear expression or other affirmative steps taken to

Case 14-4369, Document 266, 10/25/2016, 1891111, Page44 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 foster infringement, is liable for the resulting acts of infringement by third

2 parties.” Metro‐Goldwyn‐Mayer Studios Inc. v. Grokster, Ltd., 545 U.S.

3 913, 919 (2005).

4 Based on our review of the trial record, we reject Robertson’s

5 challenge to the jury’s verdict finding him liable for contributory

6 infringement based on the infringing activities of both MP3tunes

7 executives and MP3tunes users. Robertson personally encouraged his

8 employees to sideload songs to add to the index. Many of those songs

9 were from sites that contained “pirated material.” The entire point of

10 sideloading to the index was to make more music available for user

11 download—even though Robertson knew the music was generally not

12 available for free in MP3 form. See id. at 936. This, in turn, aided and

13 abetted infringement by sideload.com users.

14 Nor are we persuaded by Robertson’s argument that the District

15 Court should have instructed the jury that his participation needed to be

16 substantial and to have had a direct relationship to the infringement in

17 order to find him liable for contributory infringement. The District Court

18 instructed the jury as follows: “A defendant is liable for contributory

Case 14-4369, Document 266, 10/25/2016, 1891111, Page45 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 infringement if, one, with knowledge of the infringing activity, two, that

2 defendant introduces, causes, or materially contributes to the infringing

3 conduct of another.” Joint App’x 2424. We have not previously insisted

4 on use of the phrase “substantially contributes” rather than “materially

5 contributes” in the context of a jury instruction about contributory

6 infringement. To the contrary, we have more often regarded the words

7 “material” and “substantial” as synonymous. See Substantial, Black’s Law

8 Dictionary (10th ed. 2014). We conclude that the District Court’s use of the

9 phrase “materially contributes” rather than “substantially contributes”

10 was not misleading and adequately informed the jury of the law. See

11 Owen, 155 F.3d at 139. We also think that the District Court was not

12 required to instruct the jury specifically that there had to be a “direct

13 relationship” between the contributor’s activities and the infringement.

14 We have never held that such an instruction was necessary. In any event,

15 the District Court’s instruction adequately captured the necessary

16 relationship when it reminded the jury that a defendant “materially

17 contributes to the infringing conduct of another if the defendant engages

Case 14-4369, Document 266, 10/25/2016, 1891111, Page46 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 in personal conduct that is part of, encourages, or assists the

2 infringement.” Joint App’x 2425.

3 Robertson relies on Sony Corp. of America v. Universal City Studios,

4 Inc., 464 U.S. 417, 442 (1984), to suggest more broadly that he cannot be

5 held secondarily liable as a matter of law. In Sony, the Supreme Court

6 held that when a product is capable of “substantial noninfringing uses,” its

7 manufacturer cannot be liable simply for knowing that the product could

8 be used in a way that would constitute infringement. Id. at 456. But the

9 Supreme Court has since clarified that “where evidence goes beyond a

10 product’s characteristics or the knowledge that it may be put to infringing

11 uses, and shows statements or actions directed to promoting infringement,

12 Sony’s staple‐article rule will not preclude liability.” Grokster, 545 U.S. at

13 935. Here, the evidence showed that Robertson acted in a manner

14 intended to promote infringement. We therefore reject Robertson’s

15 argument based on Sony.

16 C. Damages

17 Finally, Robertson challenges the District Court’s award of statutory

18 and punitive damages. We address each challenge in turn.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page47 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 i. Statutory Damages

2 Robertson claims that the District Court’s award of multiple

3 statutory damages for music singles and the albums on which they appear

4 was error. As previously noted, statutory damages are awarded for

5 infringement of each copyrighted “work.” 17 U.S.C. § 504(c). Several of

6 the songs relevant to the trial were issued both as singles and as part of

7 albums. The District Court instructed the jury that, so long as the plaintiffs

8 proved that “on the date of infringement, each individual sound recording

9 at issue in this case was available for purchase as a single,” it could issue

10 multiple statutory damages awards for singles that appeared on the same

11 album. Capitol Records, 48 F. Supp. 3d at 721. The jury found that each

12 song was available for purchase as a single on the date of infringement.

13 Materials that are sold as part of a compilation, such as songs on an

14 album, ordinarily are not deemed separate works for the purpose of

15 determining statutory damages. See Bryant v. Media Right Prods., Inc.,

16 603 F.3d 135, 141 (2d Cir. 2010); 17 U.S.C. § 504(c)(1) (“[A]ll the parts of a

17 compilation . . . constitute one work.”). But when a copyright holder or

18 publisher issues material on an independent basis, the law permits a

Case 14-4369, Document 266, 10/25/2016, 1891111, Page48 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 statutory damages award for each individual work. See Twin Peaks

2 Prods., Inc. v. Publ’ns Int’l, Ltd., 996 F.2d 1366, 1381 (2d Cir. 1993). In

3 other words, our “focus[] [is] on whether the plaintiff—the copyright

4 holder—issued its works separately, or together as a unit.” Bryant, 603

5 F.3d at 141. For these reasons, we conclude that the District Court

6 properly allowed separate statutory damages awards for songs that the

7 plaintiffs issued as singles, even if those songs were also made available on

8 albums.

9 And there was evidence at trial that all the songs in question were

10 made available as singles on the date of infringement. For example, an

11 EMI and Capitol Records executive testified that, with the exception of

12 tracks by Bob Seger and the Beatles, as well as one track by Pink Floyd,

13 EMI’s entire catalog was available for download and sale as singles, Joint

14 App’x 2476–82, and that this amounted to “95 to 98 percent of our total

15 catalogue available,” Joint App’x 2482. Based on this and other evidence,

16 the District Court did not err in upholding the jury’s verdict of statutory

17 damages.

Case 14-4369, Document 266, 10/25/2016, 1891111, Page49 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 ii. Punitive Damages

2 In addition to statutory damages on the plaintiffs’ Copyright Act

3 claims, the jury awarded $7.5 million in punitive damages against

4 Robertson on the plaintiffs’ common law claims. Robertson now argues

5 that the reduced award of $750,000 violated his right to due process. We

6 disagree. In granting this reduced award, the District Court properly

7 analyzed the factors enumerated in State Farm Mutual Automobile

8 Insurance Co. v. Campbell: “the degree of reprehensibility of [Robertson’s]

9 misconduct”; “the actual or potential harm suffered by the plaintiff” as

10 compared to “the punitive damages award”; and “the difference between

11 the punitive damages awarded by the jury and the civil penalties

12 authorized or imposed in comparable cases.” 538 U.S. 408, 418 (2003).

13 CONCLUSION

14 We have considered the parties’ remaining arguments on appeal

15 and conclude that they are without merit. For the foregoing reasons, we:

16 (1) VACATE the District Court’s grant of partial summary judgment

17 to the defendants based on its conclusion that MP3tunes qualified for safe

Case 14-4369, Document 266, 10/25/2016, 1891111, Page50 of 50

14‐4369(L) EMI Christian Music Grp., Inc. et al. v. MP3tunes, LLC et al. 1 harbor protection under the DMCA because the District Court applied too

2 narrow a definition of “repeat infringer”;

3 (2) REVERSE the District Court’s grant of judgment as a matter of

4 law to the defendants on claims that MP3tunes permitted infringement of

5 plaintiffs’ copyrights in pre‐2007 MP3s and Beatles songs because there

6 was sufficient evidence to allow a reasonable jury to conclude that

7 MP3tunes had red‐flag knowledge of, or was willfully blind to, infringing

8 activity involving those categories of protected material;

9 (3) REMAND for further proceedings related to claims arising out of

10 the District Court’s grant of partial summary judgment; and

11 (4) AFFIRM the judgment in all other respects.

16-134-cv TCA Television Corp. v. McCollum

In the United States Court of Appeals For the Second Circuit ______

August Term, 2015

(Argued: June 23, 2016 Decided: October 11, 2016)

Docket No. 16‐134‐cv ______

TCA TELEVISION CORP., HI NEIGHBOR, DIANA ABBOTT COLTON,

Plaintiffs‐Appellants,

—v.—

KEVIN MCCOLLUM, ROBERT ASKINS, DOES, ABC COMPANIES, 1‐10, HAND TO GOD LLC, THE ENSEMBLE STUDIO THEATER, INC., MANHATTAN CLASS COMPANY, INC.,

Defendants‐Appellees,

BROADWAY GLOBAL VENTURES, CMC, MORRIS BERCHARD, MARIANO V. TOLENTINO, JR., STEPHANIE KRAMER, LAMS PRODUCTIONS, INC., DESIMONE WINKLER, JOAN RAFFE, JHETT TOLENTINO, TIMOTHY LACZYNSKI, LILY FAN, AYAL MIODOVNIK, JAM THEATRICALS LTD., KEY BRAND ENTERTAINMENT INC.,

Defendants. ______

Before: JACOBS, CALABRESI, RAGGI, Circuit Judges. ______

On appeal from a judgment entered in the Southern District of New York

(Daniels, J.) dismissing an action for copyright infringement by the heirs of

William “Bud” Abbott and Lou Costello, plaintiffs challenge the district court’s determination, made as a matter of law on a Rule 12(b)(6) motion, that defendants’ verbatim use of a portion of Abbott and Costello’s iconic comedy routine, Who’s on First?, in the recent Broadway play Hand to God, qualified as a non‐infringing fair use. Defendants defend the district court’s fair use ruling, and further argue that dismissal is supported, in any event, by plaintiffs’ failure

to plead a valid copyright interest. We here conclude that defendants’

appropriation of Who’s on First? was not a fair use, but, nevertheless, affirm the challenged judgment on defendants’ alternative invalidity ground.

AFFIRMED. ______

JONATHAN D. REICHMAN (Jonathan W. Thomas, on the brief), Kenyon & Kenyon LLP, New York, New York, for Plaintiffs‐Appellants.

MARK J. LAWLESS, Law Office of Mark J. Lawless, New York, New York, for Defendants‐Appellees. ______2

REENA RAGGI, Circuit Judge:

In this action for copyright infringement, plaintiffs, successors‐in‐interest to the estates of William “Bud” Abbott and Lou Costello, appeal from a judgment of dismissal entered in the United States District Court for the

Southern District of New York (George B. Daniels, Jr., Judge) in favor of

defendants, who include the producers of Hand to God and the play’s author,

Robert Askins. See TCA Television Corp. v. McCollum, 151 F. Supp. 3d 419

(S.D.N.Y. 2015). Plaintiffs assert that the district court erred in concluding from

the amended complaint that defendants’ use of a portion of the iconic Abbott and

Costello comedy routine, Who’s on First?, in Act I of Hand to God was so transformative as to establish defendants’ fair use defense as a matter of law. See

Fed. R. Civ. P. 12(b)(6). Defendants here not only defend the district court’s fair

use determination but also argue that affirmance is warranted, in any event, by

plaintiffs’ failure to plead a valid copyright interest. The district court rejected

that argument. See TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 430–

31.1

For the reasons explained herein, we conclude that defendants’ verbatim

incorporation of more than a minute of the Who’s on First? routine in their commercial production was not a fair use of the material. Nevertheless, we affirm dismissal because plaintiffs fail plausibly to allege a valid copyright interest.

I. Background

The following facts derive from plaintiffs’ amended complaint, incorporated exhibits, and documents susceptible to judicial notice. See Goel v.

Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016) (acknowledging that, on motion to dismiss, courts may consider documents appended to or incorporated in complaint and matters of which judicial notice may be taken); Island Software &

1 Defendants do not cross‐appeal the district court’s denial of dismissal on the ground of copyright invalidity; rather, they argue it as an alternative ground for affirmance, even if plaintiffs’ fair use challenge prevails. In this opinion, we first address plaintiffs’ challenge to the fair use determination supporting dismissal because if we were to identify no error in that ruling there would be no need to consider defendants’ proposed alternative ground for affirmance.

Comput. Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 261 (2d Cir. 2005) (stating that court may take judicial notice of copyright registrations). For purposes of

this appeal, we presume these facts to be true. See Anschutz Corp. v. Merrill

Lynch & Co., 690 F.3d 98, 102 (2d Cir. 2012).

A. Abbott and Costello’s Who’s on First? Routine

Abbott and Costello were a popular mid‐Twentieth Century comedy duo.

One of their routines, commonly referred to as Who’s on First? (also, the

“Routine”), has become a treasured piece of American entertainment history.2

The Routine’s humor derives from misunderstandings that arise when Abbott

announces the roster of a baseball team filled with such oddly named players as

“Who,” “What,” and “I Don’t Know.” A rapid‐fire exchange reveals that “who’s on first” need not be a question. It can be a statement of fact, i.e., a player named

“Who” is the first baseman. Later parts of the routine reveal, after similar comic misunderstandings, that a player named “What” is the second baseman, and one

named “I Don’t Know” is the third baseman.

2 In 1999, Time magazine named the Routine the best comedy sketch of the Twentieth Century. See Am. Compl. ¶ 37; Best of the Century, Time, December 31, 1999, at 73.

B. Agreements Pertaining to Rights in the Routine

The parties cite various contracts and copyright filings spanning more than

40 years as relevant to claimed rights in the Routine.

1. Abbott and Costello’s Agreements with UPC

a. The July 1940 Agreement

Abbott and Costello first performed Who’s on First? in the late 1930s, notably on a 1938 live radio broadcast of The Kate Smith Hour. The Routine was published for purposes of federal copyright law when Abbott and Costello

performed a version of it in their first motion picture, One Night in the Tropics

(“Tropics”).3

The team appeared in Tropics pursuant to a July 24, 1940 contract (the

“July Agreement”) with Universal Pictures Company, Inc. (“UPC”). The July

Agreement guaranteed Abbott and Costello a minimum of five weeks’ work at a

3 Viewing the facts in the light most favorable to plaintiffs, the district court discussed in some detail why (1) before Tropics’s release, the Routine was protected by common law copyright; and (2) the movie’s release could constitute “publication” of the Routine, extinguishing any common law right and requiring registration and deposit with the federal Copyright Office to claim any statutory copyright protection. See TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 427–30.

pay rate of $3,500 per week. In turn, Abbott and Costello (the “Artists”) agreed

to grant UPC (the “Producer”) certain rights and to furnish it with certain items.

We reproduce the relevant text here, adding bracketed signals and highlighting

to distinguish various provisions:

[1] The Artists expressly give and grant to the Producer the sole and exclusive right to photograph and/or otherwise reproduce any and all of their acts, poses, plays and appearances of any and all kinds during the term hereof, and [2] further agree [a] to furnish to the Producer, without charge to it, the material and routines heretofore used and now owned by the Artists for use by the Producer in the photoplay in which they appear hereunder and for which the Producer shall have the exclusive motion picture rights, and [b] to record their voices and all instrumental, musical and other sound effects produced by them, and [c] to reproduce and/or transmit the same, either separately or in conjunction with such acts, poses, plays and appearances as the Producer may desire, and further [3] give and grant to the Producer solely and exclusively all rights of every kind and character whatsoever in and to the same, or any of them, perpetually, including as well the perpetual right to use the names of the Artists and pictures or other reproductions of the Artists’ physical likenesses, and recordations and reproductions of the Artists’ voices, in connection with the advertising and exploitation thereof.

J.A. 168–69.

b. The November 1940 Agreement

On November 6, 1940, only days before Tropics’s public release, Abbott and Costello entered into a new multi‐year/multi‐picture agreement with UPC

(the “November Agreement”).4 That contract terminated the July Agreement without prejudice to, among other things, UPC’s “ownership . . . of all rights

heretofore acquired,” including those “in or to any . . . material furnished or

supplied by the Artists.” Id. at 162. In the November Agreement, Abbott and

Costello agreed “to furnish and make available to the Producer all literary and dramatic material and routines heretofore used by the Artists either on the radio or otherwise and now owned by the Artists,” and acknowledged that “the

Producer shall have the right to use said material and routines to such extent as

the Producer may desire in connection with any photoplay in which the Artists

4 Plaintiffs’ amended complaint cites only the November Agreement with UPC as the relevant contract. See Am. Compl. ¶ 43. By the time that agreement was signed, however, Abbott and Costello presumably had already finished their work on Tropics—including any additions to the Routine reflected in that movie. Thus, it would appear that the team’s work on Tropics was pursuant to the July Agreement, discussed supra at I.B.1.a. The discrepancy does not affect our analysis here because, in the district court, defendants conceded that, at least for purposes of their motion to dismiss, the July Agreement had “in effect, been pleaded” by plaintiffs in support of their claim. Sept. 9, 2015 Hr’g Tr. 2–3.

render their services hereunder and in connection with the advertising and

exploitation of such photoplay.” Id. at 129. Abbott and Costello agreed that they would “not use or license, authorize or permit the use of any of the material

and/or routines” so referenced “in connection with motion pictures” by others

than UPC for specified times. Id. Nevertheless, they reserved the right to use materials and routines created by them (without the assistance of UPC writers)

“on the radio and in personal appearances.” Id. at 129–30.

2. UPC Registers a Copyright for Tropics

In November 1940, UPC registered a copyright for Tropics with the United

States Copyright Office, which it renewed in December 1967. See id. at 36, 39–40.

3. UPC Uses an Expanded Version of the Routine in The Naughty Nineties and Registers a Copyright for that Movie

In 1945, Abbott and Costello performed an expanded version of Who’s on

First? in another movie for UPC, The Naughty Nineties. That version maintains the core of the Routine—with “Who” on first base, “What” on second, and “I

Don’t Know” on third—but several new players take the field: left fielder “Why,” center fielder “Because,” pitcher “Tomorrow,” catcher “Today,” and shortstop “I

Don’t Care.”

In June 1945, UPC registered a copyright for The Naughty Nineties with the United States Copyright Office, which it renewed in 1972. See id. at 37, 41–

42; Am. Compl. ¶ 45.5

4. The 1944 Copyright Registration for “Abbott and Costello Baseball Routine”

In April 1944, a work entitled “Abbott and Costello Baseball Routine” was registered with the Copyright Office “in the name of Bud Abbott and Lou

Costello, c/o Writers War Board.” J.A. 114. The certificate indicates that this

“Baseball Routine” was published on “March 13, 1944” in “‘Soldier Shows,’ No.

19.” Id.6 The record suggests that this registration was not renewed, prompting the Copyright Office to conclude that the work had entered the public domain in

5 By operation of the Sonny Bono Copyright Term Extension Act, Pub. L. No. 105–298, 112 Stat. 2827 (1998), the renewal term for Tropics will not expire until 2035 and that for The Naughty Nineties will not expire until 2040. See 17 U.S.C. § 304(b).

6 The George Mason University Libraries, in their “Guide to the John C. Becher Soldier Show Collection, 1940‐1953,” indicates that “Soldier Shows” refers to entertainments “made by soldiers for soldiers,” with the object of “mass participation” to raise morale. J.A. 208–09. Because the record here is devoid of any information about either Soldier Shows generally or Soldier Shows, No. 19 in particular, we make no assumptions about the content of the material that is the subject of the 1944 copyright registration.

1972, and, on that ground, to reject a 1984 application for a derivative work registration filed by the children of Abbott and Costello based on the 1944 registration.

5. The 1984 Quitclaim Agreement

Plaintiffs do not rely on the 1944 registration to support their copyright claim here. Rather, they claim to have succeeded to UPC’s copyright interests in the Routine as performed in Tropics and The Naughty Nineties based on a quitclaim agreement dated March 12, 1984 (the “Quitclaim”).

In the Quitclaim, which was subsequently recorded with the Copyright

Office, UPC’s successor‐in‐interest, Universal Pictures (“Universal”), granted

Abbott & Costello Enterprises (“A & C”), a partnership formed by the heirs of

Abbott and Costello,7 “any and all” of Universal’s rights, title, and interest in the

Routine. Id. at 45. Universal stated that it did so relying upon A & C’s representation that it was “a partnership composed of the successors in interest

7 Bud Abbott died in 1974; Lou Costello died in 1959. See Bud Abbott, Straight Man to Lou Costello, Is Dead, N.Y. Times, April 25, 1974, at 42; Lou Costello, 52, Dies on Coast; Comic Had Teamed with Abbott, N.Y. Times, Mar. 4, 1959, at 31.

to the late Bud Abbott and Lou Costello” and, therefore, “the owner of copyright

in and to the Routine.” Id. at 46.

A & C dissolved in 1992, with 50% of its assets transferred to TCA

Television Corporation, a California entity owned by Lou Costello’s heirs, and the other 50% divided evenly between Bud Abbott’s heirs, Vickie Abbott

Wheeler and Bud Abbott, Jr. Wheeler would later transfer her 25% interest to a

California partnership, Hi Neighbor, and Abbott, Jr. would transfer his 25% interest to Diana Abbott Colton. It is by operation of the Quitclaim and the referenced dissolution and transfer agreements that plaintiffs TCA Television, Hi

Neighbor, and Colton now claim a copyright interest in Who’s on First?.

C. Hand to God

As described in the amended complaint, Hand to God (the “Play”) is “a dark comedy about an introverted student in religious, small‐town Texas who finds a creative outlet and a means of communication through a hand puppet,

wh[ich] turns into his evil or devilish persona.” Am. Compl. ¶ 58. After two

successful off‐Broadway runs, Hand to God opened to critical acclaim on

Broadway in the spring of 2015. Through press coverage, plaintiffs learned that

Hand to God incorporated part of the Routine in one of its “key scene[s],” without license or permission. Id. at ¶ 63. While the Play was still in previews for its Broadway opening, plaintiffs sent defendants a cease and desist letter.

Defendants’ failure to comply with that request prompted this lawsuit.

1. The Relevant Scene

Plaintiffs allege that the Play infringes their copyright in the Routine by using its first part—that is, the part pertaining to first baseman “Who”—in Act I,

Scene 2. In that scene, which occurs approximately 15 minutes into the Play, the lead character, “Jason,” and the girl with whom he is smitten, “Jessica,” have just

emerged from the basement of their church, where they had been participating in

a Christian puppet workshop. Jason tries to impress Jessica by using his sock

puppet, “Tyrone,” to perform, almost verbatim, a little over a minute of Who’s on First?. Jason plays the Bud Abbott role, while Tyrone assumes Lou Costello’s character.8

8 The Routine is used in the Play as follows:

JASON . . . . You wanna see something[?] JESSICA Ummm.

JASON You’ll like it. JESSICA Yeah? JASON I think you’ll like it. JESSICA Okay. JASON Okay.

Jason slicks back his hair. Takes a deep breath and then says...

JASON Well Costello, I’m goin’ to New York with you. You know Buck Harris the Yankee[s’] manager gave me a job as coach as long as you’re on the team. TYRONE Look Abbott, if you’re the coach, you must know all the players. JASON I certainly do. TYRONE Well I’ve never met the guys. So you’ll have to tell me their names and then Iʹll know who’s playing on the team. JASON Oh I’ll tell you their names, but you know it seems to me they give these ball players now‐a‐days very particular names.

As he starts he’s a little aspergersy. As he goes on he gets more and more comfortable.

TYRONE You mean funny names? JASON Well let’s see we have on the bags, Who’s on first, What’s on second, I don’t know is on third... TYRONE That’s what I want to find out.

JASON I say Who’s on first, What’s on second, I don’t know’s on third. TYRONE Are you the manager? JASON Yes. TYRONE You gonna be the coach too? JASON Yes. TYRONE And you don’t know the fellows’ names. JASON Well I should. TYRONE Then who’s on first? JASON Yes? TYRONE I mean the fellow’s name. JASON Who. TYRONE The guy on first. JASON Who. TYRONE The first baseman. JASON Who. TYRONE The guy playing . . .

Jason is really into it. Jessica is giggling a bit. But you can imagine him going into it all alone on a Saturday night.

JASON Who is on first. TYRONE I’m askin[’] you who’s on first. JASON That’s the man’s name. TYRONE That’s whose name. JASON Yes. TYRONE Well go ahead and tell me. JASON That’s it. TYRONE That’s who? JASON Yes.

When Jason somewhat bashfully concludes the “Who” part of the Routine,

Jessica compliments him by saying, “That’s really good,” and asks, “Did you

come up with that all by yourself[?]” Suppl. App’x 21. When Jason answers,

“Yes,” the audience laughs at what it recognizes as a lie. Id.; see Am. Compl.

¶ 64. The answer, however, triggers a different response from the puppet,

which, seemingly of its own volition, calls Jason a “Liar,” and states that the

comic exchange they just performed is “a famous routine from the [F]ifties.”

Suppl. App’x 21. Jason corrects Tyrone, stating that the sketch is from the

“Forties.” Id. Tyrone then insults Jessica, telling her that she would know the

Routine’s origin if she “weren’t so stupid.” Id. Jason and Jessica each order

Jason reaches a pause in the routine and looks out at her. He becomes aware of what he’s doing.

JESSICA What are you doing[?] Don’t stop. JASON I . . .

He gets red.

JESSICA What? JASON I can’t remember anymore.

Suppl. App’x 17–21 (emphases added).

Tyrone to “shut up” to no effect. Id. at 22. Instead, as the scene continues,

Tyrone vulgarly divulges Jason’s physical desire for Jessica. Only after a

seeming physical struggle with Tyrone is Jason able to remove the puppet from

his hand and thereby end Tyrone’s outburst. Jason tries to apologize to Jessica,

but she quickly exits, leaving Jason—in the words of the stage direction—

“[d]efeated by what he ca[]n’t defeat.” Id. at 24.

The scene foreshadows darker and more disturbing exchanges between

Jason and the puppet that will occur as the Play proceeds.

2. Promotional Materials

Plaintiffs allege that, in online promotional materials for the Play,

defendants used a “video clip” of Jason and his puppet performing Who’s on

First? to “stoke interest” in and sell tickets for the Play. Am. Compl. ¶¶ 69, 89.

These promotional materials are not part of the court record.

D. District Court Proceedings

On June 4, 2015, plaintiffs filed this action in the Southern District of New

York, claiming both federal and common law copyright infringement.

Defendants promptly moved to dismiss, arguing, inter alia, that (1) plaintiffs did

not hold a valid copyright; (2) the Routine was in the public domain; and

(3) Hand to God’s incorporation of the Routine was sufficiently transformative to qualify as a permissible fair use, not prohibited infringement.

On December 17, 2015, the district court granted defendants’ motion to dismiss. It declined to do so on either of the first two grounds argued by

defendants, concluding that, at the 12(b)(6) stage, plaintiffs had “sufficiently alleged a continuous chain of title” to the Routine to survive dismissal. TCA

Television Corp. v. McCollum, 151 F. Supp. 3d at 431. Instead, the court concluded that dismissal was warranted because defendants’ use of Who’s on

First? in Hand to God was “highly transformative” and a non‐infringing fair use.

Id. at 434, 437.

This appeal followed.

II. Discussion

A. Dismissal Was Not Properly Based on Fair Use

1. Standard of Review

We review de novo a judgment of dismissal under Fed. R. Civ. P. 12(b)(6), accepting all factual allegations in the amended complaint and its incorporated

exhibits as true and drawing all reasonable inferences in plaintiffs’ favor. See

Concord Assocs., L.P. v. Entm’t Props. Tr., 817 F.3d 46, 52 (2d Cir. 2016). The challenged dismissal here is based on the district court’s determination that plaintiffs could not succeed on their copyright infringement claim because the

Rule 12(b)(6) record established defendants’ fair use defense as a matter of law.

Our review of that decision is necessarily informed by certain basic copyright principles. First, the law affords copyright protection to promote not simply individual interests, but—in the words of the Constitution—“the progress

of science and useful arts” for the benefit of society as a whole. U.S. Const. art I,

§ 8, cl. 8. As the Supreme Court has explained, copyright protection is based on the “economic philosophy . . . that encouragement of individual effort by

personal gain is the best way to advance public welfare.” Mazer v. Stein, 347

U.S. 201, 219 (1954). In short, the “monopoly created by copyright . . . rewards the individual author,” but only “in order to benefit the public.” Harper & Row

Publishers, Inc. v. Nation Enters., 471 U.S. 539, 546 (1985) (internal quotation marks omitted); see Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932) (“The sole

interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.”).

Second, and consistent with this public purpose, the law has long recognized that “some opportunity for fair use of copyrighted materials” is

necessary to promote progress in science and art. Campbell v. Acuff‐Rose Music,

Inc., 510 U.S. 569, 575 (1994); Iowa State Univ. Research Found., Inc. v. Am.

Broad. Cos., 621 F.2d 57, 60 (2d Cir. 1980) (stating that fair use doctrine “permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster”). The

doctrine of fair use, derived from common law, is now codified in the Copyright

Act of 1976, Pub. L. No. 94‐553, 90 Stat. 2541. See 17 U.S.C. § 107. That codification does not so much define “fair use” as provide a non‐exhaustive list

of factors to guide courts’ fair use determinations. This affords the doctrine a

certain “malleability” that can challenge judicial application. 4 Melville B.

Nimmer & David Nimmer, Nimmer on Copyright (hereinafter “Nimmer”)

§ 13.05, at 13‐156 (Matthew Bender, rev. ed., 2016).

Courts most frequently address a proffered fair use defense at summary

judgment. See, e.g., Blanch v. Koons, 467 F.3d 244, 250 (2d Cir. 2006) (explaining that court may resolve fair use question at summary judgment if there are no genuine issues of fact); see also Harper & Row Publishers, Inc. v. Nation Enters.,

471 U.S. at 560 (stating that appeals court may decide fair use where “district court has found facts sufficient to evaluate each of the statutory factors”).

Nevertheless, this court has acknowledged the possibility of fair use being so

clearly established by a complaint as to support dismissal of a copyright infringement claim. See Cariou v. Prince, 714 F.3d 694, 707 (2d Cir. 2013)

(granting defendant partial summary judgment on fair use and citing approvingly to Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687 (7th

Cir. 2012) (rejecting argument that fair use could not be decided on motion to dismiss)).

On de novo review here, we conclude that defendants’ entitlement to a fair use defense was not so clearly established on the face of the amended complaint and its incorporated exhibits as to support dismissal.

2. The Statutory Framework for Analyzing Fair Use

In the preamble to 17 U.S.C. § 107, Congress states that “the fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research is

not an infringement of copyright.” As the words “such as” indicate, the listing is

“illustrative and not limitative.” 17 U.S.C. § 101; see Harper & Row Publishers,

Inc. v. Nation Enters., 471 U.S. at 561. Four nonexclusive factors—incorporating common law traditions—are properly considered in “determining whether the use made of a work in any particular case is a fair use.” 17 U.S.C. § 107. These

statutory factors are as follows:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Id.; see generally Folsom v. Marsh, 9 F. Cas. 342, 348 (C.C.D. Mass. 1841) (Story,

J.) (explaining that common law courts “deciding questions of this sort” should

“look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or

diminish the profits, or supersede the objects, of the original work”).

In reviewing the challenged determination of fair use in this case, we necessarily discuss these factors individually, at the same time that we heed the

Supreme Court’s instruction that the factors must be viewed collectively, with their results “weighed together, in light of the purposes of copyright.”

Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 578.

a. Purpose and Character of the Use

(1) Transformative Use

The first statutory fair use factor considers the purpose and character of the secondary use. In this regard, the uses identified by Congress in the preamble to § 107—criticism, comment, news reporting, teaching, scholarship, and research—might be deemed “most appropriate” for a purpose or character finding indicative of fair use. Nimmer § 13.05[A][1][a], at 13‐162; see Authors

Guild v. Google, Inc., 804 F.3d 202, 215 (2d Cir. 2015) (noting that providing

commentary or criticism on another’s work is “[a]mong the best recognized justifications for copying”).

The challenged use here does not appear to fit within any of these

statutory categories. Nevertheless, the district court concluded that defendants’

use was “transformative,” indeed, so “highly transformative” as to be

“determinative” of fair use. TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 434–35. The district court explained that by having a single character perform the Routine, the Play’s authors were able to contrast “Jason’s seemingly soft‐ spoken personality and the actual outrageousness of his inner nature, which he expresses through the sock puppet.” Id. at 436. This contrast was “a darkly comedic critique of the social norms governing a small town in the Bible Belt.”

Id. This reasoning is flawed in that what it identifies are the general artistic and critical purpose and character of the Play. The district court did not explain how defendants’ extensive copying of a famous comedy routine was necessary to this purpose, much less how the character of the Routine was transformed by defendants’ use.

The Supreme Court has stated that “the goal of copyright . . . is generally furthered by the creation of transformative works.” Campbell v. Acuff‐Rose

Music, Inc., 510 U.S. at 579.9 But how does a court decide “whether and to what extent the new work is ‘transformative’”? Id. Campbell instructs that a court properly considers “whether the new work merely supersedes the objects of the

original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.”

9 The idea that “transformative” purpose could support fair use was put forth by our colleague, Judge Leval, in a seminal article, “Toward a Fair Use Standard.” See 103 Harv. L. Rev. 1105, 1111 (1990) (“[T]he question of justification turns primarily on whether, and to what extent, the challenged use is transformative. The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test . . . . If, on the other hand, the secondary use adds value to the original—if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings—this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.”).

Fair use is not limited to transformative works. See Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 579. But because the only purpose found by the district court and relied on by defendants is the creation of a transformative work, in analyzing this factor, we necessarily focus on whether a finding of transformative purpose could be made as a matter of law on a Rule 12(b)(6) motion.

Id. (emphases added) (alterations, citations, and internal quotation marks omitted).

As the highlighted language indicates, the focus of inquiry is not simply

on the new work, i.e., on whether that work serves a purpose or conveys an overall expression, meaning, or message different from the copyrighted material it appropriates. Rather, the critical inquiry is whether the new work uses the copyrighted material itself for a purpose, or imbues it with a character, different from that for which it was created. See id. Otherwise, any play that needed a character to sing a song, tell a joke, or recite a poem could use unaltered

copyrighted material with impunity, so long as the purpose or message of the

play was different from that of the appropriated material.

In sum, even if, as the district court concluded, Hand to God is a “darkly comedic critique of the social norms governing a small town in the Bible Belt,”

TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 436, and even if the Play’s purpose and character are completely different from the vaudevillian humor

originally animating Who’s on First?, that, by itself, does not demonstrate that

defendants’ use of the Routine in the Play was transformative of the original

work.

We made this point in Cariou v. Prince, 714 F.3d 694. There, the defendant, a self‐styled “appropriation artist,” id. at 699, had taken plaintiff’s copyrighted photographs—“serene and deliberately composed” portraits of

Rastafarian men—and altered them to create “crude and jarring” collages, id. at

706. Defendant acknowledged that he had not used the photographs to

“comment on” the original works. Id. at 707. Instead, both works had an underlying artistic purpose, but defendant stated that he had sought to change the original material “into something that’s completely different.” Id. (internal quotation marks omitted). Reversing a district court award of summary

judgment in favor of plaintiff, this court ruled that, although commentary

frequently constitutes fair use, it is not essential that a new creative work

comment on an incorporated copyrighted work to be transformative. See id. at

706.10 Rather, “to qualify as a fair use” in the absence of such a different purpose,

10 Even if such commentary is not essential to fair use, it remains the case, even after Cariou, that commentary or criticism on another’s work is “[a]mong the

the new work “generally must alter the original with ‘new expression, meaning, or message.’” Id. (quoting Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 579).11

best recognized justifications for copying” because such commentary or criticism is in the public interest and frequently requires quoting the copyrighted work to be effective. Authors Guild v. Google, Inc., 804 F.3d at 215; see Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 580–81 (explaining that if new work “has no critical bearing on the substance or style of the original composition . . . the claim to fairness in borrowing from another’s work diminishes accordingly (if it does not vanish), and other factors, like the extent of its commerciality, loom larger”). Hand to God may be a “critique of the social norms governing a small town in the Bible Belt,” TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 436, but defendants have not argued that it is a commentary or criticism of Who’s on First?. Thus, such transformative purposes do not justify defendants’ challenged use here.

11 In Swatch Group Management Services Ltd. v. Bloomberg L.P., 756 F.3d 73 (2d Cir. 2014), we stated in dictum that “a secondary work can be transformative in function or purpose without altering or actually adding to the original work.” Id. at 84 (internal quotation marks omitted). But that statement must be read in context. We were there discussing the fair use of data, not the creation of new artistic work as in Cariou. In the former context, we recognized that “the need to convey information to the public accurately may in some instances make it desirable and consonant with copyright law for a defendant to faithfully reproduce an original work without alteration.” Id. That is not this case. Defendants used a verbatim portion of Who’s on First? in Hand to God. The unaltered use of such creative material within another creative work has a weaker claim to fair use protection. See Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 579; Cariou v. Prince, 714 F.3d at 706; see also Nimmer § 13.05[A][2][a], at 13‐187 (recognizing that “scope of fair use is greater when informational type works, as opposed to more creative products[,] are involved” because there is

Cariou concluded that the challenged artworks there satisfied this standard because they not only strove for “new aesthetics with creative and

communicative results distinct from” that of the copyrighted material, but also

gave the incorporated photographs “new expression,” thereby admitting a

transformative purpose. Id. at 708. Indeed, where the defendant’s use so

“heavily obscured and altered” the original photographs as to make them

“barely recognizable” within the new work, the court ruled that transformative

purpose (and ultimately fair use) was established as a matter of law. Id. at 710.

But where lesser changes retained certain of the original work’s aesthetics, the court could not say “for sure” that their incorporation into the defendant’s works

had “transformed [the original] work enough to render it transformative.” Id. at

711. As to those works, Cariou remanded for further proceedings. Id.

Insofar as Cariou might be thought to represent the high‐water mark of our court’s recognition of transformative works, it has drawn some criticism. See

“greater license to use portions” of “work more of diligence than of originality or inventiveness” (internal quotation marks omitted)). For such an appropriation to be deemed “fair use,” the new creative work must either use the copyrighted work for a different purpose or imbue it with a different character, so as to alter the expression, meaning, or message of the original.

Kienitz v. Sconnie Nation LLC, 766 F.3d 756, 758 (7th Cir. 2014) (expressing skepticism as to Cariou’s approach and criticizing reliance on transformativeness as substitute for the statutory factors, which threatens to override the copyright

owner’s exclusive right to prepare derivative works); see also Nimmer

§ 13.05[B][6], at 13.224.20 (stating with respect to Cariou: “It would seem that the pendulum has swung too far in the direction of recognizing any alteration as

transformative, such that this doctrine now threatens to swallow fair use. It is

respectfully submitted that a correction is needed in the law.”). We need not

defend Cariou here, however, because our point is that even scrupulous adherence to that decision does not permit defendants’ use of Who’s on First? in

Hand to God to be held transformative.

Far from altering Who’s on First? to the point where it is “barely recognizable” within the Play, Cariou v. Prince, 714 F.3d at 710, defendants’ use appears not to have altered the Routine at all. The Play may convey a dark

critique of society, but it does not transform Abbott and Costello’s Routine so that it conveys that message. To the contrary, it appears that the Play specifically has its characters perform Who’s on First? without alteration so that the audience

will readily recognize both the famous Routine and the boy’s false claim to

having created it. Indeed, it is only after Who’s on First? is performed—at some length, almost verbatim, and with the Play’s characters mimicking the original

timing, tone, and delivery of Abbott and Costello—that the boy’s lie about

creating the classic Routine—no part of the Routine—becomes the triggering

event for the puppet to assume an independent persona.

Defendants nevertheless maintain that using the Routine for such a

“dramatic,” rather than comedic, purpose was transformative. Appellees’ Br. 18

(stating that Play’s use of Routine was “far cry” from original “comedy schtick”).

The argument will not bear close scrutiny. The “dramatic” purpose served by

the Routine in the Play appears to be as a “McGuffin,” that is, as a theatrical

device that sets up the plot, but is of little or no significance in itself.12 To

12 See 3 Oxford English Dictionary Additions Series 285 (1997) (defining “McGuffin” as “particular event, object, factor, etc., which . . . acts as the impetus for the sequence of events depicted, although often proving tangential to the plot it develops”); see also Merriam‐Webster’s Collegiate Dictionary 744 (11th ed. 2003) (defining “MacGuffin” as “object, event, or character in film or story that serves to set and keep the plot in motion despite usu[ally] lacking intrinsic importance”).

advance the plot of the Play, specifically, to have the puppet Tyrone take on a

persona distinct from that of Jason, defendants needed Jason to lie about

something and for Tyrone to call him on it. But the particular subject of the lie— the Routine—appears irrelevant to that purpose. Such unaltered use of an

allegedly copyrighted work, having no bearing on the original work, requires

justification to qualify for a fair use defense. See Authors Guild v. Google, Inc.,

804 F.3d at 215 (stating that “taking from another author’s work for the purpose

of making points that have no bearing on the original may well be fair use, but

the taker would need to show a justification”).

More than the Routine’s ability to capture audience attention is necessary

to provide such justification. As the Supreme Court has cautioned, where a secondary use “has no critical bearing on the substance or style of the original composition, which the alleged infringer merely uses to get attention . . . , the claim to fairness in borrowing from another’s work diminishes accordingly (if it does not vanish).” Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 580. Nor is a different conclusion warranted because defendants here place the unaltered

Routine in a sharply different context from its original authors. See id. at 598

(Kennedy, J., concurring) (observing that courts should not afford fair use

protection to persons who merely place characters from familiar copyrighted

works into novel or eccentric settings).

The fact that, even as a McGuffin, the Routine is quite funny, also cannot

justify its use in the Play. That humor is an achievement of the Routine’s creators, not of the playwright who takes advantage of it without transforming the Routine’s aesthetic. Moreover, the Play appropriates the Routine’s humor not incidentally, but extensively by having the characters perform some dozen of the original exchanges on the comic ambiguity of the words “who’s on first.” No

new dramatic purpose was served by so much copying. Cf. Campbell v. Acuff‐

Rose Music, Inc., 510 U.S. at 589 (concluding that copying of song for parodic purpose was fair where it was not “excessive” in relation to that purpose as

secondary user took only what was necessary to evoke original). The only purpose served by the extent of defendants’ taking is identically comedic to that of the original authors, that is, to have two performers expand on a singular joke in order to generate increasing audience laughter. As this court has recognized,

there is “nothing transformative” about using an original work “in the manner it

was made to be” used. On Davis v. Gap, Inc., 246 F.3d 152, 174 (2d Cir. 2001); see

Ringgold v. Black Entm’t Television, Inc., 126 F.3d 70, 79 (2d Cir. 1997)

(concluding that purpose factor favored copyright owner where defendant used

“work for precisely a central purpose for which it was created”). Defendants’

use of the Routine, not briefly as the basis for a dramatic lie, but extensively for

its original comedic effect, cannot be deemed transformative.

In sum, nothing in the 12(b)(6) record shows that the Play imbued the

Routine with any new expression, meaning, or message. Nor does any new dramatic purpose justify defendants’ extensive copying of the Routine.

Accordingly, the district court erred both in finding defendants’ use of the

Routine transformative and in concluding, on that basis, that a fair use defense was established as a matter of law.13

13 We note that even a correct finding of transformative use is not necessarily determinative of the first statutory factor, much less of fair use. See Authors Guild v. Google Inc., 804 F.3d at 218; Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. at 1111 (recognizing that “existence of . . . transformative objective does not . . . guarantee success in claiming fair use” because “transformative justification must overcome factors favoring the copyright owner”).

(2) Commercial Purpose

The first statutory factor specifically instructs courts to consider whether

copyrighted materials are used for a commercial purpose or for a nonprofit

educational purpose, the former tending “to weigh against a finding of fair use.”

Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 585 (internal quotation marks omitted). There is no question here that defendants’ use of Who’s on First? in

Hand to God was for a commercial purpose. Nevertheless, the district court discounted that fact upon finding the use “highly transformative.” TCA

Television Corp. v. McCollum, 151 F. Supp. 3d at 434–35; see Campbell v. Acuff‐

Rose Music, Inc., 510 U.S. at 579 (recognizing that “the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use”). Because we here conclude that

defendants’ use was not transformative, let alone “highly transformative,” we

conclude that the district court erred in discounting Hand to God’s commercial character. See Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 579–81.14

14 This court has sometimes assigned little weight to the commercial nature of a secondary use even absent a transformative purpose. See, e.g., Castle Rock

This conclusion applies with particular force here where plaintiffs allege that defendants not only used an unaltered and appreciable excerpt of the

Routine in a commercial play but also featured the Routine in the Play’s

advertising, conduct which reasonably qualifies as commercial exploitation weighing strongly against fair use. See id. at 585 (observing that use of copyrighted work “to advertise a product, even in a parody, will be entitled to less indulgence under the first factor of the fair use enquiry than the sale of a parody for its own sake”); American Geophysical Union v. Texaco Inc., 60 F.3d

913, 922 (2d Cir. 1994) (stating that fair use claim will not be sustained when

secondary use can fairly be characterized as “commercial exploitation” (internal

quotation marks omitted)); Consumers Union of U.S., Inc. v. Gen. Signal Corp.,

724 F.2d 1044, 1049 (2d Cir. 1983) (observing that some infringement actions

involve copying of creative expression for “purpose of having that precise form

Entm’t, Inc. v. Carol Publ’g Grp., Inc., 150 F.3d 132, 142 (2d Cir. 1998). But where, as here, defendants justify their use solely by reference to a transformative purpose, commercialism cannot automatically be discounted absent a finding of such purpose. See Blanch v. Koons, 467 F.3d at 254 (discounting commercial nature of secondary use only because new work was substantially transformative).

of expression advance someone else’s commercial interests—for example, using well‐known copyrighted lines to attract attention to an advertisement”). Indeed, to the extent defendants excessively copied from the Routine even within the

Play, their advertising focus on the Routine’s comic exchanges raises particular commercial exploitation concerns.

Thus, defendants’ commercial use of the Routine was not transformative.

Rather, it duplicated to a significant degree the comedic purpose of the original

work. As such, the first statutory factor, far from weighing in defendants’ favor,

weighs in favor of plaintiffs.

b. Nature of Copyrighted Work

The second statutory factor, “the nature of the copyrighted work,” also

weighs in plaintiffs’ favor. As the Supreme Court has observed, certain “works

are closer to the core of intended copyright protection than others, with the

consequence that fair use is more difficult to establish when the former works are

copied.” Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 586. Like the district court, we conclude that Who’s on First?, an original comedy sketch created for public entertainment, lies at the heart of copyright’s intended protection. See id.

(recognizing that creative expression created for public dissemination is at core of “copyright’s protective purposes”); On Davis v. Gap, Inc., 246 F.3d at 175

(concluding that second factor favored plaintiff because copyrighted work was

“in the nature of an artistic creation”). Thus, while the secondary user of

noncreative information can more readily claim fair use based on the law’s

recognition of “a greater need to disseminate factual works than works of fiction

or fantasy,” Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. at 563; see

Authors Guild v. Google, Inc., 804 F.3d at 220 & n.21 (explaining that factual works “often present well justified fair uses” because “there is often occasion to

test the accuracy of, to rely on, or to repeat their factual propositions,” which

“may reasonably require quotation”), the secondary user of a creative work must

justify his use, usually by explaining the functional or creative rationale behind its quotation, see Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev.

1105, 1113 (1990) (explaining that, in considering whether quotation is fair, courts

must consider utility of each challenged passage).

Defendants argue that their use was justified by the dramatic need to use

an instantly recognizable “cultural” touchstone in the relevant scene. Appellees’

Br. 15. Defendants do not explain, however, why Jason’s lie had to pertain to a

cultural touchstone, as opposed to any obvious tall tale—e.g., inventing the

Internet, traveling to Mars, out‐swimming Michael Phelps. See generally Leval,

Toward a Fair Use Standard, 103 Harv. L. Rev. at 1111 (observing that court considering fair use must determine not only if justification for copying exists, but also “how powerful, or persuasive, is the justification”). But even assuming

defendants’ professed dramatic need, they do not explain why the cultural

touchstone had to be the Routine—or even a comedy sketch—as opposed to

some other readily recognizable exchange, including those already in the public

domain. Most troubling, even if defendants could justify their dramatic need to

use a small, identifiable segment of the Routine, that does not justify having their

characters perform, verbatim, some dozen variations on the Routine’s singular

joke. As already noted, the purpose of such extensive use was to provoke audience laughter in exactly the same way as the Routine’s creators had done.

In sum, because defendants’ use of the Routine cannot be deemed transformative, and because the record is devoid of any persuasive justification

for the extent of defendants’ use, the creative nature of the Routine weighs

strongly against a fair use defense.

c. Amount and Substantiality of Use

The third statutory factor asks whether “‘the amount and substantiality of the portion used in relation to the copyrighted work as a whole’ . . . are reasonable in relation to the purpose of the copying.” Campbell v. Acuff‐Rose

Music, Inc., 510 U.S. at 586 (quoting 17 U.S.C. § 107(3)). In assessing this factor, we consider not only “the quantity of the materials used” but also “their quality and importance.” Id. at 587; see Harper & Row Publishers, Inc. v. Nation Enters.,

471 U.S. at 565 (stating that “fact that a substantial portion of the infringing work

was copied verbatim is evidence of the qualitative value of the copied material,

both to the originator and to the plagiarist who seeks to profit from marketing

someone else’s copyrighted expression”).

While acknowledging that the portion of the Routine used by defendants was “instantly recognizable” and “more than merely the ‘introductory premise,’”

the district court decided—without explanation—that this factor tipped only

“slightly” in plaintiffs’ favor in light of defendants’ transformative use. TCA

Television Corp. v. McCollum, 151 F. Supp. 3d at 434. We reject the district court’s transformative use determination for reasons already explained. On de novo review, we further conclude that the third statutory factor weighs strongly in favor of plaintiffs.

While the portion of the Routine copied by defendants takes less than two

minutes to perform, it plainly reveals the singular joke underlying the entire

Routine: that words understood by one person as a question can be understood by another as an answer. Moreover, defendants repeatedly exploit that joke through a dozen variations. This manifests substantial copying. See Harper &

Row Publishers, Inc. v. Nation Enters., 471 U.S. at 548, 565–66 (concluding that third factor favored plaintiffs where defendants copied approximately 300 words

verbatim in light of “expressive value of the excerpts”); Castle Rock Entm’t v.

Carol Publ’g Grp., Inc., 955 F. Supp. 260, 269 (S.D.N.Y. 1997) (citing Harper &

Row as support for proposition that copying even few words of challenged work can constitute substantial taking if it amounts to taking heart of original work), aff’d, 150 F.3d 132 (2d Cir. 1998).

Even a substantial taking, however, can constitute fair use if justified. See

Authors Guild, Inc. v. HathiTrust, 755 F.3d 87, 98 (2d Cir. 2014) (acknowledging that some purposes require copying entirety of copyrighted work); see also

Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. at 1123 (explaining that, under third factor, “an important inquiry is whether the selection and quantity of

the material taken are reasonable in relation to the purported justification”). But,

as already explained, defendants offer no persuasive justification for their

extensive use of the Routine. Cf. Authors Guild, Inc. v. HathiTrust, 755 F.3d at

98 (stating that “crux” of third factor inquiry is whether “no more was taken than

necessary” (internal quotation marks omitted)).

d. Effect on Potential Market for Copyrighted Work

The final statutory factor considers “the effect of the use upon the potential

market for or value of the copyrighted work,” 17 U.S.C. § 107(4), focusing on whether the secondary use usurps demand for the protected work by serving as a market substitute, see Campbell v. Acuff‐Rose Music, Inc., 510 U.S. at 592

(stating that role of courts is to distinguish between “biting criticism that merely suppresses demand and copyright infringement, which usurps it” (alterations

and internal quotation marks omitted)). In weighing this factor, a court properly

looks to “not only the extent of market harm caused by the particular actions of

the alleged infringer, but also whether unrestricted and widespread conduct of

the sort engaged in by the defendant would result in a substantially adverse impact on the potential market for the original.” Id. at 590 (alteration and internal quotation marks omitted).

The district court weighed this factor in defendants’ favor, concluding that

the Play’s use of the Routine could not reasonably be expected to usurp the market for Abbott and Costello’s original performance. See TCA Television

Corp. v. McCollum, 151 F. Supp. 3d at 434–35. In so doing, however, the district court disregarded the possibility of defendants’ use adversely affecting the licensing market for the Routine. See id. at 434 (citing Cariou v. Prince, 714 F.3d at 708 (stating that fourth factor “does not focus principally on the question of

damage to [a] derivative market”)).

While derivative markets are not the principal focus of the fourth inquiry,

that does not mean that they are irrelevant. See Campbell v. Acuff‐Rose Music,

Inc., 510 U.S. at 593 (recognizing that evidence of substantial harm to derivative

market would weigh against fair use). A court considering fair use properly

identifies and weighs relevant harm to the derivative market for a copyrighted

work, which market includes uses that creators of original works might “license

others to develop.” Id. at 592; see American Geophysical Union v. Texaco Inc., 60

F.3d at 929 (“[T]he impact on potential licensing revenues is a proper subject for consideration in assessing the fourth factor.”).

To be clear, in assessing harm posed to a licensing market, a court’s focus is not on possible lost licensing fees from defendants’ challenged use. See

American Geophysical Union v. Texaco Inc., 60 F.3d at 929 n.17 (explaining that fourth factor would always favor copyright owner if courts focused on loss of potential licensing fees from alleged infringer); see also Leval, Toward a Fair Use

Standard, 103 Harv. L. Rev. at 1124 (“By definition every fair use involves some loss of royalty revenue because the secondary user has not paid royalties.”).

Rather, a court properly considers the challenged use’s “impact on potential

licensing revenues for traditional, reasonable, or likely to be developed markets.”

American Geophysical Union v. Texaco Inc., 60 F.3d at 930; accord Swatch Grp.

Mgmt. Servs. Ltd. v. Bloomberg L.P., 756 F.3d 73, 91 (2d Cir. 2014).

Plaintiffs here alleged the existence of a traditional—and active— derivative market for licensing the Routine. See Am. Compl. ¶¶ 40, 81–83

(alleging that plaintiffs receive “regular” requests to license Who’s on First?, which they frequently grant). Further, they alleged market harm. See id. at ¶ 83

(alleging that defendants’ unlicensed use of Who’s on First? negatively affected commercial market for future licensing). Accepting these allegations as true at

this stage of the litigation, we conclude that this factor weighs in favor of

plaintiffs. See On Davis v. Gap, Inc., 246 F.3d at 175–76 (concluding that fourth factor favored copyright owner where defendants’ taking caused both loss of

royalty revenue and “diminution of [owner’s] opportunity to license to others who might regard [owner’s] design as preempted by [defendant’s] ad”).

In sum, on the 12(b)(6) record, all four statutory factors weigh in favor of plaintiffs and against a defense of fair use. Because, at this stage of the

proceeding, defendants have identified no other equitable factors as here

relevant to the fair use analysis, we conclude that the dismissal of plaintiffs’ amended complaint on the ground of fair use was error. Nevertheless, for reasons explained in the next section of the opinion, we conclude that dismissal

was warranted because plaintiffs did not plausibly allege a valid copyright

interest in the Routine.

B. Dismissal for Failure To Plead a Valid Copyright

Defendants argue that, even if we reject dismissal on the basis of a fair use defense, we should affirm because plaintiffs fail plausibly to plead ownership of a valid copyright in the Routine. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co.,

499 U.S. 340, 361 (1991) (identifying two elements of infringement: (1) ownership

of valid copyright and (2) copying original elements of work). Defendants assert

that Abbott and Costello’s Who’s on First? Routine fell into the public domain in

1968, when the initial copyright term for Tropics expired. Defendants concede that UPC’s registration for that movie protected the Routine—first published

therein—from entering the public domain through the term of that copyright, see

Shoptalk, Ltd. v. Concorde‐New Horizons Corp., 168 F.3d 586, 592 (2d Cir. 1999), but they assert that only Abbott and Costello, as the Routine’s authors, could

renew the copyright in that work—as distinct from Tropics—which the team failed to do.15

In disputing this challenge, plaintiffs argue that UPC had the right to

renew the copyright in the Routine because (1) Abbott and Costello assigned

ownership of their common law copyright in the Routine to UPC in either the

July or November Agreement, (2) the Routine as published in Tropics was a

“work for hire” owned by UPC, and (3) the Routine merged into Tropics so as to support a single copyright. Plaintiffs maintain that, under any of these theories,

UPC’s renewal of the Tropics copyright also maintained copyright protection for the Routine, so that they now hold a valid copyright in that work by virtue of

UPC’s transfer of its rights in the Routine in the Quitclaim.

We identify no merit in any of the theories relied on by plaintiffs to support their copyright claim and, accordingly, we affirm dismissal of the

15 Because both parties seemingly concede that the Routine was protected from entering the public domain through at least Tropics’s initial copyright term, we need not determine whether Tropics’s publication automatically divested Abbott and Costello of their common law copyright and injected it into the public domain. See Roy Export Co. Establishment of Vaduz, Liechtenstein v. Columbia Broad. Sys., Inc., 672 F.2d 1095, 1101–02 (2d Cir. 1982).

amended complaint for failure to plead a valid copyright.

1. Copyright Assignment

In rejecting defendants’ copyright invalidity challenge, the district court

thought that “[t]he contract language, together with UPC’s subsequent registration of the copyrights” for Tropics and The Naughty Nineties, might admit a finding of “implied assignment of the initial copyright from Abbott and

Costello.” TCA Television Corp. v. McCollum, 151 F. Supp. 3d at 429; see

Nimmer § 10.03[B][2], at 10‐56.2(6) (explaining that pre‐1978 assignment of common law copyright could be effectuated orally or implied from conduct).

The conclusion is flawed in two respects. First, as detailed in this section, the

July and November Agreements clearly express the parties’ intent for Abbott and

Costello to license the use of, not to assign copyrights in, their existing comedy routines for use in UPC movies in which the team appeared. Second, and requiring no further discussion in the face of clear contract language, UPC’s registration (and renewal) of copyrights in its movies says nothing about what

Abbott and Costello intended to convey in the two agreements because UPC

would have taken such action to protect its independent movie rights in any

event. See generally Faulkner v. Nat’l Geographic Soc’y, 220 F. Supp. 2d 237, 239

(S.D.N.Y. 2002) (noting that under 1909 Copyright Act, proprietor of collective work had right to renew copyright in collective work itself).

Turning then to the agreements, we note at the outset that neither contract has a choice of law provision. Thus, the controlling law would be the contract’s

“center of gravity,” which typically is the place of contracting or performance.

Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir. 1997)

(internal quotation marks omitted). The July Agreement was executed in New

York with expected performance in California. The November Agreement was

also to be performed in California and may have been executed there, where

UPC was located and Abbott and Costello were then completing Tropics. Any uncertainty on the latter point is irrelevant, however, because New York and

California law both instruct that contracts must be interpreted according to the mutual intent of the parties at the time the contract was formed. See Welsbach

Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624, 629, 825 N.Y.S.2d 692, 695

(2006); AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 821, 799 P.2d 1253, 1264

(1990). Both states recognize that the best evidence of the parties’ intent is the

language used in their contract. See Brad H. v. City of New York, 17 N.Y.3d 180,

185, 928 N.Y.S.2d 221, 224 (2011); AIU Ins. Co. v. Superior Court, 51 Cal. 3d at

822, 799 P.2d at 1264. Thus, where contract language is clear and unambiguous, courts will enforce an agreement according to its terms, without looking outside the four corners of the document. See Brad H. v. City of New York, 17 N.Y.3d at

185, 928 N.Y.S.2d at 224; AIU Ins. Co. v. Superior Court, 51 Cal. 3d at 822, 799

P.2d at 1264.

The July Agreement employing Abbott and Costello for “one feature photoplay,” J.A. 165, states that the team would furnish UPC with “routines heretofore used and now owned by Artists for use by the Producer in the photoplay in which they appear hereunder and for which the Producer shall have the exclusive motion picture rights,” id. at 169 (emphases added). The longer‐term November Agreement similarly states that the team would furnish

UPC with all “routines heretofore used by the Artists either on the radio or otherwise and now owned by the Artists,” and that UPC would “have the right

to use said material and routines to such extent as the Producer may desire in connection with any photoplay in which the Artists render their services

hereunder.” Id. at 129 (emphases added). As the highlighted language in each agreement makes plain, Abbott and Costello furnished UPC with their routines for a limited purpose: use in any movies in which the team appeared under the respective agreements.16 This is unmistakably the language of an exclusive, limited‐use license, not the assignment of copyright. See Compendium of

non‐exclusive grant of permission to use a copyrighted work for certain purposes”).

A clause in the July Agreement granting UPC “all rights of every kind and character whatsoever in and to the same . . . perpetually” warrants no different conclusion. J.A. 169. This language appears in the same sentence as that quoted in the preceding paragraph and, thus, “all rights . . . in and to the same” can only be understood to reference UPC’s motion picture rights, not the team’s common

16 Plaintiffs acknowledged as much in the district court when they argued that the agreements’ language “represented a clear grant of rights to UPC in all previous acts and routines created by Abbott and Costello . . . if used in any motion pictures produced by UPC in which Abbott & Costello provided their services.” Pls.’ Mem. Opp. Mot. Dismiss at 7, TCA Television Corp. v. McCollum, No. 15‐cv‐4325 (GBD), ECF No. 61 (emphasis added).

law copyright in its routines.17 Indeed, in the November Agreement, wherein the

team grants UPC the right to photograph and reproduce their “acts,” the

“perpetual” right “to use the same” is expressly granted “only in connection

with the photoplays in which the Artists appear hereunder and in connection

with the advertising and exploitation thereof.” Id. at 127. The November

Agreement states that “the Producer shall not have the right to use the Artists’ names or likenesses or reproductions of their voices in radio broadcasts (except as hereinafter expressly permitted) independent of . . . motion picture productions or in commercial tie‐ups.” Id. at 128.

Other language in the November Agreement further confirms that Abbott

and Costello granted UPC only a license to use their routines. The team therein

agreed “that they w[ould] not use or license, authorize or permit the use of any

of the material and/or routines” furnished to UPC under the agreement “in connection with motion pictures for any person, firm or corporation other than the Producer, at any time prior to the termination of the employment of the

17 See supra p. 7 (quoting relevant sentence in July Agreement in full).

Artists under this agreement or one year after the general release of the photoplay in which used, whichever is later.” Id. at 129. The fact that the

Agreement limits Abbott and Costello’s ability to use or license specified material (i.e., material created before the agreements) only “in connection with motion pictures,” and only for a limited time, plainly indicates the parties’

understanding that the team retained ownership of the copyright in their pre‐

agreement material and granted UPC only a license. See P.C. Films Corp. v.

MGM/UA Home Video Inc., 138 F.3d 453, 456 (2d Cir. 1998) (explaining that under 1909 Copyright Act, “transfer of anything less than the totality of rights

commanded by copyright was automatically a license rather than an assignment

[of] the copyright”).

Thus, the language of the July and November Agreements, by itself, clearly belies plaintiffs’ claim that Abbott and Costello therein conveyed their common law copyright in the Routine to UPC. That conclusion is reinforced by

the very Quitclaim on which plaintiffs’ claimed ownership of the Who’s on First? copyright depends. To secure the Quitclaim of UPC’s interests in the Routine

(then held by its successor, Universal), plaintiffs’ predecessors‐in‐interest therein

represented that they owned the copyright in the Routine. In short, the parties to

the Quitclaim understood Abbott and Costello not to have transferred, but to

have retained, ownership of the Routine’s copyright.

Accordingly, plaintiffs cannot state a plausible infringement claim based

on a 1940 transfer of copyright ownership from Abbott and Costello to UPC in either the July or November Agreement. The record does not support such

assignment.18

2. Work Made for Hire

Plaintiffs maintain that, even if the July and November Agreements cannot

be construed to have assigned copyrights, they are work‐for‐hire agreements.

They argue that UPC, “[a]s the author under a work‐for‐hire agreement of the

films . . . , properly registered its copyright in these two films with the Copyright

Office, and thereafter timely renewed their copyright registrations.” Appellants’

18 Because the agreements cannot be construed to effect an assignment of the Routine’s copyright to UPC, we need not decide whether they further conveyed the Routine’s renewal rights. See Corcovado Music Corp. v. Hollis Music, Inc., 981 F.2d 679, 684 (2d Cir. 1993) (recognizing strong presumption against conveyance of renewal rights).

Br. 9; see Estate of Burne Hogarth v. Edgar Rice Burroughs, Inc., 342 F.3d 149,

156–57 (2d Cir. 2003) (explaining that, under 1909 Copyright Act, employer was

legal author and, therefore, had renewal rights).

The argument is defeated by plaintiffs’ own allegation—which we must accept as true—that the Routine was first performed in March 1938, more than two years before Abbott and Costello entered into the July and November

Agreements with UPC. See Am. Compl. ¶ 32. Insofar as Abbott and Costello had already performed Who’s on First? in 1938, they plainly did not create the

Routine at UPC’s “instance and expense” in 1940, as would be required for it to

be a work‐for‐hire. Playboy Enters., Inc. v. Dumas, 53 F.3d 549, 554 (2d Cir. 1995)

(stating that work is considered “for hire” when made at hiring party’s instance

and expense, i.e., “when the motivating factor in producing the work was the employer who induced the creation” (internal quotation marks omitted)); see also Urantia Found. v. Maaherra, 114 F.3d 955, 961 (9th Cir. 1997) (“An employment (or commissioning) relationship at the time the work is created is a condition for claiming renewal as the proprietor of a work made for hire.”

(internal quotation marks omitted)).

Plaintiffs seek to avoid this conclusion by noting defendants’

(1) concession—at least for purposes of their motion to dismiss—that new material was added to the Routine for Tropics, see TCA Television Corp. v.

McCollum, 151 F. Supp. 3d at 431; and (2) failure to establish “the contents, language or scope of protectable expression of the 1938 radio broadcast,”

Appellants’ Reply Br. 22. We are not persuaded.

On review of a motion to dismiss, courts must draw all reasonable inferences in plaintiffs’ favor. Even applying that principle here, it is not plausible to infer that the Routine, as performed in 1938, did not already contain the initial series of exchanges about a person named “Who” playing first base for

the simple reason that there is no Routine without at least that part. Further, because that is the part of the Routine appropriated in Hand to God, plaintiffs must plausibly allege a valid copyright in that material, regardless of later

additions. Thus, to the extent plaintiffs’ copyright claim rests on a theory of

work‐for‐hire, it was their burden to plead facts showing that the appropriated

parts of the Routine had not existed in the 1938 iteration of Who’s on First?, but were first created for Tropics so as to be covered by the copyright and copyright

renewal of that movie. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. at

361 (stating that to establish infringement claim, plaintiff must demonstrate, among other things, ownership of valid copyright).

3. Merger of Routine in Motion Pictures

Finally, plaintiffs argue that even if their copyright ownership claim

cannot rest on either an assignment or work‐for‐hire theory, it is plausible because “so much of the Routine as was used in the Movies ‘merged’ with the

Movies to become a ‘unitary whole.’” See Appellants’ Reply Br. 28. Thus, the

Routine was not separately registerable; rather it was protected by UPC’s

statutory registration and its renewal of the copyrights for movies using the

Routine.

This argument also fails because, as this court recently observed, “authors

of freestanding works that are incorporated into a film . . . may copyright these

‘separate and independent works.’” 16 Casa Duse, LLC v. Merkin, 791 F.3d 247,

259 (2d Cir. 2015) (emphasis added) (quoting 17 U.S.C. § 101); see id. at 257

(noting that separate copyrights may be necessary where motion picture

incorporates “separate, freestanding pieces that independently constitute ‘works

of authorship’”). Who’s on First? was such a freestanding work within Tropics.

As already noted, plaintiffs acknowledged in the amended complaint that the

Routine (1) was prepared and existed on its own for some years before it was

performed in Tropics, see Am. Compl. ¶ 32; and (2) was performed independently from the films “thousands of times” on the radio and elsewhere,

see id. at ¶¶ 34–35; see also J.A. 129 (stating in November Agreement that

“Artists reserve the right to use on the radio and in personal appearances” all preexisting routines). The Quitclaim representation that plaintiffs’ predecessors‐ in‐interest still owned the Routine’s copyright in 1984 is also at odds with the argument that the Routine had so merged with Tropics as to admit a single copyright owned by UPC.

Neither Garcia v. Google, Inc., 786 F.3d 733 (9th Cir. 2015) (en banc), nor

Richlin v. Metro‐Goldwyn‐Mayer Pictures, Inc., 531 F.3d 962 (9th Cir. 2008), relied on by plaintiffs, is to the contrary. In Garcia, the Ninth Circuit reversed a panel decision holding that an actor’s five‐second contribution to a movie was

sufficiently creative to entitle her to register a copyright in her performance. The

en banc court explained that “[t]reating every acting performance as an

independent work” would be a “logistical and financial nightmare.” Garcia v.

Google, Inc., 786 F.3d at 743. This case is not analogous. While the screen actor’s performance there was so “integrated into” the filmed work as to be “inseparable

from” it, see 16 Casa Duse, LLC v. Merkin, 791 F.3d at 254, Who’s on First? is a freestanding comedy routine performed by Abbott and Costello not only years

before the first frame of Tropics was ever filmed but also for many years thereafter. Thus, the concerns at issue in Garcia are not present here.

As for Richlin, the Ninth Circuit did not there hold, as plaintiffs contend, that an author is “not entitled to an independent copyright by reason of inclusion of his [story] treatment’s material in [a] motion picture.” Appellants’ Reply Br.

27–28 (emphasis in original). Rather, the court there assumed that plaintiffs’ story treatment was independently copyrightable when it held that plaintiffs had

“failed to secure a federal copyright for it.” Richlin v. Metro‐Goldwyn‐Mayer

Pictures, Inc., 531 F.3d at 976. Thus, the court acknowledged that “publication of a motion picture with notice secures federal statutory copyright protection for all

of its component parts,” but observed “that does not mean that the component

parts necessarily each secure an independent federal statutory copyright.” Id. at

975–76. The movie’s publication protected so much of the treatment as was disclosed therein, but it “did not constitute publication of the Treatment ‘as such’—i.e., as a work standing alone.” Id. at 973.

This reasoning undermines rather than supports plaintiffs’ merger theory.

The plaintiffs in Richlin “clearly intended” that the treatment “be merged into inseparable or interdependent parts of a unitary whole.” Id. at 967. That is not this case. As already explained, the Routine was created and performed by

Abbott and Costello well before Tropics was filmed, and the team continued to perform it for years after. Indeed, the Agreements’ licensing of the Routine’s

performance in Tropics and The Naughty Nineties contemplated such independent performances. In these circumstances, we conclude that the

Routine did not merge into UPC’s films so as to avoid the need for its creators to

renew the copyright. See 16 Casa Duse, LLC v. Merkin, 791 F.3d at 259.

In sum, because plaintiffs fail plausibly to allege that (1) Abbott and

Costello assigned their common law copyright in Who’s on First? to UPC; (2) the

Routine, as appropriated by defendants in Hand to God, was first created for

UPC as a work‐for‐hire; or (3) the Routine so merged with the UPC movies in

which it was performed as to become a unitary whole, we conclude that

plaintiffs did not plead their possession of a valid copyright in the Routine, as

required to pursue their infringement claim.

Accordingly, even though the district court erred in dismissing plaintiffs’

amended complaint based on defendants’ fair use of the appropriated material, we affirm dismissal based on plaintiffs’ failure plausibly to allege a valid

III. Conclusion

To summarize, we conclude as follows:

1. Dismissal was not supported by fair use because all four relevant factors weigh in plaintiffs’ favor:

a. Defendants’ verbatim use of over a minute of Who’s on First? in their commercial production, Hand to God, was not transformative because defendants neither used so much of the Routine for a different purpose nor

imbued the original with a different message, meaning, or expression;

b. Defendants failed persuasively to justify their use of the

Routine, as a secondary user who appropriates a creative work without

alteration must do;

c. Defendants’ use of some dozen of the Routine’s variations of

“who’s on first” was excessive in relation to any dramatic purpose; and

d. Plaintiffs allege an active secondary market for the work, which was not considered by the district court.

2. Dismissal is warranted by plaintiffs’ failure plausibly to plead ownership of a valid copyright. Their efforts to do so on theories of assignment, work‐for‐hire, and merger all fail as a matter of law.

Accordingly, the judgment of dismissal is AFFIRMED.

Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 1 of 38

FOR PUBLICATION

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

VMG SALSOUL, LLC, a Nos. 13-57104 Delaware limited liability 14-55837 company, Plaintiff-Appellant, D.C. No. 2:12-cv-05967-BRO-CW v.

MADONNA LOUISE OPINION CICCONE, professionally known as Madonna, an individual; SHEP PETTIBONE, an individual; WB MUSIC CORPORATION, a Delaware corporation; WEBO GIRL PUBLISHING, INC., a California corporation; LEXOR MUSIC, INC., a New York corporation; WARNER MUSIC GROUP, a Delaware corporation; WARNER BROS. RECORDS, INC., a Delaware corporation, Defendants-Appellees. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 2 of 38

2 VMG SALSOUL V. CICCONE

Appeals from the United States District Court for the Central District of California Beverly Reid O’Connell, District Judge, Presiding

Argued and Submitted April 5, 2016 Pasadena, California

Filed June 2, 2016

Before: Barry G. Silverman and Susan P. Graber, Circuit Judges, and David A. Ezra,* District Judge.

Opinion by Judge Graber; Dissent by Judge Silverman

SUMMARY**

The panel affirmed the district court’s summary judgment in favor of the defendants and vacated an award of attorney’s fees on a claim that in the Madonna song Vogue, a modified version of a horn segment allegedly copied from a song known as Love Break violated the plaintiff’s copyrights to Love Break.

* The Honorable David A. Ezra, United States District Judge for the District of Hawaii, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 3 of 38

VMG SALSOUL V. CICCONE 3

Affirming the district court’s summary judgment, the panel held that any copying that occurred was “de mimimis” and not an infringement of either the composition or the sound recording of Love Break. The panel agreed with the district court that, as a matter of law, a general audience would not recognize the brief snippet in Vogue as originating from Love Break. Disagreeing with the Sixth Circuit, the panel held that Congress did not eliminate the de minimis exception to claims alleging infringement of a sound recording in 17 U.S.C. § 114(b).

The panel held that the district court abused its discretion in granting attorney’s fees to the defendants under 17 U.S.C. § 505. The panel held that a claim premised on a legal theory adopted by the only circuit court to have addressed the issue is, as a matter of law, objectively reasonable.

Dissenting, Judge Silverman wrote that the court should follow the Sixth Circuit and hold that the use of an identical copy of a portion of a copyrighted fixed sound recording is an infringement.

COUNSEL

Robert S. Besser (argued) and Christopher Chapin, Law Offices of Robert S. Besser, Santa Monica, California, for Plaintiff-Appellant.

Alexander Kaplan (argued), Proskauer Rose LLP, New York, New York; Richard S. Busch (argued) and Paul H. Duvall, King & Ballow, San Diego, California; and Sandra A. Crawshaw-Sparks and Susan L. Gutierrez, Proskauer Rose LLP, Los Angeles, California, for Defendants-Appellees. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 4 of 38

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OPINION

GRABER, Circuit Judge:

In the early 1990s, pop star Madonna Louise Ciccone, commonly known by her first name only, released the song Vogue to great commercial success. In this copyright infringement action, Plaintiff VMG Salsoul, LLC, alleges that the producer of Vogue, Shep Pettibone, copied a 0.23-second segment of horns from an earlier song, known as Love Break, and used a modified version of that snippet when recording Vogue. Plaintiff asserts that Defendants Madonna, Pettibone, and others thereby violated Plaintiff’s copyrights to Love Break. The district court applied the longstanding legal rule that “de minimis” copying does not constitute infringement and held that, even if Plaintiff proved its allegations of actual copying, the claim failed because the copying (if it occurred) was trivial. The district court granted summary judgment to Defendants and awarded them attorney’s fees under 17 U.S.C. § 505. Plaintiff timely appeals.

Reviewing the summary judgment de novo, Alcantar v. Hobart Serv., 800 F.3d 1047, 1051 (9th Cir. 2015), we agree with the district court that, as a matter of law, a general audience would not recognize the brief snippet in Vogue as originating from Love Break. We also reject Plaintiff’s argument that Congress eliminated the “de minimis” exception to claims alleging infringement of a sound recording. We recognize that the Sixth Circuit held to the contrary in Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), but—like the leading copyright treatise and several district courts—we find Bridgeport’s reasoning unpersuasive. We hold that the “de minimis” exception applies to infringement actions concerning Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 5 of 38

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copyrighted sound recordings, just as it applies to all other copyright infringement actions. Accordingly, we affirm the summary judgment in favor of Defendants.

But we conclude that the district court abused its discretion in granting attorney’s fees to Defendants under 17 U.S.C. § 505. See Seltzer v. Green Day, Inc., 725 F.3d 1170, 1180 (9th Cir. 2013) (holding that we review for abuse of discretion the district court’s award of attorney’s fees under § 505). A claim premised on a legal theory adopted by the only circuit court to have addressed the issue is, as a matter of law, objectively reasonable. The district court’s conclusion to the contrary constitutes legal error. We therefore vacate the award of fees and remand for reconsideration.

FACTUAL AND PROCEDURAL HISTORY

Because this case comes to us on appeal from a grant of summary judgment to Defendants, we recount the facts in the light most favorable to Plaintiff. Alcantar, 800 F.3d at 1051.

In the early 1980s, Pettibone recorded the song Ooh I Love It (Love Break), which we refer to as Love Break. In 1990, Madonna and Pettibone recorded the song Vogue, which would become a mega-hit dance song after its release on Madonna’s albums. Plaintiff alleges that, when recording Vogue, Pettibone “sampled” certain sounds from the recording of Love Break and added those sounds to Vogue. “Sampling” in this context means the actual physical copying of sounds from an existing recording for use in a new recording, even if accomplished with slight modifications such as changes to pitch or tempo. See Newton v. Diamond, Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 6 of 38

6 VMG SALSOUL V. CICCONE

388 F.3d 1189, 1192 (9th Cir. 2004) (discussing the term “sampling”).

Plaintiff asserts that it holds copyrights to the composition and to the sound recording of Love Break. Plaintiff argues that, because Vogue contains sampled material from Love Break, Defendants have violated both copyrights. Although Plaintiff originally asserted improper sampling of strings, vocals, congas, “vibraslap,” and horns from Love Break as well as another song, Plaintiff now asserts a sole theory of infringement: When creating two commercial versions of Vogue, Pettibone sampled a “horn hit”1 from Love Break, violating Plaintiff’s copyrights to both the composition and the sound recording of Love Break.

The horn hit appears in Love Break in two forms. A “single” horn hit in Love Break consists of a quarter-note chord comprised of four notes—E-flat, A, D, and F—in the key of B-flat. The single horn hit lasts for 0.23 seconds. A “double” horn hit in Love Break consists of an eighth-note chord of those same notes, followed immediately by a quarter-note chord of the same notes. Plaintiff’s expert identified the instruments as “predominantly” trombones and trumpets.

The alleged source of the sampling is the “instrumental” version of Love Break,2 which lasts 7 minutes and 46 seconds. The single horn hit occurs 27 times, and the double

1 Plaintiff prefers the label “horn part,” but the label has no effect on the legal analysis. For simplicity, we follow the district court’s convention.

2 The label “instrumental” is misleading: The recording contains many vocals. But again we adopt the terminology used by the district court. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 7 of 38

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horn hit occurs 23 times. The horn hits occur at intervals of approximately 2 to 4 seconds in two different segments: between 3:11 and 4:38, and from 7:01 to the end, at 7:46. The general pattern is single-double repeated, double-single repeated, single-single-double repeated, and double-single repeated. Many other instruments are playing at the same time as the horns.

The horn hit in Vogue appears in the same two forms as in Love Break: single and double. A “single” horn hit in Vogue consists of a quarter-note chord comprised of four notes—E, A-sharp, D-sharp, and F-sharp—in the key of B- natural.3 A double horn hit in Vogue consists of an eighth- note chord of those same notes, followed immediately by a quarter-note chord of the same notes.

The two commercial versions of Vogue that Plaintiff challenges are known as the “radio edit” version and the “compilation” version. The radio edit version of Vogue lasts 4 minutes and 53 seconds. The single horn hit occurs once, the double horn hit occurs three times, and a “breakdown” version of the horn hit occurs once.4 They occur at 0:56, 1:02, 3:41, 4:05, and 4:18. The pattern is single-double- double-double-breakdown. As with Love Break, many other instruments are playing at the same time as the horns.

3 In musical terms, assuming that the composition was copied, Pettibone “transposed” the horn hit in Love Break by one-half step, resulting in notes that are half a step higher in Vogue.

4 The record does not appear to disclose the meaning of a “breakdown” version of the horn hit, and neither party attributes any significance to this form of the horn hit. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 8 of 38

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The compilation version of Vogue lasts 5 minutes and 17 seconds. The single horn hit occurs once, and the double horn hit occurs five times. They occur at 1:14, 1:20, 3:59, 4:24, 4:40, and 4:57. The pattern is single-double-double- double-double-double. Again, many other instruments are playing as well.

One of Plaintiff’s experts transcribed the composition of the horn hits in the two songs as follows. Love Break’s single horn hit:

Vogue’s single horn hit:

Love Break’s double horn hit:

Vogue’s double horn hit: Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 9 of 38

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In a written order, the district court granted summary judgment to Defendants on two alternative grounds. First, neither the composition nor the sound recording of the horn hit was “original” for purposes of copyright law. Second, the court ruled that, even if the horn hit was original, any sampling of the horn hit was “de minimis or trivial.” In a separate order, the district court awarded attorney’s fees to Defendants under 17 U.S.C. § 505. Plaintiff timely appeals both orders.

DISCUSSION

Plaintiff has submitted evidence of actual copying. In particular, Tony Shimkin has sworn that he, as Pettibone’s personal assistant, helped with the creation of Vogue and that, in Shimkin’s presence, Pettibone directed an engineer to introduce sounds from Love Break into the recording of Vogue. Additionally, Plaintiff submitted reports from music experts who concluded that the horn hits in Vogue were sampled from Love Break. Defendants do not concede that sampling occurred, and they have introduced much evidence to the contrary.5 But for purposes of summary judgment, Plaintiff has introduced sufficient evidence (including direct evidence) to create a genuine issue of material fact as to whether copying in fact occurred. Taking the facts in the light most favorable to Plaintiff, Plaintiff has demonstrated actual copying. Accordingly, our analysis proceeds to the next step.

5 For example, Plaintiff hired Shimkin and then brought this action, raising doubts about Shimkin’s credibility; Pettibone and others testified that Shimkin was not present during the creation of Vogue and was not even employed by Pettibone at that time; and Defendants’ experts dispute the analysis and conclusions of Plaintiff’s experts. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 10 of 38

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Our leading authority on actual copying is Newton, 388 F.3d 1189. We explained in Newton that proof of actual copying is insufficient to establish copyright infringement:

For an unauthorized use of a copyrighted work to be actionable, the use must be significant enough to constitute infringement. See Ringgold v. Black Entm’t Television, Inc., 126 F.3d 70, 74–75 (2d Cir. 1997). This means that even where the fact of copying is conceded, no legal consequences will follow from that fact unless the copying is substantial. See Laureyssens v. Idea Group, Inc., 964 F.2d 131, 140 (2d Cir. 1992); 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[A], at 13-30.2. The principle that trivial copying does not constitute actionable infringement has long been a part of copyright law. Indeed, as [a judge] observed over 80 years ago: “Even where there is some copying, that fact is not conclusive of infringement. Some copying is permitted. In addition to copying, it must be shown that this has been done to an unfair extent.” West Publ’g Co. v. Edward Thompson Co., 169 F. 833, 861 (E.D.N.Y. 1909). This principle reflects the legal maxim, de minimis non curatlex (often rendered as, “the law does not concern itself with trifles”). See Ringgold, 126 F.3d at 74–75. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 11 of 38

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Newton, 388 F.3d at 1192–93. In other words, to establish its infringement claim, Plaintiff must show that the copying was greater than de minimis.

Plaintiff’s claim encompasses two distinct alleged infringements: infringement of the copyright to the composition of Love Break and infringement of the copyright to the sound recording of Love Break. Compare 17 U.S.C. § 102(a)(2) (protecting “musical works”) with id. § 102(a)(7) (protecting “sound recordings”); see Erickson v. Blake, 839 F. Supp. 2d 1132, 1135 n.3 (D. Or. 2012) (“Sound recordings and musical compositions are separate works with their own distinct copyrights.”); see also Newton, 388 F.3d at 1193–94 (noting the distinction). We squarely held in Newton, 388 F.3d at 1193, that the de minimis exception applies to claims of infringement of a copyrighted composition. But it is an open question in this circuit whether the exception applies to claims of infringement of a copyrighted sound recording.

Below, we address (A) whether the alleged copying of the composition or the sound recording was de minimis, (B) whether the de minimis exception applies to alleged infringement of copyrighted sound recordings, and (C) whether the district court abused its discretion in awarding attorney’s fees to Defendants under 17 U.S.C. § 505.6

6 Because we affirm the judgment on the ground that any copying was de minimis, we do not reach Defendants’ alternative arguments. Accordingly, we assume without deciding that the horn hits are “original.” See Newton, 388 F.3d at 1192 (assuming originality). We also assume without deciding that Pettibone is not a co-owner of Love Break. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 12 of 38

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A. Application of the De Minimis Exception

A “use is de minimis only if the average audience would not recognize the appropriation.” Newton, 388 F.3d at 1193; see id. at 1196 (affirming the grant of summary judgment because “an average audience would not discern Newton’s hand as a composer . . . from Beastie Boys’ use of the sample”); Fisher v. Dees, 794 F.2d 432, 435 n.2 (9th Cir. 1986) (“As a rule, a taking is considered de minimis only if it is so meager and fragmentary that the average audience would not recognize the appropriation.”); see also Dymow v. Bolton, 11 F.2d 690, 692 (2d Cir. 1926) (“[C]opying which is infringement must be something which ordinary observations would cause to be recognized as having been taken from the work of another.” (internal quotation marks omitted)). Accordingly, we must determine whether a reasonable juror could conclude that the average audience would recognize the appropriation. We will consider the composition and the sound recording copyrights in turn.7

1. Alleged Infringement of the Composition Copyright

When considering an infringement claim of a copyrighted musical composition, what matters is not how the musicians actually played the notes but, rather, a “generic rendition of the composition.” Newton, 388 F.3d at 1194; see id. at 1193 (holding that, when considering infringement of the

7 It appears that Plaintiff did not introduce into the summary judgment record a copy of the copyrighted composition and did not introduce a copy of one of the two allegedly infringing sound recordings. We need not decide whether those omissions are fatal to Plaintiff’s claims. For purposes of our analysis, we accept the partial transcription of the composition by Plaintiff’s expert, and we analyze the sound recordings that Plaintiff did submit. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 13 of 38

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composition copyright, one “must remove from consideration all the elements unique to [the musician’s] performance”). That is, we must compare the written compositions of the two pieces.

Viewing the evidence in the light most favorable to Plaintiff, Defendants copied two distinct passages in the horn part of the score for Love Break. First, Defendants copied the quarter-note single horn hit. But no additional part of the score concerning the single horn hit is the same, because the single horn hit appears at a different place in the measure. In Love Break, the notes for the measure are: half-note rest, quarter-note rest, single horn hit. In Vogue, however, the notes for the measure are: half-note rest, eighth-note rest, single horn hit, eighth-note rest. Second, Defendants copied a full measure that contains the double horn hit. In both songs, the notes for the measure are: half-note rest, eighth- note rest, eighth-note horn hit, quarter-note horn hit. In sum, Defendants copied, at most, a quarter-note single horn hit and a full measure containing rests and a double horn hit.

After listening to the recordings, we conclude that a reasonable jury could not conclude that an average audience would recognize the appropriation of the composition. Our decision in Newton is instructive. That case involved a copyrighted composition of “a piece for flute and voice.” Newton, 388 F.3d at 1191. The defendants used a six-second sample that “consist[ed] of three notes, C—D flat—C, sung over a background C note played on the flute.” Id. The composition also “require[d] overblowing the background C note that is played on the flute.” Id. The defendants repeated a six-second sample “throughout [the song], so that it appears over forty times in various renditions of the song.” Id. at 1192. After listening to the recordings, we affirmed the grant Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 14 of 38

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of summary judgment because “an average audience would not discern [the composer’s] hand as a composer.” Id. at 1196.

The snippets of the composition that were (as we must assume) taken here are much smaller than the sample at issue in Newton. The copied elements from the Love Break composition are very short, much shorter than the six-second sample in Newton. The single horn hit lasts less than a quarter-second, and the double horn hit lasts—even counting the rests at the beginning of the measure—less than a second. Similarly, the horn hits appear only five or six times in Vogue, rather than the dozens of times that the sampled material in Newton occurred in the challenged song in that case. Moreover, unlike in Newton, in which the challenged song copied the entire composition of the original work for the given temporal segment, the sampling at issue here involves only one instrument group out of many. As noted above, listening to the audio recordings confirms what the foregoing analysis of the composition strongly suggests: A reasonable jury could not conclude that an average audience would recognize an appropriation of the Love Break composition.

2. Alleged Infringement of the Sound Recording Copyright

When considering a claimed infringement of a copyrighted sound recording, what matters is how the musicians played the notes, that is, how their rendition distinguishes the recording from a generic rendition of the same composition. See Newton, 388 F.3d at 1193 (describing the protected elements of a copyrighted sound recording as “the elements unique to [the musician’s] performance”). Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 15 of 38

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Viewing the evidence in the light most favorable to Plaintiff, by accepting its experts’ reports, Pettibone sampled one single horn hit, which occurred at 3:35 in Love Break. Pettibone then used that sampled single horn hit to create the double horn hit used in Vogue.

The horn hit itself was not copied precisely. According to Plaintiff’s expert, the chord “was modified by transposing it upward, cleaning up the attack slightly in order to make it punchier [by truncating the horn hit] and overlaying it with other sounds and effects. One such effect mimicked the reverse cymbal crash. . . . The reverb/delay ‘tail’ . . . was prolonged and heightened.” Moreover, as with the composition, the horn hits are not isolated sounds. Many other instruments are playing at the same time in both Love Break and Vogue.

In sum, viewing the evidence in the light most favorable to Plaintiff, Pettibone copied one quarter-note of a four-note chord, lasting 0.23 seconds; he isolated the horns by filtering out the other instruments playing at the same time; he transposed it to a different key; he truncated it; and he added effects and other sounds to the chord itself.8 For the double horn hit, he used the same process, except that he duplicated the single horn hit and shortened one of the duplicates to create the eighth-note chord from the quarter-note chord. Finally, he overlaid the resulting horn hits with sounds from many other instruments to create the song Vogue.

8 For all of those reasons, we decline to apply the “fragmented literal similarity” test: Defendants did not copy “a portion of the plaintiff’s work exactly or nearly exactly.” Newton, 388 F.3d at 1195; see also Dr. Seuss Enters., L.P. v. Penguin Books USA, Inc., 109 F.3d 1394, 1398 n.4 (9th Cir. 1997) (rejecting the category of “fragmented literal similarity”). Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 16 of 38

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After listening to the audio recordings submitted by the parties, we conclude that a reasonable juror could not conclude that an average audience would recognize the appropriation of the horn hit. That common-sense conclusion is borne out by dry analysis. The horn hit is very short—less than a second. The horn hit occurs only a few times in Vogue. Without careful attention, the horn hits are easy to miss. Moreover, the horn hits in Vogue do not sound identical to the horn hits from Love Break. As noted above, assuming that the sampling occurred, Pettibone truncated the horn hit, transposed it to a different key, and added other sounds and effects to the horn hit itself. The horn hit then was added to Vogue along with many other instrument tracks. Even if one grants the dubious proposition that a listener recognized some similarities between the horn hits in the two songs, it is hard to imagine that he or she would conclude that sampling had occurred.

A quirk in the procedural history of this case is illuminating on this point. Plaintiff’s primary expert originally misidentified the source of the sampled double horn hit. In his original report, the expert concluded that both a single horn hit and a double horn hit were sampled from Love Break. The parties later discovered the original tracks to Vogue and were able to listen to the horn hits without interference from the many other instruments. After listening to those tracks, the expert decided that he had erred in opining that a double horn hit was sampled. He concluded instead that only a single horn hit was sampled, which was used to create the double horn hit in Vogue. In other words, a highly qualified and trained musician listened to the recordings with the express aim of discerning which parts of the song had been copied, and he could not do so accurately. An average audience would not do a better job. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 17 of 38

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In sum, the district court correctly held that summary judgment to Defendants was appropriate on the issue of de minimis copying.

B. The De Minimis Exception and Sound Recordings

Plaintiff argues, in the alternative, that even if the copying here is trivial, that fact is irrelevant because the de minimis exception does not apply to infringements of copyrighted sound recordings. Plaintiff urges us to follow the Sixth Circuit’s decision in Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), which adopted a bright- line rule: For copyrighted sound recordings, any unauthorized copying—no matter how trivial—constitutes infringement.

The rule that infringement occurs only when a substantial portion is copied is firmly established in the law. The leading copyright treatise traces the rule to the mid-1800s. 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[A][2][a], at 13-56 to 13-57, 13-57 n.102 (2013) (citing Folsom v. Marsh, 9 F. Cas. 342, No. 4901 (C.C. Mass. 1841)); id. § 13.03[E][2], at 13-100 & n.208 (citing Daly v. Palmer, 6 F. Cas. 1132, No. 3,552 (C.C.S.D.N.Y. 1868)); see also Perris v. Hexamer, 99 U.S. (9 Otto) 674, 675–76 (1878) (stating that a “copyright gives the author or the publisher the exclusive right of multiplying copies of what he has written or printed. It follows that to infringe this right a substantial copy of the whole or of a material part must be produced.”); Dymow, 11 F.2d 690 (applying the rule in 1926). We recognized the rule as early as 1977: “If copying is established, then only does there arise the second issue, that of illicit copying (unlawful appropriation). On that issue the test is the response of the ordinary lay hearer . . . .” Sid & Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 18 of 38

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Marty Krofft Television Prods., Inc. v. McDonald’s Corp., 562 F.2d 1157, 1164 (9th Cir. 1977) (alteration and internal quotation marks omitted), superseded in other part by 17 U.S.C. § 504(b); see Fisher, 794 F.2d at 434 n.2 (using the term “de minimis” to describe the concept). The reason for the rule is that the “plaintiff’s legally protected interest [is] the potential financial return from his compositions which derive from the lay public’s approbation of his efforts.” Krofft, 562 F.2d at 1165 (quoting Arnstein v. Porter, 154 F.2d 464, 473 (2d Cir. 1946)). If the public does not recognize the appropriation, then the copier has not benefitted from the original artist’s expressive content. Accordingly, there is no infringement.

Other than Bridgeport and the district courts following that decision, we are aware of no case that has held that the de minimis doctrine does not apply in a copyright infringement case. Instead, courts consistently have applied the rule in all cases alleging copyright infringement. Indeed, we stated in dictum in Newton that the rule “applies throughout the law of copyright, including cases of music sampling.”9 388 F.3d at 1195 (emphasis added).

Plaintiff nevertheless argues that Congress intended to create a special rule for copyrighted sound recordings, eliminating the de minimis exception. We begin our analysis with the statutory text.

9 Defendants incorrectly assert that the quoted sentence controls the outcome in this case. Newton considered an alleged infringement of the composition only; it had no occasion to consider—and did not consider—the argument that a different rule applies to the infringement of sound recordings. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 19 of 38

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Title 17 U.S.C. § 102, titled “Subject matter of copyright: In general,” states, in relevant part:

(a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories:

(1) literary works;

(2) musical works, including any accompanying words;

(3) dramatic works, including any accompanying music;

(4) pantomimes and choreographic works;

(5) pictorial, graphic, and sculptural works;

(6) motion pictures and other audiovisual works;

(7) sound recordings; and

(8) architectural works. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 20 of 38

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(Emphasis added.) That provision treats sound recordings identically to all other types of protected works; nothing in the text suggests differential treatment, for any purpose, of sound recordings compared to, say, literary works. Similarly, nothing in the neutrally worded statutory definition of “sound recordings” suggests that Congress intended to eliminate the de minimis exception. See id. § 101 (“‘Sound recordings’ are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.”).

Title 17 U.S.C. § 106, titled “Exclusive rights in copyrighted works,” states:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and choreographic works, Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 21 of 38

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pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and

(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

Again, nothing in that provision suggests differential treatment of de minimis copying of sound recordings compared to, say, sculptures. Although subsection (6) deals exclusively with sound recordings, that subsection concerns public performances; nothing in its text bears on de minimis copying.

Instead, Plaintiff’s statutory argument hinges on the third sentence of 17 U.S.C. § 114(b), which states:10

10 The full subsection states:

The exclusive right of the owner of copyright in a sound recording under clause (1) of section 106 is limited to the right to duplicate the sound recording in the form of phonorecords or copies that directly or indirectly recapture the actual sounds fixed in the recording. The exclusive right of the owner of copyright in a sound recording under clause (2) of Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 22 of 38

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The exclusive rights of the owner of copyright in a sound recording under clauses (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording.

Like all the other sentences in § 114(b), the third sentence imposes an express limitation on the rights of a copyright holder: “The exclusive rights of the owner of a copyright in a sound recording . . . do not extend to the making or

section 106 is limited to the right to prepare a derivative work in which the actual sounds fixed in the sound recording are rearranged, remixed, or otherwise altered in sequence or quality. The exclusive rights of the owner of copyright in a sound recording under clauses (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording. The exclusive rights of the owner of copyright in a sound recording under clauses (1), (2), and (3) of section 106 do not apply to sound recordings included in educational television and radio programs (as defined in section 397 of title 47) distributed or transmitted by or through public broadcasting entities (as defined by section 118(f)): Provided, That copies or phonorecords of said programs are not commercially distributed by or through public broadcasting entities to the general public.

17 U.S.C. § 114(b). Nothing in the other sentences advances Plaintiff’s argument. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 23 of 38

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duplication of another sound recording [with certain qualities].” Id. (emphasis added); see id. (first sentence: “exclusive rights . . . do not extend” to certain circumstances; second sentence: “exclusive rights . . . do not extend” to certain circumstances; fourth sentence: “exclusive rights . . . do not apply” in certain circumstances). We ordinarily would hesitate to read an implicit expansion of rights into Congress’ statement of an express limitation on rights. Given the considerable background of consistent application of the de minimis exception across centuries of jurisprudence, we are particularly hesitant to read the statutory text as an unstated, implicit elimination of that steadfast rule.

A straightforward reading of the third sentence in § 114(b) reveals Congress’ intended limitation on the rights of a sound recording copyright holder: A new recording that mimics the copyrighted recording is not an infringement, even if the mimicking is very well done, so long as there was no actual copying. That is, if a band played and recorded its own version of Love Break in a way that sounded very similar to the copyrighted recording of Love Break, then there would be no infringement so long as there was no actual copying of the recorded Love Break. But the quoted passage does not speak to the question that we face: whether Congress intended to eliminate the longstanding de minimis exception for sound recordings in all circumstances even where, as here, the new sound recording as a whole sounds nothing like the original.

Even if there were some ambiguity as to congressional intent with respect to § 114(b), the legislative history clearly confirms our analysis on each of the above points. Congress intended § 114 to limit, not to expand, the rights of copyright holders: “The approach of the bill is to set forth the copyright Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 24 of 38

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owner’s exclusive rights in broad terms in section 106, and then to provide various limitations, qualifications, or exemptions in the 12 sections that follow. Thus, everything in section 106 is made ‘subject to sections 107 through 118,’ and must be read in conjunction with those provisions.” H.R. Rep. No. 94-1476, at 61 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5674.

With respect to § 114(b) specifically, a House Report stated:

Subsection (b) of section 114 makes clear that statutory protection for sound recordings extends only to the particular sounds of which the recording consists, and would not prevent a separate recording of another performance in which those sounds are imitated. Thus, infringement takes place whenever all or any substantial portion of the actual sounds that go to make up a copyrighted sound recording are reproduced in phonorecords by repressing, transcribing, recapturing off the air, or any other method, or by reproducing them in the soundtrack or audio portion of a motion picture or other audiovisual work. Mere imitation of a recorded performance would not constitute a copyright infringement even where one performer deliberately sets out to simulate another’s performance as exactly as possible.

Id. at 106, reprinted in 1976 U.S.C.C.A.N. at 5721 (emphasis added). That passage strongly supports the natural reading of § 114(b), discussed above. Congress intended to make clear Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 25 of 38

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that imitation of a recorded performance cannot be infringement so long as no actual copying is done. There is no indication that Congress intended, through § 114(b), to expand the rights of a copyright holder to a sound recording.

Perhaps more importantly, the quoted passage articulates the principle that “infringement takes place whenever all or any substantial portion of the actual sounds . . . are reproduced.” Id. (emphasis added). That is, when enacting this specific statutory provision, Congress clearly understood that the de minimis exception applies to copyrighted sound recordings, just as it applies to all other copyrighted works. In sum, the statutory text, confirmed by the legislative history, reveals that Congress intended to maintain the de minimis exception for copyrighted sound recordings.

In coming to a different conclusion, the Sixth Circuit reasoned as follows:

[T]he rights of sound recording copyright holders under clauses (1) and (2) of section 106 “do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording.” 17 U.S.C. § 114(b) (emphasis added). The significance of this provision is amplified by the fact that the Copyright Act of 1976 added the word “entirely” to this language. Compare Sound Recording Act of 1971, Pub. L. 92-140, 85 Stat. 391 (Oct. 15, 1971) (adding subsection (f) to former 17 U.S.C. § 1) (“does not extend to the Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 26 of 38

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making or duplication of another sound recording that is an independent fixation of other sounds”). In other words, a sound recording owner has the exclusive right to “sample” his own recording.

Bridgeport, 410 F.3d at 800–01.

We reject that interpretation of § 114(b). Bridgeport ignored the statutory structure and § 114(b)’s express limitation on the rights of a copyright holder. Bridgeport also declined to consider legislative history on the ground that “digital sampling wasn’t being done in 1971.” 410 F.3d at 805. But the state of technology is irrelevant to interpreting Congress’ intent as to statutory structure. Moreover, as Nimmer points out, Bridgeport’s reasoning fails on its own terms because contemporary technology plainly allowed the copying of small portions of a protected sound recording. Nimmer § 13.03[A][2][b], at 13-62 n.114.16.

Close examination of Bridgeport’s interpretive method further exposes its illogic. In effect, Bridgeport inferred from the fact that “exclusive rights . . . do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds,” 17 U.S.C. § 114(b) (emphases added), the conclusion that exclusive rights do extend to the making of another sound recording that does not consist entirely of an independent fixation of other sounds. As pointed out by Nimmer, Bridgeport’s interpretive method “rests on a logical fallacy.” Nimmer § 13.03[A][2][b], at 13-61; see also Saregama India Ltd. v. Mosley, 687 F. Supp. 2d 1325, 1340–41 (S.D. Fla. 2009) (critiquing Bridgeport’s interpretive method for a similar reason). A statement that rights do not extend to a Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 27 of 38

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particular circumstance does not automatically mean that the rights extend to all other circumstances. In logical terms, it is a fallacy to infer the inverse of a conditional from the conditional. E.g., Joseph G. Brennan, A Handbook of Logic 79–80 (2d ed. 1961).

For example, take as a given the proposition that “if it has rained, then the grass is not dry.” It does not necessarily follow that “if it has not rained, then the grass is dry.” Someone may have watered the lawn, for instance. We cannot infer the second if-then statement from the first. The first if-then statement does not tell us anything about the condition of the grass if it has not rained. Accordingly, even though it is true that, “if the recording consists entirely of independent sounds, then the copyright does not extend to it,” that statement does not necessarily mean that “if the recording does not consist entirely of independent sounds, then the copyright does extend to it.”

The Sixth Circuit also looked beyond the statutory text, to the nature of a sound recording, and reasoned:

[E]ven when a small part of a sound recording is sampled, the part taken is something of value. No further proof of that is necessary than the fact that the producer of the record or the artist on the record intentionally sampled because it would (1) save costs, or (2) add something to the new recording, or (3) both. For the sound recording copyright holder, it is not the “song” but the sounds that are fixed in the medium of his choice. When those sounds are sampled they are taken directly from that Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 28 of 38

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fixed medium. It is a physical taking rather than an intellectual one.

Bridgeport, 410 F.3d at 801–02 (footnote omitted).

We disagree for three reasons. First, the possibility of a “physical taking” exists with respect to other kinds of artistic works as well, such as photographs, as to which the usual de minimis rule applies. See, e.g., Sandoval v. New Line Cinema Corp., 147 F.3d 215, 216 (2d Cir. 1998) (affirming summary judgment to the defendant because the defendant’s use of the plaintiff’s photographs in a movie was de minimis). A computer program can, for instance, “sample” a piece of one photograph and insert it into another photograph or work of art. We are aware of no copyright case carving out an exception to the de minimis requirement in that context, and we can think of no principled reason to differentiate one kind of “physical taking” from another. Second, even accepting the premise that sound recordings differ qualitatively from other copyrighted works and therefore could warrant a different infringement rule, that theoretical difference does not mean that Congress actually adopted a different rule. Third, the distinction between a “physical taking” and an “intellectual one,” premised in part on “sav[ing] costs” by not having to hire musicians, does not advance the Sixth Circuit’s view. The Supreme Court has held unequivocally that the Copyright Act protects only the expressive aspects of a copyrighted work, and not the “fruit of the [author’s] labor.” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349 (1991). Indeed, the Supreme Court in Feist explained at length why, though that result may seem unfair, protecting only the expressive aspects of a copyrighted work is actually a key part of the design of the copyright laws. Id. at 349–54 (explaining how “the ‘sweat of the brow’ doctrine flouted Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 29 of 38

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basic copyright principles”). Accordingly, all that remains of Bridgeport’s argument is that the second artist has taken some expressive content from the original artist. But that is always true, regardless of the nature of the work, and the de minimis test nevertheless applies. See Nimmer § 13.03[A][2][b], at 13-63 to 13-64 (providing a similar critique of Bridgeport’s physical/intellectual distinction and concluding that it “seems to be built on air”).

Because we conclude that Congress intended to maintain the “de minimis” exception for copyrights to sound recordings, we take the unusual step of creating a circuit split by disagreeing with the Sixth Circuit’s contrary holding in Bridgeport. We do so only after careful reflection because, as we noted in Seven Arts Filmed Entertainment Ltd. v. Content Media Corp., 733 F.3d 1251, 1256 (9th Cir. 2013), “the creation of a circuit split would be particularly troublesome in the realm of copyright. Creating inconsistent rules among the circuits would lead to different levels of protection in different areas of the country, even if the same alleged infringement is occurring nationwide.” (Citation, internal quotations marks, and brackets omitted.) We acknowledge that our decision has consequences. But the goal of avoiding a circuit split cannot override our independent duty to determine congressional intent. Otherwise, we would have no choice but to blindly follow the rule announced by whichever circuit court decided an issue first, even if we were convinced, as we are here, that our sister circuit erred.

Moreover, other considerations suggest that the “troublesome” consequences ordinarily attendant to the creation of a circuit split are diminished here. In declining to create a circuit split in Seven Arts, we noted that “the leading Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 30 of 38

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copyright treatise,” Nimmer, agreed with the view of our sister circuits. 733 F.3d at 1255. As to the issue before us, by contrast, Nimmer devotes many pages to explaining why the Sixth Circuit’s opinion is, in no uncertain terms, wrong. Nimmer § 13.03[A][2][b], at 13-59 to 13-66.

Additionally, as a practical matter, a deep split among the federal courts already exists. Since the Sixth Circuit decided Bridgeport, almost every district court not bound by that decision has declined to apply Bridgeport’s rule. See, e.g., Saregama, 687 F. Supp. 2d at 1340–41 (rejecting Bridgeport’s rule after analysis); Steward v. West, No. 13- 02449, Docket No. 179 at 14 n.8 (C.D. Cal. 2014) (unpublished civil minutes) (“declin[ing] to follow the per se infringment analysis from Bridgeport” because Bridgeport “has been criticized by courts and commentators alike”); Batiste v. Najm, 28 F. Supp. 3d 595, 625 (E.D. La. 2014) (noting that, because some courts have declined to apply Bridgeport’s rule, “it is far from clear” that Bridgeport’s rule should apply); Pryor v. Warner/Chappell Music, Inc., No. CV13-04344, 2014 WL 2812309, at *7 n.3 (C.D. Cal. June 20, 2014) (unpublished) (declining to apply Bridgeport’s rule because it has not been adopted by the Ninth Circuit); Zany Toys, LLC v. Pearl Enters., LLC, No. 13-5262, 2014 WL 2168415, at *11 n.7 (D.N.J. May 23, 2014) (unpublished) (stating Bridgeport’s rule without discussion); see also EMI Records Ltd v. Premise Media Corp., No. 601209, 2008 WL 5027245 (N.Y. Sup. Ct. Aug. 8, 2008) (unpublished) (expressly rejecting Bridgeport’s analysis). Although we are the first circuit court to follow a different path than Bridgeport’s, we are in well-charted territory.

Plaintiff next argues that, because Congress has not amended the copyright statute in response to Bridgeport, we Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 31 of 38

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should conclude that Bridgeport correctly divined congressional intent. We disagree. The Supreme Court has held that congressional inaction in the face of a judicial statutory interpretation, even with respect to the Supreme Court’s own decisions affecting the entire nation, carries almost no weight. See Alexander v. Sandoval, 532 U.S. 275, 292 (2001) (“It is impossible to assert with any degree of assurance that congressional failure to act represents affirmative congressional approval of the Court’s statutory interpretation.” (internal quotation marks omitted)). Here, Congress’ inaction with respect to a decision by one circuit court has even less import, especially considering that many other courts have declined to apply Bridgeport’s rule.

Finally, Plaintiff advances several reasons why Bridgeport’s rule is superior as a matter of policy. For example, the Sixth Circuit opined that its bright-line rule was easy to enforce; that “the market will control the license price and keep it within bounds”; and that “sampling is never accidental” and is therefore easy to avoid. Bridgeport, 410 F.3d at 801. Those arguments are for a legislature, not a court. They speak to what Congress could decide; they do not inform what Congress actually decided.11

11 It also is not clear that the cited policy reasons are necessarily persuasive. For example, this particular case presents an example in which there is uncertainty as to enforcement—musical experts disagree as to whether sampling occurred. As another example, it is not necessarily true that the market will keep license prices “within bounds”—it is possible that a bright-line rule against sampling would unduly stifle creativity in certain segments of the music industry because the licensing costs would be too expensive for the amateur musician. In any event, even raising these counter-points demonstrates that the arguments, as Plaintiff concedes, rest on policy considerations, not on statutory interpretation. One cannot answer questions such as how much licensing Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 32 of 38

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We hold that the “de minimis” exception applies to actions alleging infringement of a copyright to sound recordings.

C. Attorney’s Fees

Finally, we consider the district court’s award of attorney’s fees to Defendants. The Copyright Act permits a court to “award a reasonable attorney’s fee to the prevailing party.” 17 U.S.C. § 505. “[A]ttorney’s fees are to be awarded to prevailing parties only as a matter of the court’s discretion.” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994). “In deciding whether to award fees under the Copyright Act, the district court should consider, among other things: the degree of success obtained on the claim; frivolousness; motivation; objective reasonableness of factual and legal arguments; and need for compensation and deterrence.” Maljack Prods., Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 889 (9th Cir. 1996).

Here, the district court concluded that Plaintiff’s legal claim premised on Bridgeport was objectively unreasonable because, in the court’s view, Plaintiff should have been aware of the critiques of Bridgeport and should have declined to bring the claim. In relying on that reasoning, the court erred as a matter of law. It plainly is reasonable to bring a claim founded on the only circuit-court precedent to have considered the legal issue, whether or not our circuit ultimately agrees with that precedent.

cost is too much without exercising value judgments—matters generally assigned to the legislature. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 33 of 38

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The district court also ruled that Plaintiff’s claim was objectively unreasonable because of issues that hinged on “disputed facts and credibility determinations.” Again, the court erred as a matter of law. If a plaintiff has a claim that hinges on disputed facts sufficient to reach a jury, that claim necessarily is reasonable because a jury might decide the case in the plaintiff’s favor.

Because the district court erred in finding that Plaintiff’s claim was objectively unreasonable, we vacate the award of fees and remand for reconsideration.

Judgment AFFIRMED; award of fees VACATED and REMANDED for reconsideration. The parties shall bear their own costs on appeal.

SILVERMAN, Circuit Judge, dissenting:

The plaintiff is the owner of a copyright in a fixed sound recording. This is a valuable property right, the stock-in- trade of artists who make their living recording music and selling records. The plaintiff alleges that the defendants, without a license or any sort of permission, physically copied a small part of the plaintiff’s sound recording – which, to repeat, is property belonging to the plaintiff – and, having appropriated it, inserted into their own recording. If the plaintiff’s allegations are to be believed, the defendants deemed this maneuver preferable to paying for a license to use the material, or to hiring their own musicians to record it. In any other context, this would be called theft. It is no defense to theft that the thief made off with only a “de minimis” part of the victim’s property. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 34 of 38

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The majority chooses to follow the views of a popular treatise instead of an on-point decision of the Sixth Circuit, a decision that has governed the music industry in Nashville – “Music City”1 – and elsewhere for over a decade without causing either the sky to fall in, or Congress to step in. And just exactly what is the Sixth Circuit’s radical holding in Bridgeport Music, Inc. v. Dimension Films that the majority finds so distasteful? It’s this: if you want to use an identical copy of a portion of a copyrighted fixed sound recording – we’re not talking about “substantially similar” tunes or rhythms, but an actual identical copy of a sound that has already been recorded in a fixed medium – get a license. You can’t just take it. 410 F.3d 792, 800–01 (6th Cir. 2005).

As the majority acknowledges, after Newton v. Diamond, 388 F.3d 1189 (9th Cir. 2003), it is an “open question” in the Ninth Circuit whether a de minimis defense applies to fixed sound recordings as it does to less tangible works. The Bridgeport court explained why it should not.

First, by statute, sound recording copyright holders have an exclusive right to sample their own recordings. It’s an exclusive right; the statute does not give that right to others. 410 F.3d at 800–01. Under 17 U.S.C. §§ 106 and 114, the holder of a copyright in a sound recording (but not others) has the exclusive right to reproduce the work in copies or records “that directly or indirectly recapture the actual sounds fixed in the recording,” as well as the exclusive right to prepare derivative works “in which the actual sounds fixed in the

1 Nashville also describes itself as the “Songwriting Capital of the World.” See The Story of Music City, Nashville Convention & V isitors Corp., http://www.visitmusiccity.com/visitors/aboutmusiccity/sto ryofmusiccity (last visited May 20, 2016). Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 35 of 38

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sound recording are rearranged, remixed, or otherwise altered in sequence or quality.” 17 U.S.C. §§ 106(1) and (2); 114(b). Congress clearly qualified these exclusive rights, writing that “another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording” are not within the scope of the copyright holder’s exclusive rights. 17 U.S.C. § 114(b). In other words, the world at large is free to imitate or simulate the creative work fixed in the recording (like a tribute band, for example) so long as an actual copy of the sound recording itself is not made. 410 F.3d at 800.

The majority rejects this straightforward reading, explaining by way of a rhetorical exercise that Bridgeport’s reading of § 114(b) is a logical fallacy, expanding the rights of copyright holders beyond that allowed under the judicial de minimis rule. As I see it, it is the majority that tortures the natural reading of these provisions. Bear in mind that § 114(b) simply explains the scope of exclusive rights already granted to copyright holders under § 106. These two provisions must be read together, as the Sixth Circuit did. 410 F.3d at 799–801. When read together, their message is clear: copyright holders have exclusive rights to their recordings, but cannot be heard to complain (i.e., there can be no infringement of those exclusive rights) where a new recording consists entirely of independently created sounds, such as might be found in a very good imitation. By the same token, if a new recording includes something other than independently created sounds, such as a blatant copy, the copyright holder whose work was sampled has a legitimate gripe. That right was not invented by the Sixth Circuit: it already exists in the statutes. And these statutes say nothing about the de minimis exception. Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 36 of 38

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The second reason the Sixth Circuit gave for not adopting the de minimis rule is that sound recordings are different than their compositional counterparts: when a defendant copies a recording, he or she takes not the song but the sounds as they are fixed in the medium of the copyright holders’ choice. Id. at 801–02. In other words, the very nature of digital sampling makes a de minimis analysis inapplicable, since sampling or pirating necessarily involves copying a fixed performance. See id. at 801 n.13. The defendants wanted horns to punctuate their song, so they took the plaintiff’s copyrighted recording of horns. The horn hit is brief, but clearly perceptible and does its job. This is unlike indiscernible photographs used, not for their content (which cannot be made out), but to dress a movie set. See Sandoval v. New Line Cinema Corp., 147 F.2d 215, 218 (2d Cir. 1998).

This is a physical taking, not an intellectual one. Id. at 802. Sampling is never accidental. Id. at 801. As the Sixth Circuit observed, it is not like the case of a composer who has a melody in his head, perhaps not even realizing that the reason he hears this melody is that it is the work of another that he has heard before. Id. When you sample a sound recording you know you are taking another’s work product. Id. Accordingly, the pertinent inquiry in a sampling case is not whether a defendant sampled a little or a lot, but whether a defendant sampled at all. Id. at 798 n.6, 801–02 and n.13.

Again, the majority disagrees, rejecting Bridgeport’s characterization of a sample as a “physical taking” on the basis that copyright protection extends only to expressive aspects of a work, not the fruit of the author’s labor. According to the majority, copyright protection doesn’t extend to the sweat of an author’s brow. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349 (1991) (discussing Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 37 of 38

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originality as applied to factual compilations, such as telephone directories). But that’s irrelevant here, since there is no question that the underlying sound recording can be copyrighted, and it is the taking of that protectable work that is at issue.

I find Bridgeport’s arguments well-reasoned and persuasive. Equally compelling is, I think, Congress’s silence in the wake of Bridgeport, especially in light of the fact that the Sixth Circuit explicitly invited Congress to clarify or change the law if Bridgeport’s bright-line rule was not what Congress intended. 410 F.3d at 805. While it’s true that congressional inaction in the face of judicial interpretation is not ironclad evidence of Congressional approval, see Alexander v. Sandoval, 532 U.S. 275, 292 (2001), it’s not chopped liver either. In this case Bridgeport has not been hiding out in the woods, waiting to be found: it has been governing the music industry in Nashville and elsewhere for eleven years. The majority now proposes to introduce a different rule for this circuit, creating a circuit split, and providing a lower level of protection for copyright holders in a different area of the country. See Seven Arts Filmed Entertainment Ltd. v. Content Media Corp. PLC, 733 F.3d 1251, 1256 (9th Cir. 2013). This inconsistent approach is plainly in contravention of Congressional intent that copyright laws be predictable and uniform, yet the majority defends its rogue path on the ground that Congress must have intended something other than what the Sixth Circuit has concluded, even though we’ve heard not a peep from Congress, or for that matter the Supreme Court, in the eleven years since Bridgeport has been on the books.

In short, the majority’s fuzzy approach would require a factual and largely visceral inquiry into whether each and Case: 14-55837, 06/02/2016, ID: 9999240, DktEntry: 37-1, Page 38 of 38

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every instance of sampling was “substantial,” whereas Bridgeport provides in the case of a fixed sound recording a bright-line rule, and I quote: “Get a license or do not sample.” 410 F.3d at 801. True, Get a license or do not sample doesn’t carry the same divine force as Thou Shalt Not Steal, but it’s the same basic idea. I would hold that the de minimis exception does not apply to the sampling, copying, stealing, pirating, misappropriation – call it what you will – of copyrighted fixed sound recordings. Once the sound is fixed, it is tangible property belonging to the copyright holder, and no one else has the right to take even a little of it without permission. I therefore respectfully dissent.2

2 Since I think that summary judgment was improperly granted on the plaintiff’s sampling claims, I also would reverse the award of attorneys’ fees. However, I agree with the majority that the fee award was erroneous in any event. I also agree that the district court properly granted summary judgment on the plaintiff’s composition infringement claim. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERAL Case No. CV 15-03462 RGK (AGRx) Date August 8, 2016 Title Michael Skidmore v. Led Zeppelin et al.

Present: The R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE Honorable Sharon L. Williams Not Reported N/A Deputy Clerk Court Reporter / Recorder Tape No. Attorneys Present for Plaintiffs: Attorneys Present for Defendants: Not Present Not Present Proceedings: (IN CHAMBERS) Order re: Defendants’ Motion for Attorney’s Fees (DE 293) and Costs (DE 295)

I. INTRODUCTION

On May 31, 2014, Michael Skidmore, as trustee for the Randy Craig Wolfe Trust (“Plaintiff”) filed suit against Led Zeppelin, James Patrick Page, Robert Anthony Plant, John Paul Jones, Super Hype Publishing, Inc., and Warner Music Group Corp., which is the parent company of Warner/Chappell Music, Inc., Atlantic Recording Corporation, and Rhino Entertainment Company (“Defendants”). On October 8, 2014, Plaintiff filed a First Amended Complaint (“FAC”). The FAC claims that Defendants’ song, Stairway to Heaven, infringes another song, Taurus, created by the rock band Spirit. The lawsuit alleges: (1) Copyright Infringement and (2) Violation of the Right of Attribution.

On April 8, 2016, this Court issued an Order granting summary judgment in favor of Defendants on the right of attribution claim but denying summary judgment on the copyright infringement claim. The case proceeded to trial, and on June 23, 2016, a jury returned a verdict in favor of Defendants, finding that they had not infringed Plaintiff’s copyright in the song Taurus.

Presently before the Court are Defendant Warner/Chappell Music, Inc.’s Motions for Attorney’s Fees and Costs. Defendant seeks $613,471 in attorney’s fees and $179,699.06 in costs. For the following reasons, the Court DENIES Defendant’s Motions.

II. JUDICIAL STANDARD

Attorney fees are generally not recoverable unless they are provided for by statute or enforceable contract. See Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 241 (1975). Under Federal Rule of Civil Procedure 54(d)(2)(A), “claims for attorneys’ fees . . . shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial.” Fed. R. Civ. P. 54(d)(2)(A). In a motion for attorney fees, the moving party bears the burden of establishing entitlement to an award and documenting the appropriate rates and hours. See

CV-90 (06/04) CIVIL MINUTES - GENERAL Page 1 of 5 Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). As a result, an award of attorney fees is within the court’s discretion and will not be disturbed absent abuse of that discretion. See Intel Corp. v. Terabyte Int’l., Inc., 6 F.3d 614, 621 (9th Cir. 1993).

III. DISCUSSION

Defendant seeks attorney’s fees and costs under the Copyright Act, which states that “the court in its discretion may allow the recovery of full costs . . . . the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.” 17 U.S.C. § 505. “Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney’s fees are to be awarded to prevailing parties only as a matter of the court’s discretion.” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994). “In deciding whether to award fees under the Copyright Act, the district court should consider, among other things: the degree of success obtained on the claim; frivolousness; motivation; objective reasonableness of factual and legal arguments; and need for compensation and deterrence.” Maljack Prods., Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 889 (9th Cir. 1996). Recently, the Supreme Court has cautioned lower courts to avoid treating objective reasonableness as the controlling factor; instead, the Court explained, “district courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979, 1989 (2016).

As recited above, “[t]he Ninth Circuit has invited district courts to consider five factors when determining whether to award fees in copyright cases. Those factors are: (1) ‘the degree of success obtained on the claim’; (2) ‘frivolousness’; (3) ‘motivation’; (4) ‘objective reasonableness of factual and legal arguments’; and (5) ‘need for compensation and deterrence.’” Nutrivita Labs., Inc. v. VBS Distribution Inc., No. CV-1301635, 2016 WL 595834, at *4 (C.D. Cal. Jan. 27, 2016). Defendant also urges the Court to consider Plaintiff’s litigation misconduct. The Court considers all these factors below.

A. Degree of Success

Defendant prevailed on the merits at trial, and Plaintiff has not disputed that this factor weighs in Defendant’s favor. Therefore, the degree of success favors granting attorney’s fees.

B. Frivolousness/Objective Reasonableness

Defendant maintains that the lawsuit was frivolous and objectively unreasonable from its inception because Plaintiff “relied on public domain material and performance elements not protected by the Taurus copyright.” (Def.’s Reply ISO Mot. Atty. Fees 8:10-11, ECF No. 306.) The Court disagrees. Plaintiff survived a motion for summary judgment, meaning that this Court considered the merits of the claim and determined that sufficient evidence existed to proceed to trial. Furthermore, at trial, the jury found that Plaintiff owned the copyright in Taurus and that Defendants had access to the work. Ultimately, however, the jury found that no substantial similarity existed between the two songs. In doing so, the jury did not determine that Plaintiff’s claim impermissibly relied on public domain elements or performance aspects of the musical composition. Therefore, Plaintiff’s claim was not frivolous.

Defendant also argues, “[Plaintiff] cannot find shelter in the Court’s summary judgment ruling that he raised a triable issue as to substantial similarity: that ruling was expressly based on his experts’ reports, which the Court subsequently ruled were inadmissible.” (Def.’s Reply ISO Mot. Atty. Fees 8:11-14, ECF No. 306.) The Court rejects this argument. The fact that this Court ruled Plaintiff’s expert reports inadmissible after considering and relying on the reports in the summary judgment order does not undermine the validity of the legal conclusion at summary judgment. “At the summary judgment

CV-90 (06/04) CIVIL MINUTES - GENERAL Page 2 of 5 stage, we do not focus on the admissibility of the evidence’s form. We instead focus on the admissibility of its contents.” Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003). In the present case, the Court focused only on the content—not the admissibility—of Plaintiff’s expert reports, disregarded the unprotected performance elements, and determined that the remaining material created a triable issue of fact as to substantial similarity. Subsequently, in preparation for trial, this Court issued the following order:

Plaintiff’s expert reports are inadmissible in their present condition because they considered unprotected elements contained only in the sound recording. If Plaintiff wishes to introduce expert testimony at trial, it must submit reports completely purged of any reliance on the unprotected performance elements in the sound recording. Any comparison analysis must consider only the protected elements represented in the musical composition.

(Order Granting Def.s’ Mot. In Limine No. 4, ECF No. 203.) Nothing in the Court’s evidentiary ruling contradicted or undermined its prior holding on summary judgment. Rather, the Order simply instructed Plaintiff to re-submit expert reports without the unprotected performance elements that this Court had disregarded at the summary judgment stage. Put differently, the Court sought to ensure that any expert report presented to the jury contained only the protected musical elements that were deemed relevant to the similarity analysis in the summary judgment order.

Accordingly, because Plaintiff’s claim was not frivolous or objectively unreasonable, these two factors militate against an award of attorney’s fees.

C. Motivation

Throughout the course of litigation, Plaintiff has maintained that the purpose of the lawsuit was to secure credit for Randy California, the author of Taurus, whose musical composition was allegedly stolen by Defendants. Plaintiff submits evidence that Randy California had considered filing a lawsuit over Stairway to Heaven while he was still living, but he ultimately never initiated legal action. (Order Denying Def.’s Mot. Summ. J. 7, ECF No. 159.) After Randy California died, his trust (Plaintiff in this case) would have been equitably prevented from bringing suit because of the lengthy passage of time; however, once the Supreme Court eliminated the equitable defense of laches in copyright claims seeking damages, Plaintiff promptly filed suit. See Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1967 (2014).

In rebuttal Defendant contends that Plaintiff was motivated by ignoble ambitions and that the trust initiated the lawsuit to extort a massive settlement from the Led Zeppelin members, even though Randy California never attempted to sue in his lifetime. Defendant, however, has failed to provide any evidence that Plaintiff harbored nefarious motives in bringing this suit. Furthermore, Defendant has not countered the declarations from Plaintiff suggesting that Randy California actually did contemplate a lawsuit.

Therefore, the motivation factor weighs in favor of Plaintiff and militates against granting fees.

D. Need for Compensation and Deterrence

Defendant argues that allowing fees will deter future claimants from asserting stale and meritless copyright claims. The Court rejects this argument because, as explained above, Plaintiff did not act in bad faith by delaying or bringing a “stale” claim; rather, until the Supreme Court’s Petrella decision in CV-90 (06/04) CIVIL MINUTES - GENERAL Page 3 of 5 2014, Plaintiff’s claim would have been barred by laches. Moreover, the Court has already held that Plaintiff’s claim was not meritless. Therefore, by filing the lawsuit, Plaintiff did not engage in misconduct that would justify the deterrent effect of attorney’s fees.

Defendant also contends that compensation is required, as it was forced to bear its own costs after its insurer denied coverage because the claims asserted were so old. Plaintiff has not challenged Defendant’s need for compensation; instead, he rebuts that he manages a charitable trust with limited financial resources incapable of satisfying an award of over $700,000. See Ets-Hokin v. Skyy Spirits, Inc., 323 F.3d 763, 766 (9th Cir. 2003) (holding that the Ninth Circuit considers “whether the chilling effect of attorney’s fees may be too great or impose an inequitable burden on an impecunious plaintiff”). Plaintiff has not proffered any evidence to substantiate his claims about the impecunious nature of the trust, nor has he meaningfully opposed Defendant’s argument regarding the need for compensation.

Overall, while Defendant has not demonstrated a need for deterrence, it has shown a need for compensation. Accordingly, this factor weighs slightly in favor of granting attorney’s fees.

E. Litigation Misconduct

In its most recent word on attorney’s fees under the Copyright Act, the Supreme Court counseled lower courts to consider factors beyond the objective reasonableness of a claim. As an example, the Court explained that “a [district] court may order fee-shifting because of a party’s litigation misconduct, whatever the reasonableness of his claims or defenses.” Kirtsaeng, 136 S. Ct. at 1988–89 (emphasis added). Seizing on this language, Defendant urges this Court to consider Plaintiff’s litigation misconduct in the present case

Throughout the course of litigation, Plaintiff’s counsel demonstrated a tenuous grasp of legal ethics and a rudimentary understanding of courtroom decorum. Perhaps most emblematic of counsel’s cavalier attitude is the “unclean hands” moment of the trial. During his direct examination of Michael Skidmore (the trustee of the Randy Craig Wolfe Trust) Plaintiff’s counsel mentioned that Defendants had raised the defense of unclean hands. Plaintiff’s counsel then waved his hands in the air and implored Skidmore, “Please show the jury your hands,” as if a showing of manicured fingers would rebut the equitable defense of unclean hands. The gallery audience and jury members audibly responded, prompting this Court to reprimand Plaintiff’s counsel—even before Defense counsel could rise to object—and instruct the jury members to disregard counsel’s antics. As another example, consider the manner in which Plaintiff’s counsel ignored this Court’s order excluding evidence about the charitable nature of the Randy Craig Wolfe Trust. Mere minutes after the pretrial conference in which the Court issued its evidentiary ruling, Plaintiff’s counsel brazenly appeared before television cameras and declared, “If money is won in this case, it’s to be used to buy musical instruments for children who are in need in Ventura County.” (Anderson Decl. Ex. 1, ECF No. 293.) In further violation of the Court’s order, Plaintiff’s counsel elicited testimony from Wolfe’s sister at trial about the charitable purpose of the trust. (Anderson Decl. Ex. 4 at 157:14-16, ECF No. 293.) Such misconduct demeans the legal proceedings, distracts from the substantive issues, and squanders the Court’s time.

The aforementioned examples are just two of many incidents comprising a litany of tasteless courtroom antics and litigation misconduct. (Def.’s Mot. Atty. Fees 5-12, ECF No. 293.) Accordingly, this factor weighs in favor of Defendant.

F. Weighing the Factors

Overall, two factors (litigation misconduct and degree of success) swing solidly in Defendant’s direction, and a third factor (need for compensation) slightly favors Defendant. On the other hand, three factors (motivation, frivolousness, and objective reasonableness) weigh strongly in Plaintiff’s favor. CV-90 (06/04) CIVIL MINUTES - GENERAL Page 4 of 5 Once the media hype and tangential distractions are stripped away, what remains is an objectively reasonable claim motivated by a desire to recognize Randy California’s musical contribution. The claim survived a summary judgment motion and proceeded to a hard-fought trial where a jury found for Plaintiff on ownership and access, but ultimately rendered a verdict for Defendants based on a lack of substantial similarity. Plaintiff was afforded a full opportunity to litigate its theory of infringement and Defendants were entitled to raise a meritorious defense, which ultimately prevailed. Viewing “all the circumstances of [this] case on their own terms, in light of the Copyright Act’s essential goals,” this Court concludes that attorney’s fees are not appropriate. Kirtsaeng, 136 S. Ct. at 1989.

IV. CONCLUSION

For the foregoing reasons, the Court DENIES Defendant’s Motion for Attorney’s Fees and Costs.

IT IS SO ORDERED. : Initials of Preparer

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