Part 34

Capitol, of course, appealed. A year later, the Second Circuit Court of Appeals overturned the lower court’s decision. It held that while Judge Sweet correctly determined there was no applicable UK copyright, this did not fully answer the question of whether Capitol had grounds to sue Naxos under any American law. It agreed that there was no applicable federal copyright question, and also agreed that New York State’s Penal Law 275.00, its anti-music-piracy statute, was also inapplicable because it did not give the victims of music piracy a private right of action. That left only New York State common law.

Citing the footnote in the Goldstein Supreme Court case that gave states the green light to define “publication” however they wanted for pre-1972 phonorecords, the Second Circuit held that protection against copying fell within a state’s power, still ignoring Justice Berger’s admonishment that these powers only extended to copying carried out within its jurisdiction. However, the most significant point of law that the Second Circuit had to deal with was the expiration of the records’ UK copyrights. The court asserted that neither the Berne Convention nor the Universal Copyright Convention applied to sound recordings, and the treaty that did apply, the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication, did not apply to phonorecords made before March 10, 1974. If any of these three had held, the “rule of the shorter term” would have applied, meaning that the American copyright would have expired when the home nation copyright expired. There was no guiding precedent as to whether New York State common-law copyright contained a “rule of the shorter term.” Therefore, it was necessary to refer the case to New York’s highest court (called, confusingly, the “Court of Appeals”), a process called “certification.”

Judge Victoria Graffeo’s opinion was an extended treatise on the 400-year history of common-law copyright. However, in making a few of her theoretical points, she overlooked or neglected some basic judicial mechanics. She stated that Capitol’s complaint was based on New York law because that was the situs of the alleged infringement. However, as previously discussed, Capitol never asserted a location-specific jurisdiction. They always claimed jurisdiction based on federal diversity, and never, in any brief submitted to the New York Court of Appears, did they claim that the alleged copying or distribution ever took place in New York. They implied it many times, but a careful reading of the briefs shows that they never came out and stated this.

Judge Graffeo started her analysis with the Statute of Anne. It was a fairly straightforward textbook rendition until she got to the 1909 White-Smith piano roll case. At that point she backtracked and stated that “Despite the fact that sound recordings could not be “published” under federal law they were eligible for state common-law protection.” In support of this, she did not cite White-Smith itself, but Justice Thompson’s dissent Wheaton v. Peters.

Wheaton v. Peters is cited only once in White-Smith itself, for the unremarkable proposition that there is no common-law federal copyright. Understandable, given that Wheaton v. Peters was decided three-quarters of a century before the first phonograph was sold. However, Thompson’s dissent in Wheaton v. Peters, which is far longer than the main opinion, is the principal basis for the “cupcake theory”: that federal copyrights are merely a set of rights that are slathered on top the more important state common-law copyrights, and that when federal copyrights expire, the perpetual state common-law copyrights remain.

To be continued…

Part 33

Just where did this alleged infringement take place? Like California’s statute 653h, New York has an anti-music piracy law, located in Article 275 (275.00-.45) of the penal code. At the time, Section 275.05 defined the crime of “manufacture of unauthorized recording in the second degree” as applying to one who:

1.   knowingly, and without the consent of the owner, transfers or causes to be transferred any sound recording, with the intent to rent or sell, or cause to be rented or sold for profit, such article to which such sound recording was transferred, or

2.   transports within this state, for commercial advantage or private financial gain, a recording, knowing that the sounds have been reproduced or transferred without the consent of the owner; provided however, that this section hall only apply to sound recordings initially fixed prior to February 15, 1972.

“Owner” was defined as “the person who owns, or has the exclusive license in the United States to distribute to the public copies of the sounds fixed in a master phonograph record [or other format].”

The statute only assessed criminal penalties; it did not create a private right of action to recover damages. But in its brief before the New York State Court of Appeals, Capitol Records asserted that it was entitled to civil relief under “common law copyright infringement.” To define what this was, it pointed to the above criminal statute and two civil cases, Metropolitan Opera v. Wagner-Nichols Music (1950) and Capitol Records v. Greatest Records (1964). Metropolitan Opera was the case where the opera company sued over recordings lifted from the Met’s Saturday afternoon radio broadcasts; Capitol v. Greatest involved the pirated Beatles singles and album excerpts.

The problem is that all three basically say the same thing: copyright infringement is the unauthorized manufacture or distribution of protected sound recordings within the state of New York. But this element was never established. Keep in mind that the CDs were manufactured in Nashville. Instead, Capitol’s lawyers implied, but never forthrightly stated, that the copying and distribution of the disputed recordings anywhere in the United States constituted common-law copyright infringement. That flatly contradicts what Chief Justice Berger said in the Goldstein Supreme Court case: “a copyright granted by a particular State has effect only within its boundaries . . .individuals who wish to purchase a copy of a work protected in their state will be able to buy unauthorized copies in other States where no protection exists.”

So not only am I left scratching my head about what the proper venue for this case should have been, I have reservations about whether the federal district court for the southern district of New York really had jurisdiction to hear it.

The parties submitted their pleadings, and as is typical in such litigation, Naxos tendered a motion to dismiss and Capital replied with a motion to winnow out some of Naxos’s less plausible affirmative defenses. Judge Sweet, on his own, converted Naxos’s motion to a full-blown motion for summary judgment. This was the equivalent of him saying that “I already have a sufficient factual record to fully decide the issues in the case.” This is polite legalese for “I’ve already seen enough to convince me that Capitol’s case is a hopeless dog.”

The core of Judge Sweet’s argument was simple. The original recordings were British. The last United Kingdom copyright had expired in 1986. In fact, EMI had told Richard Warren, Curator of Yale’s Historical Sound Recordings Collection in a letter that it no longer held an enforceable UK copyright to recordings made before 1957. Naxos never attempted to “palm off” the recordings as anything other than what they were. Thus, no tortuous activity occurred. Summary judgment in favor of Naxos. Case over.

To be continued…

Part 32

ITAR-TASS was a tortured-logic case twisted around to achieve a specific outcome: if the author of a foreign work claims protection in the United States under his home-nation’s copyright laws via the Berne Convention, and alleges infringement in the United States, his case will be considered under United States law. In other words, although the Berne language claims he is “entitled to the same copyright protection in other member states as in his home nation,” in the United States that means he will be “entitled to the same copyright protection as any other American author under similar circumstances.” The critical difference between Capitol v. Naxos and ITAR-TASS was that the doctrine was shifted from a conflict between foreign and American copyright law (ITAR-TASS) to a conflict between foreign and New York state law (Capitol v. Naxos).

Many of the facts in the case of Capitol Records, Inc. v. Naxos of America, Inc. have been touched on previously, but this is a good place to gather them together in one place. The dispute concerned a series of about ten classical music recordings made between 1931 and 1939 in England by the Gramophone Company. The artists included Yehudi Menuhin, Pablo Casals, and Edwin Fischer. Composers included Elgar, Max Bruch, J. S. Bach, and others. The Gramophone Company later became EMI, an affiliate of Capitol. Although the British copyrights for the last of these recordings expired in 1986, EMI asserted that its 1930’s contracts with the artists gave it “absolute, world-wide and perpetual” ownership of the recordings. Capitol licensed all the common-law copyrights in the recordings in America through a Matrix Exchange Agreement executed with EMI in 1996, ten years after the last British copyright expired.

Naxos began distributing the disputed recordings in 1999. It created them by dubbing the best available shellac copies. These turned out to be discs made in the U.S. in the 1930s by Victor under license to the Gramophone Company. Naxos then converted them into digital format using studio playback hardware and noise reduction software.

There are some aspects of the case that puzzle me to this day. The complaint was originally brought in the federal district court for the southern district of New York in diversity. It alleged unfair competition, misappropriation of property, unjust enrichment and common law copyright infringement. But normally, as we have discussed earlier, in a diversity action (a suit between parties from different states) the appropriate venue is the federal district court of the defendant’s home. That would be the middle district of Tennessee, because Naxos’s headquarters is the Nashville suburb of Franklin. However, there is an exception to the rule: a case may be brought in the venue most proximate to where the substance of the events giving rise to the cause of action occurred. As the Second Circuit Court later put it, everyone simply assumed that New York was the appropriate location because that was “the jurisdiction where the alleged infringement occurred.” Although I am not certain because I do not have all the information, it appears that Naxos’s lawyers did not vigorously contest the issue of inappropriate venue. If so, they blew the most important single issue in the case. Had this case been adjudicated in federal court in Tennessee, there would probably be nothing for me to write about today.

To be continued…