IP Law Daily, COPYRIGHT—2nd Cir.: Concert bootleg recordings are eligible for compulsory licensing, a prominent appellate court rules, (Oct 7, 2022)

By Matthew Hersh, J.D.

The ruling applies to bootlegs of audio, but excludes concert videos from the scope of the license.

A website operator that purchased and then marketed bootlegged audio and video concert recordings of famous musical acts was entitled to obtain a compulsory license for the audio recordings—but not for the videos—from the owners of those works, the U.S. Court of Appeals for the Second Circuit had held. The court, in a 44-page ruling partially reversing and partially affirming the judgment of a Manhattan federal court, also resolved disputed questions over the proper scope of injunctive relief, the personal liability of the website owner, and the impact of the then-emerging COVID-19 outbreak on jury deliberations (ABKCO Music, Inc. v. Sagan, October 6, 2022, Jacobs, D.).

The case involves Wolfgang’s Vault, a music memorabilia website that offers visitors the chance to “Own an Iconic Piece of Music History.” As discussed in earlier IP Law Daily coverage of the website (here, here, and USPTOhere), the website was built around the collection assembled by the late Bill Graham, the legendary music promoter who brought Bay Area acts like the Grateful Dead, Jefferson Airplane, Santana, and others, to the public eye. (The name of the website is a nod to Bill Graham’s birthname, Wolfgang Grajonca.) As the New York Times noted in a recent tribute, Graham “carved himself such an outsize public role that after his death, in a helicopter accident after a concert in 1991, San Francisco renamed its Civic Auditorium arena after him.”

Although some of the bands promoted by Bill Graham welcomed the taping, or bootlegging, of their concerts, many others didn’t. In 2015, a collection of music publishers sued the owner and operator of the website. The publishers, who owned the rights to nearly 200 musical works that were allegedly bootlegged and streamed over the website, demanded $30 million in damages as well as a permanent injunction. The district court sided with the publishers on the merits, but a jury awarded only $189,500 in statutory damages—far less than the publishers had sought. Both sides appealed, leading to this decision.

Concert videos. The court first upheld the trial court’s ruling that the website operator infringed the rights of the song owners by streaming videos of the recorded concerts. The website operator argued that he was entitled to exploit the so-called “compulsory license,” a provision of the Copyright Act that, at least at the time of the lawsuit, allowed record companies and other music distributors to “make and distribute phonorecords,” for a fixed fee, of certain previously-published musical works. The question at law here was whether this compulsory license provision—traditionally used by record companies to release “covers” of earlier songs without having to negotiate a fee with the song owner—applied to the streaming of concert videos. The district court found that it did not, and the court of appeals agreed. The statute’s definition of a “phonorecord,” the court noted, expressly excluded sounds that accompanied “audiovisual works”—and that naturally applied to any recording that included both sounds and images. Summary judgment was therefore proper for the live concert videos.

Audio-only recordings. But while the court of appeals upheld the summary judgment ruling on the videos, it reached a different conclusion on the audio-only concert recordings. Under the compulsory license, as noted above, anyone may make and distribute phonorecords of any previously-published music as long as they pay the fixed fee and comply with the other requirements of the statute. But that statute also provides that where a person seeks to make and distribute a phonorecord that duplicates a sound recording that was “fixed by another,” the compulsory license does not apply unless the person who fixed the sound recording had a license to do so. Did that limitation apply here? The trial court thought it did, but the court appeals disagreed.

The “fixed by another” limitation did not apply, the court of appeals reasoned, because the bootleg tapes were in fact fixed by the very person—Bill Graham, or those who worked with him—who sold the bootlegs to the current website operator in the first place. This was not the “another,” the court concluded, that the statute referred to. After all, the court noted, if the current website owner had made the recordings himself, they could not have been “fixed by another.” It should not matter, the court reasoned, that the website owner purchased the rights to those bootlegs from Graham. To hold otherwise, the court noted, “would impair the transferability of these sorts of works because every trade would thereby impose new burdens and diminish value.”

The court buttressed its reasoning by considering the legislative history of the 1970s-era statute. The limitations on compulsory license for recordings “fixed by another” was intended by Congress to preclude audio bootlegs of albums, not live performances. Many music pirates, the court noted, tried to use the compulsory license to buy records off the shelf—it was records back then, of course, not CDs or MP3s—and simply duplicate them and resell them, paying only the statutory fixed rate to the owners of the music. Courts in that era rightly squelched those efforts, the court of today noted, as simply a mode of piracy disguised as compulsory licensing. But since piracy concerns “are not a consideration when (as here) the owner of the sound recording has transferred its rights to a successor,” the court reasoned, “there is no reason to assume the application of” the “fixed by another” limitations.

Implied license and equitable estoppel. Although the website operator partially prevailed as to the compulsory license, it was not entitled to reversal on its arguments of implied license and equitable estoppel. The owners of the musical works at issue could not have implicitly granted the website a license to use the works, the court reasoned, because the compulsory license gave them no choice in the matter. Thus, there could not have been the “meeting of the minds” necessary for a license to be implied. Nor did the owners of the musical works take any action to suggest that the website was authorized to use the works, the court found. The evidence showed that prior to the time of this lawsuit, the music publishers had knowledge of the exploitation of a single recording of a Rolling Stones concert—but nothing else. They therefore could not have given the website the impression that they would not sue.

Liability of website owner. The court of appeals reversed the trial court as to the website operator’s personal liability. The website operator did not personally “press the button” to upload infringing materials to the website, the court reasoned, so he could not have been directly liable. To be sure, the court noted, there was evidence that the person who did the uploading acted under the website owner’s control, but that could ensnare the website owner only under a theory of vicarious liability—which the music publishers did not plead.

Permanent injunction. The court of appeals next turned to arguments by the music publishers, beginning with the question of injunctive relief. The trial court had refused to grant the publishers a permanent injunction against the website, and the court of appeals agreed. The publishers’ harm could easily be remedied with cash, the court reasoned, while the public had an interest in continuing to access “iconic” recordings of historical importance. To be sure, the court acknowledged, in an earlier case the court had affirmed an injunction that precluded the streaming of copyrighted television programming over the internet. But “this case is distinguishable in every way that matters,” the court noted. Most importantly, the court noted, that case involved newly created programs, while this case involved recordings from as far back as 60 years ago. The denial of an injunction would therefore “have no impact on concert performances themselves, or the desire to preserve them.”

Impact of COVID. Finally, in the portion of the ruling that appears to have garnered the most public attention, though it may be of less consequence for copyright law purists, the court refused to reverse the jury’s award of statutory damages. The trial began on March 2, 2020, just as news of the COVID-19 pandemic was spreading, and continued even through the March 12 declaration of a state of emergency. Perhaps not surprisingly, jury deliberations lasted only one hour, as jurors were anxious to isolate. The music publishers argued below and on appeal that the jury award—$189,000 in statutory damages, a mere fraction of what they had sought—should be overturned. The district court denied the publisher’s request for a new trial on damages. Even if the jurors had rushed to get through the case, the appellate court noted, that could have cut in favor of either the publishers or the website. The publishers failed to explain “why it would have been easier for a rushed jury to award damages on the lower side of the scale,” the court reasoned, “as opposed to in the middle or on the higher end.” The jury award would therefore stand.

The Case is No. 20-3816.

Attorneys: Christian Carbone (Loeb & Loeb LLP) for ABKCO Music, Inc. and Colgems-EMI Music Inc. Michael S. Elkin (Winston & Strawn LLP) for Norton LLC and Bill Graham Archives, LLC.

Companies: ABKCO Music, Inc., Colgems-EMI Music Inc.; EMI Algee Music Corp.; Norton LLC; Bill Graham Archives, LLC

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