IP Law Daily, COPYRIGHT NEWS: Second Circuit pushes music publishers’ buttons in longstanding case over online music vault, (May 3, 2023)

By Matthew Hersh, J.D.

The court of appeals overly narrowed the doctrine of direct infringement, a new petition for certiorari asserts.

The U.S. Court of Appeals for the Second Circuit erred when it found that the owner of a website could not have been directly liable for infringing the rights of songwriters and their publishers because he did not personally “push the button” on the machinery that uploaded and distributed unlicensed musical works, a new petition for certiorari asserts. The petition, filed on behalf of a wide group of music publishers, asks the Supreme Court to take up the case on only a narrow aspect of their longstanding legal battle against the owner of a popular streaming website.

The petition is the latest action in a nearly decade-long struggle by music publishers against Wolfgang’s Vault, a music memorabilia website. The website was built around the warehouse-sized collection assembled by the late Bill Graham, the legendary music promoter who brought Bay Area acts like the Grateful Dead, Jefferson Airplane, and Santana—among many others—to the public eye. Although the original Graham collection was not originally exploited for profit, according to the publishers, that changed when the collection was purchased by William Sagan in 2003. Sagan, a longtime businessman and music lover who owns a number of music related businesses in addition to the Vault, reportedly turned the collection into a commercial venture that was worth over $100 million a mere seven years later.

The case has been making its way through the courts since 2015. In 2018, the federal district court in Manhattan granted summary judgment for the music publishers on most of their copyright infringement claims, leaving the question of damages to the jury. In early March of 2020, just as COVID was starting to hit, a jury awarded close to the bare minimum—under $200,000 of the $30 million the publishers requested—in statutory damages. Later that year, the district court rejected the publishers’ claims that the jurors had rushed their decision because of the oncoming pandemic.

The case for the publishers only worsened when the dispute reached the Second Circuit. In its 2022 opinion, the court agreed with the trial court that a new trial was not warranted over COVID. But the court also reversed some of the trial court’s rulings on liability as well. For one thing, the trial court had found as a matter of law that the Vault infringed the rights of the music publishers by hosting audiovisual works as well as audio-only works. The court of appeals agreed as to the audiovisual works, but stripped the audio works out of the case. (Full coverage of that issue, as well as the many other aspects of the Second Circuit’s decision, can be found in IP Law Daily’s coverage of the case here.

More importantly to this certiorari petition, the Second Circuit also narrowed the case in one other way. In the trial court, the publishers sued not only the Vault itself but also its owner, Sagan. (No doubt because Sagan had personal resources separate from his company). The trial court found Sagan personally liable, but the court of appeals reversed. That issue formed the basis of this petition.

Direct infringement. The petition focuses solely on the question of Sagan’s personal liability—in particular, whether Sagan could be liable for direct infringement for his role in the Vault. The district court found that Sagan, among other things, managed all aspects of the company, including instructing his chief technology officer which specific concerts to make available to website visitors. On that basis, the district court found, the publishers had stated a claim for direct infringement. But the Second Circuit saw it differently. In only a brief discussion of the issue, the court appeals observed that direct liability could attach only to “the person who actually pushes the button”—which was not Sagan.

This “press the button” language was simply wrong, the petition asserts. Indeed, the petition notes, “established principles of agency law” impose direct liability on the person who orders someone to make infringing copies, “not just the person who follows the orders.” That understanding, the petition notes, “is compelled not only by settled law, but by common sense: it would be absurd if a corporate executive who orders her staff to print a million infringing copies of a copyrighted work with full knowledge of their infringing nature could escape direct liability in lieu of the low-level employee who follows those instructions and actually and unwittingly pushes the print button.”

The question presented by the petition is: “whether direct liability for copyright infringement is limited to the person who actually ‘presses the button’ to make the infringing copies.”

Commentary. From the view of this author, there might be a “plague on all houses” issue here. The music publishers pleaded only direct liability against Sagan, but not vicarious liability—typically the far easier route to hold company officers liable for actions of the company. The district court, in turn, found that Sagan was “deeply involved” in the acquisition of recordings, that he had “final decision making authority” over the Vault, and that he instructed the company’s CTO “which concerts to make available for download or not,” among other things. But despite acknowledging that the publishers brought only a direct and not vicarious liability claim, the district court found that Sagan was personally liable because he had “the ability to supervise infringing activity and a financial interest in that activity”—the traditional standard for vicarious liability. The Second Circuit, in turn, which might well have reversed because of this error, went further than it needed to by stating overbroadly that direct liability applies only to the person who “pushes the button”—the trigger for this petition.

The Case is No. 22-1053.

Attorneys: Paul D. Clement (Clement & Murphy, PLLC) for ABKCO Music, Inc.

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