Case 1:03-cv-06570-DAB-KNF Document 16 Filed 07/24/06 Page 1 of 11
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`CURTIS BROWN p/k/a GRAND MASTER CAZ, :
`and CHARLIE CHASE, collectively p/k/a THE
`COLD CRUSH BROTHERS,
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`:
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`Plaintiffs,
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`: REPORT & RECOMMENDATION
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`03 Civ. 6570 (DAB)(KNF)
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`-against-
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`COLUMBIA RECORDING CORPORATION,
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`:
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`:
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`Defendant.
`---------------------------------------------------------------X
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`KEVIN NATHANIEL FOX
`UNITED STATES MAGISTRATE JUDGE
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`TO THE HONORABLE DEBORAH A. BATTS, UNITED STATES DISTRICT JUDGE
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`I. INTRODUCTION
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`Curtis Brown p/k/a Grand Master Caz and Charlie Chase, collectively p/k/a The Cold
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`Crush Brothers (“plaintiffs”) brought this action against defendant Columbia Recording
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`Corporation (“CRC”) to recover damages for infringement of the plaintiffs’ copyrighted sound
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`recording. The plaintiffs’ claims are brought pursuant to the Copyright Act of 1976, 17 U.S.C.
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`§§ 101 et seq. (“Copyright Act”).
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`Upon the defendant’s failure to answer or otherwise respond to the complaint, your
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`Honor ordered that a default be entered against them. Thereafter, your Honor referred the matter
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`to the undersigned to conduct an inquest and to report and recommend the amount of damages, if
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`any, to be awarded against the defendant.
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`The Court directed the plaintiffs to serve and file proposed findings of fact and
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`Case 1:03-cv-06570-DAB-KNF Document 16 Filed 07/24/06 Page 2 of 11
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`conclusions of law, and an inquest memorandum setting forth their proof of damages, the costs
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`of this action, and interest. The Court also directed the defendant to serve and file any opposing
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`memoranda, affidavits and exhibits, as well as any alternative findings of fact and conclusions of
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`law they deemed appropriate. The defendant did not file anything in opposition to the plaintiffs’
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`submissions.
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`The plaintiffs’ submissions aver that they are entitled to recover damages in the amount
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`of $155,500 for the defendant’s infringement of their copyrighted sound recordings.
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`II. BACKGROUND
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`When a defendant defaults in an action, by failing to plead or otherwise defend against a
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`complaint, the defendant is deemed to have admitted every well-pleaded allegation of the
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`complaint except those relating to damages. See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993);
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`Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). In
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`addition, the plaintiff is entitled to all reasonable inferences from the evidence presented. See Au
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`Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Based upon the submissions
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`made by the plaintiffs, the complaint filed in the instant action, and the Court’s review of the
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`entire court file in this action, the following findings of fact are made.
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`The plaintiffs are musicians residing in the state of New York. Defendant CRC is a
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`corporation organized and existing under the laws of the state of New York, with its principal
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`place of business at 51 West 52nd Street, New York, New York.
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`The plaintiffs composed the music and lyrics to a work entitled “Freestyling.” The
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`plaintiffs then made a master sound recording of “Freestyling” on an album entitled “DJ Charlie
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`Chase Cold Crush Brothers v. Fantastic Romantic 5 Live MC Battles from Harlem World 1981,”
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`published in June 1998. The United States Copyright Office granted the plaintiffs’ application
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`for a copyright for the master recording of “Freestyling,” and assigned the recording Copyright
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`Registration SR 327-188.
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`The group known as M.O.P. “digitally sampled” a portion of “Freestyling” in the master
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`recording of their work “Old Timerz.” Digital sampling is a technique whereby a portion of an
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`already existing sound recording is incorporated into a new work. More specifically,
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`[d]igital sampling has been described as:
`the conversion of analog sound waves into a digital code. The digital code
`that describes the sampled music . . . can then be reused, manipulated or
`combined with other digitalized or recorded sounds using a machine with
`digital data processing capabilities, such as a . . . computerized
`synthesizer.
`Thus, digital sampling is similar to taping the original composition and reusing it
`in another context.
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`Jarvis v. A & M Records, 827 F. Supp. 282, 286 (D.N.J. 1993) (citation omitted); see also Dina
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`LaPolt & Samuel J. Fox, Negotiating Music Samples, Entertainment Industry Contracts §
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`161.02[1][a] (2006) (defining a digital sample as “a portion of a pre-existing master recording
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`which is extracted and embodied in a new master recording”). In this case, as a result of
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`M.O.P.’s conduct, a person listening to “Old Timerz” will hear plaintiff Curtis Brown rapping
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`the lyrics of “Freestyling” exactly as he can be heard on the original master sound recording of
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`that composition. The “Old Timerz” track appears on an album entitled “Warriorz,” which the
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`defendant, CRC, distributed for sale to the general public following its release in October 2000.
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`The plaintiffs contend that because M.O.P. digitally sampled a portion of “Freestyling,”
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`CRC was required under the copyright statute to obtain from them two separate and distinct
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`licenses: one for the master sound recording and one for the composition. In support of their
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`application for damages, the plaintiffs have submitted proposed findings of fact and conclusions
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`of law, along with the declaration of Jay L. Berger (“Berger”), the agent and business manager
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`for the plaintiffs and an expert in the area of licensing and the computation of royalties.1
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`III. CONCLUSIONS OF LAW
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`A default judgment in an action establishes liability, but is not a concession of damages.
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`See Cappetta v. Lippman, 913 F. Supp. 302, 304 (S.D.N.Y. 1996) (citing Flaks v. Koegel,
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`504 F.2d 702, 707 [2d Cir. 1974]). Damages must be established by a plaintiff in a post-default
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`inquest. See id. In conducting an inquest, a court need not hold a hearing “as long as it [has]
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`ensured that there was a basis for the damages specified in the default judgment.” Transatlantic
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`Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). The court
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`may rely on affidavits or documentary evidence in evaluating the fairness of the sum requested.
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`See Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993).
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`Under the Copyright Act, “an infringer of copyright is liable for either (1) the copyright
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`owner’s actual damages and any additional profits of the infringer, as provided by [§ 504(b)]; or
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`(2) statutory damages, as provided by subsection [§ 504(c)].” 17 U.S.C. § 504(a). Actual
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`damages are measured by “the extent to which the market value of the copyrighted work at the
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`time of the infringement has been injured or destroyed by the infringement.” Fitzgerald Publ’g
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`Co., Inc. v. Baylor Publ’g Co., Inc., 807 F.2d 1110, 1118 (2d Cir. 1986)(citation omitted). In
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`appropriate circumstances, actual damages may be taken to be a reasonable license fee, that is,
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`Berger avers that because he acts as a representative for the plaintiffs, he is not receiving
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`compensation for his preparation and submission of an opinion in this matter. See Berger
`Declaration, ¶ 22 at 4.
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`the fair market value of a license authorizing the defendant’s use of the copyrighted work. See
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`On Davis v. Gap, Inc., 246 F.3d 152, 164-168 (2d Cir. 2001). This measure of damages
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`contemplates “a negotiation between a willing buyer and a willing seller,” and does not depend
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`on whether the copyright infringer was in fact willing to negotiate for a license. Id. at 172.
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`Rather, “[an] honest purchaser is hypothesized solely as a tool for determining the fair market
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`value of what was illegally taken.” Id.
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`In some instances, courts have relied on expert testimony to determine the fair market
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`value of a reasonable license fee. See, e.g., Stehrenberger v. R.J. Reynolds Tobacco Holdings,
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`Inc., 335 F. Supp. 2d 466, 467-68 (S.D.N.Y. 2004) (approving calculation made by plaintiff’s
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`damages expert for use of artwork while disapproving additional fee for unauthorized usage);
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`Barerra v. Brooklyn Music, Ltd., 346 F. Supp. 2d 400, 410 (S.D.N.Y. 2004) (using calculation
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`of plaintiff’s expert to determine reasonable license fee for use of stock photograph); cf. Baker v.
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`Urban Outfitters, Inc., 254 F. Supp. 2d 346, 352-59 (S.D.N.Y. 2003) (evaluating but excluding
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`testimony and report of plaintiff’s expert and relying instead on plaintiff’s past license fees);
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`Country Road Music, Inc. v. MP3.com, Inc., 279 F. Supp. 2d 325, 331 (S.D.N.Y. 2003)
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`(excluding report and testimony of plaintiff’s expert but concluding record may contain other
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`evidence in support of actual damages claim).
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`Rule 702 of the Federal Rules of Evidence provides:
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`If scientific, technical, or other specialized knowledge will assist the trier of fact
`to understand the evidence or to determine a fact in issue, a witness qualified as an
`expert by knowledge, skill, experience, training, or education, may testify thereto
`in the form of an opinion or otherwise, if (1) the testimony is based upon
`sufficient facts or data, (2) the testimony is the product of reliable principles and
`methods, and (3) the witness has applied the principles and methods reliably to the
`facts of the case.
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`Furthermore, the Supreme Court has explained that “the task of ensuring that an expert’s
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`testimony both rests on a reliable foundation and is relevant to the task at hand” is to be
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`performed by a court. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597, 113 S.
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`Ct. 2786, 2799 (1993). Each step of an expert’s analysis must be reliable in order for the expert’s
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`testimony to be considered in a judicial proceeding. Amorgianos v. National R.R. Passenger
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`Corp., 303 F.3d 256, 267 (2d Cir. 2002). However, “[a] minor flaw in an expert’s reasoning or a
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`slight modification of an otherwise reliable method will not render an expert’s opinion per se
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`inadmissable.” Id. Further, “[a]lthough expert testimony should be excluded if it is speculative
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`or conjectural, or if it is based on assumptions that are so unrealistic and contradictory as to
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`suggest bad faith or to be in essence an apples and oranges comparison, other contentions that the
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`assumptions are unfounded go to the weight, not the admissibility, of the testimony.” Boucher v.
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`U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996)(citations omitted)(internal quotation
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`marks omitted).
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`Plaintiff’s expert, Berger, has three years of experience negotiating and drafting various
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`types of music industry licenses. For example, during that period, Berger reviewed and/or
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`negotiated more than three hundred songwriter contracts and master license use and sample use
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`agreements for master recordings and compositions. In addition, Berger reviewed more than one
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`thousand artist, songwriter and publisher royalty reports from record companies and performing
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`rights societies. Berger is the co-author of an article on recent judicial developments in copyright
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`infringement treatment for the digital sampling of music, see Oren J. Warshavsky & Jay L.
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`Berger, Will Case Change Law on Sampling, 26 Nat’l L. J. C1 (2002), and has provided expert
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`testimony and reports on the issues of, inter alia, music licensing, compensation for the licensing
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`of master recordings and musical compositions, and artists’ rights, copyright ownership and
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`apportionment of royalties in cases brought in both the federal and state courts. See Berger
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`Declaration, ¶¶ 7-16 at 2-4. The Court finds that Berger has sufficient knowledge, skill and
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`experience in the area of licensing copyrighted material to qualify him to provide an opinion
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`about a reasonable license fee for the defendant’s use of the plaintiffs’ sound recording.
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`According to Berger, under the copyright law “there are two different and distinct sets of
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`rights: the right to the musical composition [the written lyrics and the accompanying music], and
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`the rights to the sound recording of the musical composition.” Berger Declaration, ¶ 24 at 5; see
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`also T. B. Harms Co. v. Jem Records, Inc., 655 F. Supp. 1575, 1577 n.1 (D.N.J. 1987)(“When a
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`copyrighted song is recorded on a phonorecord, there are two separate copyrights: one [in] the
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`musical composition and the other in the sound recording.”)(citing N. Boorstyn, Copyright Law
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`Section 5:11 n.54 [1981 & Supp. 1986]). Thus, in order to use a digital sample without violating
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`the Copyright Act, an artist must obtain two different licenses: one from the owner of the master
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`recording and one from the owner of the copyright to the underlying composition. See Berger
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`Declaration, ¶ 26 at 5-6. An SR copyright, such as the plaintiffs were granted, covers both a
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`sound recording and a musical composition. See, e.g. Tuff-N-Rumble Mgmt., Inc. v. Sugarhill
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`Music Publ’g Inc., 75 F. Supp. 2d 242, 247 (S.D.N.Y. 1999).
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`Based on his experience negotiating and drafting master use licenses for sound recordings
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`and compositions on behalf of his company’s clients, Berger calculates that a typical license fee
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`for the right to use a master sound recording ranges from five cents ($0.05) to eight cents ($0.08).
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`Further, Berger estimates that, in the circumstances presented here, a typical license fee for use of
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`a musical composition ranges from 3.7 cents ($0.03775) to 7.5 cents ($0.0755). Additionally,
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`according to Berger, in negotiating a contract for a license, customarily he would demand a non-
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`refundable advance based on either 500,000 or 1,000,000 units, as an initial payment. When a
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`sample is “uncleared,” that is, when a defendant seeks licenses for a master recording and
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`composition after an infringing work has been released to the general public, the amount of the
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`advance is based on 1,000,000 units. See Berger Declaration, ¶¶ 34-36 at 7.
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`Drawing on his knowledge of typical licensing arrangements, Berger concludes that a
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`reasonable license fee in this case is between $87,750 (i.e., an advance against 1,000,000 units,
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`$0.05 for the master royalty rate and $0.03775 for the composition royalty rate) and $155,500
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`(i.e., an advance against 1,000,000 units, a master royalty rate of $0.08 per unit and a
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`composition royalty of $0.0755 per unit). See id. ¶¶ 37-38 at 8.
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`The analysis performed by Berger to compute a reasonable license fee, or range of fees, is
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`one that reliably could be expected to determine the value of a license for the use of a digital
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`sample of a sound recording. Additionally, because Berger is an agent for the plaintiffs and other
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`copyright owners, and has established rates that are regularly paid by licensees, his method for
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`determining a reasonable license fee is particularly relevant in this case. See Davis, 246 F.3d at
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`167 (noting that reliance upon royalty rates established by agents for copyright owners renders
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`determination of the fair market value of a license fee “no more speculative than determining the
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`damages in the case of a stolen cargo of lumber or potatoes”). Moreover, Berger relied on
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`materials pertinent to this action in the application of his usual method of calculating a license
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`According to Berger, the license fee, or royalty rate, for a musical composition usually is
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`determined by statute, see 37 C.F.R. § 255.3(j). However, the compulsory royalty rate
`established by statute is available only under conditions that are not applicable in this case.
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`fee for the use of a digital sample. Accordingly, the Court finds that Berger computed the range
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`of reasonable license fees through the application of reliable principles and methods, and with
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`sufficient bases in fact.
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`Plaintiffs seek the maximum royalty of $155,500. The Second Circuit has ruled that an
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`award of actual damages in a copyright infringement case “should be broadly construed to favor
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`victims of infringement.” See Davis, 246 F.3d at 164 (citing, inter alia, William F. Patry,
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`Copyright Law and Practice 1167 [1994] [“Within reason, any ambiguities should be resolved in
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`favor of the copyright owner.”]; 4 [Melville B. Nimmer & David Nimmer, Nimmer on
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`Copyright] § 14.02[A], at 14-12 [“[U]ncertainty will not preclude a recovery of actual damages if
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`the uncertainty is as to amount, but not as to the fact that actual damages are attributable to the
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`infringement.”]). Hence, when a court is confronted with imprecision in the calculation of
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`damages, it “should err on the side of guaranteeing the plaintiff a full recovery.” Sygma Photo
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`News, Inc. v. High Society Magazine, 778 F.2d 89, 95 (2d Cir. 1985)(citations omitted). Under
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`the circumstances, the Court finds that an award representing a full recovery is appropriate in this
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`case. Accordingly, the plaintiffs are entitled to actual damages in the amount of $155,500.
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`IV. RECOMMENDATION
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`For the reasons set forth above, the Court recommends that the plaintiffs be awarded
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`$155,500, plus post-judgment interest in an amount to be calculated by the Clerk of Court
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`pursuant to 28 U.S.C. § 1961(a).
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`* * *
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`The plaintiffs shall serve a copy of this Report and Recommendation upon the defendant
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`and submit proof of service to the Clerk of Court.
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