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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`EMI ENTERTAINMENT WORLD, INC.,
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`Plaintiff,
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`- against -
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`KAREN RECORDS, INC., ET AL.,
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`Defendants.
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`1:05-cv-00390-RJH-JCF
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`MEMORANDUM OPINION
`AND ORDER
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`Richard J. Holwell, District Judge:
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`This case arises out of a long-running royalty dispute between Karen Records,
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`Inc. (“Karen”), a Latin record company, and the Harry Fox Agency (“Harry Fox”), the
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`mechanical licensing clearinghouse. It raises interesting questions about the Copyright
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`Act’s compulsory mechanical licensing scheme for nondramatic musical works.
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`For many years, Karen and Harry Fox have disputed the amount of royalties that
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`Karen owes music publishers represented by Harry Fox. In this action, one such
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`publisher, EMI Entertainment World, Inc. (“EMI”), claims that Karen infringed its
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`copyrights because Karen never acquired mechanical licenses for four songs it included
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`on compilation albums. While the lawsuit is brought in EMI’s name, Harry Fox is the
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`driving force behind it.
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`The parties’ dispute focuses on the scope of Karen’s authorization to use EMI’s
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`compositions. In particular, the parties disagree about whether Karen acquired
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`mechanical licenses to EMI’s compositions, and the scope of the protection afforded by
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`those licenses. Both Karen and EMI have moved for summary judgment. For the
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`reasons that follow, the parties’ motions are granted in part and denied in part.
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 2 of 18
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`I.
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`A.
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`BACKGROUND
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`The Parties and Compositions in Suit
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`Karen, the defendant, is a record company and “the home of the best merengues,
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`bachatas and sones.” (Karen Music, http://www.karenmusic.net/ingles/
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`index.htm (last visited Mar. 19, 2009).) Harry Fox is a mechanical licensing agency for
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`music publishers, which describes itself as “a ‘one stop shop’ for most mechanical
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`licensing in the United States.” (Badavas Decl. ¶ 6.) Plaintiff EMI is a music publisher
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`that Harry Fox represents. (Id. ¶ 4-5.)
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`The parties have a long history of disputes, but this case concerns four specific
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`compositions: (i) La Colegiala by Grover Walter Leon Aguilar; (ii) Corazón Partío by
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`Alejandro Sanz; (iii) Cuando Acaba el Placer by Nacho Mano; and (iv) Fuiste Mia un
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`Verano by Leonardo Favio and Vico Berti. (Badavas Decl. ¶ 18.) As the case turns on
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`Karen’s obligations under the compulsory licensing system for nondramatic musical
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`works established in § 115 of the Copyright Act, 17 U.S.C. § 115 (2006), the Court
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`begins with a brief description of that system.
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`B.
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`Compulsory Mechanical Licensing and the Harry Fox Agency
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`Under § 115, a nondramatic musical composition (i.e., a song’s words and music)
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`that has been reproduced in phonorecords with the permission of the copyright owner
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`may be reproduced in phonorecords by another person, if that person notifies the
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`copyright owner and pays a royalty fixed by law. See 17 U.S.C. § 115; Notes of
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`Committee on the Judiciary, H.R. Rep. 94-1476 (Sept. 3, 1976), as reprinted in 17
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 3 of 18
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`U.S.C.A. § 115, at 472 (2005).1 Section 115’s precursor allowed the act of
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`“mechanically” recording a song on media such as phonographic records or piano rolls.
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`(3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 8.04[A], at 8-58-4
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`(2008) (“Nimmer”).) Thus for purely historical reasons a license acquired under § 115 is
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`referred to as “mechanical” license. (Id.)
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`By regulation, the current royalty for a mechanical license is the greater of (i) 9.1
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`cents per track or (ii) 1.75 cents per partial minute of a track’s playing time. 37 C.F.R.
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`§ 255.3 (2008). As a result, a record company that wants to produce a compilation CD
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`with twelve tracks on it can expect to pay about a dollar per CD for mechanical licenses
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`(12 x $.091 = $1.092), unless it can negotiate better rates with the entities that hold the
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`copyrights to the compositions included on the CD. Section 115(c)(3)(B) of the
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`Copyright Act expressly contemplates such private negotiation, and exempts license
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`clearinghouses from the antitrust laws.2
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`To obtain a mechanical license, a licensee must follow the procedure specified in
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`§ 115(b). The essential requirement is that the licensee serve notice of its intent to make
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`use of the composition on the copyright owner. Such notice must be served before, or
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`within thirty days after, the licensee makes phonorecords of the composition. § 115(b).
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`In addition, the notice must be served before distribution of the phonorecords begins. Id.
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`1 “Phonorecord” is the Copyright Act’s generic term for objects like CDs or records that
`sounds are fixed in. 17 U.S.C. § 101.
`2 In part, this provision provides:
`Notwithstanding any provision of the antitrust laws, any copyright owners
`of nondramatic musical works and any persons entitled to obtain a
`compulsory license under subsection (a)(1) may negotiate and agree upon
`the terms and rates of royalty payments under this section and the
`proportionate division of fees paid among copyright owners, and may
`designate common agents on a nonexclusive basis to negotiate, agree to,
`pay or receive such royalty payments.
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`An implementing regulation, 37 C.F.R. § 201.18, specifies the form, content, and
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`manner of service for the notice. For example, the notice must have a title that only a
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`lawyer could love, “Notice of Intention to Obtain a Compulsory License for Making and
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`Distributing Phonorecords.” § 201.18(c)(1). It must contain a “clear statement,”
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`§ 201.18(c)(2), identifying the licensee, the musical composition for which a license is
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`sought, and the phonorecords that will be made and distributed. And the notice must be
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`signed by the licensee. See § 201.18(d).
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`These requirements need not be followed with Prussian rigidity, however. Under
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`§ 201.18(g), “[h]armless errors in a Notice that do not materially affect the adequacy of
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`the information required to serve the purposes of [§ 115(b)] shall not render the Notice
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`invalid.” Thus, if the purposes of § 115(b) are served, technical noncompliance with
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`37 C.F.R. § 201.18 does not prevent a licensee from acquiring a compulsory mechanical
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`license.
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`Once a license is issued, the licensee must make monthly royalty payments to the
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`copyright holder. See 17 U.S.C. §§ 115(c)(2), 115(c)(5). A licensee’s failure to pay
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`royalties, however, does not result in her license terminating automatically. Instead,
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`§ 115 puts the burden on the copyright owner to “give written notice to the licensee that,
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`unless the [licensee’s] default is remedied within thirty days from the date of [notice of
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`default], the compulsory license will be automatically terminated.” § 115(c)(6). Once a
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`rightsholder terminates a license, the licensee becomes liable for all production or
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`distribution for which it did not pay a statutory royalty. In the words of the statute,
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`“termination renders either the making or the distribution, or both, of all phonorecords for
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`which the royalty has not been paid, actionable as acts of infringement under section 501
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`and fully subject to the remedies provided by sections 502 through 506 and 509.”
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`§ 115(c)(6).
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`In practice, questions about how § 115(b) operates are largely academic. Most
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`record companies do not make use of the process outlined therein, but acquire licenses
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`from Harry Fox, which is authorized to issue mechanical licenses on behalf of the major
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`U.S. music publishers. (See Badavas Decl. ¶ 6.) Licenses issued by Harry Fox do not,
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`however, alter the basic rights and obligations of the licensee under § 115. (See id. ¶ 7.)
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`Thus, the net effect Harry Fox’s involvement in the licensing process is to streamline the
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`procedures created by §§ 115(b) and 115(c), with the statute acting as a “ceiling” on the
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`price a copyright owner may charge for a mechanical license. (Nimmer, § 8.04[I], at 8-81
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`to 8-82.)
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`C.
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`The Present Dispute
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`This lawsuit concerns Karen’s obligations to pay statutory royalties for three CDs
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`it released between 1999 and 2001.
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`In the summer of 1999, Karen developed plans to release CDs entitled Mas
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`Romantico and Bomba 2000. (See Rodriguez Aff. ¶¶ 24, 43.) On July 6, 1999, Karen
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`faxed preprinted forms to Harry Fox requesting licenses for two songs it intended to
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`include on Mas Romantico—Cuando Acaba el Placer and Corazón Partío. (See
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`Rodriguez Aff. Ex. E.)3 The forms listed Karen’s name and contact information, the
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`3 Cuando Acaba el Placer [When Pleasure Ends] tells the story of a rejected lover who
`cannot forget his past love. Corazón Partío [Broken Heart] recounts a similar story,
`culminating in the chorus, “¿Quién me va a entregar sus emociones? / ¿quién me va a
`pedir que nunca le abandone? / ¿quién me tapara esta noche si hace frío? / ¿quién me va a
`curar el corazón partío?” [“Who will give me her emotions? / Who’s going to ask me to
`never abandon her? / Who will warm me if the night is cold? / Who will heal my broken
`heart?”]. (See, e.g., Alexandre Pires, Cuando Acaba el Placer, on Exitos: Solo Para
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 6 of 18
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`names and authors of the compositions for which Karen sought licenses, and the
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`publishers that owned the rights to those compositions. (Id.) The forms further indicated
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`that the songs would be included on Mas Romantico. (Id.) In the forms’ “explanation”
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`fields, someone wrote, “Please issue and release license from 7/6/99.” (Id.) According to
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`a certificate of registration filed with the Copyright Office, Karen released Mas
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`Romantico on September 21, 1999. (Rodriguez Aff. Ex. F.)4
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`On October 2, 1999, Karen sent an identical form to Harry Fox requesting a
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`license for Fuiste Mia un Verano, which Karen intended to include on Bomba 2000. (See
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`Rodriguez Aff. Ex. J.)5 Confusingly, this form also read, “Please issue and release
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`license from 7/6/99.” (Id.) Karen first released Bomba 2000 on October 30, 1999.
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`(Rodriguez Aff. Ex. K.) It re-released the album a year later, on October 30, 2000.
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`(Rodriguez Aff. Ex. F.)
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`In the fall of 2001, Karen developed plans to release an album called Grandes
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`Exitos de Alex Bueno en Bachata (“Grandes Exitos”). (See Rodriguez Aff. ¶¶ 48-49.) In
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`connection with the album, Karen sent a fax to EMI requesting a mechanical license for
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`Usted (Sony International 2007); Alejandro Sanz, Corazón Partío, on Más (WEA Latina
`1997).)
`4 EMI claims that Mas Romantico was released in July 1999, but the only evidence it
`cites is a photocopy of the album’s artwork dated May 21, 2007. (See Bernstein Decl.
`Ex. I.) Since a certificate of registration constitutes prima facie evidence of the facts
`stated therein, 17 U.S.C. § 410(c), the Court finds that Mas Romantico was released on
`September 21, 1999.
`5 As its title suggests, Fuiste Mia un Verano [You Were Mine One Summer] tells the story
`of a summer love affair. As in Cuando Acaba el Placer and Corazón Partío, the singer
`cannot put the memory of his lost love behind him. (See, e.g., Leonardo Favio, Fuiste
`Mia un Verano, on 30 Exitos (Codisco 2007).)
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`La Colegiala on November 15, 2001. (See Rodriguez Aff. Ex. N.)6 Eleven days later, an
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`EMI employee named Frank Mercado sent a fax to Harry Fox. In part, it read:
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`Following please find a license request rate sheet issued for the above
`mentioned album [Grandes Exitos]. Kindly have a license issued for each
`title listed and sent to the attention of Ingrid Rodgers at Karen Records for
`counter-signature. Please do not place [the] licenses in to [sic] Pending.
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`(Rodriguez Aff. Ex. O.) The record contains no evidence that Karen received a copy of
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`this fax.
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`The next day, November 16, 2001, Karen faxed a form to Harry Fox requesting a
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`license for La Colegiala. (Rodriguez Aff. Ex. M.) Three features of this form
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`distinguish it from the other forms that Karen sent to Harry Fox. First, the form was
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`entitled “Request for Mechanical License.” Second, it contained a line for “publisher[’]s
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`approval” that Harry Fox never countersigned. And third, the form did not contain the
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`other forms’ “Please issue and release…” language. Grandes Exitos was released on
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`November 30, 2001. (Rodriguez Aff. ¶ 52.)
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`Throughout this entire period, Karen and Harry Fox were engaged in disputes
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`over Karen’s prior royalty payments. (See Badavas Decl. ¶¶ 26-28, 30-33, 36-39, 45, 47-
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`49, 51.) In September 1997—two years before the release of Mas Romantico and Bomba
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`2000—Harry Fox sent Karen a letter terminating its licenses for a number of
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`phonorecords not at issue here. (Badavas Decl. Ex. O.) Eight months later, two
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`copyright owners who are not a party to this action initiated a copyright infringement
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`action against Karen. (See Compl., Nicolosi v. Karen Publishing Co., No 98 Civ. 3843
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`6 In this standby, the singer attempts to attract the attention of a pretty college student.
`(See Let’s Sing It, La Colegiala Lyrics, http://artists.letssingit.com/gary-low-lyrics-la-
`colegiala-6l4zj1g (last visited Mar. 19, 2009).)
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`(WHP) (S.D.N.Y. May 29, 1998).) As part of an agreement settling that action, Karen
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`permitted Harry Fox to audit its books and records. (Badavas Decl. ¶ 29.)
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`Harry Fox conducted the audit in early 1999. (See Badavas Ex. P.) On March 13,
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`1999, its accountants, Prager & Fenton, issued a report concluding that Karen owed
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`$501,362.44 to publishers represented by Harry Fox for the period between January 1,
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`1992 and December 31, 1998. (Id. at 1.) Accountants retained by Karen disputed this
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`conclusion. (Badavas Decl. Ex. Q.)
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`After more back-and-forth between Karen and Harry Fox, EMI and another
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`publisher, Peer International Corp., initiated a second copyright infringement action
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`against Karen on June 21, 2000. (See Compl., Peer Int’l Corp. v. Karen Publ’g Co., No.
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`00 Civ. 4599 (LAP) (S.D.N.Y. June 21, 2000).) In April 2001, the parties settled that
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`lawsuit. (See Badavas Decl. Ex. Z.) The settlement agreement provided that certain
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`licenses previously issued and revoked by Harry Fox “shall be deemed restored to
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`operation and be and become binding on Karen Publishing Company and the Plaintiffs . .
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`. .” (Id. at 5, ¶ 3.) However, the plaintiffs reserved their right to terminate and revoke
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`these licenses if Karen failed to pay royalties in the future. (Id.) Meanwhile, Karen and
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`Harry Fox continued to negotiate over the amount of royalties Karen owed for January 1,
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`1992 through December 31, 1998. (See Badavas Decl. ¶¶ 47-49, 51.) They did not,
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`however, ever reach agreement.
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`Events came to a head in the fall of 2004. On October 26, 2004, Harry Fox sent
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`Karen a letter complaining that Karen had failed to pay royalties for a number of
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`compositions, including the four compositions at issue in this case. (Badavas Decl. Ex.
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`HH, at 1 & Schedule A, at 1, 3.) The letter also notified Karen pursuant to § 115 that
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 9 of 18
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`Harry Fox was terminating Karen’s licenses to these compositions. (Id., at 1.) There is
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`no evidence that Karen remedied the defaults mentioned in this letter.
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`On January 14, 2005, EMI initiated this lawsuit. After recounting the history of
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`Harry Fox’s relationship with Karen, EMI’s complaint alleged that (i) Harry Fox had
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`refused to grant Karen a licenses for La Colegiala, Corazón Partío, Cuando Acaba el
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`Placer, and Fuiste Mia un Verano (Compl. ¶ 27 & Schedule A); (ii) Karen had failed to
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`resolve its royalty payment defaults (id. ¶ 28); and (iii) Karen nevertheless continued to
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`manufacture and distribute recordings embodying those compositions (id. ¶ 31).
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`In March and April 2008, the parties moved for summary judgment. In its
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`motion, EMI argues that because Harry Fox terminated all of Karen’s licenses issued to
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`Karen in its September 1997 letter, Karen’s use of the compositions was unauthorized.
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`(Pl.’s Opening Mem. 8.) EMI further argues that nothing in the record supports a finding
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`that EMI issued implied licenses to Karen. (Pl.’s Reply Mem. 5-6, 8.) For its part, Karen
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`maintains that EMI’s action is untimely, or barred by the doctrines of laches, waiver, and
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`estoppel. (Def.’s Opp. Mem. 3-10.) Karen argues that in any event, it acquired valid
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`mechanical licenses for the four compositions at issue. (Id. at 13-14.) In its cross
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`motion, Karen moves to dismiss the complaint in its entirety.
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`II.
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`DISCUSSION
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`Both parties’ motions raise the question of whether Karen ever acquired
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`mechanical licenses for La Colegiala, Corazón Partío, Cuando Acaba el Placer, and
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`Fuiste Mia un Verano, and if so, what sales those licenses covered. Summary judgment
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`is appropriate “if the pleadings, the discovery and disclosure materials on file, and any
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`affidavits show that there is no genuine issue as to any material fact and that the movant
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`is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “An interlocutory
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`summary judgment may be rendered on liability alone, even if there is a genuine issue on
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`the amount of damages.” Fed R. Civ. P. 56(d)(2).
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`A.
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`Cuando Acaba el Placer, Corazón Partío, and Fuiste Mia un Verano
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`With respect to Cuando Acaba el Placer, Corazón Partío, and Fuiste Mia un
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`Verano, the Court concludes that Karen acquired mechanical licenses in its
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`communications with Harry Fox in July and October 1999, which terminated on
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`November 25, 2004. As a result of the termination, Karen is retroactively liable for any
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`sales of those compositions that occurred within the limitations period for which it did
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`not pay a statutory royalty.
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`1. Acquisition
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`First, acquisition. As suggested above, see supra pp. 5-6, Karen’s
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`communications with Harry Fox in July and October 1999 substantially complied with
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`the requirements of 17 U.S.C. § 115(b) and 37 C.F.R. § 201.18. Karen therefore acquired
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`mechanical licenses to Cuando Acaba el Placer, Corazón Partío, and Fuiste Mia un
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`Verano by operation of law.
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`True, Karen’s form requests did not comply with § 201.18’s requirements to the
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`letter. They were not, for example, signed by “a duly authorized officer or agent of the
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`corporation,” § 201.18(e)(1), nor were they entitled “Notice of Intention to Obtain a
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`Compulsory License for Making and Distributing Phonorecords,” § 201.18(d). But as
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`already noted, such errors are not fatal to a notice unless they “materially affect[ed] the
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`adequacy of the information required to serve the purposes of [17 U.S.C. § 115(b)].”
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`37 C.F.R. § 201.18(g). Karen’s notices clearly indicated its intent to acquire mechanical
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`licenses to EMI’s works, specifically identified the compositions it sought licenses for (as
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 11 of 18
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`well as the albums those compositions would appear on), and identified Karen with
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`enough specificity for EMI to easily enforce its rights (witness this suit). The purposes of
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`§ 115(b) were served.
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`EMI’s only objection to this conclusion is that Harry Fox precluded Karen from
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`acquiring mechanical licenses for its compositions in the letter it sent in September 1997.
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`(See Pl.’s Opening Mem. 7-8; Badavas Decl. Ex. O.) In particular, EMI argues on the
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`basis of the September 1997 letter that Harry Fox “imposed a ‘license hold’ on the Karen
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`account so that no new licenses could be issued.” (Pl.’s Opening Mem. 8 (emphasis
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`added).) This argument is flawed as a matter of law and fact.
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`To begin with, there is some question whether a copyright owner may
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`prospectively withhold mechanical licenses based on a licensee’s past failure to pay
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`royalties. In Peer International, for instance, the Ninth Circuit noted that the plaintiffs
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`before it could not prevent the defendants from obtaining licenses to works not subject to
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`an earlier revocation, “[b]ecause the plaintiffs’ copyrighted works are governed by the
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`compulsory licensing provisions of section 115(c) . . . .” 909 F.2d at 1334.
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`The Court need not address the general question of whether a copyright owner
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`can prospectively prohibit a licensee from taking advantage of § 115(b), however,
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`because Harry Fox’s September 1997 letter does not show nearly as much as EMI claims.
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`The letter does not indicate that a “license hold” has been placed on Karen’s account; and
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`it only purports to terminate “the aforesaid licenses with respect to the phonorecords set
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`forth in such schedules.” (Badavas Decl. Ex. O, at 1.) Thus, even assuming a copyright
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`owner or its agent may prospectively place a “hold” on a licensee’s ability to obtain
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`mechanical licenses under § 115—a position for which there is little support in the
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`statutory text—Harry Fox’s letter failed to do so.
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`EMI does not raise the point, but it might also be argued that Karen could not
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`acquire a mechanical license from Harry Fox, because EMI controlled the copyrights at
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`issue. See 17 U.S.C. § 115(b) (“Any person who wishes to obtain a compulsory license
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`under this section shall . . . serve notice of intention to do so on the copyright owner.”
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`(emphasis added)). This distinction makes no difference, however, because Harry Fox
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`acted as EMI’s licensing agent at all relevant times. (See, e.g., Badavas Decl. ¶ 1
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`(“Although HFA is not a party to this action, it has acted as EMI’s authorized agent at all
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`times relevant hereto.”); id. ¶ 6 (“HFA serves as a ‘one stop shop’ for most mechanical
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`licensing in the United States; it collects and distributes royalties to its publisher-
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`principals for the sale of licensed recordings.”). Under basic principles of agency law,
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`Karen’s notice of intent was effective as to EMI. See Restatement (Third) of Agency,
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`§ 5.02 (2006) (“A notification given to an agent is effective as notice to the principal if
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`the agent has actual or apparent authority to receive the notification . . . .”); § 5.03 (“For
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`purposes of determining a principal’s legal relations with a third party, notice of a fact
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`that an agent knows or has reason to know is imputed to the principal if knowledge of the
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`fact is material to the agent’s duties to the principal . . . .”).
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`2. Termination
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`The next question is the scope of the licenses Karen acquired. As noted,
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`§ 115(c)(6) provides that if a licensee fails to pay statutory royalties, the copyright owner
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`may terminate the licensee’s license by providing thirty days notice of its intent to do so.
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`Here, the clock started running with Harry Fox’s October 26, 2004 letter, which expressly
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`notified Karen that (i) it was in default on its royalty payments and (ii) Harry Fox was
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`terminating the licenses at issue in this lawsuit. (Badavas Decl. Ex. HH, at 1.) There is
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`no evidence that Karen attempted to cure its defaults within the thirty days following
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`EMI’s letter. Thus, Karen’s licenses to Cuando Acaba el Placer, Corazón Partío, and
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`Fuiste Mia un Verano terminated on November 25, 2004.
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`The effect of this termination is specified by statute: the termination “render[ed]
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`either the making or the distribution, or both, of all phonorecords for which the royalty
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`has not been paid, actionable as acts of infringement.” § 115(c)(6). Accordingly, with
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`respect to these three compositions, Karen is liable as an infringer for all sales that
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`occurred within the limitations period for which it did not pay Harry Fox or EMI a
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`statutory royalty.
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`B.
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`La Colegiala
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`The Court next turns to La Colegiala. The form Karen faxed to Harry Fox for
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`this song differed in important ways from the forms it sent to Harry Fox for Cuando
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`Acaba el Placer, Corazón Partío, and Fuiste Mia un Verano. Unlike the earlier forms,
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`the La Colegiala form explicitly requested a license. Furthermore, it did not contain the
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`earlier forms’ “Please issue and release…” language, and thus never expressed a clear
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`intent to make use of La Colegiala. The Court concludes that as a result of these
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`differences, Karen never acquired a license for this composition.
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`Karen does not contest this point. But it argues, citing Frank Mercado’s fax to
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`Harry Fox, that EMI is estopped from asserting that a license never issued. This
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`argument is unavailing, since there is no evidence that Karen received EMI’s fax before
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`this litigation. Reliance, which is an element of estoppel, presupposes knowledge. Lottie
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 14 of 18
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`Joplin Thomas Trust v. Crown Publishers, Inc., 456 F. Supp. 531, 535 (S.D.N.Y. 1977)
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`(Cannella, J.), aff’d 592 F.2d 651 (2d Cir. 1978).
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`Section 106 of the Copyright Act grants a copyright owner the exclusive right “to
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`distribute copies or phonorecords of the copyrighted work to the public by sale or other
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`transfer of ownership, or by rental, lease, or lending,” or to “authorize” a third party to do
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`so. 17 U.S.C. § 106(3). And § 501 provides that “[a]nyone who violates any of the
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`exclusive rights of the copyright owner as provided by sections 106 through 122 . . . is an
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`infringer of the copyright or right of the author, as the case may be.” 17 U.S.C. § 501(a).
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`Since Karen never acquired a valid license to La Colegiala, any sales of that composition
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`which occurred within the limitations period infringed EMI’s copyright.
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`C.
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`Karen’s Remaining Defenses
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`With this understanding of the scope of Karen’s licenses in mind, the Court turns
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`to Karen’s remaining defenses.
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`1. Statute of Limitations
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`First, Karen contends that the statute of limitations bars EMI’s action in all
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`respects. (Def.’s Opp. Mem. 6-7.) Specifically, Karen contends that because EMI was
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`aware that Mas Romantico, Bomba 2000, and Grandes Exitos made use of its
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`compositions, EMI’s cause of action accrued when those albums were released in 1999
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`and 2001. In addition, Karen contends that there is “absolutely no evidence to suggest
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`that Karen had re-released or redistributed the Subject Recording within three years of
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`the filing of the Complaint.” (Def.’s Opp. Mem. 6.)
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`These arguments rest on misunderstandings of law and fact. Under § 507(b) of
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`the Copyright Act, an action for infringement must be brought “within three years after
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`the claim accrued.” While courts in this Circuit do not apply the “continuing wrong”
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 15 of 18
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`theory associated with Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983), they do
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`recognize that “[e]ach act of infringement is a distinct harm giving rise to an independent
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`claim for relief.” Stone v. Williams, 970 F.2d 1043, 1050 (2d Cir. 1992); see, e.g.,
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`Auscape Int’l v. Nat’l Geographic Soc’y, 409 F. Supp. 2d 235, 241 (S.D.N.Y. 2004)
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`(Kaplan, J.). It follows that while Karen is not liable for its initial release of Mas
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`Romantico, Bomba 2000, and Grandes Exitos, it is liable for sales of those albums that
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`occurred during the limitations period.
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`Furthermore, the record does contain evidence that such sales occurred. In
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`particular, the record contains an accounting produced by Karen which shows that Karen
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`received revenue for three of the four compositions at issue in this lawsuit through 2005.
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`(See Badavas Decl., Ex. JJ. at 76-77 (noting first quarter 2005 sales of Cuando Acaba el
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`Placer, Corazón Partío, and La Colegiala).) Karen has introduced no evidence that this
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`revenue was anything but the result of direct sales. Thus, the Court rejects Karen’s
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`argument that the statute of limitations bars EMI’s action in toto.
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`2. Waiver
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`Karen next argues that EMI has waived any infringement claim against it based
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`on the four compositions in suit, because EMI (i) initiated and settled another lawsuit
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`against Karen involving a different version of La Colegiala, and (ii) accepted royalties
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`for Mas Romantico in 2001 after consulting with counsel. (See Def.’s Opp. Mem. 8-10.)
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`The defense of waiver generally requires a showing that the plaintiff intentionally
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`relinquished a known right. See Capitol Records, Inc. v. Naxos of Am., Inc., 372 F.3d
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`471, 482 (2d Cir. 2004) (“[A] claim of waiver requires proof of an ‘intentional
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`relinquishment of a known right with both knowledge of its existence and an intention to
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`relinquish it.’” (applying New York law)). Nothing in the agreement settling the earlier
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 16 of 18
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`litigations shows that EMI intended to relinquish its right to sue Karen in the future. (Cf.
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`Badavas Decl. Ex. Z, at 5 (reserving EMI’s rights in the event of continued accounting
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`defaults).) And of course, EMI’s acceptance of checks in 2001 did not waive its right to
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`sue for infringement that did not occur until three years later. The Court rejects Karen’s
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`waiver defense.
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`3. Laches
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`Lastly, Karen argues that EMI’s action is barred by laches, since “[EMI] delayed
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`six years from the date it received notice of Karen’s intent to use the first two subject
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`compositions and the request for license to object to or ‘deny’ the license.” (Def.’s Opp.
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`Mem. 7.) Assuming the defense is available in copyright infringement actions, see Zitz v.
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`Pereira, 119 F. Supp. 2d 133, 142 (E.D.N.Y. 1999) (Boyle, M.J.), EMI did not
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`unreasonably delay initiating this lawsuit. The record shows a history of on-again, off-
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`again negotiations between Karen and Harry Fox that lasted from 1997 until 2005. (See,
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`e.g., Badavas Decl. ¶¶ 30, 51, 60.) Given the cost of litigation in the federal courts,
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`seeking a negotiated solution before filing suit is far from unreasonable. Oracle Real
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`Estate Holdings I LLC v. Adrian Holdings Co. I, LLC, 582 F. Supp. 2d 616, 634
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`(S.D.N.Y. 2008) (Holwell, J.).
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`D.
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`Damages
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`Arguing that Karen’s infringement of its copyrights was willful, EMI requests
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`statutory damages of $150,000 for each act of infringement that occurred within the
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`limitations period. In addition, EMI seeks to hold Bienvenido Rodriguez and Isabel
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`Rodriguez, Karen’s two principals, personally liable for any infringement committed by
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`Karen. The current record, however, does not indicate with any certainty how many
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`infringing sales occurred during the periods the Court has identified. In view of the
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 17 of 18
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`settled principle that “statutory damages cannot be divorced entirely from economic
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`reality,” Yurman Studio, Inc. v. Castaneda, No. 07 Civ. 1241 (SAS), 2008 WL 4949775,
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`at *3 (S.D.N.Y. Nov. 19, 2008) (Scheindlin, J.), the Court directs the parties to make
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`supplemental submissions addressing the actual number of infringing sales that occurred
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`within the periods the Court has identified. If the parties’ submissions show continuing,
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`genuine factual disputes as to this issue, the Court will set the case for trial; if not,
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`summary judgment will be entered.
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`Case 1:05-cv-00390-LAP-JCF Document 90 Filed 03/30/09 Page 18 of 18