Lying is Still Bad

In the long fought BitTorrent infringement case of Malibu Media v. Tashiro, (S.D. Indiana) the court appears to be close to closing this case with a resolution in favor of Malibu Media. As with just about every other case that has gone through substantive proceedings, the results appear to be either a finding of infringement, or defendants who lie and destroy evidence, resulting in a verdict in favor of the plaintiff.

This case, fought longer and harder than most, has resulting in a few extra points, one being with respect to a long fight about Plaintiff’s expert Patrick Page and efforts to discredit Mr. Paige. Curiously, these seem to have backfired as the court found Plaintiff’s expert Mr. Paige more credible than the expert offered by Defendants.

Based on the relative credentials of the parties’ experts, the Court concludes that Patrick Paige’s testimony is more accurate and more credible. As such, the Court finds it highly likely that thousands of files were deleted and were unrecoverable. This confirms that Defendant Charles did not temporarily delete relevant evidence; instead, he permanently destroyed that evidence. As a result, Charles is liable for spoliation.

But the real substance of this case relates to a husband and wife who the court found lied and destroyed evidence. Much has been written on this case about the lack of evidence, but the heart of the case deals with why the evidence was missing. As summarized by the Court:

Discovery in the federal system is intended “make a trial less a game of blind man’s bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent.” United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958) (emphasis added). The rules governing discovery contemplate that parties will “obtain the fullest possible knowledge of the issues and facts before trial,” such that “civil trials in the federal courts no longer need be carried on in the dark.” Hickman v. Taylor, 329 U.S. 495, 501 (1947).

[Defendant’s] conduct is simply not consistent with these principles. By deleting files from the Stover drive, [Defendant] chose to conceal—not disclose—potentially relevant information. And by doing so, [Defendant] deprived Plaintiff of the ability to gain the “fullest possible knowledge” of the facts relevant to Plaintiff’s underlying copyright claim. [Defendant] thus flouted the important principles underpinning litigation carried on before this Court and other courts in the federal system, and his decision to do so cannot go unpunished.

In this case it was more than just the husband that got in trouble, but the Court specifically found the wife at fault as well.

[Defendant Wife’s] own testimony thus demonstrates that she repeatedly failed to discharge her duty to reasonably investigate whether her discovery responses were complete and accurate, and sanctions against [Defendant Wife] are therefore appropriate.

Additionally, [Defendant Wife’s] failure to investigate was especially egregious in light of her attorney’s representations to the contrary. … These misrepresentations are hardly consistent with a party’s duties to investigate and disclose relevant facts, confirming that sanctions against [Defendant Wife] are appropriate.

In essence, the court found the husband-wife team acted together on many fronts and they were liable for the bad acts of the other.  Protecting a family member may seem like a good idea, there are consequences when doing so involves lying or hiding evidence.

Based on these considerations, the Court concludes that the [Defendants] have the sort of “close family relationship,” Sebastian, 2008 WL 2875255, at *33, that would support extending a Fifth Amendment adverse inference from one party to another. Thus, when Plaintiff’s counsel asked whether [Defendant] had agreed with his wife to hide the truth in this case, the Court may infer that [Defendant] refused to answer not only to protect himself, but also to protect his wife.

And while the court found also fault with the Defendants’ attorney, he managed to escape without sanctions.

[Defendant’s attorney’s] conduct in this case borders on sanctionable. …. In these circumstances, the Court will exercise its discretion to refrain from sanctioning [Defendant’s attorney].

In summation, the court found the Defendants guilty of perjury with respect to hiding evidence, hiding hard drives and lying about the use of BitTorrent and directed that both husband and wife be found liable under Plaintiff’s claims.

Here, the Court finds by clear and convincing evidence that Defendants have engaged in a similar pattern of misconduct. Defendants spoiled evidence, committed perjury, and failed to discharge their duties to conduct discovery reasonably and in good faith. They lied to the opposing party; they withheld the existence of material evidence; and they deleted potentially damaging computer files the very night before they were to relinquish such files for discovery. Just as in the cases cited above, this extensive pattern of conduct warrants the harshest of sanctions, and the Magistrate Judge accordingly recommends that the Court enter default judgment against both Defendants.

Based on the long record of this case and likely hundreds of thousands in attorney fees, this may result in one of the most significant awards against defendants in any BitTorrent litigation.


The case and relevant opinion: Malibu Media, LLC v. Tashiro, et al. 1:13-cv-00205, (S.D. Indiana, May 18, 2015)


Two Strikes Against “Troll Slayer”

In the closely watched case of Blaha v. Rightscorp, a prominent self-proclaimed “troll slayer” took on copyright enforcement firm Rightscorp and tried to argue that enforcing U.S. Copyright Law against those who commit theft was an abuse of process.

According to the class action complaint:

Rightscorp describes itself to investors as a “leading provider of monetization services” for copyright owners. Rightscorp’s business model involves using federal legal process and the threat of statutory damages for copyright infringement to engage in what some call “speculative invoicing” of consumers who it accuses of having engaged in file sharing.

The Plaintiff attempts to bring a class action on behalf of all those caught infringing on two basis, the first being for abuse of process, summarized in the complaint as:

To identify potential consumers to target, Rightscorp has willfully misused this Court’s subpoena power by issuing at least 142 special DMCA subpoenas, per 17 U.S.C. § 512(h), to various Internet Service Providers (“ISPs”). These subpoenas, which were issued on this Court’s authority, but procured outside of an adversarial proceeding and without any judicial review, are so clearly legally invalid as to be a sham and abuse of the legal process.

The second claim is related to the use of “robo-calls” made to identified infringers.

This action is pending in the Central District of California, a jurisdiction well known for being strict and firm in its protections against abusive copyright enforcement.

In defense, Rightscorp argued that under California’s anti-SLAPP law, which protects against abusive litigation, their actions were not only lawful, but legitimate in enforcing copyrights against acts of theft. (SLAPP stands for Strategic Lawsuits Against Public Participation.) In essence, in this case a “troll slayer” accused Rightscorp of abusive litigation in the enforcement of copyrights against Internet pirates and Rightscorp countered with the claim that it was in fact the “troll slayer” that was litigating in an abusive manner and moved to strike Plaintiff’s claim under California’s anti-SLAPP law.

The court agreed with Rightscorp.

There is no question that the complained of conduct [by Rightscorp] satisfies the first prong of the anti-SLAPP statute. The entire claim is based on [Rightscorp’s] representations to various federal courts in order to convince those courts to issue subpoenas. This kind of action is specifically defined as protected action by § 425.16(e).

The court went on to affirm that while it was clear the Plaintiff and their counsel did not approve of Rightscorp’s enforcement of copyrights against pirates, simply not liking the law was not enough.

The first fatal deficiency in Plaintiff’s abuse of process claim is that Plaintiff raises no ulterior motive in [Rightscorp’s] use of the subpoenas….there is no allegation and no evidence that [Rightscorp] sought to do anything other than what their subpoena requests indicated – identify potential copyright infringers for the purpose of pursuing Defendants’ rights under the Copyright Act.

* * *

The second fatal deficiency in Plaintiff’s claim is that it is barred by the California litigation privilege…. Plaintiff provides no argument why those communications to the various courts in acquiring the subpoenas do not satisfy the four part test quoted above, perhaps because they obviously do.

The court summarily concluded with the biggest sting in the case:

The motion to strike is GRANTED. Attorney’s fees and costs must be awarded under California Code of Civil Procedure § 425.16(c) and are granted subject to a properly noticed motion as to amount.

With a refrain of “I fought the law and the law won” (the Clash) playing quietly, a “troll slayer” must now pay.

In another motion, there was an attempt to bring in the attorney or “General Counsel” of Rightscorp as a member of the company’s “management.” The court dismissed this defendant finding:

There is no evidence that [General Counsel] was involved in any specific acts directed toward any of the class members in California. … Plaintiff has demonstrated nothing more than that [General Counsel] provides general intellectual property advice to Rightscorp, which happens to be based here. And while Rightscorp has taken certain measures in California, there is no evidence – or even an allegation – that [General Counsel’s] advice is somehow California-specific rather than advice that applies throughout the United States…. In short, [General Counsel’s] connection to California solely through his client, Rightscorp, is the kind of fortuitous contact with a forum that does not provide the kind of substantial connection with the forum needed for the exercise of personal jurisdiction.

With one claim gone, and a defendant dismissed, Rightscorp still faces a surviving claim directed at its use of “robo-calls” to infringer.  But they face this claim with an award of attorneys fees from the Plaintiff.

The case is John Blaha v. Rightscorp, Inc., et al., 2:14-cv-09032, Central District of California, (Judge Dale S. Fischer).

Relevant documents:

John Blaha v. Rightscorp, Inc., et al., 2:14-cv-09032, Dkt. 71 (C.D. Cal, May 8, 2015) – Order striking Plaintiff’s claim and awarding fees.

John Blaha v. Rightscorp, Inc., et al., 2:14-cv-09032, Dkt. 72 (C.D. Cal, May 8, 2015) – Order dismissing defendant



President’s 301 Report Calls For Stronger Copyright and Trademark Protections

The 2015 Special 301 Report on the state of intellectual property rights (“IPR”) has few surprises. In general, it calls for more and stronger protections and recognizes globalization needs to be addressed. As per the summary:

This Report reflects the Administration’s continued resolve to encourage and maintain adequate and effective IPR protection and enforcement worldwide. The Report identifies a wide range of concerns, including: (a) the deterioration in IPR protection, enforcement, and market access for persons relying on IPR in a number of trading partners; (b) reported inadequacies in trade secret protection in China, India, and elsewhere, as well as an increasing incidence of trade secret misappropriation; (c) troubling “indigenous innovation” policies that may unfairly disadvantage U.S. rights holders in China; (d) the continuing challenges of online copyright piracy in countries such as Brazil, China, India, and Russia and trademark counterfeiting in China and elsewhere; (e) market access barriers, including nontransparent and discriminatory measures, that appear to impede access to products embodying IPR and measures that impede market access for U.S. entities that rely upon IPR protection; and (f) other ongoing, systemic IPR enforcement issues in many trading partners around the world.

There are a few interesting insights. Under a review of digital piracy, the report notes:

[P]iracy over the Internet has become the priority copyright enforcement issue… The availability of, and recourse by rights holders to enforcement procedures and remedies is a critical component of the online ecosystem. … Governments should avoid creating a domestic environment that offers a safe haven for piracy on the Internet.

The report then goes on to call out Switzerland specifically which recently exempted private use downloading of content from copyright enforcement and states:

The United States strongly urges Switzerland to demonstrate its commitment to provide robust copyright protection and to combat online piracy by taking concrete steps to ensure that rights holders can protect their rights.

And there is a notable reference to increased problematic criminal activity in Switzerland with the opening of the gates to private level piracy, which is no surprise.  If you freely allow unlimited minor theft on a large scale, the proverbial “million tiny cuts” eventually become lethal.

The report also brings up two very interesting points with respect to globalization and IPR. There is a relation of the importance of IPR and the environment:

Strong IPR protection and enforcement are essential to promoting investment in innovation in the environmental sector. Such innovation not only promotes economic growth and supports jobs, but also is critical to responding to environmental challenges. IPR provides incentives for R&D in this important sector, including through university research. Conversely, inadequate IPR protection and enforcement in foreign markets discourages entry into technology transfer arrangements in those markets. This may hinder the realization of the technological advances needed to meet environmental challenges, including the mitigation of, and adaptation to, climate change.

And there is a relation of the importance of the social impact of IPR and health:

IPR protection plays an important role in providing the incentives necessary for the development and marketing of new medicines. An effective, transparent, and predictable IPR system is necessary for both manufacturers of innovative medicines and manufacturers of generic medicines.

In summary, the report presents a picture that calls for stronger protections of intellectual property rights, accountability for countries, and outlines that stronger protections further the interests of all parties economically, environmentally and socially.


For Full Text: 2015 Special 301 Report



More than you can chew

Mass tort litigation can promote judicial economy and efficiency in managing cases. As often quoted, the purpose of joinder is “to promote trial convenience and expedite the final resolution of disputes, thereby preventing multiple lawsuits, extra expense to the parties, and loss of time to the court as well as the litigants appearing before it.” West Coast Productions, Inc. v Does 1–5,829, 275 FRD 9, 15 (DDC 2011)

However, with great cases comes great responsibility. In the pending We 3 Kings, Inc. v. The Steve Harvey Show, et al. case the plaintiff complained that The Steve Harvey Show incorporated cue music in its production without a license. Rather that bring suit against the production company and distributor, plaintiff named each TV station that aired the show, for a total of over 200 defendants. This action also listed each time the music was used in the entire season, 268 times, and claimed $700 in damages for each use against each TV station individually for a total of 225 x 268 x $700 or $42,000,000+. (Note, the case claims $42,310,000 not $42,210,000, which may simply be a math error, or may incorporate additional defendants.)

One thing plaintiff seemed to have overlooked is that this case actually has over 200 defendants. Each defendant is a party to the case and more than simply a number in a damages calculation. When faced with the massive task of serving 200+ defendants, the plaintiff failed to follow through and effect service and then failed to dismiss the outstanding defendants. (There are other indications that the attorneys for plaintiff were non-responsive and generally failing to follow through on a number of issues.) In March 2015, well after the deadline for all defendants to be served, several of the defendants who had been served filed a motion to dismiss the balance of the parties.   The court then on its own issued a Show Cause Order demanding an explanation from the plainitff.

The result was predictable. As per the court order:

On April 13, 2015, Plaintiff and its counsel were ordered to show cause why they should not be sanctioned in the amount of $1,000 for (1) their unnecessary joinder of an extremely large number of defendants whom they apparently had no interest in pursuing in this Court and (2) their failure to respond to either the motion to dismiss or the Court’s OSC. Plaintiff’s response states only that Plaintiff is seeking new counsel and finding new counsel is taking longer than expected. For reasons left to the imagination, Plaintiff – or at least its counsel – seems to believe that this explains the failure to serve the extremely large number of defendants who were named in this case. It does not. In addition, the response fails to offer any reason for Plaintiff’s failure to respond to the motion and the OSC or for its joinder of numerous defendants it has failed to serve.

Plaintiff and its counsel are therefore sanctioned, jointly and severally, in the amount of $1,000. This amount is to be paid to the Clerk of Court no later than May 4, 2015. Counsel must file a declaration no later than May 5, 2015 stating that the sanctions have been paid.

– Order of April 24, 2015

A few things to keep in mind on this case:

– This is a $1,000 sanction in a multi-million dollar case. Copyright liability is strict and it is likely the defendants will eventually pay the plaintiff far more than this sanction of the court.

– The real lesson here: joinder may make cases more efficient, but it does not make them easy. With great cases comes great responsibility… and a lot of work. You still have to do the work.

Key documents:

The complaint: We Three Kings v. The Steve Harvey Show et al., 2:14-cv-08816, (C.D. Cal.)

April 24, 2015 Order of Judge Dale S. Fisher, 2:14-cv-08816, (C.D. Cal.)

Internet Subscriber Liability For BitTorrent Use

In a default judgment opinion, Judge Robert M. Dow, Jr., carefully scrutinized and questioned plaintiff’s motives and actions. After reviewing a number of the criticisms against BitTorrent infringement claims the Judge concluded:

Plaintiff, however, does more than merely identify Defendant as the account holder at the relevant IP address. It also offers evidence linking that IP address to bit-exchanges involving hundreds of digital media files in just three months. Taken together, these facts plausibly suggest that Defendant—the controlling account holder of an IP address associated with frequent BitTorrent use—is the infringing user. See Malibu Media, LLC v. Doe, 2015 WL 857408, at *4 (D. Md. Feb. 26, 2015) (“That the Defendant’s IP address was used to obtain 2,034 other third party files through BitTorrent over an 18–month period supports the reasonable inference that the Defendant-and not some other person using the Defendant’s IP address—was the infringer.”). The Court therefore finds a plausible claim of direct copyright infringement.

The court went on to find that even if the infringer was not the defendant, the defendant was still liable as the subscriber finding:

Plaintiff also states a plausible claim for contributory copyright infringement. “A defendant is liable for contributory copyright infringement when it with knowledge of the infringing activity, induces, causes, or materially contributes to the infringing conduct of another.” Monotype Imaging, Inc. v. Bitstream, Inc., 376 F. Supp. 2d 877, 883 (N.D. Ill. 2005) (citations and internal quotation marks omitted); see also PHE, 2014 WL 1856755, at *2.

And while declining to find willful infringement, contra Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 702 (9th Cir. 2008)(In a default, “all factual allegations in the complaint are deemed true, including the allegation of [] willful infringement …”) the court did award all costs and fees and entered an injunction against the defendant and awarded plaintiff $11,525.00.

Once again the courts continue to extend liability for BitTorrent infringement to the account holders and subscribers.  The lesson: If you pay the bill, make sure no one is using BitTorrent.

The full opinion is: Malibu Media v. Funderburg, 1:13-cv-02614, N.D. Ill. (April 24, 2014)

### UPDATE:  On review of the Amended Complaint it appears the Judge’s finding of contributory infringement was not plead by plaintiff.  The Judge appears to have brought an alternative finding of contributory infringement to this opinion on their own based on the evidence.

The filed Amended Complaint is: Amended Complaint : Malibu Media v. Funderburg, 1:13-cv-02614, N.D. Ill.

A case where a motion for default is granted in part & denied in part

Riding Films Inc. (Plaintiff) Versus 129-193 John Does (Defendants)

In determining whether to enter judgment by default, courts often consider the following factors:

• the amount of money potentially involved;
• whether material issues of fact or issues of substantial public importance are at issue;
• whether the default is largely technical;
• whether plaintiff has been substantially prejudiced by the delay involved;
• and whether the grounds for default are clearly established or are in doubt.

The court may also consider;

• how harsh an effect of a default judgment might have
• or whether the default was caused by a good faith mistake or by excusable or inexcusable neglect on the part of the defendant

Defaulting defendant – considered to have admitted all the well-pleaded allegations relating to the liability. To succeed in this case,

Plaintiff must prove valid ownership of the motion picture copyright.

Defendant must be proven to have violated on or more of plaintiff’s exclusive rights (e.g. by copying and distributing plaintiffs copyrighted movie picture without authorization).

However, only within court’s discretion will the default judgment be granted and not through mere determination of the liability of the defendant.

In the Dawn Rider case, the factors militate in granting default judgment’s favour. Recommendation for the plaintiff’s motion for default judgment be granted in part and denied in part. The defendant James McLean;

Permanently Enjoined

– from directly or indirectly infringing plaintiff’s copyrighted works


– to destroy all copies of Dawn Rider from his hard drive to any physical device in his possession where he may have transferred it to

Read the full report below:

Report & Recommendation on Mtn. for Default against J. Mclean

Review calculates statutory damages per infringement via BitTorrent protocol

OHIO – Plaintiff TCYK LCC filed two separate lawsuits against Does 1-47 and 48-98 for allegedly violating copyright laws by downloading and sharing plaintiff’s motion picture, The Company You Keep, via BitTorrent protocol. One of the IP addresses was traced to one Joe Snodgrass and another to one Charles Ghent. Judge Marbley presided over the cases.

In the Snodgrass case, TCYK LLC initially sought $150,000 in statutory damages. Nonetheless, the Court owns the substantial discretion to set the statutory damages within the allowable range, guided by certain variables:

“When determining the proper amount of statutory damages, courts have looked to: (1) whether defendants’ infringement was willful, knowing, or innocent; (2) defendants’ profit from infringement; (3) plaintiffs’ loss from infringement; and (4) deterring future violations by defendants and similarly situated entities.

The facts of this case do not justify plaintiff’s requested award. Although the entry of his default has established a copyright infringement by defendant, it is not necessarily the case that defendant was the original user who made plaintiff’s work available to the public. Moreover, there is no evidence that defendant profited from the infringement. The nature of BitTorrent is such that defendant would not likely have reaped any profit from his participation in the infringement of plaintiff’s copyright except for the amount that defendant saved by illegally downloading the motion picture.”

In both cases, the Court held that an award of $6,000 in statutory damages properly answers for the plaintiff’s loss, the defendant’s gain, and the public’s appeal to deter future copyright violations as “in the vast majority of [cases involving intentional copyright infringement by use of BitTorrent or other file sharing protocols], courts have found damages of no more than $6,500 per infringement to be sufficient compensation for the injured copyright holder.”

Motion for Default Filed for “The Company You Keep” Copyright Infringement

Failure to respond is almost always the reason behind a default judgment in courts, and this is exactly what happened to Richard Williams when TCYK, LLC filed a motion for default against him for downloading and sharing the motion picture, The Company You Keep, via BitTorrent.

Although 20 defendants were caught downloading the said movie at a specific time and date, Williams was filed with a motion for default for failing to plead or defend as required by law.


Part of the Report and Recommendation file dated January 8, 2015 says: “Plaintiff seeks $150,000 in statutory damages, $5,101.25 in attorneys’ fees, and $405.01 in costs; Plaintiff also asks that the Court permanently enjoin defendant Williams from infringing, directly or indirectly, Plaintiff’s copyrighted works.”


The Plaintiff sought damages because “defendant’s conduct was wilful, because a maximum award will deter others, and because Plaintiff and the motion picture industry have suffered real and significant harm.” However, the court still had to determine the proper amount of statutory damages according to different factors.


As a conclusion, the Plaintiff sought a permanent injunction that would “prohibit defendant’s use of the internet to reproduce or distribute Plaintiff’s motion pictures without license or express permission,” as well as to destroy all copies of The Company You Keep downloaded motion picture “onto any computer hard drive or server or transferred onto any physical medium or device in defendant’s possession, custody, or control.” The United States District Court of Ohio (Southern District) also concludes that aside from the statutory damages, the “Plaintiff is entitled to attorneys’ fees and costs, pursuant to 17 U.S.C. § 505, in the total amount of $1,905.01.”

Piracy = Jail Time

Civil enforcement of piracy gets a lot of press coverage, but one thing that needs to be kept in mind is there are both civil claims for copyright infringement and criminal penalties. Though rarely enforced, mainly due to a lack of resources, piracy can lead to jail time.

On the dockets right now in the United States there are several such cases, one being U.S. v. Brown. 14-CV-00080, N.D.Iowa. Based on court documents, Mr. Brown was caught with about 1,500 copies of movies and about 500 songs, all in violation of U.S. Copyright Law. He was charged under 18 USC 2319, which provides for five years in prison for a first offense.

It appears that in August of 2014, Mr. Brown plead guilty and is awaiting sentencing.  While not clear from public documents, it also appears the recommendation is for one year but a petition has been filed by Mr. Brown’s attorney for a reduced sentence.

Whether Mr. Brown goes to prison for 5 years, 1 year, or 6 months, as per Mr. Browns’ attorney’s request for leniency, “Let us not forget that as a result of this conviction Mr. Brown is now a felon and has lost countless rights and privileges as a result.”

Sentencing is currently set for July 16, 2015.

Relevant Documents:

U.S. v. Brown. 14-CV-00080, N.D.Iowa.–Information Complaint

U.S. v. Brown. 14-CV-00080, N.D.Iowa.–Recommendation on Guilty Plea

SoundExchange v. Muzak

On the Internet there is no shortage of stories about how little artists make off their music. Many notable Grammy winning artists make pennies per year for prominently played songs. Iggy Pop recently lamented, “If I had to depend on what I actually get from sales I’d be tending bars between sets. I mean honestly it’s become a patronage system.”

Music licensing and royalties are complex. Few people understand them. But in what almost reads like an April Fool’s parody, on April 1, 2015, the lawsuit SoundExchange v. Muzak shed a little light on why we are where we are.

First lets look at who is who in this case. From the Complaint:

1.  Defendant Muzak, LLC (“Muzak”) is the provider of one of the earliest digital music offerings in the United States – the “DishCD” offering provided to consumers as part of Dish satellite television packages. As such, Muzak was one of the first users of the Copyright Act’s “statutory license” to make digital transmissions of sound recordings. When Congress significantly revised that statutory license in 1998, it granted Muzak the special privilege of using copyrighted sound recordings at “preexisting subscription service” royalty rates that had been set below fair market value.

8. … SoundExchange is the sole entity in the United States designated by the Copyright Royalty Judges to collect digital performance royalties from statutory license users and to distribute those royalties to performing artists and copyright owners. Specifically, SoundExchange is charged by statute and regulation with administering the statutory license….

The parties defined, one thing stands out – Muzak and SoundExchange have a special place in the hearts of their Congressmen. How much better can it get than to have custom laws just for you?

Then there are the details of the dispute (abridged):

11.  As an alternative to having every music service negotiate separate licenses with every copyright owner, Congress has granted various eligible entities the ability to obtain a “statutory license,” 17 U.S.C. §§ 112(e), 114(d)(2), … This license allows eligible entities … to reproduce and publicly perform all commercial sound recordings without fear of copyright infringement.

14.  In October 1998, Congress passed the Digital Millennium Copyright Act…Among other things, the DMCA put in place a new royalty rate standard … digital audio transmissions must be set to reflect those that “would have been negotiated in the marketplace between a willing buyer and a willing seller.” …

15.  The DMCA created an exception, however, for … “preexisting” subscription services (“PSS”) that were in operation prior to the DMCA’s passage…[such as Muzak].

16.  PSS are not subject to the willing buyer/willing seller standard codified in § 114(f)(2)(B)….

19.  Congress’s purpose in grandfathering the PSS under the pre-DMCA statutory license provisions – including the pre-DMCA standard for setting royalty rates – was “to prevent disruption of the existing operations by such services.”…

To sum this up, SoundExchange has a sweetheart deal where everyone must pay them for music that gets played. Artists generally can’t negotiate what they want, but are subject to a “statutory license” rate set by the government.  Certain PSS’s (like Muzak) get a special side deal that instead of paying the rate of a “willing buyer/willing seller,” (decided by the government… not the artists) they pay an even lower rate.

At this point you can probably guess that the dispute is about SoundExchange wanting more money from Muzak. But I think there are bigger problems revealed in this case, such as:

  • Why artists can’t be the ones that decide what the rate should be for their music;
  • Why a government is deciding what a “willing buyer/willing seller,” would agree on; and
  • Why anyone should get to pay a rate for anything that is below the “willing buyer/willing seller” standard…. ever.

No matter who wins this one, it is clear the artists have lost.

The case and full Complaint is: SoundExchange v. Muzak, 15-cv-00476-RCL, (April 1, 2015, D.C.D.C.).