Opinion ID: 165537
Heading Depth: 2
Heading Rank: 1

Heading: Palladium's Copyright Infringement Claim

Text: 7 This court reviews a grant of summary judgment de novo with an examination of the record and all reasonable inferences that might be drawn from it in the light most favorable to the non-moving party. Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1216 (10th Cir.2002). Under Federal Rule of Civil Procedure 56(c), summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden of showing the absence of a genuine issue of material fact, and an entitlement to judgment as a matter of law is upon the movant, but a party opposing summary judgment must do more than simply show that there is some metaphysical doubt as to the material facts. Matsushita Electric Industrial Co. v. Zenith Radio Corporation, 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Thus, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. 8 To establish copyright infringement, a plaintiff must prove (1) ownership of a valid copyright and (2) unauthorized copying of constituent elements of the work that are original. See Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991); Jacobsen v. Deseret Book Co., 287 F.3d 936, 942 (10th Cir.2002). A plaintiff's presentation of a certificate of registration from the U.S. Copyright Office usually constitutes prima facie evidence of a valid copyright and of the facts stated in the certificate. 17 U.S.C. § 410(c). Upon presentation of such a certificate, the defendant bears the burden to overcome the presumption of validity. Autoskill Inc. v. National Educational Support Systems, Inc., 994 F.2d 1476, 1487 (10th Cir.1993). To rebut the presumption, however, a defendant sued for infringement must simply offer some evidence or proof to dispute or deny the plaintiff's prima facie case of infringement. Entertainment Research Group, Inc. v. Genesis Creative Group, Inc., 122 F.3d 1211, 1217 (1997). 9 To prove ownership of a valid copyright, Palladium presented evidence of twenty certificates of registration obtained for the musical sound recordings it has produced. 3 Each certificate identifies Palladium as the author and lists no preexisting works or materials. Nonetheless, defendants argued that Palladium did not own valid and enforceable copyrights in the sound recordings. To overcome the presumption of validity created by the certificates, defendants presented evidence that the sound recordings Palladium had registered are based upon preexisting musical compositions, 4 and that Palladium had failed to obtain either compulsory or consensual licenses from the copyright owners of those preexisting musical compositions. 10 The district court agreed with defendants that Palladium's sound recordings are derivative works of the underlying musical compositions and that such derivative works are only protected by the Copyright Act if there is lawful use of the preexisting material. The district court found that Palladium had failed to obtain a license from the copyright owners of the underlying musical compositions as provided in 17 U.S.C. § 115, and thus was not lawfully using the preexisting material. As a result, the district court concluded Palladium's copyrights were therefore invalid and unenforceable. 11 Palladium contends that the district court erred by concluding its sound recordings are derivative works of the underlying musical compositions. Palladium argues it was not required to obtain the compulsory or consensual licenses for derivative works described in the Copyright Act because its sound recordings are original recordings, and not derivative of the underlying musical compositions. 12 The Copyright Act defines a derivative work as a work based upon one or more preexisting works[.] 17 U.S.C. § 101. Examples of a derivative work provided by the Act include, among others, a translation, musical arrangement, and most relevant for our purposes, a sound recording. Id.; See also 2 M. Nimmer, Nimmer on Copyright § 2.10[A] n.8 (A sound recording is a derivative work in relation to the musical work recorded therein, just as a motion picture is a derivative work in relation to the novel or screenplay upon which it is based.); Pamfiloff v. Giant Records, Inc., 794 F.Supp. 933, 938 (N.D.Cal.1992) (quoting Nimmer ). A work can generally be copyrighted as a derivative work only if the new work was produced with the permission of the copyright owner of the preexisting work or its duly authorized licensee. See 17 U.S.C. § 103(a) (providing that copyright in a derivative work does not extend to any part of the work in which such [pre-existing] material has been used unlawfully). When the new work is a sound recording, the Copyright Act provides a mechanism for lawfully securing the right to record and distribute the preexisting musical composition through Section 115's compulsory licensing scheme. See 17 U.S.C. § 115. 5 13 Palladium does not dispute that its sound recordings are works as contemplated by the Copyright Act, nor that they are based upon preexisting works — the underlying musical compositions. In fact, Palladium does not really address the Act's definition of derivative works or provide any authority for its assertion that its recordings are not derivative works, other than to point to one section in Circular 56 from the U.S. Copyright Office describing the registration process for derivative sound recordings. Circular 56 explains that [a] derivative sound recording is one which incorporates some preexisting sounds — sounds which were previously registered, previously published, or which were fixed before February 15, 1972. Circ. 56 at 5. Palladium argues that since its sound recordings do not incorporate any preexisting sounds, they are entirely original and therefore not derivative for the purposes of the Copyright Act. 14 Palladium either simply misreads Circular 56, 6 or draws from it an unwarranted inference. Nothing in Circular 56 supports the conclusion that only sound recordings that incorporate some preexisting sounds are derivative works for the purposes of the Copyright Act. 7 Indeed, one example in the circular explains in unmistakable terms that a party in Palladium's position must first comply[ ] with permissions and license procedures before it can obtain a valid copyright in a sound recording, derivative or otherwise, if it is based upon a preexisting musical composition. Circ. 56 at 3. 8 15 The Copyright Act provisions that address rights in musical works and the compulsory licensing scheme for sound recordings of those musical works support the conclusion that when producing and selling a sound recording one must secure a license from the copyright owner of the underlying musical work. Under Section 106 of the Copyright Act, the owner of a copyright in a work of authorship generally has the following exclusive rights: 16 (1) to reproduce the copyrighted work in copies or phonorecords; 17 (2) to prepare derivative works based upon the copyrighted work; 18 (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending[.] 19 17 U.S.C. § 106(1)-(3). The copyright laws, however, attempt to strike a balance between rewarding the creative labor of authors of original works, and promoting further creativity by allowing public access to their works. See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). As applied to the present case, the most relevant example of this balance is the limitation the Act imposes on the exclusive rights of the copyright owner in an original musical work. That limitation is set forth in Section 115, which provides that the exclusive rights in the musical work under Section 106(1) and (3) are subject to compulsory licensing under certain specified conditions. See 17 U.S.C. § 115. 9 20 Under Section 115, a party intending to make and distribute a sound recording of a previously published musical work may obtain a compulsory license in that work simply by complying with the statutory requirements, including timely and sufficient notice to the owner of the copyright in the musical work and payment of statutory, or otherwise negotiated, royalties. 17 U.S.C. § 115(a)(1), (b), (c). Thus, the exclusive rights of copyright owners of previously published musical works are limited only in that they are required (hence the term compulsory) to license the work to a party who has complied with Section 115. The concept is simple. In order for a party in Palladium's position to lawfully use preexisting, copyrighted musical works to create and sell its sound recordings, it must first secure the appropriate licensing from the copyright owners of those musical works. See Bridgeport Music, Inc. v. Dimension Films, 383 F.3d 390, 398 n. 7 (6th Cir.2004) (Needless to say, in the case of a [sound] recording of a musical composition the imitator would have to clear with the holder of the composition copyright.). By failing to comply with Section 115, Palladium has illegally used the preexisting material. See 17 U.S.C. § 103(a). As a result, Palladium's copyrights in the sound recordings at issue are invalid and unenforceable. 21 Palladium also argues, in the alternative, that the licensing scheme provided by Section 115 does not apply here because Palladium only distributed its sound recordings on a wholesale basis and not retail or directly to the public as required by § 115(a)(1). See Aplt. Br. at 10. As support for this argument, Palladium relies upon the first sentence of § 115(a)(1), which provides: 22 When phonorecords of a nondramatic musical work have been distributed to the public in the United States under the authority of the copyright owner, any other person, including those who make phonorecords or digital phonorecord deliveries, may, by complying with the provisions of this section, obtain a compulsory license to make and distribute phonorecords of the work. 23 (emphasis added). Palladium fails to offer any authority, and we could find none, for reading a wholesale/retail distinction into § 115(a)(1). More importantly, the first sentence of § 115(a)(1) refers to public distribution of (a) a nondramatic musical work, and (b) under the authority of the copyright owner of that musical work. See also, Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d at 1332, 1334 n. 2 (9th Cir.1990) (noting that [o]nce the owner of a copyright in a nondramatic musical work distributes copies of that work to the public, others may obtain a compulsory license under Section 115); 2 Nimmer § 8.04[A] (stating that Section 115's compulsory license is applicable only to copyright owners of nondramatic musical works). The first sentence, therefore, cannot address Palladium's distribution, whether retail or wholesale, of its sound recordings because, as Palladium admits, it is not a copyright owner of the underlying musical works. Instead, this language refers to the initial distribution to the public under the authority of the copyright owner which triggers when others may, by complying with Section 115, obtain a compulsory license to make and distribute the work in question. 24 Palladium's sound recordings are derivative works, and its copyrights in the sound recordings are invalid and unenforceable because it has failed to obtain compulsory or consensual licenses from the copyright owners of the underlying musical compositions as required by 17 U.S.C. § 115. Further, Palladium's wholesale/retail argument has no application to the distributed to the public reference in § 115(a)(1).