Opinion ID: 545581
Heading Depth: 2
Heading Rank: 2

Heading: appeal by peer and the class plaintiffs

Text: 29 The plaintiffs claim the trial court erred in holding that the defendants' failure to pay royalties before the plaintiffs terminated their compulsory licenses did not constitute infringement where the defendants did not continue to sell, distribute or otherwise make use of the works ... after termination of the compulsory licenses. The plaintiffs were only awarded statutory infringement damages for those works which the defendants continued to make or sell after receiving the notice of termination. 5 30 The Copyright Act provides [a]nyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 118 ... is an infringer of the copyright. 17 U.S.C. Sec. 501(a). The owner of a copyright has the exclusive right to reproduce or distribute phonorecords 6 of the copyrighted work. Id. Sec. 106. However, once the owner of a copyright in a nondramatic musical work distributes phonorecords of that work to the public, any other person may obtain a compulsory license from the U.S. Copyright Office to make and distribute that work simply by giving the copyright owner notice of his intention to do so. Id. Secs. 115(a)-(b). In exchange, the copyright owner is entitled to royalties each month at a statutory rate, plus a monthly statement of accounts, for every phonorecord made and distributed by the licensee. Id. Sec. 115(c). 31 The statutory procedures for invoking the license under section 115 are rarely used, however. See Recording Indus. Ass'n v. Copyright Royalty Tribunal, 662 F.2d 1, 4 (D.C.Cir.1981). 32 The usual effect of the system is to make the statutory royalty rate a ceiling on the price copyright owners can charge for use of their songs under negotiated contracts: if the owner demands a higher price in voluntary negotiations, the manufacturer can turn to the statutory scheme, but if the owner is willing to accept less than the statutory rate, he is free to do so. 33 Id. (footnote omitted). The parties in this case negotiated their own licenses using the statutory rate, but with royalty payments due on a quarterly, as opposed to a monthly, basis. 34 At issue in this action is section 115(c)(5), which provides: 35 If the copyright owner does not receive the monthly payment and the monthly and annual statements of account when due, the owner may give written notice to the licensee that, unless the default is remedied within thirty days from the date of the notice, the compulsory license will be automatically terminated. Such termination renders either the making or the distribution, or both, of all phonorecords for which the royalty has not been paid, actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 506 and 509. 36 The plaintiffs argue that any pre-termination manufacture or distribution by the defendants for which no royalty payment was received within the thirty-day period constitute retroactive acts of infringement within the plain meaning of section 115(c)(5). The plaintiffs identify 216 (Schedule B) infringements of this type for which they claim entitlement to at least the statutory minimum of $250 per infringement under section 504. 37 The plaintiffs cite to Norbay Music, Inc. v. King Records, Inc., 290 F.2d 617, 620 (2d Cir.1961), in which the court held a failure to cure defaults in the payment of royalties constituted an act of infringement under the 1909 Copyright Act. Under the 1909 Act, the copyright owner could sue for royalties under 17 U.S.C. Sec. 1(e) 7 or for infringement under 17 U.S.C. Sec. 101(e) 8 . The court in Norbay stated: 38 Section 101(e) clearly treats the term infringement as embracing unauthorized manufacture occurring after the copyright proprietor has licensed mechanical reproduction. Since a once-recorded composition is available to all third parties upon the payment of a two-cent royalty, manufacture at this point can be unauthorized only in that the third party fails to make the required payments. Thus Sec. 101(e), in treating unauthorized manufacture as infringement, treats nonpayment of the statutory royalty as an act of infringement. 39 290 F.2d at 620. 40 The Copyright Act has changed significantly since it was interpreted in Norbay. While comparable to section 1(e) of the 1909 Act, section 115 of the 1976 Act is different both in terms of its language and the remedies provided. Most importantly, section 115 did not retain the upon the payment language of section 1(e) which the court found so persuasive in Norbay. Therefore, Norbay's interpretation of the 1909 Act to the effect that the failure to pay royalties in itself constitutes infringement is not conclusive here. 41 While the plaintiffs' construction of the 1976 Act is plausible, we find it inapplicable where, as here, the parties have negotiated their own licenses which vary from the statutory scheme. Generally, anyone who is authorized by the copyright owner to use the copyrighted work in a way specified in the statute ... is not an infringer of the copyright with respect to such use. Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 433, 104 S.Ct. 774, 784, 78 L.Ed.2d 574 (1984). In this case, the private license agreements granted Pausa the right to sell and distribute the plaintiffs' copyrighted works. Pausa's use was thus authorized for as long as the agreements remained in effect. Accordingly, Pausa's use of the copyrighted works up until the date of termination, December 26, 1984, was not an act of infringement entitling the plaintiffs to statutory damages. 9 42 The plaintiffs are not entitled to additional statutory damages as the failure to pay royalties under a private license agreement is not an act of infringement within the meaning of section 115(c)(5). 43 AFFIRMED.