Court Opinion

ID: 3051234
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:34:40.725917+00
Date Added: 2024-06-11T11:49:25.238560
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

SYBERSOUND RECORDS, INC.,                
                 Plaintiff-Appellant,
                 v.
UAV CORPORATION, doing business
as Karaoke Bay doing business as
Sterling Entertainment; MADACY
ENTERTAINMENT LP, doing business                No. 06-55221
as Karaoke Party; AUDIO STREAM,
INC., doing business as Keynote                  D.C. No.
                                              CV-05-05861-JFW
Karaoke; TOP TUNES, INC.; SINGING
                                                 OPINION
MACHINE COMPANY, INC.; BCI
ECLIPSE COMPANY, LLC; AMOS
ALTER; DAVID ALTER; EDWARD
GOETZ; DENNIS NORDEN; FRANK
ROBERTSON; DOUGLAS VOGT;
RICHARD VOGT,
             Defendants-Appellees.
                                         
        Appeal from the United States District Court
           for the Central District of California
         John F. Walter, District Judge, Presiding

                   Argued and Submitted
           October 18, 2007—Pasadena, California

                    Filed February 27, 2008

 Before: Diarmuid F. O’Scannlain and Milan D. Smith, Jr.,
 Circuit Judges, and Michael W. Mosman,* District Judge.

   *The Honorable Michael W. Mosman, United States District Judge for
the District of Oregon, sitting by designation.

                               1673
1674    SYBERSOUND RECORDS v. UAV CORP.
       Opinion by Judge Milan D. Smith, Jr.
             SYBERSOUND RECORDS v. UAV CORP.           1677

                        COUNSEL

Peter L. Haviland and Julian Brew, Kaye Scholer LLP, Los
Angeles, California, for the plaintiff-appellant.

Paul N. Sorrell, Lavely & Singer Professional Corporation,
Los Angeles, California; Daniel A. Johnson, Sullivan Johnson
LLP, Los Angeles, California; Robert A. Aronson, Beverly
Hills, California, for the defendants-appellees.
1678          SYBERSOUND RECORDS v. UAV CORP.
                           OPINION

MILAN D. SMITH, JR., Circuit Judge:

   Sybersound Records (Sybersound), a karaoke record pro-
ducer, appeals the district court’s judgment dismissing the
first amended complaint (FAC) it filed against its competitors
(collectively, Corporation Defendants), and their officers and
employees (collectively, Individual Defendants). We affirm
the judgment of the district court.

   In this appeal, we determine whether a party lacking stand-
ing to bring a copyright infringement suit under the Copyright
Act, but who complains of competitive injury stemming from
acts of alleged infringement, may bring a Lanham Act claim,
Racketeer Influenced and Corrupt Organizations Act (RICO)
claim, or related state law unfair competition claims, whose
successful prosecution would require the litigation of the
underlying infringement claim. We hold that it cannot.

   We also consider whether the transfer of an interest in a
divisible copyright interest from a copyright co-owner to
Sybersound, unaccompanied by a like transfer from the other
copyright co-owners, can be an assignment or exclusive
license that gives the transferee a co-ownership interest in the
copyright. We hold that it cannot.

                   I.   Factual Background

A.     Copyright Compliance Statements

   Sybersound and the Corporation Defendants are competi-
tors that produce and sell karaoke records. They primarily sell
to a group of distributors and retailers that resell these records
to the public. This purchasing group (collectively, Customers)
includes Anderson Merchandising, Handleman Entertainment
Resources, Alliance Entertainment Corporation, Wal*Mart,
KMart, Best Buy, Toys “R” Us, and Fry’s Electronics.
              SYBERSOUND RECORDS v. UAV CORP.               1679
   According to Sybersound, to reproduce and distribute
karaoke records, karaoke record producers must obtain
karaoke synchronization licenses from each copyright holder
with an interest in each song included on the record. The Cus-
tomers require that the karaoke records they buy be 100%
licensed. To comply with the Customers’ policies, sellers of
karaoke records must obtain copyright licenses from and pay
fees and full royalties to each of the copyright owners. Some
Customers have instituted measures to ensure compliance
with their licensing requirements. For example, in 2003,
Handleman required its vendors to sign an indemnification
agreement in which each vendor “represents that it has all the
appropriate and necessary licenses in order for Handleman to
sell Vendor’s merchandise to Handleman’s customers.” The
following year, Handleman began requiring that each karaoke
vendor annually provide a written certification that it has
acquired karaoke licenses from each copyright holder and that
“each such license is current, valid and paid in full to the date
of the opinion letter.” Similarly, Anderson requires its ven-
dors to provide written documentation that its karaoke record-
ings are fully licensed and that vendors are accurately
reporting sales and accounting for royalties.

   Sybersound alleges that the Corporation Defendants mis-
represent to the Customers that their karaoke records are
100% licensed and that all applicable royalties have been
paid. Specifically, Sybersound alleges that its competitors
claim to have all necessary licenses when they hold only com-
pulsory licenses, licenses from less than 100% of the copy-
right holders, or no licenses at all. It further alleges that the
Individual Defendants have, on various occasions, admitted
that they intentionally failed to acquire the appropriate
licenses for their karaoke recordings.

   Sybersound also alleges that Madacy and Singing Machine
use misleading labeling on their karaoke records which state,
for example, that all songs are “used with permission” or that
1680            SYBERSOUND RECORDS v. UAV CORP.
“The Singing Machine, The Leader in Home Karaoke, strictly
adheres to all applicable music copyright and licensing laws.”

   Finally, Sybersound alleges that UAV and Madacy’s
licensing agent sent a letter to the Customers and publishers
falsely claiming that Sybersound did not have karaoke-use
licenses for many songs included in its recordings.

B.     Sybersound’s Copyright Infringement Claim

   Sybersound also claims that UAV, Madacy, Audio Stream,
Top Tunes, and BCI are infringing Sybersound’s copyrights
in several songs by producing karaoke records of these songs
without obtaining a license from Sybersound or its copyright
assignor, TVT Music Publishing (TVT). Sybersound claims
to have acquired an ownership interest in these songs by
entering into a written agreement with TVT, an original co-
claimant1 to the copyright of these songs. This written agree-
ment allegedly made Sybersound an “exclusive assignee and
licensee of TVT’s copyrighted interests for purposes of
karaoke use, and also the exclusive assignee of the right to sue
to enforce the assigned copyright interest.” According to
Sybersound, the copyright holders of these songs had an
understanding that each could license only his or her respec-
tive shares and that a duly authorized karaoke recording
would require a written license from each.

                  II.   Procedural Background

   Sybersound, along with six music publishing companies,
filed a complaint against the Corporation Defendants, alleging
copyright infringement, violation of the Lanham Act, inten-
tional interference with prospective economic relations, unfair
competition under California Business and Professions Code
  1
   A copyright claimant is either the “author of the work,” or the “person
or organization that has obtained ownership of all rights under the copy-
right initially belonging to the author.” 37 C.F.R. § 202.3(a)(3).
                SYBERSOUND RECORDS v. UAV CORP.                   1681
§ 17200 et seq., common law unfair competition, unfair trade
practices under California Business and Professions Code
§ 17000 et seq., and seeking rescission and an accounting.
The district court severed the music publishing plaintiffs from
the suit and dismissed the claims for rescission of licenses and
an accounting without prejudice. The Corporation Defendants
then filed motions to dismiss for failure to state a claim, pur-
suant to Federal Rule of Civil Procedure 12(b)(6). The district
court granted these motions, dismissing the remaining claims
with leave to amend.

   Sybersound then filed a FAC that included most of the
alleged causes of action pled in the original complaint, but
also added claims against the Individual Defendants for viola-
tions of RICO, 18 U.S.C. § 1962(a), (c). The Corporation
Defendants and the Individual Defendants (collectively,
Defendants) filed motions to dismiss the FAC for failure to
state a claim. The district court granted these motions, dis-
missing all claims with prejudice, and entered final judgment
for the Defendants.2 Sybersound timely appealed.

         III.   Standard of Review and Jurisdiction

   Dismissals for failure to state a claim are reviewed de novo.
Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d
940, 946 (9th Cir. 2005). Generally, the review is limited to
the consideration of the complaint, and all allegations of
material fact are construed in the light most favorable to the
nonmoving party. Id. Dismissal is appropriate only where “it
appears beyond doubt that the plaintiff can prove no set of
facts in support of the claim entitling plaintiff to relief.” Id.
(citations omitted). “This court can affirm the district court’s
dismissal on any ground supported by the record, even if the
district court did not rely on the ground.” Id. at 950 (citations
omitted).
  2
   Defendants Madacy, Amos Alter, and David Alter filed a motion to
stay or dismiss the FAC based on international comity and forum non con-
veniens arguments. The district court denied this motion as moot.
1682            SYBERSOUND RECORDS v. UAV CORP.
     We have jurisdiction under 28 U.S.C. § 1291.

                         IV.   Discussion

A.     Lanham Act Claim

     The Lanham Act § 43(a)(1) states in pertinent part:

       Any person who, on or in connection with any goods
       or services, . . . uses in commerce any word, term,
       name, symbol, or device, or any combination
       thereof, or any false designation of origin, false or
       misleading description of fact, or false or misleading
       representation of fact, which—

           (A) is likely to cause confusion, or to
           cause mistake, or to deceive . . . as to the
           origin, sponsorship, or approval of his or
           her goods, services, or commercial activi-
           ties by another person, or

           (B) in commercial advertising or promo-
           tion, misrepresents the nature, characteris-
           tics, qualities, or geographic origin of his or
           her or another person’s goods, services, or
           commercial activities,

       shall be liable in a civil action by any person who
       believes that he or she is or is likely to be damaged
       by such act.

Lanham Act § 43(a)(1), 15 U.S.C. § 1125(a)(1).

  [1] The Lanham Act was intended to protect against the
“deceptive and misleading use of marks” and to “protect per-
sons engaged in . . . [interstate] commerce against unfair com-
petition.” 15 U.S.C. § 1127; Dastar v. Twentieth Century Fox
Film Corp., 539 U.S. 23, 28 (2003). Section 43(a), 15 U.S.C.
              SYBERSOUND RECORDS v. UAV CORP.             1683
§ 1125(a), “is one of the few provisions [of the Act] that goes
beyond trademark protection” and addresses unfair competi-
tion. Dastar, 539 U.S. at 29. This provision, however, “does
not have boundless application as a remedy for unfair trade
practices” and is not a “federal ‘codification’ of the overall
law of ‘unfair competition’ . . . but can apply only to certain
unfair trade practices prohibited by its text.” Id. (citations
omitted).

   Sybersound contends that the Corporation Defendants
engaged in unfair competition by violating copyright laws,
thereby paying less in royalties and licensing fees to produce
their products than Sybersound did to produce its own, and by
misrepresenting their compliance with the Customers’ licens-
ing policies, which permitted them to sell pirated records at
prices that undercut Sybersound’s own prices. Furthermore,
representatives of UAV and Madacy purportedly sent letters
or made statements to the Customers accusing Sybersound of
also failing to obtain the requisite licenses for its re-
recordings. Sybersound contends these are misrepresentations
under § 43(a)(1)(B) of the Lanham Act because they are made
in commercial advertising or promotion to the Customers and
the misrepresentations are about the “nature, characteristics,
[and] qualities” of the karaoke records.

   [2] Sybersound claims that it is contesting only the Corpo-
ration Defendants’ misrepresentations in response to the Cus-
tomers’ policies. According to Sybersound’s own description
of copyright law in the context of karaoke synchronization
licenses, however, the Customers’ policies parallel the licens-
ing agreements that exist in the recording industry and are a
mechanism for the Customers to ensure that the products they
sell comply with copyright law. The nature of the alleged mis-
representation exposes a tension between the Lanham Act’s
goal of preventing unfair competition and the Copyright Act’s
goal of providing a statutory scheme granting rights only to
copyright owners.
1684          SYBERSOUND RECORDS v. UAV CORP.
   [3] Copyright is wholly a “creature of statute, and the only
rights that exist under copyright law are those granted by stat-
ute.” Silvers v. Sony Pictures Entm’t, 402 F.3d 881, 883-84
(9th Cir. 2005) (en banc). Under copyright law, only copy-
right owners and exclusive licensees of copyright may enforce
a copyright or a license. See 17 U.S.C. § 501(b) (conferring
standing only to the “legal or beneficial owner of an exclusive
right” who “is entitled . . . to institute an action for any
infringement . . . while he or she is the owner of it”); Silvers,
402 F.3d at 885. Therefore, third party strangers and nonex-
clusive licensees cannot bring suit to enforce a copyright,
even if an infringer is operating without a license to the detri-
ment of a nonexclusive licensee who has paid full value for
his license. See 3-10 Melville B. Nimmer & David Nimmer,
Nimmer on Copyright, § 10.02 [B][1] (2007).

  The reasoning behind the Supreme Court’s decision in
Dastar, 539 U.S. 23, is instructive in resolving the issue
before this court because it addressed the tension between the
Lanham Act and the Copyright Act. Id. at 33-35.

   In Dastar, a film company copied a television series that
had passed into the public domain, and marketed it as its own.
Id. at 27-28. Production companies that owned the exclusive
television rights from the original book on which the series
was based brought a Lanham Act suit, claiming that the lack
of attribution to the original series misrepresented the “origin”
of the series. Id. The Court held that “origin of goods” in the
Lanham Act § 43(a)(1)(A) did not refer to the author of any
idea, concept, or communication embodied in a good, but to
the producer of the tangible good itself. Id. at 37. Otherwise,
the Lanham Act would provide authors of creative works with
perpetual protection that they did not have under the Copy-
right Act. Id.

   In dicta, the Court further noted that if the film company
had misrepresented, in advertising or promotion, that the con-
tents of the video were significantly different from the series
              SYBERSOUND RECORDS v. UAV CORP.              1685
that it copied, it would have a Lanham Act claim for misrep-
resenting the “nature, characteristics [or] qualities” of its
goods. Id. at 38.

   [4] Sybersound argues that the licensing status of each
work is part of the nature, characteristics, or qualities of the
karaoke products. Following the reasoning in Dastar, how-
ever, to avoid overlap between the Lanham and Copyright
Acts, the nature, characteristics, and qualities of karaoke
recordings under the Lanham Act are more properly construed
to mean characteristics of the good itself, such as the original
song and artist of the karaoke recording, and the quality of its
audio and visual effects. Construing the Lanham Act to cover
misrepresentations about copyright licensing status as Syber-
sound urges would allow competitors engaged in the distribu-
tion of copyrightable materials to litigate the underlying
copyright infringement when they have no standing to do so
because they are nonexclusive licensees or third party strang-
ers under copyright law, and we decline to do so.

  [5] Accordingly, we affirm the district court’s dismissal of
Sybersound’s Lanham Act claims.

B.   Copyright Infringement

   Sybersound’s second cause of action alleges that UAV,
Madacy, Audio Stream, Top Tunes, and BCI infringed Syber-
sound’s copyrights in nine songs. Sybersound asserts standing
to sue as a co-owner in the copyrights for those songs.

   Sybersound bases its copyright infringement claim on the
following reasoning: TVT is an original co-claimant or joint
copyright holder (co-owner) in nine songs. Such co-owners
are like tenants in common, each owning a share of the undi-
vided whole. H.R. Rep. No. 94-1476, at 121 (1976), as
reprinted in 1976 U.S.C.C.A.N. 5659, 5736 (“Under the bill,
as under present law, coowners of a copyright would be
treated generally as tenants in common, with each coowner
1686            SYBERSOUND RECORDS v. UAV CORP.
having an independent right to use or license the use of a
work, subject to a duty of accounting to the other coowners
for any profits.”). Sybersound contends that it stepped into
TVT’s shoes and became a co-owner in the karaoke-use inter-
est of the copyright when it became the “exclusive assignee
and licensee of TVT Music Publishing’s copyrighted interests
for purposes of karaoke use, and also exclusive assignee of
the right to sue to enforce the assigned copyright interests, for
both present and past infringements in karaoke exploitation”
pursuant to an assignment agreement with TVT. Citing 17
U.S.C. § 201(d)(1), Sybersound asserts standing to sue, as a
co-owner, for copyright infringement against the Corporation
Defendants that use any of the nine referenced copyrighted
songs for karaoke purposes without having obtained a license
from Sybersound or TVT. See 17 U.S.C. § 501(b); Davis v.
Blige, 505 F.3d 90, 99 (2d Cir. 2007) (co-owners may bring
suit for copyright infringement without joining other co-
owners).

   Sybersound’s analysis is flawed because, as a co-owner of
the copyright, TVT could not grant an exclusive right in the
karaoke-use interest of the nine referenced copyrights.

  Prior to the current 1976 Copyright Act, under the 1909
Copyright Act and the doctrine of indivisibility, a copyright
owner could not assign less than “ ‘the totality of rights com-
manded by copyright.’ ” Gardner v. Nike, Inc., 279 F.3d 774,
778 (9th Cir. 2002) (quoting 3-10 Nimmer, supra, § 10.01[A]
(2001)) (a copyright owner possessed a bundle of rights that
could not be assigned in parts). “Anything less than an assign-
ment was considered to be a license,” and only the copyright
owner or assignee had standing to bring an infringement
action. Id.

   [6] The 1976 Copyright Act largely eliminated the doctrine
of indivisibility and codified the divisibility of the bundle of
rights that constitutes a copyright.3 17 U.S.C. § 201(d)(2); Sil-
  3
   A copyright consists of a bundle of six statutorily created rights, cur-
rently codified at 17 U.S.C. § 106. The statute confers upon the owner of
                  SYBERSOUND RECORDS v. UAV CORP.                      1687
vers, 402 F.3d at 886. However, 17 U.S.C. § 201(d), entitled
“Transfer of Ownership,” codified this divisibility as follows:

      (1) The ownership of a copyright may be transferred
      in whole or in part by any means of conveyance or
      by operation of law, and may be bequeathed by will
      or pass as personal property by the applicable laws
      of intestate succession.

      (2) Any of the exclusive rights comprised in a copy-
      right, including any subdivision of any of the rights
      specified by section 106, may be transferred as pro-
      vided by clause (1) and owned separately. The owner
      of any particular exclusive right is entitled, to the
      extent of that right, to all of the protection and reme-
      dies accorded to the copyright owner by this title.

17 U.S.C. § 201(d) (emphasis added). Next, 17 U.S.C. § 101
defines “transfer of copyright ownership” as “an assignment,

the copyright the exclusive right to do and authorize the following:
      (1) to reproduce the copyrighted work in copies or phonore-
      cords;
      (2) to prepare derivative works based upon the copyrighted
      work;
      (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;
      (4) in the case of literary, musical, dramatic, and choreographic
      works, pantomimes, and motion pictures and other audiovisual
      works, to perform the copyrighted work publicly;
      (5) in the case of literary, musical, dramatic, and choreographic
      works, pantomimes, and pictorial, graphic, or sculptural works,
      including the individual images of a motion picture or other
      audiovisual work, to display the copyrighted work publicly; and
      (6) in the case of sound recordings, to perform the copyrighted
      work publicly by means of a digital audio transmission.
Id.
1688          SYBERSOUND RECORDS v. UAV CORP.
mortgage, exclusive license, or any other conveyance, alien-
ation, or hypothecation of a copyright or any of the exclusive
rights comprised in a copyright . . . but not including a non
exclusive license.” 17 U.S.C. § 101 (emphasis added). “In
other words, exclusive rights may be chopped up and owned
separately, and each separate owner of a subdivided exclusive
right may sue to enforce that owned portion of an exclusive
right, no matter how small.” Silvers, 402 F.3d at 887 (empha-
sis added).

   If TVT were the sole copyright owner of the nine refer-
enced songs and had transferred an exclusive karaoke-use
interest to Sybersound (assuming such a divisible interest
exists), Sybersound would have had standing as the exclusive
licensee to sue the Corporation Defendants for infringement.
However, even if a karaoke-use is a properly divisible interest
in a copyright, TVT is not the exclusive owner of the karaoke-
use interest in the copyright. In its Request for Judicial Notice
filed concurrently with its motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), Madacy attached copies of
copyright registration records from the United States Copy-
right Office showing that EMI Music Publishing, Ltd., Bey-
once Publishing, Scott Storch Music, Careers-BMG Music
Publishing, Inc., Xtina Music, Logrhythm Music, and others,
are all co-owners of the copyrights in one or more of the nine
assigned songs. Thus, unless all the other co-owners of the
copyright joined in granting an exclusive right to Sybersound,
TVT, acting solely as a co-owner of the copyright, could grant
only a nonexclusive license to Sybersound because TVT may
not limit the other co-owners’ independent rights to exploit
the copyright. See Oddo v. Ries, 743 F.2d 630, 633 (9th Cir.
1984). Sybersound does not allege that it has received the
consent of the other co-owners to become the exclusive
licensee for the karaoke-use interest.

  [7] Sybersound assumes that because its assignment agree-
ment with TVT says that TVT is transferring all its karaoke-
use interests in the copyrights to Sybersound, and says that
                  SYBERSOUND RECORDS v. UAV CORP.                      1689
Sybersound became exclusive assignee of TVT’s copyrighted
interest in karaoke use and of TVT’s right to sue, Sybersound
became a co-owner upon execution of the agreement. Syber-
sound is mistaken. Although the 1976 Copyright Act permits
exclusive rights to be chopped up and owned separately, to be
effective, the assignment or other type of alienation permitted
by 17 U.S.C. §§101 and 201(d)(2) must be exclusive. Since
TVT’s assignment was admittedly non-exclusive, TVT suc-
ceeded only in transferring what it could under 17 U.S.C.
§ 201(d), a non-exclusive license, which gives Sybersound no
standing to sue for copyright infringement. See 3-10 Nimmer,
supra, § 10.02 [B][1] (2007).

   [8] We hold that because Sybersound is neither an exclu-
sive licensee nor a co-owner in the nine copyrights, it lacks
standing to bring the copyright infringement claims alleged in
the FAC, and, thus, its copyright infringement claims fail.

C.     RICO Claims

  1) Statutory Standing

   RICO provides a private right of action for “[a]ny person
injured in his business or property” by a RICO violation. 18
U.S.C. § 1964(c). Sybersound seeks relief pursuant to RICO
statutes, 18 U.S.C. § 1962(a) and (c). 18 U.S.C. § 1962(a)
prohibits a person who receives income derived from a pat-
tern of racketeering activity from using or investing such
income in an enterprise engaged in interstate commerce.4 18
  4
     Section 1962(a) states:
      It shall be unlawful for any person who has received any income
      derived, directly or indirectly, from a pattern of racketeering
      activity or through collection of a unlawful debt in which such
      person has participated as a principal within the meaning of sec-
      tion 2, title 18, United States Code to use or invest, directly or
      indirectly, any part of such income, or the proceeds of such
      income, in acquisition of any interest in, or the establishment or
      operation of, any enterprise which is engaged in, or the activities
      of which affect, interstate or foreign commerce.
1690             SYBERSOUND RECORDS v. UAV CORP.
U.S.C. § 1962(c) prohibits a person employed by or associ-
ated with any enterprise engaged in interstate commerce to
conduct or participate in the conduct of the enterprise through
a pattern of racketeering activity.5

   Sybersound alleges that some of the individual executives
of the Corporation Defendants engaged in racketeering in vio-
lation of § 1962(c) by engaging in the predicate acts of crimi-
nal copyright infringement, mail fraud, and wire fraud.
Specifically, it alleges that the Individual Defendants engaged
in copyright infringement by copying and distributing karaoke
records for which they lacked licenses and did not pay royal-
ties, and further engaged in mail and wire fraud by represent-
ing to the Customers via mail or fax that they comply with the
Customers’ policies.6 Sybersound also seeks recovery under
§ 1962(a), alleging that the Corporation Defendants invested
the proceeds from these predicate acts to unfairly reduce
prices to undercut their competitors. Sybersound contends that
it has met the standing requirements under 18 U.S.C.
§ 1962(a) and (c) because it is a competitor that has been
directly injured by the resulting undercutting of its prices.

  [9] In Holmes v. Securities Investor Protection Corp., 503
U.S. 258, 267-68 (1992), the Supreme Court held that Con-
gress intended the statute conferring a private right of action
under RICO, 18 U.S.C. § 1964(c), to include a proximate cau-
  5
   Section 1962(c) states:
      It shall be unlawful for any person employed by or associated
      with any enterprise engaged in, or the activities of which affect,
      interstate or foreign commerce, to conduct or participate, directly
      or indirectly, in the conduct of such enterprise’s affairs through
      a pattern of racketeering activity or collection of unlawful debt.
   6
     Sybersound also alleged in the FAC that the letters sent by individuals
at UAV and Madacy to Customers that falsely stated that Sybersound’s
karaoke records lacked the requisite licenses were acts of mail and wire
fraud. Sybersound, however, failed to raise this argument in its brief, and
we decline to reach the merits of this claim. Smith v. Marsh, 194 F.3d
1045, 1052 (9th Cir. 1999).
              SYBERSOUND RECORDS v. UAV CORP.                 1691
sation requirement because the relevant language in the RICO
statute mirrored that of the civil-action portions of the federal
antitrust laws. Holmes, 503 U.S. at 267-68. It reasoned that at
the time RICO was enacted, courts had interpreted the anti-
trust provision to include a proximate causation requirement.
Id. Because Congress is presumed to know how the federal
courts interpret its statutes, the Supreme Court concluded that
Congress intended that the courts read a similar proximate
causation requirement into RICO. Id.

  Following the Supreme Court’s analysis in Holmes, this
court formulated three nonexhaustive factors to determine
whether the RICO proximate causation requirement has been
met:

    (1) whether there are more direct victims of the
    alleged wrongful conduct who can be counted on to
    vindicate the law as private attorneys general; (2)
    whether it will be difficult to ascertain the amount of
    the plaintiff’s damages attributable to defendant’s
    wrongful conduct; and (3) whether the courts will
    have to adopt complicated rules apportioning dam-
    ages to obviate the risk of multiple recoveries.

Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1168-69 (9th Cir.
2002) (quotations and citation omitted). The district court dis-
missed Sybersound’s RICO claim, reasoning that it had failed
to overcome this proximate causation hurdle.

   Sybersound argues that as a competitor injured by unlawful
predicate acts, it is the quintessential RICO plaintiff that has
suffered a direct injury. Furthermore, Sybersound claims that
because of the small number of Customers involved, damages
would not be difficult to ascertain because it can establish
when it lost a contract to a competitor charging lower prices.
It also claims that its injuries are separate and distinct from
the injuries to the copyright holders, eliminating the risk of
multiple recoveries.
1692          SYBERSOUND RECORDS v. UAV CORP.
   The Supreme Court recently clarified the proximate causa-
tion requirement for a suit brought under § 1962(c), thereby
foreclosing Sybersound’s argument. Anza v. Ideal Steel Sup-
ply Corp., 126 S. Ct. 1991 (2006).

   In Anza, National Steel Supply (National) failed to charge
New York sales tax to its cash-paying customers and submit-
ted fraudulent tax returns, which allegedly allowed it to
undercut Ideal Steel Supply Corporation’s (Ideal) prices. Id.
at 1994-95. Ideal brought suit under RICO, 18 U.S.C.
§ 1962(a) and (c). Id. at 1995. The district court granted
National’s Rule 12(b)(6) motion to dismiss for failure to state
a claim. Id. at 1995. The Second Circuit vacated the district
court’s judgment, holding that the plaintiff has standing “even
where the scheme depended on fraudulent communications
directed to and relied on by a third party rather than the plain-
tiff.” Id. The Supreme Court reversed, holding that the attenu-
ated harm suffered by Ideal did not meet the directness
requirement laid out in Holmes as to the § 1962(c) claim. Id.
at 1996.

   [10] In reaching its conclusion, the Supreme Court consid-
ered the principles underlying the directness requirement. Id.
at 1997-98. First, “[o]ne motivating principle is the difficulty
that can arise when a court attempts to ascertain the damages
caused by some remote action.” Id. at 1997. The Supreme
Court noted that defrauding the tax authority did not require
National to lower prices, since lower prices may have resulted
from, for example, a decision that “additional sales would jus-
tify a smaller profit margin.” Id. Moreover, “Ideal’s lost sales
could have resulted from factors other than petitioner’s
alleged acts of fraud. Businesses lose and gain customers for
many reasons . . . .” Id.

   [11] Similarly in this case, the court would have to engage
in a speculative and complicated analysis to determine what
percentage of Sybersound’s decreased sales, if any, were
attributable to the Corporation Defendants’ decision to lower
              SYBERSOUND RECORDS v. UAV CORP.              1693
their prices or a Customer’s preference for a competitor’s
products over Sybersound’s, instead of to acts of copyright
infringement or mail and wire fraud. See id. This case would
require an even more speculative analysis than Anza because
Sybersound has more than one principal competitor.

  As noted by the Supreme Court,

    [t]he element of proximate causation recognized in
    Holmes is meant to prevent these types of intricate,
    uncertain inquiries from overrunning RICO litiga-
    tion. It has particular resonance when applied to
    claims brought by economic competitors, which, if
    left unchecked, could blur the line between RICO
    and the antitrust laws.

Id. at 1998. “When a court evaluates a RICO claim for proxi-
mate causation, the central question it must ask is whether the
alleged violation led directly to plaintiff’s injuries.” Id.

   Second, “[t]he requirement of direct causal connection is
especially warranted where the immediate victims of an
alleged RICO violation can be expected to vindicate the laws
by pursuing their own claims.” Id. at 1998. The Supreme
Court noted that the direct victim, the state tax authority,
could be expected to pursue National for its tax violations. Id.
Here, as well, the more direct victims of the Corporation
Defendants’ alleged infringement actions, the copyright hold-
ers, can be expected to pursue their own claims. In fact, prior
to the severing of their claims, six music publishers pursued
their copyright infringement claims as part of this very action.

   The third factor discussed in Holmes was the risk of multi-
ple recoveries. Holmes, 503 U.S. at 269. Anza makes clear,
however, this is not a necessary condition for concluding that
proximate cause is lacking. See Anza, 126 S. Ct. at 1997-98
(acknowledging that there was no appreciable risk of duplica-
tive recoveries).
1694          SYBERSOUND RECORDS v. UAV CORP.
   [12] Following Anza, we hold that Sybersound cannot over-
come the proximate causation hurdle to assert a RICO viola-
tion under § 1962(c).

  2) Investment Injury

  Sybersound has not alleged an investment injury separate
and distinct from the injury flowing from the predicate act, as
required for a RICO claim brought under § 1962(a).

   [13] In Nugget Hydroelectric, L.P. v. Pacific Gas and Elec-
tric Co., 981 F.2d 429, 437 (9th Cir. 1992), we held that a
“plaintiff seeking civil damages for a violation of section
1962(a) must allege facts tending to show that he or she was
injured by the use or investment of racketeering income.” In
this case, Sybersound must allege that the investment of rack-
eteering income was the proximate cause of its injury. Rein-
vestment of proceeds from alleged racketeering activity back
into the enterprise to continue its racketeering activity is
insufficient to show proximate causation. See Wagh v. Metris
Direct, Inc., 363 F.3d 821, 829 (9th Cir. 2003), overruled on
other grounds, Odom v. Microsoft Corp., 486 F.3d 541, 551
(9th Cir. 2007) (en banc); Westways World Travel v. AMR
Corp., 182 F. Supp. 2d 952, 960-61 (C.D. Cal. 2001)
(explaining that when racketeering is committed on behalf of
a corporation, almost every racketeering act committed by a
corporation would also result in a § 1962(a) violation because
corporations generally reinvest their profits, eviscerating the
distinction between § 1962(c) and (a)).

   [14] Sybersound argues that it meets § 1962(a)’s invest-
ment injury requirement because it is the direct victim of the
use of proceeds generated by the predicate acts. Its competi-
tors used the proceeds from their copyright infringements and
mail fraud to undercut Sybersound’s prices. Sybersound,
however, has not alleged any injury separate and distinct from
the injuries incurred from the predicate act itself.
              SYBERSOUND RECORDS v. UAV CORP.              1695
   [15] Here, Sybersound’s injury stems from the alleged
copyright infringement. The purported infringement by the
Corporation Defendants, not the income from the sale of
pirated records, allegedly allowed the Corporation Defendants
to undercut Sybersound’s prices. Sybersound’s reliance on
Simon v. Value Behavioral Health, 208 F.3d 1073, 1083 (9th
Cir. 2000), overruled on other grounds, Odom, 486 F.3d at
551, is unavailing. In that case, Value Behavioral Health
fraudulently denied health benefit claims to patients and rein-
vested that income to build a group of preferred medical pro-
viders who undertook to eliminate outside providers. Id. The
court, in dicta, noted that the victims of the investment were
competitors who were driven out of business by the preferred
providers. Id. There, the competitors in Simon would not have
been injured by the predicate act of the fraudulent denial of
health care benefits, but would have been directly injured by
the reinvestment of the proceeds resulting from such denial.
In contrast, Sybersound’s competitive injury stems from the
alleged copyright infringement for which it does not have
statutory standing to bring a RICO claim.

   [16] Accordingly, we hold that the district court properly
dismissed Sybersound’s § 1962(a) and (c) RICO claims.

D.   State Law Claims

  1) Preemption

   Finally, Sybersound seeks relief under a variety of Califor-
nia state laws. The district court dismissed all state law
claims, finding that they are preempted by the Copyright Act.
It reasoned that the underlying basis of each of Sybersound’s
state law claims is that because the Corporation Defendants
failed to obtain complete licenses for the songs they sell, they
caused harm to Sybersound. It therefore concluded that the
state law claims are “merely copyright claims dressed up to
look like state law claims” and that the claims were not distin-
guishable from copyright infringement claims.
1696           SYBERSOUND RECORDS v. UAV CORP.
   [17] The Copyright Act explicitly preempts state laws that
regulate in the area of copyright, stating that “all legal or equi-
table rights that are equivalent to any of the exclusive rights
within the general scope of copyright as specified by section
106 . . . are governed exclusively by this title.” 17 U.S.C.
§ 301(a). Copyright law does not preempt state laws with
respect to “activities violating legal or equitable rights that are
not equivalent to any of the exclusive rights within the general
scope of copyright as specified by section 106.” Id.
§ 301(b)(3). Traditionally, two conditions must be satisfied
for a law to be preempted under the federal Copyright Act.
Downing v. Abercrombie & Fitch, 265 F.3d 994, 1003 (9th
Cir. 2001). “First, the content of the protected right must fall
within the subject matter of copyright as described in 17
U.S.C. §§ 102 and 103. Second, the right asserted under state
law must be equivalent to the exclusive rights contained in
section 106 of the Copyright Act.” Id.

   [18] In this case, the plaintiff lacks standing to bring a
claim of copyright infringement under the federal copyright
law. The cases cited by Sybersound to avoid preemption are
inapplicable because they all involve plaintiffs who would
have had standing under the federal copyright act, or who pur-
sued non-infringement claims. E.g., Firoozye v. Earthlink
Network, 153 F. Supp. 2d 1115 (N.D. Cal. 2001) (plaintiff
asserted own copyright claim); Rubin v. Brooks/Cole Pub.
Co., 836 F. Supp. 909 (D. Mass. 1993) (same); PMC, Inc. v.
Saban Entm’t, Inc., 52 Cal. Rptr. 2d 877, 885 n.8 (Ct. App.
1996) (gravaman of complaint was that defendant prevented
plaintiff from finalizing a licensing deal), overruled on other
grounds, Korea Supply Co. v. Lockheed Martin Corp., 63
P.3d 937, 954 n.11 (Cal. 2003).

   [19] The exclusive rights of copyright owners granted by
Congress under § 106 of the Copyright Act may only be
enforced by an owner or exclusive licensee of the right;
allowing the litigation of these state claims would defeat Con-
gress’s intent to have federal law occupy the entire field of
              SYBERSOUND RECORDS v. UAV CORP.                1697
copyright law. See 17 U.S.C. § 501(b); Perfect 10, Inc. v.
Cybernet Ventures, Inc., 167 F. Supp. 2d 1114, 1125 (C.D.
Cal. 2001). If we were to permit Sybersound’s claims based
on incidences of copyright infringement to proceed, Syber-
sound would be litigating a third party copyright infringement
claim under the guise of state law; to prevail on either the
infringement claim or the claim based on misrepresentations
of whether infringement occurred, Sybersound would have to
prove that copyright infringement occurred. Accordingly, the
state law claims that necessarily depend on such a showing
were properly dismissed.

  We now turn to the remaining state law claims.

  2) Intentional Interference with Prospective Economic
  Relations

   Sybersound alleges that the Corporation Defendants
intended to disrupt, and have disrupted, its business relation-
ships with its Customers by engaging in the wrongful acts of
misrepresenting to the Customers that the Corporation Defen-
dants are paying all royalties required under their licensing
contracts, and that Sybersound does not have valid licenses
for its songs.

  In California, the elements of the tort of intentional interfer-
ence with prospective economic advantage are:

    (1) an economic relationship between the plaintiff
    and some third party, with the probability of future
    economic benefit to the plaintiff; (2) the defendant’s
    knowledge of the relationship; (3) intentional
    [wrongful] acts on the part of the defendant designed
    to disrupt the relationship; (4) actual disruption of
    the relationship; and (5) economic harm to the plain-
    tiff proximately caused by the acts of the defendant.

Korea Supply Co., 63 P.3d at 950.
1698           SYBERSOUND RECORDS v. UAV CORP.
   [20] As noted, to the extent an alleged wrongful act by the
Corporation Defendants is based on copyright infringement,
it is preempted.

   Furthermore, Sybersound has failed to plead facts either
showing or allowing the inference of actual disruption to its
relationship with the Customers. See Silicon Knights, Inc. v.
Crystal Dynamics, Inc., 983 F. Supp. 1303, 1313 (N.D. Cal.
1997) (finding the pleadings insufficient where the complaint
alleged only that the misrepresentations induced distributors
not to deal with plaintiffs without providing facts alleging an
actual disruption to negotiations or potential contracts). In its
complaint, Sybersound merely states in a conclusory manner
that it “has been harmed because its ongoing business and
economic relationships with Customers have been disrupted.”
Sybersound does not allege, for example, that it lost a contract
nor that a negotiation with a Customer failed.

   [21] Accordingly, Sybersound’s cause of action for tortious
interference with prospective economic relations was properly
dismissed.

  3) Unfair Competition Law (UCL), California Business
  and Professions Code § 17200 et seq.

   [22] California’s statutory unfair competition laws broadly
prohibit unlawful, unfair, and fraudulent business acts. Korea
Supply Co., 63 P.3d at 943. Unlawful acts are “anything that
can properly be called a business practice and that at the same
time is forbidden by law . . . be it civil, criminal, federal, state,
or municipal, statutory, regulatory, or court-made,” where
court-made law is, “for example a violation of a prior court
order.” Nat’l Rural Telecomm. Coop. v. DIRECTV, Inc., 319
F. Supp. 2d 1059, 1074 & n.22 (C.D. Cal. 2003) (quoting
Smith v. State Farm Mut. Auto. Ins. Co., 113 Cal. Rptr. 2d
399, 414 (Ct. App. 2001); Saunders v. Superior Court, 33 Cal.
Rptr. 2d 438, 441 (Ct. App. 1994)) (internal quotations omit-
ted). Unfair acts among competitors means “conduct that
                SYBERSOUND RECORDS v. UAV CORP.                    1699
threatens an incipient violation of an antitrust law, or violates
the spirit or policy of those laws because its effects are com-
parable to or the same as a violation of the law, or otherwise
significantly threatens or harms competition.” Cel-Tech
Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 544
(Cal. 1999). Finally, fraudulent acts are ones where members
of the public are likely to be deceived. Nat’l Rural Telecomm.
Coop., 319 F. Supp. 2d at 1077-78.

   In its FAC, Sybersound asserts that the “foregoing acts con-
stitute unlawful, unfair and fraudulent business acts or prac-
tices within the meaning of Section 17200” and that it has
“suffered injury in fact and has lost money as a direct result
of the Defendants’ violations of Section 17200.” Even assum-
ing that this constitutes a sufficiently detailed pleading,
Sybersound has failed to state a claim.

   [23] To the extent the improper business act complained of
is based on copyright infringement, the claim was properly
dismissed because it is preempted. What remains are claims
based on the Corporation Defendants’ alleged misrepresenta-
tions to the Customers that they are complying with policies
requiring payment of royalties, misrepresentations to copy-
right holders that they are obtaining proper licenses from
other co-owners and paying all royalties, and misrepresenta-
tions to the Customers that Sybersound is infringing copy-
rights.

   [24] We first address the claims based on contracts and
misrepresentations to which Sybersound was not a party,
namely the misrepresentations to the Customers and copyright
holders about payment of royalties and licenses, which sound
in contract law. Under the sweeping standing provisions of
California’s UCL, “[s]ection 17200 does not require that a
plaintiff prove that he or she was directly injured by the unfair
practice or that the predicate law provides for a private right
of action.”7 Gregory v. Albertson’s Inc., 128 Cal. Rptr. 2d
7
  Recently, Proposition 64 restricted UCL’s standing requirement some-
what by requiring a private action be brought by “any person who has suf-
1700            SYBERSOUND RECORDS v. UAV CORP.
389, 392 (Ct. App. 2002). “[A] breach of contract may form
the predicate for a section 17200 claim, provided it also con-
stitutes conduct that is unlawful, or unfair, or fraudulent.”
Nat’l Rural Telecomm. Coop., 319 F. Supp. 2d at 1074 (inter-
nal quotation and citation omitted). Sybersound, however, has
not pled that the breaches of contract are independently
unlawful, unfair, or fraudulent, merely that the Corporation
Defendants do not pay royalties or acquire licenses from other
co-owners, in breach of their contracts with licensors and the
Customers.

    Furthermore, allowing Sybersound to bring suit to essen-
tially vindicate the rights of the copyright holders and the
Customers would pose significant problems in administering
the equitable remedy provided under the UCL. In its FAC,
Sybersound requests “a preliminary and permanent injunction
barring the Defendants from engaging in additional acts of
unfair competition and for such restitution as permitted by
law.” It further states that “forcing Defendants to fully license
their products will result in the enforcement of an important
right affecting the public interest.” Because the unfair compe-
tition claim is based upon the misrepresentations that occurred
in separate business relationships among karaoke records pro-
ducers, licensors, and the Customers, the court would be
placed in the awkward situation of enforcing private contracts
among sophisticated parties who are not all parties to this law-
suit. See Gregory, 128 Cal. Rptr. 2d at 396 (dismissing a UCL
claim and noting that the specific remedy sought under the
UCL would “cause the court to assume the roles of real estate
broker or property manager . . . [and] require the court to
make competitive business judgments.” (internal quotation
omitted)).

fered injury in fact and has lost money or property as a result of such
unfair competition.” Cal. Bus. & Prof. Code § 17204. Sybersound has
alleged loss of money as a result of the Corporation Defendants’ wrong-
fully acquired competitive advantage.
              SYBERSOUND RECORDS v. UAV CORP.              1701
   [25] In this case, forcing “Defendants to fully license their
products” and enforcing sales and royalties contracts through
this litigation may “leave victims worse off than they would
be if they filed individual actions against [defendants].”
Rosenbluth Int’l, Inc. v. Superior Court, 124 Cal. Rptr. 2d
844, 847 (Ct. App. 2002) (dismissing a UCL claim that was
based on a contract where the public in general was not
harmed by the defendant’s unlawful practices, but where the
victims of the unlawful actions were sophisticated corpora-
tions that negotiated their individual contracts with defen-
dants). Courts are institutionally ill-suited to enforce and
superintend private contracts among business entities where
the concerned entities themselves are not parties to the suit.

   Sybersound’s allegations that UAV and Madacy falsely
told the Customers that Sybersound’s karaoke recordings
infringed on copyrights also fail to state a claim. Since Syber-
sound cannot state a claim under the Lanham Act or the
Copyright Act and has not pled any other unlawful acts under
which this claim would fall, it cannot meet the unlawful con-
duct prong of the UCL. Moreover, Sybersound has also not
pled an act that would be an incipient violation of antitrust
law, as required under Cel-Tech for claims against competi-
tors. Finally, Sybersound has not pled that these misrepresen-
tations are likely to deceive members of the general public.

   [26] Accordingly, we conclude that the UCL claim was
also properly dismissed by the district court.

  4) California Common Law Unfair Competition

   [27] “The common law tort of unfair competition is gener-
ally thought to be synonymous with the act of ‘passing off’
one’s goods as those of another.” Bank of the W. v. Superior
Court, 833 P.2d 545, 551 (Cal. 1992) (explaining that the tort
provided “an equitable remedy against the wrongful exploita-
tion of trade names and common law trademarks that were not
otherwise entitled to legal protection” and that the expansion
1702           SYBERSOUND RECORDS v. UAV CORP.
of unfair competition law is primarily based in statutes).
Sybersound has not alleged that the Corporation Defendants
have passed off their goods as those of another nor that they
exploit trade names or trademarks and, thus, has not stated a
common law unfair competition claim.

  5) Unfair Trade Practices, California Business and
  Professions Code § 17000 et seq.

   Under California Business and Professions Code § 17043,
“[i]t is unlawful for any person engaged in business within
this State to sell any article or product at less than the cost
thereof to such vendor, or to give away any article or product,
for the purpose of injuring competitors or destroying competi-
tion.” Cal. Bus. & Prof. Code § 17043 (emphasis added).

   The California Supreme Court has held that to violate this
act, a generalized understanding or intent that particular con-
duct will injure competition is insufficient to state a claim;
instead, the violator must act with the specific purpose of
injuring its competition. Cel-Tech Commc’ns, 973 P.2d at 536
(“Section 17043 uses the word ‘purpose,’ not ‘intent,’ not
‘knowledge.’ We therefore conclude that to violate section
17043, a company must act with the purpose, i.e., the desire,
of injuring competitors or destroying competition.”).

   [28] Sybersound has not met this requirement. It alleges
that the Defendants engaged in their behavior “knowing that
their below-cost sales would undercut the prices of their com-
petitors . . . and specifically intended to injure competitors . . .
and to destroy competition.” As noted, the intent to injure
competitors is insufficient; Sybersound must allege that the
Corporation Defendants’ purpose was to injure Sybersound.
Because it has not done so, this claim also fails.

                        V.    Conclusion

   For the foregoing reasons, the judgment of the district court
is AFFIRMED.