Opinion
No. 01 Civ. 10998 JSR.
August 30, 2002
MEMORANDUM ORDER
Licensor of recordings of musical artist sued licensee, claiming that copying of recordings on to MP3 format was breach of license agreement. Licensee moved for summary judgment. The District Court, Rakoff, J., held that: (1) copying was not violation of agreement; (2) agreement was not unconscionable; and (3) agreement was not terminable at will.
Judgment for licensee.
*1 Plaintiffs, a music artist named Hannah Bentley (who previously did business under the name Sam LaHanna) and her personal company, FurryRecords, Inc., allege that the sole remaining defendant in this case, a music promotion company named The Orchard, LLC ("Orchard"), committed various violations of the Copyright Act, 17 U.S.C. § 101 et seq., the Lanham Act, 15 U.S.C. § 1125, and the common law, chiefly by making allegedly unauthorized MP3 copies of plaintiffs' recordings. Ultimately, the viability of all of plaintiffs' claims against Orchard depends on the scope and validity, vel non, of a license agreement between Sam LaHanna and Orchard, dated September 3, 1999. Against this background, both sides move for summary judgment.
The talented Ms. Bentley is also an attorney and represents the plaintiffs in this lawsuit.
By stipulations dated February 6, 2002 and February 11, 2002, three defendants, RealNetworks, Inc., peoplesound.com, Ltd., and Vitaminic SpA, were dismissed from the case on consent. The purported "Does I-C" (seemingly intended to identify between 1 and 100 unknown sublicensees) have never been identified and are barely mentioned, even in passing, in the Amended Complaint (see paragraphs 31 and 43 thereof); any purported claims against them are not only insufficiently pleaded but have long since been abandoned. Additionally, any claims against them would necessarily be derivative of the claims against Orchard, which, detailed below, are hereby dismissed.
The pertinent portions of the license agreement read:
You [Sam LaHanna] grant to us [Orchard] throughout the Territory during the Sales Period the NON-EXCLUSIVE rights to sell, distribute and otherwise exploit any and all of your Recordings by any and all means and media (whether now known or existing in the future), including, without limitation, the non-exclusive rights to sell, distribute and otherwise exploit any and all of your Recordings throughout E-stores including, but not limited to, those via the Internet, as well as digital storage, download and transmission rights, whether now known or existing in the future.
* * *
The following words when used have the following meanings: "You" means the person(s) signing as individual(s) and/or as member(s) of any group(s). "We" or "Us" means THE ORCHARD, LLC. "Territory" means the Universe. "Signing Date" means the date You sign. "Term" means a period starting on the Signing Date and ending one (1) year from the Signing Date. "Recordings" means each and every compact disc and/or any other audio and/or audiovisual recording in any format, in whole or in part (whether now known or existing in the future) which You deliver during the Term. "Sales Period" means the time period beginning on the Signing Date and continuing in perpetuity for each of your Recordings in each country of the Territory.
Declaration of Scott Cohen dated April 29, 2002, Ex. 3 (license agreement dated Sept. 3, 1999) at pp. 3-4.
Plaintiffs' primary argument is that, because the contract does not expressly provide for "copying" per se, defendant's encoding of plaintiffs' works into MP3 format constitutes copyright infringement (and other, related violations). However, defendant's open-ended right under the contract to "otherwise exploit" plaintiffs' recordings permits such copying. Moreover, any doubt on this score is resolved, so far as MP3 copying is concerned, by the contract's specific grant to defendant to exercise plaintiffs' "storage, download and transmission rights, whether now known or existing in the future."
While the contract was between Orchard and Sam LaHanna, the latter was doing business at the time as "FurryRecords," an entity that was subsequently incorporated with LaHannah/Bentley as President and principal shareholder.
Plaintiffs' fall-back argument is that the license agreement-a form contract used by Orchard-is unconscionable, and therefore void, chiefly because, while it obligates defendant to promote plaintiffs' recordings for only a one-year period, it permits defendants to sell, distribute, and otherwise exploit plaintiffs' recordings "in perpetuity." But there is nothing inherently unreasonable in a promoter, in return for promoting (here, on a website) musical works of a relatively unknown artist, obtaining, as here, a non-exclusive right to thereafter exploit those works. Furthermore, notwithstanding the "in perpetuity" language, plaintiffs have a federally-protected statutory right to terminate the contract after 35 years. See 17 U.S.C. § 203(a)(3).
*2 More generally, Ms. Bentley (LaHanna), a graduate of the Columbia Law School, could not conceivably have been misled as to the nature of the bargain she was entering into in agreeing to this simple, four-page contract. Nor is there any competent evidence that she was subject to high pressure tactics, given a deadline by which she had to accept or reject the contract, or otherwise subject to having her will overborne. Indeed, virtually none of the indicia of unconscionability under New York state law (which governs this contract) is here present. See Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 537 N.Y.S.2d 787, 791, 534 N.E.2d 824 (N.Y. 1988).
Plaintiffs' final argument is that because of its "in perpetuity" term, the agreement is, under New York law, terminable at will, and that plaintiffs terminated it by a letter dated July 24, 2001, so that any copying thereafter was unlawful. However, New York law provides that a contract is terminable at will only if (i) there is no fixed "or determinable" duration to the overall contract and (ii) there is no express agreement that the duration is perpetual. See Ketcham v. The Hall Syndicate, Inc., 37 Misc.2d 693, 236 N.Y.S.2d 206, 212 (N.Y.Sup.Ct. 1962). Here, by contrast, the license agreement itself expressly provides that defendant's rights to plaintiffs' music shall last "in perpetuity" unless terminated by mutual consent (not here given), see license agreement at p. 4, 236 N.Y.S.2d 206. Moreover, there is a determinable duration because, as mentioned, federal law expressly gives plaintiffs the right to terminate the contract after 35 years. Thus, on any analysis, the contract is not terminable at will.
With respect to defendant's request for attorney's fees, the Court finds that plaintiffs' position, while ultimately deficient as a matter of law, is not so frivolous, objectively unreasonable, or advanced in bad faith as to warrant an award of attorney's fees to defendant. See Lieb v. Topstone Industries, Inc., 788 F.2d 151, 156 (3d Cir. 1986).
The Court has considered plaintiffs' other arguments and finds them without merit. Consequently, defendants' motion for summary judgment is granted and plaintiffs' cross-motion is denied. Accordingly, the Clerk of the Court is directed to enter judgment dismissing the case with prejudice.
SO ORDERED.