.:..:

••• SHARICB DAVIS,

Plaintiff-Appellant,

-against-

MARy I. BLIGH, BRUCB MlLLBR, RONALD LA~CB, Kw~ HOLLAND, DANA STINSON, AUSAR MUSIC, MARy J. BLIGB PUBLISHING, BRUCE MILLER PuBLISHING, KWAMB HOLLAND PUBLISHING, MARY 1. BLIOB MUSIC, DAYNA S. DAY PUBLISHING, WARNBR-TAMBRLANE MUSIC PUBLISHINO CORP., UNIVERS~L MUSIC GROUP, INC., UNIVERSAL STUDIOS, INC., UNIVERSAL MUSIC PUBLISHING GROUP, UNIVERSAL-MCA MUSIC PuBLISHING, UNlVBRSAL MUSIC & VIDBO DISTRIBUTION CORP. and MCA RBCORDS, INC.,

Defendants-Appellees.

ON APPEAL FROM TIlE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF OF'AMICI CURIAE THE MOTION PICTURE ASSOCIATION OF AMERICA, INC. AND ASSOCIATION OF AMERICA:~ ~~ ..... ':

PUBLISHERS, INC. IN SUPPORT OF DEFENDANTS-APPEI.;~EE~ ';-- \ PETITION FOR REHEARING OR REHEARING EN BA~ :.i (.,

;1':5 I 'i \ ..... co 1 otf"i -"0 '"'U ,:

):>-~ ~ r"'~ McDBRMOITWILL&EMB~~€, U ROBBRT H. ROTSTBIN ;t""I_ 2049. Century Park East ~ ~ Los Angeles, California ~OO67-3218 (310) 277-4110

CHRISTINE A. PEPE 340 Madison Avenue New York~ New York 10173-1922 (212) 547-5400

. Attorneys fOT Amici Curiae

.'

f{uLE26.1CORPOltATEDISCLOSURE StATEMENT

mtrs~~tt? Fedeta:fltule of-A.ppellate ProcedUre 26.1, the undersigned ':.i-;P" ,:1'.'

,~ iii,:,.· · . .;~~~;P~~A:Peliil;Pri lJefudf of Amici Curiae the Moo,,!! Picture

.............. i ........ iii'::I~~~i~~~i~fA.ttte~¢~aiid:th~~$~~ci~tion9f AIneticaiiJfubiislie~ceriif:'~esth~t: . r (1) . The Mot?on Picture Association of America has no parent companies,

nor do any publicly held companies own ten percent or more of its stock.

(2) The Association of American Publishers has no parent companies, nor

do any publicly held companies own ten percent or more of its stock.

Christine A. Pepe

TABLE OF CONTENTS

Page

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. ... . : .. ;.. ..

••.••..•••.. ~~ ..•. >.:~ .••.•.••••.••...•.•••..••••.••.••.••.•.. ; .•.•. }./;".<~ .... < ... ' ... '.' .. ' . .' ' ... ' •..••.•..••...•••.... · ••.• ; •. ··.··· ••.• ·Yi·, .. ·.......·i.· ... · ........... · •.. TIf?-{mlf]r~i1lt~~ff~f~~;~f.:~jr~.ij~·~;;.~.: .. ~:~~ .. ~ ~.~~.~.~~.~: .. ~:..~,; .... ,~; ~ ....... ~ .. ~. 2 . . ","", ......... ':',.:- ,-: :.:.:.;. ':':':':-:'::';.:.:.".'.', ' .. :.'. '" ::".~:- .:: ..... : ......... ,' "

.« .••. ' •.•.•.• , .. > (».»i ·'··~~~~i~.j~~~d;#9~1J.8.···2()7(i§~6) ..... ~ .. ; ................ ~ .. : ..... : .................... ~ .. 5

Thornsonv; Larson, 147 F.3d 195 (2d Cir. 1998) .......................................... 4

University of Colo. Foundation, Inc. v. American Cyanamid Co., 196 F.3d 1366 (Fed. Cir. 1999) ........................................................................ 2

FEDERAL STATUTES & LEGISLATIVE HISTORY

17 U.S.C. § 101 et seq .................................................................................... 1

17 U.S.C. § 201 ............................................................................................... 2

3S U.S .. C. § 262 ............................................................................................... 2

H.R Rep. No. 94-1476 ................................................................................... 2

MISCELLANEOUS

M. Nimmer & D. Nimmer, 1 Nimmer on Copyright § 6.10 ..................... 2,3,4

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'~{jDtJCTlONANDSTATEMENT OF INTEREST

)jii~,i:~Ci'~~ su~ith!~ I?rief.in s~tH)f "'AAellees' Petition for . "."':.

> .. ' ...{/ ··.)i.· •.•••• ~~~~.w.n.>. ~ofi\e.h~~~ .• l!J .• • •.• ~.··~.'-.;"~~hC.Th~MqtiO'h Pictyr ..• eAssoCiation ofAtn~Tiq~ :::;,: :. >::~: :': ::::,,':;~.':. .. :~ :::::j' :: <::

some 300 members of the Association of American Publishers include most of the

major commercial book and journal publishers in the United States, as well as

many small and non-profit entities. Amici have a substantial interest in cases

relating to licenses of copyright and can provide valuable perspectives to assist the

Court in assessing the high stakes and substantial issues raised by the Petition.

The motion picture and publishing industries have long relied on the

principle that, absent an agreement to the contrary, a co-owner of a copyright may

assign or nonexclusively license that interest without the other co-owners' assent.

Before the Opinion, neither Congress nor the case law distinguished between

prospective and retroactive transfers. By invalidating retroactive licenses

regarding past acts of copyright infringement, the Opinion not only departs from

the settled law, but also enunciates a rule that could have serious adverse

consequences for companies such as Amici's members. The Opinion could

frustrate efforts to resolve infringement claims, resulting in needless, costly

litigation. Indeed, by preventing good faith downstream licensees from settling

:"1-

. . .. :: ..

cMes,theQPihion could actually chill the creation and dissemination of expressive

wotks.Fmally, tl.J.e opinion could foster collusive conduct among co-owners.

·n~:t~E.(jpimONC6ilLD JMpEDERESOLUTION OF

·······.;ifi;_~f_~~~~~~=im IP"SSEMINATION OFV ALUABLE EXPRESSIVE WORKS ... . ,..' . ,.

The relevant hiw is set forth in the Appellees' Petition. The salient point is

that, according to hornbook copyright law, one joint owner may unilaterally exploit

. a copyrighted work, assign his or her interest in the work, or grant a nonexclusive

license to a third-party. 17 U.S.C. § 201(d); H.R. Rep. No. 94-1476 at 121 (1976);

M. Nimmer & D. Nimmer, 1 Nimmer on Copyright § 6.10[A]. This rule reflects a

Congressional decision to make interests in copyright fully alienable. 1 The

Opinion recognizes this rule for prospective licenses and assignments, but creates

an exception for retroactive transactions, which are supposedly less fair to co-

owners than are prospective licenses. Op. at 13,23. The Court's premise is flawed.

On the one hand, a non-licensing co-owner might believe a prospective

1 Importantly, Congress decided to treat copyright co-ownership differently from patent co-ownership. Unlike copyright, each holder of a patent interest has an effective veto over an infringement suit. See Ethicon, Inc. v. United States Surgical Corp., 135 F.3d 1456, 1468 (Fed. Cir. 1998), quoting Willingham v. Lawton, 555 F.2d 1340, 1344 (6th Cir. 1977) ("Thus, the congressional policy. expressed by section 262 is that patent co-owners are 'at the mercy of each other."') (emphasis added). Further, a patent co-owner has no duty to account to another co-owner for royalties. 35 U.S.C. § 262.

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H~~~~t~~.~~aitandevenodi6US.Z Yet, under established copyright law, absent

..••..•..••.. ;:................... . ..... ·w,$t~~i~~'k~~~AP··Ofth~copyrighted· WQrk, the·.nbrbcoI1:3eilting •• ·c6~~e~· •. ¢annot

:;li';" .";~~~~~~~~~';'~hfln\i. retfuMiiveiI~ret\!!t~~ ..... i ....... : .....•.... : .. , .. ; ..... ; ..... : ..... ~ ...... ~ ........... : ...... ; ..... ~ ............ ; ..... j ..••. ~ .......•... :, ..• :., .... ! .... : ..... : ...... ; ......•...... ; ..... · ..... ; ....•.... : .. · ...•. : ....... i ...... : .... • ..... : .... : ...... f ....•• :~~:;::. ,::.: .:: .... "....... . ........ " ... '. . . :ir~:);;;;i::·;~ . . .......... '.; .. ', .... ,,":' : .. :; .. ,:.::::-::;:;:-: >::::::·::\:~Yi~~:··:);·· :,::: ::;: :;:.",: . .

··(:·::'·:.I_~lt:II:·~~~frt~¢b~yta4ct.~~~#~fi2li~~hsmg~o~~~~t,~~t?~¢i~llYWh¢t~ <b'\.. .............. .' ..... . ..... . ........ . thelj~~tisiilg9qtb~ maximizes the settlement value. Indeed, becaus.e of the

remedies available under the Copyright Act, in the usual case a co-owner

negotiating a retroactive license for past infringement has greater bargaining power

than a co-owner negotiating a prospective license for the same work. The essential

point is that prospective licenses and assignments are not, as the Opinion holds,

inherently more or less fair than retroactive licenses and assignments. And even if

they were, it would be for Congress, not the courts, to redress ~hat unfairness.3

The established approach to copyright co-ownership furthers the policy

underlying copyright law: encouraging creation and dissemination of valuable

expressive works. Before the Opinion issued, licenses from a j oint owner, whether

prospective or retroactive, encouraged the dissemination of works by good faith

downstream licensees. Disputes among co-owners could be redressed through

2 For example, a joint author ofa song who is concerned more with artistic integrity than with economics might object on principle to commercial advertising, and therefore vehemently disagree with his co-owner's decision to grant a nonexclusive license to use the song in a television commercial. 3 The co-owner who wants to limit the rights of other co-owners to license the work, prospectively or retrospectively, is not without recourse. Co-owners can contractually agree to limit their rights of exploitation. 1 Nimmer § 6.1 O[C].

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.i}/.:)\i·~q~~~.~~~W~~()fo~ers theniselvesforanaccQUrlting(Fhomson v.· Larson,·

•. ·\i\.U.) •..•.. ····1#,7i~.~d.!~~,1~~(2.ddit}·'J998)) or in egf~gio\lsca~es~fot waSte or conversion (1

•.•••• > ••••••••••••.••••••••••••••••••••••••••••.•••••••• i·.······.· ••••• ~itnm~~~.iij;.i;~~jl;.tfMe~~ief .• dbWnstre~.·.liQense¢~.·coWd, ·tQ·the·.p~q~t1t .ofthe

;; .••••••.•.•.•. ; .••..••••••••..•••••••••••.••••••••••••• ~~$r.i~~~b~.i:~~i.~9tci··tne··work .•.••. Sh941~tlie.~pWiQn .•• ~etiJtliA·14WihQweyer, ·~>C.< .•... ....... ....... .... ... ... .......•.. ......... .•.. ....... .

.~4~p~ doWs.tre;milicenSees like Amici's members will for the first time be

. subject to infringement suits even though a co-owner of the work with an

undisputed interest in the copyright consents to the exploitation, albeit

retroactively. By promUlgating a rule that hinders the dissemination of expressive

works, the Opinion is inconsistent with the very purpose of copyright.4

The Opinion's departure from settled law conflicts with commercial

expectations and: practice. While book publishers and movie producers spend

significant resources trying to "clear" ownership of a copyrighted work, even the ~

most effective clearance procedures may not avoid all infringement claims. Often,

infringement claims relate to relatively minor elements of a work, yet raise

complex issues.s As a result, Amici's members are inevitably called upon in the

4 In stating that retroactive licenses encourage infringement, the Opinion assumes that an infringer can predict that a co-owner will grant a retroactive license. One simply cannot be sure that a co-owner will ratify infringement rather than sue. Moreover, a co-owner willing to grant a retroactive license would likely do so prospectively, making it unlikely that a putative infringer will forgo the opportunity to obtain a prospective license and risk suit. S E.g., motion pictures may incorporate copyrighted novels, music, and background art; literary works may incorporate excerpts or photographs. A publisher might have paid a license fee for a photograph, or a studio might in good faith have paid

-4-

. . .. ·····\<···~J~~i¥~hr$~6tb~~w¢ssi6elit¢r into rettoactive·liceMkg··afrangements .....•....

. ···· .. ··i ...•.. ·· •.• ······> •••••• ·~~~p~st~re~oaBtrye1iberiSes with fewer th~ailofthejQint copyright

·•·•· ••. ··· •••. •·••··• •.•.•.•••••••• ·i:~~~~~~~~~!·i~6hii~~a •• ~~~.djs~ut¢ resolution. ·Thfs··is ... especially ·tnle .qf.claiffi~.· ·· .. ··.···«.·.··?·(r .. ?iii.¥~~$ii)1g~l~~r.~P#~;:~lt~i~:~~Qti.~al.8;uthordl;i$~ti:~~~~~i¥~dec~d6s~~6ari4·.· ••• ···••·••···••··· ·i>;; >./< ........ . ..... .......... ..... .•.. .... ••...... . .• ..... . ... .

id¢nti,ficati9J1>ofaUp.testatUtoryheirs is difficult, ifnot impossible. The Opinion

discoUrages such orderly resolution. Until now, a company faced with a claim that

a work infringes copyright could attempt to settle the dispute by obtaining a

retroactive license from an identifiable co-owner. At the same time, all the rights

holders would receive fair compensation by virtue of the licensing co-owner's duty

to account. This ability afforded the producer or publisher assurance that it could

exploit the copyrighted work free from further claims of infringement, and thereby

protect both itself and its downstream distributors. Such transactions furthered the

interests of the Copyright Act by compensating all owners of the copyright while

simultaneously ensuring that the public had continued access to a valuable

expressive work, i. e., a motion picture or book that was non-infringing but for a

single brief use of, for example, a song or a photograph.

a license fee for a song, only to discover later that it paid the wrong person. As another example, an unanticipated claim might arise as to a song or photograph created under the prior copyright act for which a sole author granted rights "in perpetuity"; if the author died before expiration of the initial 28-year term of copyright, the grantee's rights might have expired upon commencement of the renewal term, with the rights then reverting to the author's statutory heirs, who become co-owners of the copyright. See Stewart v. Abend, 495 U.S. 207 (1990).

-5-

·vriaei'tlieopfui6ri.,hOWeVer , a company settling in gO(jcl' faith with an

. ·ia~ptifi~bl~ciWti~!6faC()~Ynghti11terest risks a later hiwsl.1itby ··~utUdentified ····jQ~tq~¢t2~~ttie~~t,~~'(aced.with.infringementclaiIltscbUld pay a co~owner

::: >.:;. ::: .... )?\;<\): :/" ..

\~¢t~t~&~ii&6.fme¢litibi~·· ~P\v-t~~~~p~l"s&n. miglit()ftetl~~tIi~~ll'settlertieAt' . .•.•. ..••.•••..• . .•. -:;; ...•.....•••••••••........•... ' . ,>' . ............ . . '.' .... ' . .... , .. , ...... '

value to ail Idelltifia\1fe owner as a hedge against unknown claimants. This would

di~courage the original claimant from settling. Moreover, claimants who settle for

the lower sum would realize less than the full value of their copyright interest,

diminishing the value of their copyright where no other co-owner later surfaced.

Conversely, a potential defendant who in the past could obtain comfort by

purchasing a retroactive license from someone with an interest in the copyright

might now decide to abandon a project entirely rather than risk exposure to an

unknown co-owner. E.g., suppose a claimant alleges copyright infringement of a

script that the studio has purchased but not yet produced. In the past, the studio

might have acquired a nonexclusive retroactive license from the claimant as a way

of avoiding litigation and allowing production to proceed. Now, because the

studio has not yet invested a significant amount in the allegedly infringing script, it

might conclude that it is more prudent to abandon the project than to settle with the

purported sole claimant and run the risk that, after the expenditure of millions of

dollars on production and distribution, an unknown co-owner will appear and bring

suit. Ifprojects are abandoned for this reason, the Opinion inhibits the purposes of

-6-

the CopyrightAct,munely promoting the dissemination of expressive works.

The apinipn cOl.dc(~lso unfairly prejudice co-owners. Suppose that, of five ";/;. -.":

·~o-ownetsffoMr~ant't() s~#ieacla4n for areasonable sum; but that the fifth co-

.oWn~r.o¥~~~~~~tIi¢cl~ artdreftisestoseffi.e; Before the 0PWoli, a ~rhpany '/.

could acquire a retroaCtive license from the four co-owners and avoid inefficient,

costly litigation, while the copyright owners could realize full value of the claim.

Now, the person would have no incentive to settle with the consenting co-owners

because the non-consenting co-owner could still pursue his claims and force the

company to expend legal fees and risk an adverse judgment. The Opinion thus

harms co-owners who could have granted a prospective license before the

infringement and who want to settle, but who are now prevented from exploiting

their interests because of the intractability of the minority. While the law provides

a remedy for a co-owner who claims that another co-owner has wrongfully

licensed a work for less than fair value, there is no remedy for a co-owner who

claims that another co-owner has wrongfully refused to license a work for fair

value. Thus, in the case of a dispute between co-owners on the fairness of a

proposed license, the Opinion would leave one group of co-owners at the mercy of

another without any legal recourse. In requiring co-owners to agree unanimously

before entering into a transaction, the Opinion is unprecedented.

Finally, the Opinion encourages collusion that could prejudice good faith

-7-

dijWristreaJllliceri.s~es.Now, unscrupulous co-owners of a copyriglithave a

§igrtificant inC¢riti"eto cdl1ude. Suchjoint owners could agree that one ofthelJl

..... /) •. ··WillP~orttob~thtr&()l~%er ofth~~6pyiight.and wiUwakeanimqalpUilin

.·r·.· •.• ···· ••. ·i.·· .. ·.·· ... ·· .. · .... · •... · ..•. «~~~~~fevit6~~~~H~~~~t6·.a .. settieineht·.~d .• ltq¢nse.·agr~¢~¢tit.·wi~.te 9

.. alleged infringer for .the :full value of the claim. The second co-owner could later

assert a claim unaffected by the prior agreement, and exact double recovery from a

defendant. By this time, the first co-owner might have disappeared or hidden

assets. In sum, the Opinion hinders early resolution of disputes; could cause a

proliferation of litigation; and is squarely at odds with the purposes of the

Copyright Act-promoting the creation and dissemination of expressive works.

DATED: November 2, 2007 Respectfully submitted,

MCDERMOTT WILL & EMERY LLP

By: ~~d~ . R'OeIiH:Rotsteiri

Clnistine A. Pepe Attorneys for Amici Curiae

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dE~1tFrCATE OF COMPLIANCE

Th.eunde~ignedatt~rney hereby certifies that the word countand/orpage :'..-"!: .•.

. ••• • •.••• ··.·(ipUt6~tlie fote~()irl~'bri~(~f·~iciCuriaeJhe Motiql1Picture AssQCiation of "'.-.:

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32 oftlie Federal Rule'S of Appellate Procedure.

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>';j~\;,t~ii~j.j~'~~~sw:m,;Q~ii~.~;u)~AAl'lilha~ .!lep·9n~ry~Js. nqtJ~a~tg>he ,actJ~n. and is over

·.1"hat;6h~h~2. day of· November ~007 deponent served 2 copy(s) ofthewithin

'eFlle~dFAMICI CUFUAE THE MOTION PICTURE ASSOCIATION OF AMERICA, INC. AND ASSOCIATION OF AMERICAN PUBLISHERS, INC. IN SUPPORT OF DEFENDANTS-APPELLEES'

PETITION FOR REHEARING OR REHEARING EN BANC

upon the attorneys at the addresses below, and by the following method:

BY HAND DELIVERY

Richard J Scarola SCAROLA ELLIS LLP 888 Seventh Avenue. 45th Floor New York. New York 10106 212-757-0007 Attorneys for Plaintiff-Appellant Sharice Davis

Jonathan D. Davis (JD5712] JONATHAN D. DAVIS, P.C. 99 Park Avenue, Suite 1600 New York. New York 10016 [212) 687-5464 Attorneys for Defendants-Appellees Mary J. Blige and Mary J. Blige Music

"11~J!~ Sworn to me this

November 2. 2007 NATASHA R. MONELL

Notary Public, State of New York No.02M06123816

Qualified in Kings County Commission Expires March 14, 2009

George T. Gilbert (GG 9856] LAW OFFICE OF GEORGE T. GILBERT 100 Fifth Avenue. 11 th Floor New York, New York 10011 (917) 817-4819 Attorneys for Defendant-Appellee Bruce Miller

Andrew H. Bart (A86724) JENNER & BLOCK LLP 919 Third Avenue. 37th Floor New York, New York 10022 [212]891-1600 Attorneys for

Gregory J. Watford (GW 2555) LAW OFFICES OF GREGORY J. WATFORD 61 Broadway. Suite 3025 New York,--New-York 10006 (212)785-5840 .' Attorneys for Defendants-Appellees Ronald Lawrence-and Ausar Music Publishing. Ltd.

Case Name: Davis v. Blige

Docket/Case No. 05-6844-cv