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BLURREDLINESORFUZZYMATHHowDidTheyComeUpWith$7.3Million?OrWasIt$5.3Million
DAMAGECALCULATIONSINTHEMUSICINDUSTRY
Moderator:RobertS.Meloni,Esq.,Partner,Meloni &McCaffrey
Speakers:DougBania,CLP,Principal,Nevium IntellectualPropertySolutions
MattGreenberg,Ritholz LevySandersChidekel &FieldsBruceKolbrenner,CPA,Partner,PragerMetis
THEBASICSElementsNeededtoPrevailonCopyrightInfringementClaim
OWNERSHIP +COPYING (ACCESS/SUBSTANTIAL SIMILARITY)
¨ Copyrightinfringementisa“strictliabilitytort,”whichmeansthedefendant doesn’thavetohaveintendedtoinfringetoproveliability.Aplaintiffmustonlydemonstratethatthedefendanthadaccess totheallegedly infringedsong,andthatthetwosongs inquestionhavesubstantialsimilarity.
¨ Substantial similarity: whether ornottheaverage listenercantellthatonesonghasbeen copiedfromtheother.Thisisthe“ordinaryobservertest”- thehallmarkofcopyrightinfringement.Themoreelements twoworkshaveincommon,themorelikelytheyaretoberuledsubstantiallysimilar.Essentially,thejurymustdecidewhether thecopyingofprotectedelementswas“toomuch.”
¨ Provingsubstantialsimilarityinmusiccases iscomplicatedbythefactthatallsongscarrytwokindsofcopyright,forcompositionandsoundrecording,thathavetobeevaluated independently.
¨ InnocentorWillfulInfringement?Factorsintostatutorydamages, andwhetherexpenses canbedeductedfromprofitsindeterminingprofitsawards.
DEFENSES
¨ Ownership¨ Scènes à faire¨ Fairuse¨ Statuteoflimitations¨ Deminimis¨ Independent creation
IDEASVSEXPRESSIONCONCEPT&FEEto L:“Pharrell andIwereinthestudioandItoldhimthatoneofmyfavoritesongsofalltimewasMarvinGaye’sGotGiveItUp. Iwas,like,Damn,weshouldmakesomething likethat,
somethingwiththatgroove.Thenhestartedplayingalittlesomethingandweliterallywrotethesonginaboutahalfhourandrecordedit.”
CONSIDER THESE VISUAL IMAGES USING SAME IDEA,BUT DIFFERENT EXPRESSIONS OF THAT IDEA
¨ Asserting claims¨ Handlingthoseclaims¨ Settlement designed toavoidlitigation¨ Artist indemnities¨ Whataretypicalparametersofsettlement?¨ Howdotheycomparewithresults obtained iflitigation ensues? Concluded?
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¨ Musicologists areoftencalledasexpertwitnesses toassist thefactfinder.Amusicologist fortheplaintiffwillunderscorethesimilarities betweenthetwosongsaswritten,whilethedefendant’smusicologist willstress thedifferences.
¨ DamagesExperts suchasaccountantsandeconomists arealsocalled toassist thefactfinderbyprovidingopinions astodamages (actualdamages, profits,deductible expenses)
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¨ Overthepastfiftyyearstherehasbeenaninexorablygrowingnumberofmusiccopyrightinfringement claims.
¨ Between 1950- 2000U.S.courtsissuedmorethantwicethenumberofopinions inthisareathantheydidbetween 1900and1950.
¨ Since2000courtshaveissued over50%ofopinionspublished between 1950and2000.
Source:“IHearAmericaSuing:MusicCopyrightInfringementintheEraofElectronicSound”(USCGouldSchoolofLaw,LegalStudiesResearchPapersSeriesNo.14-6,March2014)
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15
10
78
15
31
3534
1940-1949 1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 2000--2009 2010-2013
MusicCopyrightCasesFiled1940-2013
Source:MusicCopyrightInfringementResource(USCGouldSchoolofLaw)
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¨ Judicial opinionsrepresent onlyasmallportionofmusiccopyrightinfringement claims;mostaresettled longbeforetrial.*
¨ Settlements – typicallya“get lost”paymenttotheplaintiff– keeps disputes offcourtdockets,butmaypromoteattenuated claims byplaintiffs seekingsimilarpayoffsbasedonconvenience andeconomicexpediency.
¨ Predilection towardssettlement, however,ultimately reflects itschariness oftheunpredictable results oflitigation (particularly jurytrials) andexpense oflitigation.
*Source:“IHearAmericaSuing:MusicCopyright InfringementintheEraofElectronicSound” (USCGouldSchoolofLaw,LegalStudiesResearchPapersSeriesNo.14-6,March2014)
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• Mostcopyrightinfringementcases(80.15%)terminatedvoluntarily- throughsettlement,agreedjudgment,orvoluntarydismissal.
• Incontrast,veryFEWterminatedviatrial(2.87%)orbydispositivemotionorotherdismissal(16.98%).• Inanoverwhelmingmajorityofcases(85.41%)thecasewasdismissedwithneitherpartywinningan
adversarialjudgmentovertheother(althoughroughly20%ofthosecasesinvolvedaconsentjudgmentfiledwiththecourt).
• Ofthe16.18%ofcasesinwhichtherewasanexplicitwinningparty,thedefendantwonalittlemorethanhalf(54.10%)andtheplaintiffalittleless(45.90%).*
Source:“Copyright’sTopography:AnEmpiricalStudyofCopyrightLitigation,”ChristopherA.Cotropia &JamesGibson,TexasL.Rev.[Vol.92:1981].
¨ Between 1960and2010over40musiccopyrightinfringement cases turnedonsummary judgmentmotions.
¨ Invariablythedefendantsoughtsummary judgmentatthedistrict court;inseveral instances appealcourtsoverturnedthedistrict court’sgrantingofdefendant’smotion.
¨ In16of42casesthecourtsdenied defendants’motions forsummaryjudgment .
Source: “IHear America Suing: MusicCopyright Infringement inthe EraofElectronic Sound” (USC Gould School of Law, LegalStudies Research PapersSeries No.14-6, March 2014)
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¨ Daubert standard: Rule of evidence regarding the admissibility of expert witness testimony infederal courts. Experts are only permitted to testify when their testimony is (1) based uponsufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3)the witness has applied the principles and methods reliably to the facts of the case.
¨ Natureofretention: ItisnecessaryforthedamageexperttoreceiveacompleteunderstandingoftheassignmentfromClientCounsel?
¨ Qualifications: Necessaryforthedamageexperttohaveathorough knowledgeofmusicindustry.
¨ InformationConsidered:Relevanceandreliability- DamageexpertmustcompileinformationfromvarioussourcestodetermineDamages.
¨ Methodology usedindeterminingDamages:ThecalculationsintheBlurredLinescaseweredifferentfrommostothers.
¨ ExpertReports:Jurydecisionofdamagesandhowtheyrelate– orNOT– todamagereportspreparedbydamageexpertsfortherespectiveparties.
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¨ Plaintiff's ActualDamages(e.g.,lostlicense revenues).
¨ Defendant’sProfitsNotAttributable toActualDamages(e.g.,revenuesfromsaleofrecords,concertandmerchandise profits,TVormoviesynchronizationfees).
¨ Plaintiffrequiredtopresent proofonlyofthe infringer’sgrossrevenue,andDefendantrequiredtoprovehisorherdeductible expenses andtheelement ofprofitattributable tofactorsotherthanthecopyrightedwork.
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¨ Bothsides inBlurredLinescasegaveestimation ofpotential damages.
¨ TheGayefamilyclaimed ThickandWilliams' profits fromthetracktotaledroughly$40millionandthataccordingtogeneralpracticesforlicensing, theyaredueabouthalfofthat.
¨ Williams/Thicke responded thatBlurredLineswasnotnearlythatprofitable,arguingthatthetrack'ssuccesswasn'tdueentirelytothemusic-- notingthattheracyvideoandsocialmediapromotionsshouldalsobeconsidered.
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¨ Gayes soughtanawardofactualdamagesundera“HYPOTHETICAL LICENSE THEORY”.
¨ “Marketvalueofthe injury”: basedonahypothetical-licensetheory- amountawillingbuyerwouldhavebeenreasonablyrequiredtopayawillingselleratthetimeofthe infringementfortheactualusemadebythe infringeroftheplaintiff'swork.
¨ Gayes’damagesexpert,NancyStern,testifiedthatappropriatelicensefortheportionsofGOT TOGIVE IT UP copiedbyBLURRED LINES wouldhavebeen50%percentofpublishingrevenueifthelicensehadbeenobtainedbeforethereleaseofBLURRED LINES,and75%to100%percentifitwereobtainedafterwards.
¨ “Reasonablemarketvalue”ofahypothetical licensemaybedeterminedbyreferencetosimilarlicensesthathavebeengrantedinthepastorevidenceofbenchmarklicensesinthe industryapproximatingthehypothetical licenseinquestion.
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¨ Everypieceofrecordedmusichastwocopyrights: (i)thesoundrecording;and(ii)theunderlyingcomposition.TheGayefamilyonlyhadlegalrightstoaportionoftheprofitthecompositioncopyrightgenerated.
¡ Basedontypicalindustrycustomandpractice,Thicke/WilliamsarguedtheGayefamilyisonlyentitledto25%ofprofitgeneratedifinfringementisdetermined.
¡ Basedonthe25%,thereareotherfactorsthatcontributedtothesuccess ofBlurredLines.
¡ Difficultieswhentheinfringingworkinextricablyinterminglesnon-infringingmaterialwiththeplaintiff’sprotectablematerial.
¨ SalesofBlurredLinesasreportedbySoundScanwasusedasareasonableindicatorofthesuccessofBlurredLinesatdifferentpointsintimefollowingitsrelease.
¨ FactorsContributing totheSuccessofBlurredLines:¡ Themusicalelements¡ Celebrityandstarpower¡ Awarenessrelatedtothevideos¡ MarketingactivitiesundertakenbyUMG¡ Socialmediaactivities
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Arecordedsongsittingonadesk isnotgoingtogeneraterevenueonitsown
PresentValueofExpectedFutureBenefits
ValueofBusiness
IntangibleAssets
TangibleAssets
Copyrights
Patents
IntangibleAssets
TangibleAssets
Trademark
INTELLECTUALPROPERTYDEPENDSONOTHERASSETSANDRESOURCESINORDERTOGENERATEECONOMICBENEFITS
EVERYSONGHASTWOCOPYRIGHTS
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
SoundScan/Week
Single
BlurredLines Album
THESUCCESSOFBLURREDLINESWASDEFINEDBYTHESOUNDSCANDATA
0
5
10
15
20
25
30
35
40
45
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Numbero
fMarketin
gEventsDuringtheWeek
SoundScan/Week
SoundScanEvents
THEVOLUMEOFMARKETINGEVENTSANDSOUNDSCANDATA
Soun
dScan/Wee
k
MARKETINGEVENTSANDSOUNDSCANDATA
Event Description Date Event Description DateA VideoSneakPeak 3/19/2013 P BETAwardsPerformance 6/30/2013
B YoutubeUnratedVideoRelease 3/26/2014 Q InterviewswithVH1,FUSE&MusicChoice 7/18/2013
C UnratedVideopulledfromYouTube 3/29/2013 R TwitterChat,#ASKTHICKEDebacle 7/23/2013
D BeatsCommercialAired 4/28/2013 S InterviewswithRyanSecreast,VanityFair,HowardSternandSIRIUSbetween7/24/13and 7/29/2013
E VideoaddedtoFusePop&VHI 4/29/2013 T AlbumReleasedinUS 7/30/2013
F NYCPromo:Power105,GQ,VH1,HOT97 5/1/2013 U TheTodayShow ,BETY106,PARK,America'sGotTalent Performances 7/30/2013
G TheVoice PerformancewithThicks,PharrellandT.I. 5/14/2013 V TheView andJimmyFallon Performances 8/2/2013
H InterviewswithKissFM&Power106 5/15/2013 W ThickeAppearsonTheColbertShow 8/6/2013
I EllenPerformance 5/16/2013 X TheMTVVideoMusicAwardsPerformancewithMileyCyrus 8/25/2013
J LeGrandPerformance&InterviewswithMadmoizelleandPauletteMag 5/18/2013 Y OprahShow Appearance 10/14/2013
K InterviewswithMetro,Booska,PurechartsandSkyrock 5/20/2013 Z 12LiveShowsinMajorMarketsbetween12/2/2013and 12/29/2013
L GrahamNorton Performance 6/6/2013 AA RyanSecreastRockin' Airs 12/31/2013
M NYCPromo:Z100,WTKU,Hot97,CBSOnline,WNOWandWBLS 6/10/2013 AB PerformanceattheGrammy's 1/26/2014
N JimmyKimmelPerformance 6/13/2013 AC ESPNSuperbowlPartyPerformance 1/31/2014
O InterviewwithCentric 6/27/2013
LISTOFMARKETINGEVENTS
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Marketin
gSpend
SoundScan/Month
MarketingExpense
SoundScan
GROSSMARKETINGEVENTSANDSOUNDSCANDATA
0
10
20
30
40
50
60
70
80
90
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
RadioStations
SoundScan/Week
SoundScanRadioStations
0
100
200
300
400
500
600
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
MarketS
izeinM
illions
SoundScan/Week
SoundScanMarketSize
Numberof radiostationsinwhich“BlurredLines”wasfirstplayed.
Combined sizeofaudienceinwhich“BlurredLines”wasfirstplayedontheradio.
FIRSTRADIOSPINHISTORYANDSOUNDSCANDATA
86%
14%
March2013
Male
Female
88%
12%
“BlurredLines”Video
Male
Female
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
Views
54%
46%
AllOtherMonths
Male
Female
ROBINTHICKE’SYOUTUBECHANNELDATA
0
10
20
30
40
50
60
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
iTunesVideoReviews
SoundScan/Week
SoundScan
Reviews
NUMBEROFITUNESVIDEOREVIEWSANDSOUNDSCANDATA
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
Retweets
SoundScan/Month
T.I.PharrellThickeSoundScan
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
Favorites
SoundScan/Month
T.I.PharrellThickeSoundScan
TWITTERACTIVITYANDSOUNDSCANDATA
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
LikesonPostsM
entio
ningBlurredLines
SoundScan/Month
LikesSoundScan
Postsmentioning “BlurredLines”
NUMBEROFLIKESONROBINTHICKE’SFACEBOOKPOSTANDSOUNDSCANDATA
0
20
40
60
80
100
120
140
160
180
200
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
MediaM
entio
ns
SoundScan/Month
MediaMentions
SoundScan
TheVoicePerformance
NUMBEROFMEDIAMENTIONSANDSOUNDSCANDATA
0
50,000
100,000
150,000
200,000
250,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
smartURL
Click
s
SoundScan/Month
smartURL TotalClicks
SoundScan
SMARTURLCLICKSANDSOUNDSCANDATA
TOTAL PROFITS - ARTIST/PRODUCER/LABEL:
Combined (Net)Publishing(writersplits) Artist Producer FoundLiable?Thicke: $5,658,214 1,404,569 (23%) 4,253,645 YESWilliams: $5,153,457 4,293,124 (64%) 860,333 YESHarris(TI): $704,774 679,362 (13%) 25,412 _______ NO
Total: $11,516,445 $6,377,055 (100%) $4,279,057 $860,333
Interscope: $1,343,674 NOUMGD: $217,150 NOStarTrak: $3,598,412 NO
Total: $16,675,690
TOTAL PROFITS - PUBLISHING:Thicke: $1,404,569
$5,697,693Williams: $4,293,124
Harris: $679,362
Total: $6,377,055
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¨ Overhead(BlurredLines) - Gayesmaintainedshouldnotbededucted
Interscope/UMGD:$7,373,616
¨ ThickeTourIncome(BlurredLines) - Gayesmaintainedshould beincluded
ThickeTourRevenues: $11,792,000
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¨ Duringdeliberations,thejuryposed awrittenquestiontotheCourtthatread:
“Q:Canyouclarifyorexplainthe intentions ofwhatthissentencemeans?‘Youmaynot includeinanawardofprofitsanyamountthatyoutook intoaccount indeterming [sic]actualdamages.’”
¨ CounselagreedtothefollowingwrittenresponsetobepresentedbytheCourt:
“Thepartiesagreedthatapproximately$8millionwasreceivedbythewritersof'BlurredLines'inpublishingrevenue.Incalculatingactualdamages,itisthe$8millionyoushouldtake intoconsideration. Ifyoudecidetoconsiderawardingprofits,youshould nottakeintoconsiderationthesame$8million.”
Post-TrialMotion: CounselforThickePartiesarguedthis instructionwasa“mistake,”,andthat“[t]heCourt’sreferenceto“approximately$8million”was“grosslyinaccurate,”because“thestipulatedamountofpublishingrevenuewas$6,377,055forallthreewriters.
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JuryVerdictForm
ACTUAL DAMAGES (LOST LICENSING INCOME - PUBLISHING):
JuryAwarded: $4,000,000asagainstThicke/WilliamsONLY
► Partiesstipulatedgrosspublishing revenuesforBlurredLinestotaled$8Million(didnotaccountforcommissionstomanagers/accountants/lawyers).
►Jury award of $4 Million consistent with theory jury applied 50% licensing fee aboutwhich Stern testified.
►Thicke/Williams argued that the award of profits as to both Thicke and Williams shouldbe remitted to “no more than 5% of the actual non-publishing profits” of Thicke andWilliams stipulated to at trial . This position premised on testimony of Sandy Wilburthat “the handful of elements in GOT TO GIVE IT UP claimed to be copied in BLURRED,even if credited, amount to no more than 5% of BLURRED.”
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HOWEVER, juryawardforactualdamages(publishing)waslaterremitted(lowered)byCourtto$3,188,527.
►”Remitter”: If the amount of damages awarded by a jury is excessive,trial judge required order a new trial OR remittitur (reduced amount ofdamage which the court considers just).
►Courtdetermined that$4Million award“notreasonablysupportedbytheevidence.”
►Remitted amountof$3,188,527=50%of$6,377,055(totalpublishing profitsforThicke&Williamsnetofcommissions tolawyers/accountants/managers).
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PROFITS (NOTCOUNTED IN CALCULATING ACTUALDAMAGES:PROFITS (NOT COUNTED IN CALCULATINGACTUAL DAMAGES):
¨ JuryfoundthatWilliamsreceivedprofitsof$1,610,455.31,andthatThickehadreceivedprofitsof$1,768,191.88,whichwerenottakenintoaccountincalculatingactualdamages.
¨ Reverseengineering– figuringoutbasisjuryaward:
AWARD AGAINST THICKE: $1,768,191=41.5689%of$4,253,645Thickeartist royaltiesAWARD AGAINST WILLIAMS: $1,610,455=187%of$860,333Williams’ producer royalties
¨ $1,768,191.88÷ 4,253,645=41.5689%
¨ Williamsprofits-to-damagesratioof187%was4.7timesGREATERthanthe41.5689%ratiousedtocalculatedamagesreThickeprofits.
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Artistroyalties: $4,253,645Producerroyalties: $860,333
Total: $5,133,978
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TotalProfits(Artist+Producerroyalties)
JuryAward Ratable shareoftotalprofits(Thicke+Williams)
$5,033,978 1,768,182(Thicke) 35.12%
$5,033,978 1,610,455(Williams) 31.99%
¨ TheawardofWilliams’ profitswasremittedfrom$1,610,455.31to$357,630.96.
¨ Courtapplied 41.5689%- whatjuryapplied toawardofThickeprofits - tothe$860,333inproducerroyalties paidtoWilliams.
¨ 41.5689%of$860,333=$357,630.96
¨ Totalreduction: $1,252,824.44
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