Following word June 17 that European Union Competition Commissioner Mario Monti will recommend approval of the proposed merger of Sony Music and BMG, independent labels, retailers and consumer groups






Breaking News

Objectors Slam Monti's Approval Of Sony-BMG Merger

By Leo Cendrowicz and Lars Brandle

Mario MontiBRUSSELS -- Following word June 17 that European Union Competition Commissioner Mario Monti will recommend approval of the proposed merger of Sony Music and BMG, independent labels, retailers and consumer groups attacked the provisional decision and expressed surprise that Monti placed no conditions on the deal.

Monti's spokeswoman insisted June 18 that it was "premature" to suggest that a decision had been made, but refused to comment further.

The EC must announce a final decision on the merger by July 22. Although Monti's decision is unlikely to change, there are a number of key steps before the merger is formally cleared. These include meetings of the advisory committee of EU representatives, an inter-service consultation with all interested EC directorates-general (internal market, enterprise, education and culture, consumers), and translation of the text (which could be up to 300 pages) into the EU's 20 official languages. The issue is expected to be formally cleared at the regular EC meeting July 14.

The merger is still under anti-trust review in the United States.

European independent labels trade body Impala expressed outrage at Monti's reported endorsement of the deal. Long a vociferous opponent of industry consolidation, the Brussels-based trade body questions how European regulators could wave through the merger despite having identified problems in the sector.

Sources suggest that the anti-trust commissioner concluded that there was not sufficient evidence of price collusion and market dominance among the music majors to justify blocking the merger. This came despite the EC's Statement of Objections to the merger, which last month accused the five companies of colluding in a tacit cartel.

"We were positively shocked by the extent of the Commission's objections," says Horst WeidenmŸller, Impala board member and CEO of Berlin-based dance-music label!K7. Monti's decision, he says, "defies all logic."

Michel LambotMichel Lambot, Impala president and co-chairman of Brussels-based independent PIAS Group, warns that EU approval of the deal would leave regulators open to claims of overriding commercial interests. "Any turnaround would do nothing to counter the image that the EC's agenda is dictated by giant commercial interests rather than the interests of European citizens," says Lambot. "It is Mr. Monti's responsibility to correct this, and we will use all options open to us to ensure that this happens."

"The whole affair is completely scandalous," says Patrick Zelnik, Impala VP and president of French label Na•ve. "What is the point of having an anti-trust watchdog if the market is left unrestrained?"

Earlier in the week, representatives of Impala were involved in closed-door hearings in Brussels on the proposed merger. Others who spoke out against the deal included Apple Computer, whose iTunes service is a rival to Sony's Web platform Connect, and retail group GERA, which warned that a merger would reduce consumer choice and limit artistic innovation.

Sony and BMG had no comment on word of Monti's approval.

EC insiders say Monti decided not to block the merger because the evidence of market collusion among music majors would not have survived a court challenge. The EU's anti-trust procedures have changed since 2000, when the EC's initial objections were enough to force Warner Music and EMI to abandon a planned merger. Now the EC needs concrete evidence and solid economic analysis if it is to block any joint ventures. If not, the decision could be challenged at the EU Court of Justice, and overturned. "It would not have stood up in the court," says one EU official. "We can't block a merger just because there is a bad feeling about it. We have to show it."

In 2002, the EC lost an EU Court of Justice case over an early collusion decision in the package-tour sector, and was warned that any future actions had to be fully justified. Chastened by the court ruling, Monti adopted new rules for anti-trust investigators, demanding stronger evidence in cases that are blocked.

The failure to collect clear evidence is also cited as the reason the Sony BMG merger was cleared without concessions. Officials say that moving from five to four majors in the music industry was not in itself reason enough to block the merger or attach conditions. The only concessions will be those already agreed upon to ensure that independent music companies are able to access Sony Connect.

Since 1990, the EC has conducted 116 in-depth merger investigations, but only 24 have been cleared unconditionally, most without any Statement of Objections. In 2003, the Commission made 222 merger decisions; only eight of those were taken after in-depth investigations, and of those, six mergers were cleared, with conditions.

According to the IFPI, Sony and BMG claimed a combined 25.1% of the world music market last year (11.9% for BMG, 13.2% for Sony). If sustained, it would make it the market leader, ahead of Universal Music, at 23.5%; EMI, 13.4%; and Warner Music, 12.7%.

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Gibson Guitar Corp. Intensifies Trademark Litigation

By Christopher Walsh

Gibson's Singlecut series modelNEW YORK -- In the wake of a successful trademark-infringement lawsuit against guitar manufacturer Paul Reed Smith, Gibson Guitar Corp. is intensifying global action to defend the trademark registration of its musical instruments.

The March 2004 ruling against Paul Reed Smith regarding its "Singlecut" model was the first development in a recent flurry of legal activity by Nashville-based Gibson. It was followed in May by a lawsuit Gibson filed in the Middle District of Tennessee against Japanese manufacturer Tokai over its "Love Rock" and other models.

In each case, Gibson claimed that the manufacturer infringed upon its Les Paul design, for which it applied for trademark registration in 1987.

"We were delighted with the Paul Reed Smith case," says Gibson Guitar Corp. general counsel Joel Cherry. "We were happy not just because of the win but because of the judge's ruling. His view of the fact and his application of the law were so clearly in our favor, and in favor of our registration and the protection of our rights. It's the kind of ruling that we hope sends a message.

"One is required to police one's rights," Cherry adds. "We feel we have an obligation, and certain of our designs are at the foundation of Gibson -- the Les Paul, of course, is the king. Clearly, we'd go to any length to protect those rights."

Cherry says that damages in the Paul Reed Smith case are to be determined in proceedings scheduled for July 6-9 at U.S. District Court for the Middle District of Tennessee.

Gibson's SG series modelsCherry confirmed to ELW that Gibson's iconic SG and ES series models are the subjects of additional legal action.

"There is an action that we are close to resolving with a Korean manufacturer which involves certain important designs of ours, which we are confident is about to be resolved in our favor," says Cherry. "There is (action involving Tokai), which has just gotten under way here in the U.S., because they've just encroached upon our soil. It's premature to talk about any result, but it is consistent with our efforts to police our rights."

Tokai could not be reached for comment by deadline.

Gibson's efforts to protect trademarks, Cherry notes, mirror the music industry's struggle to enforce intellectual property rights.

"Certain of these territories have, shall we say, far less-developed intellectual property protective laws," he says. "We are obviously zealous within the United States, but we also police them worldwide. Where we see the opportunity to send a signal and to stop that kind of activity, we will. We've won in Germany, we've won in France, we've had successes globally. In certain other territories, it's hard. The judicial system there isn't as protective of one's rights as we think it ought to be."

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Game Makers Sue 321 Studios Over Copying Software

By Jill Kipnis

LOS ANGELES -- Atari, Electronic Arts and Vivendi Universal Games have filed suit against 321 Studios, alleging that the company's Games X Copy software is a violation of the Digital Millennium Copyright Act (DMCA).

The suit (case number 04 CV 4458) was filed June 15 in U.S. District Court for the Southern District of New York.

Games X Copy allows consumers to make a copy of a PC game using a CD or DVD burner.

Douglas Lowenstein"We have made the case that there is real harm if this product continues to be on sale," says Douglas Lowenstein, president of the Entertainment Software Assn., a trade group that represents videogame makers. "We are asking for a preliminary injunction against 321 Studios. It is illegal to distribute a product that circumvents technological protections built into videogames."

A representative for 321 says the St. Charles, Mo.-based company is "confident in their legal position. They considered the issues before launching Games X Copy (in February). They had no discussion with the plaintiffs previously."

321 manufactures a similar product for copying DVDs, called DVD X Copy software, which has been the target of several legal battles this year.

In May, Macrovision won a preliminary injunction against 321, barring the company from selling DVD X Copy. Judge Richard Owen of the Federal Court for the Southern District of New York found that the software violates the DMCA.

321 had already been ordered to stop selling the product, under a February ruling by the U.S. District Court of San Francisco. That case was brought by film studios that included MGM, Sony, Warner, Disney and Universal.

A preliminary injunction against 321 was also granted in March by Judge Owen of New York, in a case brought by Paramount Pictures Corp. and Twentieth Century Fox Film Corp.

321 filed an appeal in the California case.

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Jackson Criticizes Settlement Terms Leak

Michael JacksonLOS ANGELES (AP) -- Michael Jackson issued a statement June 17 criticizing whoever was responsible for leaking documents that disclosed the settlement terms in a 1993 civil case accusing him of child molestation.

The records, obtained by Court TV on June 15, said Jackson had agreed to pay $15.3 million to a boy who claimed the singer molested him.

The singer, who faces trial in Santa Maria, Calif., for allegedly molesting a different boy in 2003, said he would never harm a child and that he had reluctantly agreed to the settlement a decade ago because of the case's potential to harm his career.

"I respect the obligation of confidentiality imposed on all of the parties to the 1993 proceedings. Yet, someone has chosen to violate the confidentiality of those proceedings," Jackson said in the statement. "Whoever is now leaking this material is showing as much disrespect for the Santa Maria Court's gag order as they are a determination to attack me."

Jackson also said no one has opened an investigation into the leaks, which he urged the public to see "for what they are."

"These kinds of attacks and leaks seek to try the case in the press, rather than to a jury who will hear all of the evidence that will show that I did not, and would not, ever, harm a child," the singer said. "I have always maintained my innocence and vehemently denied that these events ever took place."

Rodney MelvilleSanta Barbara County Superior Court Judge Rodney Melville has ordered participants in Jackson's ongoing criminal case not to speak out about the matter without getting his approval for statements. It was unclear whether Thursday's statement by Jackson was subject to the gag order.

The singer's spokeswoman, Raymone Bain, told a reporter she would check on whether the statement had been approved by the judge.

A secretary in Melville's office said the judge does not respond to inquiries from reporters.

The civil settlement in the 1993 case has been widely reported but Tuesday was the first time documents were available showing the specific figure.

The documents specified that the $15.3 million was to be held in trust by the boy's attorney. The boy, his family and Jackson agreed to keep the settlement confidential, according to the document.

Larry Feldman, the attorney representing the boy, did not return calls seeking comment.

Susan Tellem of Tellem Worldwide, which is handling media inquiries for Santa Barbara County District Attorney Tom Sneddon, also did not return a call.

In the current case, Jackson, 45, has pleaded not guilty to committing a lewd act upon a child, administering an intoxicating agent, alcohol, and conspiracy to commit child abduction, false imprisonment and extortion.

AP LogoCopyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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New Bill Would OK Movie Filtering Software

By Jill Kipnis

Lamar SmithLOS ANGELES -- Rep. Lamar Smith (R-Texas) has introduced the Family Movie Act, which states that movie filtering software does not violate copyright law.

The Family Movie Act (H.R. 4586), introduced June 16, also says that the copyright owner retains exclusive rights to a film's audio and video content. A hearing on the bill took place June 17 before the House Subcommittee on Courts, the Internet and Intellectual Property, which is headed by Smith.

The bill comes amid a House Subcommittee investigation into a lawsuit between ClearPlay -- a company that manufactures movie filtering software -- and the Directors Guild of America (DGA). At a May 20 hearing, Smith said that legislation allowing the legal sale of ClearPlay software would be introduced if the two parties did not settle their dispute.

ClearPlay's software allows film viewers to bypass scenes they deem as potentially inappropriate for children.

The DGA filed a copyright infringement lawsuit against ClearPlay in 2002. Plaintiffs that include Steven Spielberg, Martin Scorsese and Steven Soderbergh allege that ClearPlay's technology misrepresents directors' finished films and violates studio copyrights.

The DGA is strongly opposed to the Family Movie Act. In a statement, the organization says, "As the creators of films, directors oppose giving someone the legal ability to alter in any way they choose, for any purpose, and for profit, the content of a film that a director has made, often after many years of work.

"This legislation is about much more than giving consumers a choice in what they watch and don't watch," the organization adds. "Unidentified employees of electronic editing companies make the choices of what is edited out of each film they review -- it is their choices that govern and not the consumer's."

Bill AhoClearPlay CEO Bill Aho says, "We think it's a good bill. We think Rep. Smith's intentions are exactly right. As new technologies emerge, the law needs clarification.

"At the same time, we would love to find a common solution with the studios," he continues. "It has proven very, very difficult, and could, frankly, be impossible. I have had over 30 meetings in Los Angeles with studios. We are very committed to trying to find a solution. It might be that a legislative solution may be the only one that may work."

ClearPlay was targeted by another lawsuit May 13, filed by Nissim Corp., the creator of a movie filtering product called CustomPlay. Nissim claims that the new ClearPlay-enabled DVD players, which debuted in April from RCA, infringe its patents.

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MPAA Expands Anti-Piracy Campaign

By Jill Kipnis

LOS ANGELES -- The Motion Picture Assn. of America (MPAA) is extending its public education campaign against movie piracy.

Anti-piracy ads will be featured in daily newspapers and consumer magazines across the United States, as well as in more than 100 college newspapers. The MPAA will also work with about 120 universities on self-enforcing codes of conduct for student computer use on campuses.

Additionally, the MPAA will spearhead outreach programs to parents, students and local groups to explain why movie downloading is illegal, and how it impacts jobs and the economy.

Other education efforts will include working with Junior Achievement -- an organization that informs kids about free enterprise, business and economics -- to teach more than 1 million children in grades five through nine about copyrights.

The MPAA will also work with technology and consumer electronics companies to develop new solutions to illegal downloading.

These efforts add to the MPAA's existing program, which includes running anti-piracy trailers in movie theaters nationwide.

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Case Analysis

Maverick/WMG Case Raised Unanswered Issues of Precedent

By Ed Christman

Maverick Records LogoNEW YORK -- While most attorneys surveyed by ELW view the settlement of the litigation between Maverick Records, which was co-founded by Madonna, and Warner Music Group as the smart thing to do, some are disappointed that important issues of precedent raised in the Maverick complaint received no ruling.

WMG on June 14 said it had reached an agreement in principle with Maverick to settle their litigation and extend the Maverick joint venture. As part of the deal, WMG -- which currently holds 40% of Maverick -- will purchase the separate interests held in the label by Madonna and label COO Ronnie Dashev.

But regardless of the outcome, "It was shocking to see (WMG) suing this artist or this label which had made so much money for them over so many years," says one attorney. "It only goes to show the fickleness of the industry and that Madonna sales are on the wane."

WMG declined comment; calls to Madonna's spokeswoman were not returned at deadline.

The Maverick complaint charged WMG with breach of contract and sought undisclosed compensation and punitive damages.

MadonnaReportedly, Maverick valued the stake in the label held by its principals at $60 million; however, WMG is said to be paying Madonna and Dashev a total of only $10 million-$20 million under the settlement. Also as part of the settlement, WMG is said to be buying 5% of Maverick partner Guy Oseary's 25% stake, leaving him with a 20% stake in the company. WMG has also negotiated a new multi-year contract with the highly successful A&R executive. The settlement will put WMG's stake in Maverick at 80%.

Maverick was formed 12 years ago as a 50/50 joint venture between WMG and Madonna and her then manager Fred DeMann. In its first seven years, the label contributed $50 million in profits.

In 1999, when the joint venture was renewed, WMG loaned Maverick $20 million to buy out DeMann, and also provided a $6.5 million fee and an additional $7.5 million in funding to create a Latin division, according to WMG's pre-emptive suit, filed in the New Castle County Court of Chancery in Delaware. The renewal also increased the stake held by Madonna, Oseary and Dashev to 60%, leaving WMG with 40% ownership.

But the "fortunes of the joint venture declined precipitously" after the deal, the WMG suit says, with losses at the label totaling $66 million over the last five years. If the label made $50 million in its first seven years, then WMG had a total loss of $16 million.

But the Maverick complaint, filed in the Superior Court of California in Los Angeles, states that since the label was founded, it "generated $900 million in revenues and profits of $100 million for the WMG."

The new Maverick will be headed by Oseary and will move into the Burbank, Calif., headquarters of Warner Bros. Records, which will provide more services for Maverick than it did before. The move allows Maverick to reduce its staffing from about 40 to about 18; the departures are expected to include label GM Daniel Savage.

Alanis MorissetteMaverick, which recently released a new album by Alanis Morissette, is expected to generate about $60 million in revenue this year. Sources familiar with the situation say that the staff and overhead reductions are being made in an effort to return the label to profitability.

The litigations seemed "rather short-lived," which can be favorable to both sides, says Christine Lepera, an attorney at Sonnenschein Nath & Rosenthal LLP in New York. "Both sides clearly had to compromise for this settlement ... and to come up with an amicable resolution was smart."

"The lawsuit was a very interesting and rare look at the inside workings of a custom label and provided some incendiary allegations of wrongdoing on the part of WMG," says Neville Johnson of the L.A. firm of Johnson & Rishwain.

But since the lawsuit was settled, "a number of issues of first impressions which I and other lawyers in the industry would have liked to see decided" will never be answered, he adds.

Johnson says the Maverick complaint alleges that there was "an intentional mandate (from WMG) to effectively stifle the growth and profitability of the label."

For example, the complaint includes claims that WMG failed to provide adequate radio promotion support for Maverick artists, and little back-end support. There were also allegations relating to mark-ups on manufacturing and other services that were so high that WMG was in effect allegedly gauging the label with bogus costs. The suit claims that Maverick "has always been highly profitable at the 'Group level,' which measures its actual profitability. At the 'Label level,' it typically appears to be in a loss position, because its true profit is diverted to other Warner entities."

The Maverick complaint also alleges that WMG failed to provide or pay for required services to market albums, leaving the label to incur about $30 million in costs.

"It was obviously going to be a battle of accountants and experts in the music industry as to custom and practice which would have proven to be very interesting," says Johnson. "It's impossible to tell upon reading the complaint who is in the right or wrong."

But Morton H. Fry, a lawyer with New York-based Stairs Dillenbeck Finley & Rendon, suggests that if the press reports that Madonna and her partner received only $10 million for a stake that was worth $60 million, "it seems that the owners got the lesser side of the settlement."

That probably reflects the lack of success at the label itself or the overall industry problems affecting label profitability, says Fry.

Another lawyer suggests that if Madonna came out on the short end of the settlement, "the strength of the partnership papers" gave WMG a stronger legal hand. "It struck me that when Madonna's lawyer switched from quoting a legal position into what's equitable that he didn't have much faith in his legal arguments."

Bertram FieldsMadonna was represented by Bertram Fields, one of the top U.S. entertainment litigators, as well as Lawrence Y. Iser and Kristen L. Spanier. All are with Greenberg Glusker Fields Claman Machtinger & Kinsella LLP in L.A.

But another lawyer who buys into Madonna's allegations that WMG was inflating Maverick's costs says that the legal dispute should be viewed against the backdrop of what is going on at WMG.

"They have had massive layoffs and losses, and they have new owners who made a calculated move to eliminate the fat," says one attorney. "They probably saw that the deal wasn't making enough money, and they wanted Madonna out of the deal to increase their portion of the profits."

Most observers say they are not surprised that the joint venture would up in litigation.

Stanley Schneider, who has served as inside council at a couple of the major record companies, observes that most joint ventures that involve artists' labels fail. "To have the skills needed to run a successful label, even a magician would have a hard time in today's market," he says.

"What ultimately happens is that the (major) has to buy out the (artist) partner to stem the losses," he explains. "At that point, they fight about valuation." In this case, Schneider guesses that "Madonna looks at the whole relationship, while Warner probably is only looking at the last two years."

If the label is losing money, then the parent would normally ask, "Why should I pay you?" Madonna probably answered that WMG made plenty of money off of her and Maverick over the course of their relationship.

Fry of Stairs Dillenbeck Finley & Rendon points out that "as a lawyer having put together as well as unraveled many of these joint ventures, one of the most common mistakes I find is that the 'sweat equity' side (fails) to put in a floor on the buyout price."

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Washington Report

Royalty Bill Moving Ahead In California

By Scott Banerjee

Kevin MurraySAN FRANCISCO -- The quest of California State Sen. Kevin Murray (D.-Los Angeles) to help recording artists collect unpaid royalties took a big step toward becoming reality June 15 in Sacramento. However, some observers are lamenting the fact that the bill no longer establishes a fiduciary duty for labels to accurately report and pay royalties.

The bill received unanimous support in the California Assembly Committee on Arts, Entertainment, Sports, Tourism and Internet Media. It now heads to the Assembly floor for a vote on June 21, followed by a concurrence vote in the Senate.

The current bill is a far cry from the version first introduced in February 2003, which sought to establish a fiduciary duty between recording artists and their labels. The legislation -- dubbed the Recording Industry Accounting Practices Act -- recently went through another round of amendments, the fourth such revision in less than two years.

The bill has evolved significantly over time as a result of record labels modifying their royalty accounting practices.

The current version includes the creation of "minimum audit procedures" for all royalty contracts. While the final version establishes a statutory right to audit royalty statements, it contains no penalties for underpayment by labels. The bill also discourages class action suits.

Recording Artists Coalition LogoThe Recording Artists Coalition (RAC) is disappointed that the bill does not establish a fiduciary duty.

"The bill does not give recording artists substantially more audit rights than they already have in most of their contracts," says RAC counsel Jay Rosenthal. "RAC hopes that the California legislature will strengthen the bill as soon as possible. Once passed as law, there will be very little chance of passing a real fiduciary-duty law in California."

However, Barry Broad, lobbyist for the American Federation of Television and Radio Artists, admits, "We came up with the best bill we could get under the circumstances.

"This was the David vs. Goliath struggle, not a battle of equal parties. You're talking very powerful corporations battling organized labor and recoding artists." Broad adds, "It's easy to say you could hold out for a fiduciary bill, but you may never get anything."

Murray calls the acknowledgement of a statutory right to audit a significant step forward. He is particularly positive about the bill's assertion of the right to conduct "simultaneous" audits -- i.e., audits of labels on behalf of multiple artists.

"A fiduciary right is a great thing, but what we got instead are some concrete things to move artist interests forward and allow them to audit and verify their income," Murray says.

Mitch Bainwol, chairman/CEO of the RIAA, cites the marketplace as the preferred forum for improving the clarity and transparency of the royalty reporting process.

"Now we need to band together to give (the music industry) a fighting chance at a decent future," Bainwol says.

Sources with Murray's office say the bill could be signed by Gov. Arnold Schwarzenegger in August. If passed, the bill would go into effect in January 2005.

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International Section

New MEPs Face Tough IP Agenda

By Emmanuel Legrand

LONDON -- The new European Parliament has a busy agenda ahead of it in the intellectual-property (IP) sector.

The new Members of the European Parliament (MEP) have the task of reviewing and amending the existing five directives concerning IP that were passed in the '90s.

The 786-seat European Parliament was elected June 10-13, and new members now hold more than two-thirds of the seats. MEPs are elected for five years. The Parliament will hold its first plenary session July 20 in Strasbourg, France.

One of the key IP issues for MEPs, according to industry sources, will be a ruling on the Term of Protection Directive, which modernizes a directive of 1993.

Currently, recorded works in the European Union are protected for 50 years from the moment of their first recording. After that, they fall into the public domain. In contrast, publishing rights are protected for 75 years after the death of the owner.

The music industry, through trade body the IFPI, is seeking an extension of the duration of sound recording rights. In the United States, following the Sonny Bono Copyright Term Extension Act of 1998, the duration of protection has been extended by 20 years and can reach up to 95 years from first publication. Industry memebers have suggested that the EU harmonize its terms of protection with those of the United States.

MEPs are also expected to review the level of criminal sanctions for pirates and the management of digital rights in the Internet era.

Frances MooreFrances Moore, IFPI regional director for Europe, admits that with the new Parliament, a lot of field work will be needed in order to "re-establish a network of contacts." This is especially true now that the EU counts 25 member states.

"However," she adds, "we are happy to see that many key supporters of intellectual property have been returned, and that is a good starting point." She refers to such MEPs as Ireland's Arlene McCarthy and France's Janelly Fourtou, both extremely active in Strasbourg on IP protection issues.

"The power of the European Parliament continues to grow," says Moore, "which is a good thing for us since we have often relied on MEPs to put legislation affecting the recording industry onto the right track."

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Sony U.K. Execs Cleared Of ASBOs In 'Flyposting' Case

By Lars Brandle

LONDON -- Marketing executives at Sony Music U.K. have escaped Anti Social Behavior Orders (ASBO) after pledging to put an end to illegal "flyposting." Yet legal action still looms for executives at BMG U.K. and Ireland.

At Highbury Corner Magistrates' Court yesterday, North London's Camden Council withdrew action against Catherine Davies, managing director of Sony Music U.K., and Jo Headland, marketing director for the company's international division. The council says it decided on the move after Sony agreed to cease "flyposting" -- the illegal practice of pasting billboards in highly visible areas -- in England and Wales. Sony also paid unspecified costs.

John ThaneCouncillor John Thane, executive member for the environment, Camden Council, warns that the council will continue to target BMG executives after that company "declined our offer to make the same undertaking" as Sony.

The council said it is not proceeding with an ASBO against BMG U.K. temporary hire Lucy Hansford, as she is due to exit the company next week.

"Camden Council is pleased that Sony Music Entertainment (U.K.) Ltd. has recognized that flyposting is antisocial behavior and cannot continue," says Thane in a statement. "We will be encouraging other companies engaging in flyposting in Camden and around England and Wales to recognize this as well, and we will be using this legislation against those that don't do so."

Spokesmen for BMG and Sony declined to comment.

ASBOs, civil procedures typically used to curb unruly behavior, have until now been aimed at prostitutes, vandals and drug dealers and users.

The Metropolitan police served notice on May 27 that the council would take legal measures against Sony and BMG.

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French Parliament To Discuss Copyright Legislation

By Emmanuel Legrand

European Union FlagParis -- France is in the final stage of adapting the European Union's E-Commerce Directive into local law, but another crucial piece of EU legislation for the music and film industries is way behind schedule.

France's highest court, the Constitutional Counsel, has cleared the E-Commerce Directive, which was approved by the Parliament last May. Only a limited number of elements, related to freedom of the press, were modified by the Counsel. The bill puts the onus on ISPs to remove content from their services when they are notified that it is illegal.

The law should be enacted within 10 days.

Meanwhile, the French government announced last week that the law adapting the Copyright Directive will be given a first reading by the Parliament in July. The Directive was due to be adopted by EU members at the latest in December 2002. Most EU states have now integrated the directive into their legislation.

The directive regulates copyright issues in the digital era. Music industry experts explain that France's delay is due to a lack of leadership on the issue by the department in charge, the Ministry of Culture, and by harsh debates between proponents of strong legislation protecting rights owners and groups wishing for more lax laws: Internet service providers, telecom companies and consumer bodies, among others.

"This time we have a text that is well-balanced," says Frederic Goldsmith, legal counsel for labels body SNEP. But SNEP and several other organizations fear that during the debate at the Parliament, many MPs will introduce amendments that will radically alter the proposed legislation.

"For a start, MPs hate discussing law that transpose directives," says an observer. "And there's a tendency with some MPs to side with those who take the view that IP protection on the Internet is not that necessary."

One of the hottest debates in France concerns the status of music on the Internet. Artists' and musicians' collecting societies Adami and Spedidam are in favor of a legal license that will rule content on the Internet. As is the case with radio, content providers would pay collecting societies a fee for the use of music or video on their services. At a conference last week in Paris, both organizations renewed their pledge for a legal license.

This view is combated by the music and the film industries. "Legally, it does not stand on its own, and economically, it is pure nonsense," says Goldsmith. "The Copyright Directive is very clear about that. We are in a system in which rights owners have the right to authorize or refuse for their works to appear on such services."

He adds that if the legal license system prevails, record labels and film producers would no longer have control of who uses their works and how much they pay for it.

After a first reading at the Chamber of Deputies, the copyright bill will be discussed by the Senate, but this will likely not take place until the end of 2004. A second reading should take place at the Chamber in early 2005, with a final vote by the Senate before the summer. "It is quite likely that the law will only be enacted by mid-2005," says Goldsmith.

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Korean Industry Clashes On MP3-Capable Mobile Phones

By Mark Russell

SEOUL -- The Korean Assn. of Phonograph Producers (KAPP) is threatening legal action to stop sales of the new MP3-capable mobile phones introduced by Seoul-based carrier LG Telecom.

Nearly three months of talks between KAPP, LG Telecom and the Ministry of Information and Communication broke down May 28, leading KAPP to announce that it will seek an injunction under the Copyright Act to stop sales of the phones. The Korean Copyright Act was introduced in 1957 and last amended in 2003.

The problem, as KAPP sees it, is that almost all MP3s available for download in South Korea are illegal, as legal download services have yet to take off in the territory. Most South Koreans get their online music from illegal file-sharing and streaming services, using well-known foreign operations such as Limewire and Bittorrent, or local services such as Soribada and Bugsmusic.

"Most young people use MP3 players, but everyone uses mobile phones," says Yun Sung-woo, chief of legal affairs at KAPP. "Because Korea has such a high turnover rate for its mobile phones, within a couple of years, everyone could have MP3 phones."

To prevent MP3-capable phones from being used for illegal downloading of music, South Korea's other major mobile carriers, KTF and SK Telecom, agreed this spring to demands by KAPP and other trade groups to limit sound quality on their phones and to introduce a three-day restriction on songs, after which the files lose audio quality.

KAPP officials say LG Telecom refuses to accept that policy. "Our services shouldn't encroach upon the rights of MP3 users," says Brian Cho, public relations manager at LG Telecom.

LG Telecom has sold more than 120,000 MP3-capable handsets since introducing them in May. After such a strong start for the devices, KTF and SK Telecom say they may be compelled to break their agreements with the music industry.

"We are discussing what to do next," says a KTF spokesperson. "But anything is possible."

LG Telecom remains committed to producing its MP3-capable phones. "According to our legal analysis, there are no rational reasons for (the music industry) to sue," says Cho.

He says that if the music industry makes good on its threats to revoke the ringtone, ringtune and other music licenses that LG Telecom uses, the company is prepared to sue on the grounds that the industry would be "interrupting" LG Telecom's business and violating the concept of "fair use."

"At the same time, we'll make every effort to find a win-win solution with (the music industry)," Cho adds.

Mobile phone-delivered music has been one of the few bright spots for the South Korean music industry in the past couple of years. KAPP says that in 2003, South Koreans spent more money (200 billion won, or $168 million) on ringtones, ringtunes and mobile-phone music downloads than on albums (180 billion won, or $158 million).

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France Stepping Up Battle Against Int'l Piracy

By Emmanuel Legrand

Francois LoosPARIS -- French trade minister François Loos will visit the Netherlands June 29 to discuss with Rotterdam port authorities measures to curb physical piracy and the introduction of counterfeit goods into the European Union.

Rotterdam is Europe's biggest port, and it is believed to be one of the region's main points of entry for illegal goods.

Loos will be joined during his trip by representatives of France's Agency Against Audiovisual Piracy and music industry organization SNEP.

Loos' visit is part of a global plan by the French government to address piracy affecting the music and audiovisual industries. Loos told representatives of various French intellectual-property (IP) trade bodies during a June 15 meeting in Paris that he expects an increase in international cooperation in the fight against piracy.

During a recent trip to the United States, Loos met with executives from the Motion Picture Assn. of America, and both parties have decided to work closely in exchanging "good practices" in the fight against piracy.

High on Loos' priority list are China and Russia. At the June 15 meeting, he said France fully backs the United States in its request that Chinese authorities tackle counterfeit and piracy issues. He said he will discuss the same issues with the Russian government during a July 8 trip to Moscow.

The issues will also be addressed during an international conference on IP and cultural diversity organized by the French government and set for July 2 in Paris. The confab will be attended by representatives of the European Union members states and the World Trade organization.

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WIPO Plans to Update IP Standards For Broadcasting

By Lars Brandle

WIPO LogoLONDON -- Member states of the Geneva-based World Intellectual Property Organization (WIPO) have made strides toward updating intellectual property (IP) standards for broadcasting.

The Standing Committee on Copyright and Related Rights (SCCR), which met June 7-9, recommended that the WIPO General Assembly, the organization's top decision-making body, consider convening a diplomatic conference on protection for broadcasting organizations.

The move has become necessary because the development of digital television across the world has changed the nature of broadcasting. Among the issues at stake is the usage of digital decoders that also act as hard drives in which images can be stored. Broadcasters, as well as rights owners, fear that the signal broadcast through decoders can be used for nonintended purposes or can be pirated.

A diplomatic conference is the final step in developing an international treaty. If the General Assembly endorses the SCCR recommendation at its September 2004 session, it will be a "significant step" forward, according to WIPO.

An update of broadcasters' IP rights, which were last set during the 1961 Rome Convention on the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, began in 1997. A growing signal-piracy problem in various parts of the world has made this increasingly important.

Delegates from 90 member states and eight intergovernmental and 55 non-governmental organizations attended the SCCR, including representatives from the music and film industries.

SCCR chair Jukka Liedes of Finland stated that the session "created a roadmap toward a new international instrument, the goal of which was to balance the real needs of broadcasters with those of other rightholders and society at large."

Differences remain on issues such as the scope of a new treaty and its beneficiaries; namely, whether only traditional broadcasters should be protected or whether protection should also extend to cablecasters and Webcasters.

The next meeting of the Committee will take place Nov. 17-19. Based on its review of the new text, that committee meeting could recommend dates for the diplomatic conference.

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German Police Seize FTP Server With 60,000 Songs

By Wolfgang Spahr

Hamburg -- A German network technician faces criminal prosecution and a five-figure damages bill for allegedly running the country's biggest offering of illegal music downloads.Celine Dion

Nuremberg local police arrested the 56-year-old man earlier this month. It is alleged that he was responsible for the "Lupodata" server, which contained an estimated 60,000 unauthorized music files.

Two PCs with a total of 12 hard drives were seized in the operation. Police confiscated roughly 4,000 digitized Gerd Gebhardtalbums by such artists as Celine Dion, Joe Cocker, Norah Jones, Phil Collins, Santana and David Bowie.

The server was configured to use the File Transfer Protocol, which allows large volumes of data to be transmitted.

"Anyone offering music content for downloading by third parties is acting in contravention of the law," says Gerd Gebhardt, chairman of German labels body BPW.




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Dream Makers & Deal Breakers

This Week's Dream Makers & Deal Breakers:

Rusty WeissRusty Weiss, partner and co-chairman of Morrison & Foerster's Entertainment and Technology practice, has been named head of a new videogame practice at the international law firm. The practice will focus on the convergence of Hollywood and the videogame industry.

"The videogame industry on a gross-revenue basis is larger than the motion picture industry," says Los Angeles-based Weiss. "With the videogame crossover into Hollywood and with outsourcing overseas at an all-time high, there is a real need for both international and domestic expertise."

Morrison & Foerster represents William Morris, the Walt Disney Co., Paramount, Sega, Konami, Atari, LucasArts and many others in the game and entertainment industries. The videogame practice will consist of more than 20 transactional and litigation attorneys and will draw from the company's 19 offices, including those in L.A., London, Hong Kong and Tokyo.

Before joining Morrison & Foerster, Weiss served as counsel in the motion picture division of Columbia Pictures, as well as in the business and legal affairs department of Disney Interactive.

Chris Marlowe, The Hollywood Reporter

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