Universal Music Group (UMG) has filed suit against three subsidiaries of New York-based American International Group Inc. (AIG): American Home Assurance Co., National Union Fire Insurance Co. of Pitts

Breaking News

UMG Sues Insurers Over Costs From TVT Case

By Chris Morris

AIG LogoLOS ANGELES -- Universal Music Group (UMG) has filed suit against three insurance companies, alleging that they breached contracts indemnifying UMG against certain damages incurred in an ongoing suit brought by TVT Records.

The latest action, filed June 1 in California Superior Court in L.A. (case no. BC316357), names as defendants three subsidiaries of New York-based American International Group Inc. (AIG): American Home Assurance Co., National Union Fire Insurance Co. of Pittsburgh and AIG Europe S.A.

According to the suit, UMG had multimillion-dollar policies with the AIG companies from 2001-03. These policies covered payments in legal cases, including those involving "property damage" and "media liability."

The policies, in which UMG parent Vivendi Universal was the named insured, also insured certain unnamed UMG officers, directors and employees.

Lyor CohenIn August 2002, UMG's Island Def Jam Music Group (IDJ) and its then-chairman Lyor Cohen were sued by TVT. The suit claimed that IDJ and Cohen had wrongfully blocked TVT's release of an album featuring rapper Ja Rule and producer Irv Gotti.

UMG's action claims that AIG was advised of the suit in October 2002. It alleges that a Nov. 14, 2002, letter from American Home Assurance denied coverage to UMG, and that National Union and AIG Europe failed to acknowledge coverage.

In March 2003, a jury returned a verdict in TVT's favor. That verdict is currently being appealed.

In May 2003, the jury awarded $24 million in compensatory damages to TVT. Punitive awards were later reduced; that reduction is the subject of pending motions filed by TVT's attorneys.

UMG claims that following the entry of a final judgment in the TVT case in September 2003, it was "unable to negotiate fair and reasonable terms with AIG to post a bond," and deposited more than $62 million with the court.

The suit alleges that on March 11 of this year, AIG stated that National Union refused to reimburse UMG for the costs of the defense in the TVT lawsuit, and refused to indemnify UMG.

The AIG companies "have not paid any portion of the fees and costs that Island Def Jam and Mr. Cohen have incurred in the defense of the TVT lawsuit," according to UMG's action.

UMG seeks general and punitive damages to be determined, attorneys' fees and expenses, and declarations that it has a right to indemnification under the disputed policies.

An AIG spokesman says the company does not comment on legal matters.

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NIPP, Clear Channel Settle Lawsuit

By Ray Waddell

NIPP LogoNASHVILLE -- In a development some will see as a clear victory for independent concert promoters, Nobody In Particular Presents (NIPP) has settled its lawsuit against Clear Channel Communications (CCC) and several of its subsidiaries.

The terms of the agreement are confidential. Representatives from neither firm could be immediately reached for comment.

News of the settlement comes after a federal judge on April 2 allowed Denver-based NIPP to proceed with its suit against CCC, finding sufficient evidence that CCC had attempted to create a monopoly. A trial had been set to begin Aug. 2.

NIPP filed the suit in August 2001 in U.S. District Court in Denver, charging that CCC's "monopolistic, multimedia empire" was "severely harming NIPP's ability to compete ... resulting in higher prices and fewer offerings for consumers."

NIPP alleged that CCC-operated radio stations in Denver played songs by artists whose concerts were promoted by Clear Channel Entertainment in the market, but did not play songs by bands that NIPP promoted.

Edward NottinghamIn the April 2 ruling, Judge Edward Nottingham ruled that CCC's cluster of eight radio stations in the Denver area was not a monopoly. However, the judge said he believed CCC had intended to create a monopoly position when it rejected paid advertising by NIPP.

Nottingham's 125-page decision read in part, "NIPP provides sufficient evidence that Clear Channel intends its manipulation of airplay to interfere with NIPP and other promoters' prospective business relations with artists."

Numerous bands, booking agencies, agents, managers and record-label personnel were mentioned in the court papers.

"This was a long and difficult battle, and we are very happy with this agreement," says Doug Kauffman, founder and president of NIPP, in a statement. "We look forward to continuing to be the leading independent concert promoter in the Denver area."

Andy Levin, Clear Channel's executive VP/chief legal officer, says in a prepared statement, "Clear Channel admitted no wrongdoing in connection with the lawsuit, but we are pleased to get the matter behind us."

Lead attorneys representing NIPP in the case were John Francis and Dale Harris of Davis, Graham & Stubbs in Denver.

The case has been followed with much interest by the concert industry at large. "I'd love to know the terms, but this potentially indicates Clear Channel had some particular reason to settle," observes independent promoter Jon Stoll, president of Fantasma Productions in West Palm Beach, Fla. "This is great news for the independents."

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Euro Courts Showing Support For Copy-Protection Measures

By Leo Cendrowicz

BRUSSELS -- In the controversial issue of copy protection, a series of court cases in Europe have been decided in favor of the music industry.

A few weeks after a French court dismissed legal action against labels that had released copy-protected CDs, a Brussels court dismissed a suit that the Belgian consumers' watchdog Test-Achats/Test Aankoop brought against four major record companies for installing copy-control devices on CDs.

Test-Achats says it plans to appeal the ruling, which has been hailed by the industry.

"Courts have recognized the importance for the industry of using technological measures to protect audiovisual works and recordings," a spokeswoman for the Brussels-based European regional office of the International Federation of the Phonographic Industry says.

"These technological protection measures are essential to protect the recording industry against the piracy that is decimating the sector. They are also the basis for providing consumers with new and innovative services," she says.

In the United States, the Recording Industry Assn. of America (RIAA) closely watches legal developments in this field. The RIAA sees the Belgian court case as a benchmark.

"In the U.S., labels have not yet aggressively launched copy-protected CDs, so they are following all these court cases around the world," an RIAA executive says. "There's a lot of information shared on these issues" between Europe and the United States.

In January, Test-Achats sued EMI, Universal Music Group, Sony Music and BMG because of their efforts to prevent consumers from making private copies of CDs.

Test-Achats claimed that private copying was authorized under a 1994 Belgian law that said rights-owners cannot ban copies of sound or audiovisual works made within a family context.

But a Brussels court threw out the case at the end of May, saying consumers do not have a right to make private copies and that CDs without copy controls are exceptions.

Test-Achats spokesman Jean-Philippe Ducart says the ruling did not offer any solid arguments beyond that.

"The judge ignored, for example, that blank CDs carry a tax that goes to support artists. This is something that implicitly recognizes the right to copy," he says.
The IFPI believes Test-Achats misinterpreted Belgian law.

"Courts have steered clear from interfering with the use of copy-control technologies and have denied the existence of a 'right to private copying' either under national law or on the basis of the most recent EU Copyright Directive," a spokeswoman says.

"This is just the first round," Ducart says. "We will appeal within the next few weeks."

The judgment echoes recent court cases and government proclamations in other countries. In the Netherlands, the Minister of Justice recently told the Parliament that copy-control protections on audio CDs do not raise problems for consumers, given that such discs are designed primarily to be played on CD players.

Earlier this year, a French court threw out claims by consumers' body UFC-Que Choisir against EMI Recorded Music France. But the court ruled that the playback limitations of EMI's copy protection were "hidden" and ordered the company to reimburse the consumer on whose behalf the case was brought.

The IFPI says copy-controlled discs are a response to the sharp increase in piracy, multiple copying and illegal Internet distribution of recorded music. The technology aims to protect artists, songwriters, record companies, retailers and everyone else involved in making and distributing music on CD, the IFPI says.

Additional reporting by Emmanuel Legrand in London.

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Film/TV Producers, Writers At Stalemate Over Vid Residuals

By Jill Kipnis

LOS ANGELES -- The Alliance of Motion Picture and Television Producers (AMPTP) has presented a final, three-year contract offer to the Writers Guild of America (WGA) that offers no adjustment to the calculation of residuals for DVDs and VHS tapes.

Home video residuals have been a point of contention between the organizations since the WGA's contract expired May 2. The AMPTP made its final offer June 1.

The current residual formula-created in the '80s-gives writers 0.3% of the first $5 million in wholesale revenues. The percentage increases to 0.36% when a title generates more than $5 million in wholesale sales.

The AMPTP is, however, offering the WGA a "favored-nations clause" to renegotiate video residuals in June 2005 if the AMPTP adjusts its formula with the Directors Guild of America or the Screen Actors Guild.

The WGA, which has West and East branches, is seeking to continue negotiations with the AMPTP.

Daniel Petrie Jr.In a statement, WGA West president Daniel Petrie Jr. says, "As it currently stands, their so-called final offer for a three-year contract is unacceptable. As for DVDs and videocassettes, the current formula is based on a 20-year-old business model that is both outdated and unfair. Yet the companies refuse to offer any increase."

AMPTP president Nick Counter says in a statement, "With regards to DVDs, we feel it is crucial for the current and future health of the industry that we maintain the status quo. In an era of escalating costs, when box office revenue no longer covers expenditures, DVDs have become a primary revenue source for feature films.

Further burdening a film's revenue stream without, at the very least, recouping production, distribution and marketing costs is simply fiscally irresponsible."

Leading up to the negotiations last December, the WGA sent a letter to its members stating that writers received "less than one-sixth of 1%" of DVD revenues in 2002. The WGA said writers received $18 million of the $11 billion that DVDs generated two years ago.

The AMPTP and the WGA are also negotiating other issues, including increases in health-fund contributions, residuals for Internet sales and the extension of guild jurisdiction to reality-TV writers.

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Studios Sue Web Site For Selling DVD Copying Software

By Jill Kipnis

LOS ANGELES -- Twentieth Century Fox Film Corp. and Paramount Pictures Corp. have filed a lawsuit against online retailer Technology One. The plaintiffs allege that Technology One is continuing to sell the banned "DVD X-Copy" software made by 321 Studios.

The suit was filed May 26 in Federal District Court in the Southern District of New York.

Fox and Paramount claim that Los Angeles-based Technology One -- which operates two online retail sites -- is engaging in illegal activity by selling software with a "DVD ripper" that 321 Studios is prohibited from selling and manufacturing.

Judge Susan Illston of the U.S. District Court of the Northern District of California ruled Feb. 20 that 321 must stop distributing products with the "ripper" function-which allows consumers to bypass DVD encryption codes. That case was brought by a number of studios, including MGM, Sony, Warner, Disney and Universal.

Judge Richard Owen of the Federal Court for the Southern District of New York on March 3 granted a preliminary injunction against 321 Studios in a separate case brought by Fox and Paramount. Owen ruled that "DVD X Copy" violates the Digital Millennium Copyright Act (DMCA).

Additionally, Macrovision announced May 20 that it had won a preliminary injunction against 321 Studios, barring the company from selling its software. In that case, Owen ruled that in addition to violating the DMCA, the "DVD X" line violates Macrovision's content-protection patents for DVDs.

Representatives of Fox and Paramount would not comment on the latest lawsuit. Technology One did not return calls.

Jim Spertus, VP/director of U.S. anti-piracy operations for the Motion Picture Assn. of America, which represents the studios, says: "With two federal injunctions prohibiting the further sale of 321's DVD circumvention products, (Technology One) has no excuse to flout the law."

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DVD Filtering Software In Copyright Dispute

By Jill Kipnis

LOS ANGELES -- Nissim Corp. has filed a lawsuit against ClearPlay, alleging that the defendant's software -- which filters out scenes with violence, sex or foul language from films on DVD -- infringes on its patents.

Boca Raton, Fla.-based Nissim is the creator of CustomPlay software, which has functions that are similar to ClearPlay's software. Nissim filed the lawsuit May 13 in the United States District Court of the Southern District of Florida (case no. 04-21140).

Nissim also claims that new ClearPlay-enabled DVD players, manufactured by Thomson's RCA brand, infringe its patents. The players have been available at mass merchant retailers such as Wal-Mart since April.

"It is obvious that ClearPlay's product infringes Nissim's widely respected patents," says Nissim president/CEO Max Abecassis.

ClearPlay, which is based in Salt Lake City, did not return calls by deadline.

Martin ScorseseClearPlay is also involved in a copyright-infringement lawsuit filed by the Directors Guild of America (DGA) in 2002. The plaintiffs, who include directors Steven Spielberg, Martin Scorsese and Steven Soderbergh, claim that ClearPlay's technology violates studio copyrights and misrepresents directors' finished films.

In December, ClearPlay filed a brief asking for summary judgment in the U.S. District Court in Colorado.

The lawsuit between ClearPlay and the DGA is now being investigated by the House Subcommittee on Courts, the Internet and Intellectual Property, which is headed by Rep. Lamar Smith, R-Texas. At a hearing May 20, Smith said legislation allowing ClearPlay to be sold legally would be introduced if the two parties do not resolve their dispute.

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Marvel, Sony Settle Spider-Man Merchandising Suit

NEW YORK (Dow Jones) -- Marvel Enterprises Inc. (MVL) settled its lawsuit with Sony Corp.'s (SNE) Sony Pictures Entertainment unit over "Spider-Man" merchandising rights.

In a press release Tuesday (1), the comic-book company asserted that the deal gave it "additional responsibilities" in its Spider-Man merchandising joint venture with Sony.

A spokesman for Columbia TriStar Motion Picture Group, the Sony unit that will release the movie on June 30, could not immediately be reached for comment.

Marvel said the settlement will boost its licensing revenue and operating costs starting in the second quarter but reaffirmed its full year outlook.

Marvel sued Sony in February 2003 seeking more than $50 million in damages and a termination of the companies' licensing agreement.

The suit also sought to bar Sony from participation in future Spider-Man projects, though Marvel said Tuesday that the companies now plan to collaborate on "Spider-Man 3," scheduled for 2007.

The suit alleged fraud and accused Sony of falsely representing merchandising opportunities it promised to Marvel. It also charged material breaches of the companies' licensing deal and joint venture.

Sony counterclaimed, alleging various breaches of the license by Marvel and sought to have proceedings sealed, a motion that was denied by a Los Angeles Superior Court judge in April.

Marvel said the settlement will now require it to consolidate the results of the joint venture, called Spider-Man Merchandising LLP, with its own, but left its outlook for 2004 operating income unchanged at $195 million to $205 million.

Marvel's 2003 operating income was $167 million.

Dow Jones Newswires
06-01-04 0921ET

Dow Jones Logo Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.

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Washington Report

House To Re-Examine DMCA Digital Royalty Issue

By Bill Holland

WASHINGTON, D.C. -- A House copyright panel will soon announce an oversight hearing to review a section of the 1998 Digital Millennium Copyright Act (DMCA) that deals with the performance right for digital sound recordings.

Section 104 of the DMCA amends Section 114 of U.S. copyright law to upgrade protection and licensing in the digital age.

It may be a dry-sounding topic, but it is one that hides a long history of rancor and resentment on the part of one of radio broadcasters.

The radio industry, despite recent court defeats, holds to a belief that stations should not have to pay a digital performance royalty to copyright holders for streamed digital simulcasts of on-the-air programming.

Historically, radio station owners have not had to pay performance royalties to labels for over-the-air broadcasts, and have long balked at having to pay songwriter royalties to the performing rights organizations.

In the '90s, the Recording Industry Assn. of America (RIAA) was able to secure a performance right for digital transmissions. The National Assn. of Broadcasters (NAB) misjudged the future of the new service and didn't oppose the change put forward by the RIAA. This proved a huge tactical error.

Broadcasters reluctant to pay digital royalties sued the Copyright Office, which had ruled in 2001 that they must do so under law. The broadcasters lost the case before a U.S. District Court that same year.

NAB and the radio giants -- Clear Channel Communications, Emmis Broadcasting, Susquehanna Broadcasting, Bonneville International, Cox Radio and Entercom Communications -- appealed the case to the Third Circuit Court of Appeals in Philadelphia.

The groups said that the Copyright Office and the District Court misinterpreted the law when both rejected entreaties from broadcasters to give them a digital royalty exemption for streamed simulcasts.

"Congress did not intend to impose sound-recording public-performance copyright liability upon terrestrial broadcasters that simultaneously stream their radio programming to listeners via the Internet," said the petitioners.

The broadcasters contended that Congress intended the law to apply only to "interactive" services that would enable users to select and download songs -- not to stream online radio-style broadcasts.

The Copyright Office found that it was the intent of Congress that simulcasters be required to pay royalties under both the DMCA and the Digital Performance Right Act of 1995.

In October 2003, the appeals court sided with the Copyright Office.

Both courts decided that since the royalties apply to Web-only broadcasters, an exemption for radio stations would give them an unfair market advantage.

Thrice defeated, the broadcasters are now taking their case to the Hill.

Webcasters, on the other hand, believe that all media -- broadcast, cable, satellite and Internet radio --should be treated alike. The Digital Media Assn., which represents large Webcasters, believes that a traditional "fair market value" standard for determining digital royalties is more balanced than the "willing buyer-willing seller" standard used just for Webcasters by the discredited Copyright Arbitration Royalty Panel.

Webcasters also chafe at the views of the Harry Fox Agency and performing rights organizations that they must pay an additional performance royalty for so-called computer "buffer copies," maintaining that such copies have no independent economic value of their own.

The upcoming hearing was called for by Rep. Lamar Smith, R-Texas, chairman of the Subcommittee on Courts, the Internet and Intellectual Property, as part of a systematic review of the DMCA.

Announcement of the hearing could come this week.

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International Section

Sony, BMG Face Charges Of Illegal 'Flyposting'

By Lars Brandle

LONDON -- Record companies in London may have to reconsider their street advertising activities in light of recent legal steps taken against Sony Music and BMG.

Camden council in North London has launched legal proceedings to stop the two majors from illegal "flyposting," the long-standing practice of pasting unauthorized posters in highly visible public areas.

The Metropolitan police served notice May 27 that Camden council in North London is seeking Anti-Social Behavior Orders (ASBO) against executives from BMG U.K. and Ireland and Sony Music Entertainment U.K.

A spokesperson for Camden confirms that Sony Music U.K. managing director Catherine Davies and international marketing director Jo Headland have been notified; BMG U.K. temporary employee Lucy Hansford was also contacted. Camden claims it acted in response to more than 1,000 complaints from residents, local businesses and visitors.

Representatives of Sony and BMG would not comment, other than to confirm that the companies have been contacted on the issue.

ASBOs, which are civil procedures to curb unruly behavior, have until now been aimed at drug dealers and users, prostitutes and vandals. "We've been really proactive in using this legislation. It's the first time it has been used this way," says a spokesperson for the council.

A hearing has been set for June 14 at Highbury Corner Magistrates Court in London. If the accused do not contest the ASBO, then it can be granted as an ASBO "by consent." In that case, all parties would work out the terms of the order together. However, if they do contest it, then the court will set a date for a full hearing.

Camden has already applied for an interim order to take effect from June 14, banning the companies from posting fliers until the date of the full hearing. The magistrates will decide June 14 whether to grant the order.

ASBO convictions carry jail sentences of up to five years.

Camden says Sony and BMG repeatedly ignored prosecutions and requests to stop displaying advertising material on streets. Camden estimates that the exposure BMG and Sony have gained from their street campaigns would be worth an annual £5.6 million ($10.28 million) and £3 million ($5.5 million), respectively, in legitimate advertising.

"Flyposting has a detrimental impact on the value of property and contributes to people's fear of crime and, as a result, to actual criminal behavior, which is why we are seeking to outlaw it," comments Dame Jane Roberts, leader of Camden council.

Illegally placed billboards fall under the definition of "advertisements" in the Town and Country Planning Act 1990.

In typical cases relating to such advertisements, the London Local Authorities Act applies. This law gives London local authorities the right to remove or obliterate the posters unless they are removed or destroyed within a specified time. Local authorities can reclaim the costs of removal from either the person who put up the advertisement or from any person who benefits from it.

"Flyposting" offenders are liable on summary conviction for a fine of up to £1,000 ($1,838) and a further fine of up to £100 ($183) for each day during which the offense continues after conviction.

The British Phonographic Industry (BPI) offers legal advice to its members -- which include Sony Music and BMG -- on the issue. On the BPI's Web site, under a section titled "Bill posters will be prosecuted," the trade group defines "flyposting" as an illegal activity.

Camden's hardline stance coincides with an ambitious street improvement project that, it says, is backed by investment of about £24 million ($44 million).

In a statement, project manager Peter Strange accuses Sony of hypocrisy. He cites the company's environmental policy, which is posted on its Web site (sonymusic.co.uk). Strange says, "The fact that this illegal activity is being carried out by major companies like Sony Music Entertainment (U.K.) Ltd., with a stated commitment to 'protecting and improving the environment,' to 'preserve and enhance the environment,' and to 'comply with environmental, safety and health laws and regulations,' makes it even worse."

Encams, the British environmental charity behind the "Keep Britain Tidy" campaign, is endorsing Camden council's actions and has vowed to step up its battle against illegally placed adverts. "When we first broached the subject, record chiefs simply patronized us with hollow promises in the hope that we would make our protests, give in and go away," comments Encams CEO Alan Woods. "We are 100% behind Camden, but if their tough stance still doesn't stem the tide, we'll look at other ways of using the law to stop them flyposting."

A source at another major label tells ELW that Encams approached the company on a similar issue late last year. "They contacted us, and they were pretty vigilant," says the source. "It should come as no surprise to Sony and BMG that they were named and shamed."

Encams estimates that a "good proportion" of the £342 million ($628 million) of public money that is spent every year clearing litter in Britain is used to combat flyposting. Camden says it spends £250,000 ($458,000) each year tackling the problem.

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Italy Mulls Modifying Tough New Anti-Piracy Law

By Mark Worden

MILAN -- The Italian government has suggested that it could radically modify the Decreto Urbani (Urbani Decree) on copyright and file-sharing one week after it was placed on the statute books (ELW, May 31).

The decree, named for its sponsor, culture minister Giuliano Urbani, imposes a fine of 154 euros ($188) on downloaders of illegal files. "Uploaders" face prison sentences of between six months and three years.

However, after government Web sites were sabotaged by hackers, apparently in an angry response to the new law, the minister of innovation and technology, Lucio Stanca, announced that a modification was being considered.

The Urbani decree was passed by a government majority in the Italian Senate on May 19 and officially became law on May 24. That same day, hackers put the Web sites of the culture ministry, the tax collecting ministry and collecting society SIAE out of action for several hours.

Enzo MazzaSince the protests, Stanca has suggested that the decree's strongest measure be dropped. The measure extends punishment for copyright infringement from those who do it for "financial gain" to those who do it "for profit" -- thereby making free file-swapping a crime.

Industry body FIMI, which welcomed the Urbani decree, describes the idea of modification as "absurd." In a statement, director-general Enzo Mazza says: "The passage of the decree led to an immediate drop in illegal file-sharing, which proves that it was effective. Now, with elections coming up, the government is giving in to blackmail by pirates."

Italy is due to vote in European and local elections on June 12-13.

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Appeal Trial Set In Cantat Murder Case

By Emmanuel Legrand

Bertrand CantatPARIS -- An appeal trial for French rock singer Bertrand Cantat has been set for June 30 in Vilnius, Lithuania.

Cantat, 40, is appealing his eight-year prison sentence after a Vilnius court on March 29 found the artist guilty of killing his girlfriend, the actress Marie Trintignant.

During the trial, Cantat admitted to hitting Trintignant several times during an argument on July 27, 2003. The actress was found unconscious in her hotel room in Vilnius, and died Aug. 1.

The court found Cantat guilty of causing the death of Trintignant and delivered an eight-year sentence; the maximum was 15 years.

The Trintignant family is also appealing the ruling, asking for a tougher sentence.
Cantat is the lead singer of French rock band Noir Desir, which is signed to Universal Music France's Barclay label.

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Dream Makers & Deal Breakers

This Week's Dream Makers & Deal Breakers:

Richard Leher- Richard Leher, who has represented the Rolling Stones continuously for 24 years, has joined the law firm of Greenberg Traurig. He brings the Stones with him.

The Los Angeles-based Leher most recently was head of business affairs for DreamWorks Records, prior to its sale last year to Universal Music Group. He was also executive VP of Hollywood Records for several years.

Leher graduated from Boalt Hall School of Law at the University of California at Berkeley. He started his legal career at Mitchell, Silberberg & Knupp.

R. Wayne Jackson- PricewaterhouseCoopers in New York has named senior partner R. Wayne Jackson as global leader of the firm's entertainment and media practice.

In his new role, Jackson replaces Kevin Carton, who will retire June 30 after 38 years with the company.

Among his duties, Jackson will oversee assurance, tax and advisory work for the entertainment and media practice, and will lead the division's business development, marketing and communications efforts. He will also head the editorial board for PricewaterhouseCoopers' annual report "Global Entertainment and Media Outlook." The next edition of the report is due in late June.

Jackson, who joined PricewaterhouseCoopers in 2003, retains his role as global relationship partner for Time Warner and BellSouth.

- Vivendi Universal Games (VU Games) has named Terri Durham as executive VP/global general counsel.

Durham will oversee legal affairs worldwide. She is based in Los Angeles and reports to VU Games CEO Bruce Hack.

Prior to her new appointment, Durham was VP/counsel for VU Games parent Vivendi Universal. She also worked as senior VP of legal affairs for Vivendi Universal Net USA, where she managed MP3.com's copyright-infringement litigation.

Before working for Vivendi Universal, Durham was a partner at the San Diego-based law firm Gray Cary Ware and Freidenrich.

Contributor: Jill Kipnis

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Case Analyses

Select-O-Hits 'Knew Better' In Infringement Case

By Chris Morris

LOS ANGELES -- A federal judge in New York has slapped Select-O-Hits with $312,000 in statutory damages in a suit filed by Universal Music Group (UMG) over the indie's distribution of rap mix CDs.

The jurist's message in the copyright and trademark infringement case was essentially, "You knew better."

In his May 5 decision, U.S. District Court Judge Richard M. Berman found co-defendant Cochise Productions liable for only $19,500 in damages. Memphis-based Select-O-Hits was held jointly liable for that amount.

Kenneth BresslerKenneth Bressler of Nixon Peabody, who litigated the case for UMG, says, "Select-O-Hits was shown to be extremely sophisticated and knowledgable ... as to the rap industry, and understood what constituted copyright infringement, and in spite of that distributed this material, which was infringing on its face."

UMG filed its suit in U.S. District Court in New York on Sept. 12, 2002 (case no. 02 Civ. 0043); the complaint was amended Oct. 23, 2002.

The action alleged that mix CDs released on the Cochise, Melo-Mix and Dirty Harry labels -- all distributed by Select-O-Hits -- violated UMG's copyrights. (Claims against Melo-Mix and Dirty Harry were later dismissed.)

The titles in question -- "Eastside Heavyweights," "Southside Heavyweights," "Chikago Payback Part III," etc. -- featured the music, names and likenesses of such top rap acts as Jay-Z, DMX, Nelly, Eve, Ludacris and Foxy Brown.

UMG said the music and images were utilized without authorization or license.

A bench trial of the case was held Sept. 4, 2003.

In his decision, Berman said that while Select-O-Hits deleted the infringing CDs, it did not notify retailers of potential infringement, and refused to send out a recall letter.

However, the judged noted, Cochise owner Ernie Collier immediately ceased operation of his company; returned all offending product to UMG's counsel at his own expense; and told Select-O-Hits to stop distributing the product.

Noting that Select-O-Hits VP Johnny Phillips has worked in distribution for more than 40 years, Berman wrote, "Phillips knows that a 'mix tape' contains recordings that are not original; that Cochise makes mix tapes using popular recordings; and that one needs a license to use a recording on a mix tape."

He added that Phillips conceded at trial that it was obvious just from looking at the CD covers that the mix tapes contained infringing works.

Calling the distributor's infringement "willful," Berman levied damages of $8,000 per infringement against Select-O-Hits, and only $750 per infringement against Cochise.

Phillips tells ELW that Select-O-Hits plans to appeal the decision.

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Recent Cases & Filings

Case: Todd Park Mohr, Rob Squires and Brian Nevin (Big Head Todd & the Monsters) and Park Mohr Publishing Co. vs. Warner-Tamerlane Publishing.
Issue: The members of Big Head Todd & the Monsters claim that publisher Warner-Tamerlane breached a 1998 administration agreement, and that they are owed more than $230,000 plus interest and costs.
Cite: California Superior Court, County of Los Angeles (case no. 316084).
Filing attorney: Michael F. Sitzer, Rutan & Tucker; Robert M. Horowitz and Jane G. Ebisch, Pearson, Horowitz, Poskus & Burnett.

Micahel F. SitzerRobert M. HorowitzJane G. Ebisch

Michael J. KumpCase: Greg Garrison and Greg Garrison Productions vs. Laura Lizer, trustee of the Dean Martin Family Trust.
Issue: Home video producer Garrison seeks declaratory relief, claiming that the Martin Trust is wrongfully seeking 50% of the proceeds from sales of video compilations of the late singer's TV variety shows.
Cite: California Superior Court, County of Los Angeles (case no. BC316114).
Filing attorney: Michael J. Kump, Greenberg Glusker Fields Claman Machtinger & Kinsella.

Psychopathic Records LogoCase: Michael Wood vs. Insane Clown Posse LLC, Psychopathic Records, Psychopathic Music Publishing, Ballantine Books, Random House, Inc., Joseph Bruce, Hobey Echlin, Joseph Ustler.
Issue: Booking agent Wood alleges he was libeled by the members of the rap act Insane Clown Posse in their 2003 book "ICP: Behind the Paint."
Cite: California Superior Court, County of Los Angeles (case no. BC316162).
Filing attorneys: David L. Evans & Stephen E. Samuel, Hamrick & Evans.

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Blanket License For File Sharing: Easier Said Than Done

By David Moser

Despite all of the efforts by the record industry -- including educational initiatives, Congressional lobbying and lawsuits -- illegal file sharing of copyrighted music continues to thrive and poses a huge challenge to existing business models. Some representatives of the music industry and, lately, even of file sharing companies, believe that the only real solution to the problem of file sharing is to legalize it.

Some commentators have proposed that file sharing could be legalized by implementing a collective licensing approach similar to that of the music performing rights organizations (i.e., ASCAP, BMI and SESAC in the United States).

The performing rights organizations represent songwriters and music publishers and issue blanket licenses to businesses such as radio and television stations and live music venues. A blanket license allows the business to publicly perform all songs represented by the organization that issues the license. The organization collects license fees and pays royalties to songwriters and publishers, based on monitoring procedures designed to estimate how many times individual songs have been performed.

The main benefit of such a system is that licensees can obtain a single license from each rights body to cover all of their music usage, rather than having to negotiate licenses individually with the many copyright owners.

File sharing companies would benefit greatly from such a collective licensing approach, since they would otherwise need licenses covering virtually every song and sound recording in existence.

At first glance, the blanket license model might seem to offer a simple solution to the problem of illegal file sharing. However, there are several factors unique to file sharing that make collective licensing a much more complicated issue than it may appear.

One major impediment is that, at least according to the file sharing companies, it is impossible to know what files are being traded by individuals. A blanket licensing scheme is dependent on monitoring music usage (at least on a sampling basis) in order to determine how the license fees collected should be apportioned among copyright owners and authors. If some means of monitoring is not possible, blanket licensing wouldn't seem to be a realistic solution.

Adding an additional layer of complexity, there are two copyrights involved in each piece of music distributed online, the sound recording and the musical composition contained on the sound recording. These copyrights are typically owned by different parties (i.e., record companies and music publishers) and licensed by different organizations (SoundExchange for recordings and the performing rights organizations for musical compositions). The performance right is not applicable to sound recordings outside of digital transmissions so it is a bit simpler to apply blanket licensing to radio and other non-digital performances.

File sharing is a relatively new technology that poses some unique challenges to the application of copyright law. However, in many respects, the issues involved are similar to previous challenges posed by other innovative means of distributing copyrighted works. There is inevitably resistance: on the part of copyright owners in allowing their works to be used in new ways, and on the part of businesses exploiting such new uses to pay for their use of copyrighted works.

The history of performing rights organizations in the United States provides a good example. ASCAP was formed in 1914 so that songwriters could get paid for performances of their music in live venues. Venues such as restaurants and nightclubs resisted paying for the use of music, and ASCAP had to resort to filing lawsuits to set examples and pave the way for a licensing system.

Similarly, in the 1920s, radio stations resisted obtaining licenses from ASCAP (BMI did not exist at the time) until court decisions made clear that they must do so. A few decades later, the television industry initially resisted paying licensing fees for their broadcasts of music (followed several more decades later by cable television).

From just under a century of history, a pattern seems evident. Whenever new technology results in a new way of using music, the industry built upon that technology will resist paying for its use of music. After all, music is free -- at least until you're sued and forced to pay for it. History shows that, although it may take five to 10 years, some legalized system for new uses of music will ultimately emerge. Copyright owners must therefore continually enforce their rights, even if that means filing lawsuits that result in negative publicity.

At the same time, copyright owners should be more supportive of new legal uses of music. A collective licensing system is a potential solution for at least some online distribution of music (ie., streaming and download services such as iTunes) and may, with some compromises on both sides, even be possible for file sharing.

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David Moser is an attorney who practices entertainment and intellectual property law and a professor at the Mike Curb College of Entertainment & Music Business at Belmont University in Nashville, where he teaches courses in intellectual property law and legal issues in the entertainment industry. He also operates a Web site with information on copyright, trademark, entertainment and Internet law at www.copyrightguru.com.

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