The U.K. creators of the "Who Wants to Be a Millionaire" franchise are suing the Walt Disney Co. for allegedly licensing the hit television series to ABC at below-market prices and inflating productio






Breaking News

Study: Teens Knowingly Download Music Illegally

By Susanne Ault

LOS ANGELES--Teens are aware of copyright law, but many are illegally downloading music anyway.

According to results published by a new Harris Interactive Poll on May 18, 88% of the 1,183 respondents sampled say they understand that music is protected by copyright. Still, 53% of the group, aged 8 to 18, also say they have downloaded music without paying for it. Tunes in question are commercial; not freeware or shareware.

Harris Interactive conducted the study in April. The Business Software Alliance, an anti-piracy organization whose members include Microsoft and Apple Computer, commissioned the study. Poll results can be accessed at www.bsa.org/usa/research.

The reasons cited for illegal downloading varied. About 51% of those surveyed say a key reason is that teens don't have the money to pay for tracks. Other common responses include 'lots of people do it' (33%); 'it doesn't hurt anybody when I do this' (26%); and 'no one has ever told me not to' (19%).

While teens are concerned about the possible consequences, most (60%) say they are more concerned with accidentally downloading a virus onto their computer than getting into trouble with the law (50%).

Key sources for learning about music protection laws were television (59%), parents (44%), the Internet (44%), advertisements (36%), friends (30%) and teachers (18%).

Based in New York, Harris Interactive is a market research consulting firm best known for its polling work.

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'Millionaire' Creator Sues Disney

By Jesse Hiestand

LOS ANGELES (Hollywood Reporter)--The U.K. creators of the "Who Wants to Be a Millionaire" franchise are suing the Walt Disney Co. for allegedly licensing the hit television series to ABC at below-market prices and inflating production costs so there would be no profits to share with the creators.

Series developer Celador International Ltd., company chairman Paul Smith and affiliated music production company Lusam Music Ltd. want unspecified monetary damages and an injunction barring defendants Disney or any of its affiliates from licensing the show without getting competitive bids on the open market. The plaintiffs also want a receiver appointed to ensure that no more alleged sweetheart deals are made among defendants Disney, ABC, Buena Vista Television and Valleycrest Productions Ltd.

"In essence, Disney sits on both sides of the bargaining table in any negotiation for the production and distribution rights to the series, thereby enabling it to manipulate negotiations in any way that serves its corporate interests," according to the complaint filed Wednesday in U.S. District Court in Los Angeles. "Because of Disney's vertical integration, Disney will keep most of those revenues within the Disney empire in the form of cost savings and increased profits to ABC, BVT and Valleycrest and thus to the Disney corporate bottom line (and) to the detriment of Celador."

Disney and ABC officials did not return calls seeking comment.

The case was filed by Alschuler Grossman Stein & Kahan partner Stanton "Larry" Stein, a pioneer in representing talent against alleged corporate self-dealing. He has previously sued Disney on behalf of the creators of "Home Improvement" and took on Fox Entertainment Group on behalf of "X-Files" star David Duchovny.

In the Celador case, Disney also is accused of improperly charging distribution fees and expenses against the series' merchandising revenue and wrongfully using the music developed by Lusam at Disney theme park attractions. In all, the plaintiffs claim breach of contract, breach of good faith and fair dealing, fraud and unfair competition.

The original 1998 licensing agreement between Celador and Disney called for the two companies to jointly own the series' North American rights. Celador agreed to take 50% of contingent compensation, as defined by Disney, while Smith would be an executive producer with creative consultation rights. For Celador, that worked out to a producer fee of $25,000 for a 30-minute program and $35,000 for a one-hour program, with those rates rising 5% each successive year.

Disney also agreed in principle that the show could air on any major network, implying that the licensing fee would be for fair market value, Celador claims in its suit.

A central allegation of the case is that ABC and Buena Vista Television had an oral agreement for ABC to license the show at a per-episode fee equal to Valleycrest's per-episode production costs, thus ensuring that it would never generate profits to be shared with Celador.

After the series' successful debut in August 1999, Disney allegedly failed to follow industry custom and renegotiate a higher license fee with ABC. Instead, it is alleged that the network continued to pay below-market rates while Valleycrest inflated the production budgets.

"Disney has pressured and caused ABC, BVT and Valleycrest to enter into negotiations and agreements with each other on an other than arm's-length basis and without establishing license fees that are priced fairly and reasonably for a television series as successful as ('Millionaire')," the lawsuit alleges.

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321 Banned From Selling DVD-Copy Software

By Jill Kipnis

LOS ANGELES--Macrovision has won a preliminary injunction against 321 Studios, which bars 321 from selling its DVD-copying software.

Judge Richard Owen of the Federal Court for the Southern District of New York last week ruled that 321's "DVD X" line of software violates the Digital Millennium Copyright Act of 1998 and Macrovision's content-protection patents for DVDs.

321 has already been ordered to stop selling its products by U.S. District Court of San Francisco and by Owen, in a separate case involving Paramount Pictures Corp. and Twentieth Century Fox Film Corp.

"We are disappointed because the judge did not address any of our legal arguments and, therefore, the main issues of the case. We intend to appeal," says a 321 spokeswoman.

In a statement, Macrovision CEO Bill Krepick said: "Macrovision is committed to protecting copyrighted content from illegal piracy. Because copy protection is our core business, the conduct of those like 321 Studios that facilitate widespread copying is unacceptable."

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Retailer Pays For Early 'King' Sales

By Brett Sporich

LOS ANGELES (Hollywood Reporter)--Warner Home Video, the DVD distributor of "The Lord of the Rings: The Return of the King," has suspended all home video shipments to international retailer Electronics Boutique for allegedly selling the Oscar-winning title 10 days before its agreed-upon May 25 release date.

"Violations of street date are all too common in the highly competitive home video industry," WHV senior vp domestic sales Jeff Baker said, "but what makes this case unprecedented is that EB and its store managers not only refused to pull the DVD from the shelves, but the company's executives have refused to cooperate or even discuss the issue.

"I've been in the video business since 1979, and I have never seen such a blatant violation of street date," Baker said. "We are not going to let them get away with this, and we are discussing the issue with our attorneys to consider every possible option."

West Chester, Pa.-based EB, which controls about 1,000 retail stores in malls across the country and about 500 additional stores overseas, could not be reached for comment at press time. WHV executives said that they don't believe that any of EB's overseas stores are violating release dates.

WHV, which is the DVD and VHS distributor for its sister company New Line Home Entertainment, first received word of EB selling the "King" DVD before its release date on the studio's retailer hotline, Baker said.

Reports came to WHV from competing retailers large and small, complaining that EB was effectively stealing their business, Baker said. "The callers told us that the DVDs were blowing out the doors at EB, and we have verified several of these reports." Without question, the "King" DVD is a prime release for EB's core consumers: video game buyers. "Obviously this title is right up their alley," Baker said.

As news of the release-date violation spread during the weekend and this week, there was some speculation that EB was using the DVD as a "loss leader," meaning that they were selling it for less than cost, a legal business practice in the United States. However, Baker and others have said that EB stores have been selling the double-disc "King" DVD for $24.99, just under WHV's suggested retail price of $29.95, meaning that EB is not selling the title as a loss leader or under the wholesale price.

An informal survey of EB retail stores found that the "King" DVD had allegedly sold-out or was no longer on store shelves.

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Sirius, EchoStar Join Forces

By Paul Bond

LOS ANGELES (Hollywood Reporter)--In a deal with EchoStar Communications that will enable users to hear its 64 commercial-free music channels on millions of TV sets, Sirius Satellite Radio last Thursday leapfrogged its lone competitor to become the nation's most-listened-to satellite radio service.

The deal, however, gives about two-thirds of EchoStar's 9.7 million Dish Network subscribers the Sirius service free, meaning that XM Satellite Radio and its 1.7 million subs still beats Sirius' 400,000 in the battle to woo consumers willing to pay a monthly fee to hear innovative radio programming.

Under the arrangement, subscribers to several of Dish Network's premium packages will get the free Sirius service. Sirius hopes that a significant number of those satellite TV viewers will enjoy listening to satellite radio enough to purchase it for their cars, boats and RVs, while EchoStar's hope is that more of its subs will upgrade in order to get the free Sirius service on their TVs.

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Washington Report

FCC Launches TV-Violence Probe

By Brooks Boliek

WASHINGTON (Hollywood Reporter)--The chairman of the Federal Communications Commission is launching an inquiry into the effect excessively violent broadcast TV programming has on children.

In a letter to House Commerce Committee chairman Rep. Joe Barton, R-Texas, made public last Thursday, FCC chairman Michael Powell said he has directed the FCC's Media Bureau to begin preparing for a "notice of inquiry" into the issue.

"I appreciate the Committee on Energy and Commerce's long-standing work in the important area of children's television programming and share many of the committee's concerns related to the potential effects of violent video programming on children," Powell wrote. "I have directed the commission's Media Bureau to revise its 2004 work schedule and to begin work immediately on a notice of inquiry to solicit public comment and information on the specific issues identified in your letter."

Powell's letter responded to a letter last month in which Barton and 37 other lawmakers asked the FCC to undertake an investigation. It was unclear when the commission would vote on the notice of inquiry, but Powell expected the bureau to forward its suggestions to the commission "in the near future."

A notice of inquiry allows the commission to investigate a matter of interest, but it usually doesn't include any new regulations.

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ClearPlay-Inspired Law Looms

By Brooks Boliek

WASHINGTON (Hollywood Reporter)--Legislation to end the dispute between moviemakers and a company that makes a DVD player that edits movies for sexual content, foul language and violence could come in two weeks unless the parties make a deal, the chairmen of the House copyright subcommittee said last Thursday.

While Rep. Lamar Smith, R-Texas, said the two-week time frame is not a hard-and-fast deadline, it underscores his desire to have the dispute settled. "We hope the negotiations will proceed with a resolution that's acceptable," Smith said following a hearing on the dispute. "We won't hesitate to pursue that option if a settlement is not reached in the next few weeks."

Both Smith and Judiciary Committee chairman Rep. F. James Sensenbrenner Jr., R-Wis., are pushing the parties to reach a settlement or face legislative action. Smith declined to reveal what the legislation would say but said it could come in the form of a stand-alone bill or it could be attached to the Satellite Home Viewer Improvement Act extension.

"That's an option," said Smith, who receives weekly briefings on the negotiations among the DGA, the studios and Salt Lake City-based ClearPlay.

Portions of the SHVIA legislation that allow satellite TV companies to retransmit network TV signals expire this year. SHVIA is considered one of the few must-pass bills the Judiciary Committee is weighing this year. The debate over the proposed legislation split the copyright subcommittee largely on party lines, with Democrats voicing concern about the technology.

"I do not believe Congress should give companies the right to alter, distort and mutilate creative works or to sell otherwise-infringing products that do functionally the same thing," said Rep. Howard Berman, D-Calif. "I believe such legislation would be an affront to the artistic freedom of creators. It would violate fundamental principles of copyright and trademark law. And if drafted to avoid violating the First Amendment, it would almost surely defeat the apparent purposes of its drafters."

Berman, the subcommittee's senior Democrat, was joined by Michigan Rep. John Conyers, the full committee's top Democrat. As a way to make his point, Berman read ClearPlay CEO Bill Aho's statement to the committee but edited portions of it so that it read as if the company makes a technology that violates copyright law and brings objectionable programming into the home. Berman's "filtered" version turned Aho's remarks on their head.

"I don't think you like my editing," Berman said. "Can you understand why I might be concerned?"

But their views were not shared by the Republicans, who control the committee and the Congress. The GOP contends that the technology is simply another tool that helps parents.

"The issue isn't whether a movie loses some of its authenticity due to skipping of various audio and video but whether the rights of parents to shield their children from content they object to is secondary to anything else," Smith said. "I believe that the rights of parents to protect their children are paramount. And if they choose to designate a third party to help them accomplish this, so be it."

Aho told the committee that his company's product is a high-tech way that allows people to "cover their eyes" when content they object to is shown. The ClearPlay technology is built into a $79 DVD player from Thomson Inc.'s RCA brand and is available as a stand-alone program for computers.

"This is a choice many families desire," Aho said. "We believe that it is not in the best interest of society for the movie industry -- in an effort to extend its artistic control over the experience of viewers -- to take actions that would eliminate this choice from families."

The hearing was somewhat one-sided as the studios and the DGA declined invitations by the panel to testify. The DGA decided Wednesday to pass on the hearing, so its witness Taylor Hackford ("An Officer and a Gentleman," "When We Were Kings") did not speak to the committee. His prepared text was entered into the record, however.

MPAA president and CEO Jack Valenti and Nick Counter, president of the Alliance of Motion Picture & Television Producers, offered to testify but were turned down as the committee hoped for a high-ranking studio executive.

While Smith said he thinks the hearing and the threat of legislation will force the parties to make a deal faster, entertainment industry supporters think the opposite.

While the studios and the DGA have sued ClearPlay, Hollywood is in negotiations with the company on how to do business. Only the studios can sign a contract with the company, but the DGA's collective bargaining agreement with them gives directors some control over changes. Most films are already "cleaned up" at some point so they can be shown on airplanes and cable networks or broadcast over the air.

DGA and studio officials contend that legal changes like those contemplated by the two lawmakers change the nature of copyright law. In a letter to Smith in which Valenti and Counter offer to testify at the hearing, Valenti makes that point.

"Had Mr. Counter or I been invited to testify, we would have stated our position clearly and compactly," Valenti wrote. "We believe that no one should revise, edit, omit or otherwise change a motion picture without the permission of the copyright owner. We would have confirmed that the motion picture industry supports editing movies to make them appropriate for viewing by particular audiences, but we also strenuously believe that revisions/editing/omissions by third parties collides with the creative expression of those who made the movie and those who hold the copyright to that film."

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International Section

Sources: IFPI Preps New Lawsuits

By Emmanuel Legrand

LONDON--The International Federation of the Phonographic Industry is preparing to launch a second wave of lawsuits against peer-to-peer users, insiders tell ELW.

Sources at the organization say more legal action could occur as early as June, following a first round of lawsuits filed last March in Canada, Germany, Denmark and Italy.

Details of the plan and the countries involved have not yet been disclosed. The issue was on the agenda of the IFPI's bi-annual board meeting held in London May18-20.

French IFPI affiliate body SNEP already announced that lawsuits were being prepared in France, following the
adoption of the much anticipated e-commerce bill in early May.

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Kazaa Legal Wars Rages Down Under

By Paul Resnikoff

BOSTON (Digital Music News)--Kazaa owner Sharman Networks and the Australian Recording Industry Association (ARIA) are continuing their legal wars in Australia.

Last week, proceedings had taken an ugly turn after photos of recent Sharman office raids were published in Australian Personal Computer Magazine, prompting Australian federal court judge Murray Wilcox to impose a gag order on both sides.

Sharman demanded that ARIA provide specific names of infringing downloaders, while ARIA countered that finding actual identities from handles is not realistic. Some legal wild pitches are also entering the protracted legal sessions, with Sharman most recently attempting to resurrect a one-hundred year old copyright precedent involving piano rolls to prove that digital copies of music do not constitute infringement.

Meanwhile, ARIA aims to dismantle Sharman's arguments that it does not have control over its decentralized network. That claim came under suspicion after the Vanuatu-incorporated P2P operator summarily booted Morpheus off of its FastTrack network. Altnet is also now a defendant in the case, with ARIA pointing to a potentially shady relationship with Sharman.

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Court: TV Mogul's Human Rights Were Abused

By Nick Holdsworth

MOSCOW (Hollywood Reporter)--The European Court of Human Rights ruled last Thursday that Russian authorities abused the human rights of media magnate Vladimir Gusinsky and broke international law.

NTV television network founder Gusinsky, who had presided over a media empire that was critical of the Kremlin and who now lives in self-imposed exile in Israel, was imprisoned on fraud charges four years ago.

The Human Rights judges in Strasbourg, France, ruled that the authorities used his imprisonment as leverage to force him to sign a deal selling the station's mother company Media-Most to state-controlled gas company Gazprom.

The judges ordered the Russian government to pay Gusinsky's $105,000 legal bill for violating his right to liberty and security under the European Convention on Human Rights, to which Russia is a signatory.

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Danish TV Group Owes Money To EC

By Leo Cendrowicz

BRUSSELS--The European Commission last Wednesday ordered Danish public television broadcaster TV2 to repay $101.4 million, plus interest, in government subsidies.

The commission says the subsidies had to be reimbursed because they exceeded what was legally acceptable for government support of public broadcasters.

The Danish government had provided the aid from 1995-2002 to help the broadcaster fulfill its public service obligations. EU law allows government subsidies to broadcasters operating as public services, but the aid must not affect the level playing field of private companies running without state backing.

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Italian Senate Adopts Harsher Piracy Penalties

By Mark Worden

MILAN--A new decree adopted by the Italian Senate last week will introduce tougher penalties for illegal file-sharers.

The Decreto Urbani (Urbani Decree) on illegal file-sharing, named after its sponsor--culture minister Giuliano Urbani--was initially making a distinction between film and music file sharing, introducing tougher penalties for film infringers.

Italian industry body FIMI and anti-piracy body FPM initially considered the decree too lenient on illegal music file-sharers and demanded changes in the original draft.

The text was redraft, and voted on, with a tougher stance on illegal file-sharing. FIMI declared itself "satisfied" with the result.

In a statement, Urbani said: "We have begun to adopt the anti-piracy measures of which there was a great need."

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Dream Makers & Deal Breakers

Spotlight: Handleman, Sirius, CCE


- Eddie Lambert has been appointed the publishing representative for songwriter Carole Bayer Sager. Lambert will concentrate on all aspects of Sager's musical career, pursuing licensing opportunities in television, film, commercials and soundtracks. He will also be the liaison for new collaborative efforts on her behalf. Lambert previously was VP of Film and Television Music at EMI Capitol Special Markets, serving in that post for 12 years.


- Handleman Co. in Troy, Mich., names Tony Vecchiato director of business continuity planning. He was manager of strategic planning and best practices.


- Sirius Satellite Radio in New York names Frank Raphael director of news and operations. He previously was director of news and programming at news/talk WCBS-AM New York.


- Integrated Copyright Group in Nashville has signed songwriters Kim Tribble, Shaun Shankel and Ron Harbin to exclusive copyright administration deals. ICG is an independent copyright administration company.


- Clear Channel Entertainment Television in New York appoints Steve Sterling senior VP, and Marc Forest VP of programming and production. Sterling was president of Eagle Rock Entertainment, and Forest was owner/executive producer at Double Time Productions.


- Bruce Allen Talent in Vancouver names Jo Faloona director of marketing. She was marketing manager at Warner Music Canada.




- Lions Gate Home Entertainment in Santa Monica, Calif., appoints Anne Parducci executive VP of marketing. She was senior VP of business development at Mattel Inc.





- Greg Fritz is the new VP of Marketing for Big Idea Inc., creators of the line of VeggieTales children's product. Fritz was previously VP of sales and marketing services for Word Distribution.

Contributors: Deborah Evans Price (Nashville), Carla Hay (New York), Phyllis Stark (Nashville) and Christopher Walsh (New York).

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Commentary

Corporations Crush Creators

By John Gile

Victim after victim--authors, artists, inventors--have told me the same story over and over again: "My work was stolen. The thief stonewalled me. I went to a lawyer. The lawyer told me it costs too much to fight."

Something is seriously wrong when the law encourages lawbreakers and discourages victims. Something is seriously wrong when the law rewards the guilty and punishes the innocent. Something is seriously wrong when the law tells victims, "It costs too much to fight."

Instead, the law should be telling lawbreakers, "It costs too much to steal." Laws that protect the guilty encourage crime. Laws that protect thieves encourage theft.

U. S. House Judiciary Committee member Barney Frank of Massachusetts has articulated why zero tolerance of copyright infringement is essential: "If we do not see that authors and composers and singers and musicians and other creative people are rewarded for their work, not only is that unfair to many of us, but the amount of work we get will diminish.

"There may be some people fortunate enough to be able to create out of love without regard to compensation. We cannot depend only on the independently wealthy to be our creative people. We must fully protect "intellectual property, which is essential to the creative life of America, to the quality of our life, because if we do not protect the creators, there will be less creation."

Creation is job-generating. One of my greatest satisfactions as an author and publisher is knowing that my work has created jobs for graphic artists and printers and shippers and retailers and others and has contributed millions of dollars to the United States economy from a little office in Rockford, Ill.

One of my greatest frustrations in pursuing infringers is knowing how devastating their behavior has been for my work and the jobs my work would otherwise create.

For more information, check out johngile.com.

John Gile is an award-winning author and editor. He previously was a feature writer and government reporter for the Rockford (Ill.) Register Republic, and was the managing editor of the Observer, a weekly newspaper in Northern Illinois.

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Case Analyses

Nine Inch Nails Singers Sues Ex-Manager

By Samantha Chang

NEW YORK--Nine Inch Nails frontman Trent Reznor has filed a countersuit against his former manager, alleging breach of contract and fiduciary duty and conspiracy.

In the complaint, filed May 19 in the U.S. District Court for the Southern District of New York, Reznor says J. Artist Management--owned and operated by Reznor's ex-manager John Malm--and Navigent Group, an Ohio company, together took improper control of Reznor's finances and legal documents.

Reznor's suit comes on the heels of an April 21 suit Malm filed against him. Malm managed Reznor from the mid-1980s until 2003, when the pair parted ways. Reznor alleges that the defendants withheld money he earned and refused to turn over books and records of financial transactions involving his money.

He seeks the return of the books and records plus unspecified monetary damages. Calls to Navigent Group for comment were not returned by deadline.

"Trent Reznor's lawsuit is nothing more than an ill-conceived response to an earlier lawsuit that John Malm was forced to bring in April against Reznor to recover more than $2 million in commissions that Reznor has refused to pay," says Malm's lawyer, Alan Hirth.

"Reznor has reneged on every single contract that he and Malm ever entered into. For at least the past six years Reznor's lawyers were fully apprised of all business dealings between Reznor and Malm. Only when Reznor ran out of money after failing for five years to release a new album or go on tour did Reznor and his high-priced handlers decide to blame Malm for Reznor's reckless spending and abandonment of Reznor's career."

Nine Inch Nails will release its next Interscope album, "Bleed Through," later this summer.

Case: Michael Reznor v. J. Artist Mgmt; Navigent Group; John Malm, Jr.; Richard Szekelyi
Cite: U.S. District Court for the Southern District of New York; Case. CV-3808
Filing: Steven Shiffman of Katten Muchin

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New Filings: UMG, UMVD, Gucci, ESPN


Case: JayBoy Music Corp. v. Universal Music Group; Interscope Records; Universal Music & Video Distribution; William Adams
Issue: Copyright infringement concerning a musical work.
Cite: U.S. District Court for the SDNY; No. CV-3676
Filing attorney: Herbert Jacoby of Lacher & Lovell-Taylor




Case: Norman Hutchins vs. JDI Records Corp. and James E. Roberson d/b/a JDI Records
Issue: Gospel artist Hutchins alleges JDI and Roberson breached his contract by failing to pay royalties on two album releases.
Cite: Superior Court of California, County of Los Angeles; Case No. BC315851
Filing Attorney: Reginald K. Brown




Case: Jakks Pacific Inc. v. Mattel
Issue: Tortious interference with contractual relations and copyright infringement
Cite: N.Y. Supreme Court; Case No. 601480
Filing attorney: David Sack of Feder Kaszovitz






Case: Gucci America v. Showcase Collections; Lori Sweet
Issue: Trademark infringement
Cite: US District Court, SDNY; Case No. CV-3752
Filing attorney: Ira Sacks





Case: Computer Information Network v. ESPN; Sportsticker Enterprises LP
Issue: Breach of contract, unfair competition, infringement of the Computer Fraud and Abuse Act.
Cite: US District Court, SDNY; No. CV-3707
Filing attorney: Fred Perkins of Morrison Cohen



Case: Connoisseur Records v. Matthew Gerrard Productions; Bridget Benenate; Worlds End Inc.; Hollywood Records
Issue: Breach of production agreement, conspiracy
Cite: US District Court, SDNY; No. CV-3718
Filing attorney: Alfred Pavlis

Case: Comag Marketing Group v. Big Magazine Inc.
Issue: Breach of contract
Cite: NY Supreme Court; No. 107714
Filing attorney: Bernard D'Orazio


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