Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., Civ-73-85.

• Citation: 357 F. Supp. 280
• Decision Date: 18 April 1973
• Docket Number: No. Civ-73-85.,Civ-73-85.
• Court: United States District Courts. 10th Circuit. Western District of Oklahoma
• Parties: EDWARD B. MARKS MUSIC CORPORATION, Plaintiff, v. COLORADO MAGNETICS, INC., c/b/a Sound Values, Inc., et al., Defendants.

357 F. Supp. 280

EDWARD B. MARKS MUSIC CORPORATION, Plaintiff, v. COLORADO MAGNETICS, INC., c/b/a Sound Values, Inc., et al., Defendants.

No. Civ-73-85.

United States District Court, W. D. Oklahoma.

April 18, 1973.

Charles B. Lutz, Jr., Speck, Philbin & Fleig, Attys., Inc., Oklahoma City, Okl., and Robert C. Osterberg, Abeles, Clark & Osterberg, New York City, for plaintiff.

Jerry J. Dunlap, and Charles A. Codding, Dunlap, Laney, Hessin & Dougherty, Oklahoma City, Okl., for defendants, Colorado Magnetics, Inc., Randy Sherman, and Harry Cummings, Jr.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CHANDLER, District Judge.

Plaintiff having moved this Court for a Preliminary Injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure, and said motion having come on to be heard before this Court on February 16, 1973, the Court, with the consent of the parties hereto ordered that the trial of the action on the merits be advanced and consolidated with the hearing of said application, the Court having granted, by Order dated March 15, 1973, the joint motion of the parties for an Order pursuant to Rule 42(a) of the Federal Rules of Civil Procedure separating the trial of the issue of liability herein. And the Court having heard and considered the evidence, all deposition testimony and exhibits, and the briefs of the parties, finds the facts and states the conclusions of law as follows:

FINDINGS OF FACT

1. The Plaintiff Edward B. Marks Music Corporation (Marks) is a New York corporation having its principal place of business in New York City, New York. Joseph Auslander was the President of MARKS at the time of filing of this suit and at all times material to this suit.

2. The Defendant Colorado Magnetics, Inc. (Magnetics) is a Colorado corporation and was domesticated in the State of Oklahoma in November of 1972. Magnetics has a place of business located in Oklahoma City, Oklahoma and has three tradenames: Sound Values, Inc.; Sound Values Marketing Corp.; and Magnetic Recorders, Inc., each of said tradenames being registered in the State of Oklahoma as a corporate tradename of Colorado Magnetics, Inc.

3. The Defendant Randy Sherman (Sherman) is an individual residing in Oklahoma City, Oklahoma and is the President of Magnetics.

4. The Defendant Harry Cummings, Jr. (Cummings) is an individual residing in Oklahoma City, Oklahoma and is the Secretary-Treasurer of Magnetics.

5. The Plaintiff has brought this lawsuit alleging the Defendants Sherman, Cummings and Magnetics have infringed certain of its copyrighted musical compositions. The Defendants have answered denying infringement and asserting affirmative defenses that the Defendants' use of the Plaintiff's musical compositions in suit is within the compulsory license provision of the Copyright Law and that the Plaintiff is estopped to deny the Defendants' use is not within the compulsory license provision of the Copyright Law, the Defendants further asserting that the Plaintiff's musical compositions in suit are unenforceable against the Defendants because of the Plaintiff's inequitable conduct, unclean hands and misuse of its musical compositions in suit.

6. Marks is a music publisher and, in general, acquires title to various musical compositions from the respective authors/composers via assignments or agreements. Marks then registers its claim to copyright or records its assignment of a claim to copyright in the various musical compositions. Marks derives income via its ownership of the copyrights in the various musical compositions through such uses as recording uses, public performance uses and motion picture sound track uses.

7. This case involves Marks' right to receive compensation for recording uses of the musical compositions controlled by it. When an individual or company desires to produce a sound recording utilizing musical compositions controlled by Marks, the individual or company either negotiates with Marks for a license or, in those instances where Marks has previously acquiesced in the recording use of a particular musical composition, the individual or company desiring to use the musical compositions may serve notice of intention to use the musical compositions on Marks in accordance with the compulsory license provision of the Copyright Law. In either event, Marks receives what is referred to as a "mechanical royalty" for each recording use of its musical compositions from the licensees, either negotiated licenses or licenses obtained in accordance with the compulsory license provision of the Copyright Law.

8. Marks introduced a considerable amount of background evidence relating to the performance of the recording artist, the costs incurred by some of the major recording companies, such as CBS and RCA, for producing recordings of various musical compositions and the promotion efforts of these recording companies and the music publisher with respect to obtaining public acceptance of a particular musical composition or recording thereof. None of the Plaintiff's witnesses were able to testify from their own knowledge, nor was any evidence produced as to the recording or promotion costs incurred by their companies relating to recordings of the musical compositions in suit. However, all of this evidence was considered by the Court as background evidence in reaching the Court's determination of the legal and factual issues involved in this case.

9. The Plaintiff and the Defendants are not in competition, and neither the recording companies represented by the Plaintiff's witnesses, nor the performing artists are parties in the present case.

10. After acquiring control of the copyrights of the musical compositions in this case, Marks licenses the right to record the musical compositions to various recording companies through a licensing agent, The Harry Fox Agency, Inc., along with some 3500 other music publishers. A number of licenses to various recording companies were introduced into evidence signed by a representative of The Harry Fox Agency, Inc. on behalf of Marks. The license agreements between Marks and the various recording companies show that Marks has obtained a number of different licenses for the identical recording of the same musical composition. Marks issues separate licenses for each album marketed by a recording company, even in those instances where the recording of a particular musical composition was released on earlier albums by the same recording company; the licenses are issued at various royalty rates; the royalty rates vary depending upon the licensed manufacturer; the retail selling prices of the recordings are specified in the license agreements; the marketing and distribution channels through which the recordings are to be made available to the public are frequently specified; and the particular packaging of the recording is frequently specified. The basis for calculating the royalty to be paid to Marks is also varied, such as being based on recordings manufactured and sold; the recordings sold; and/or the recordings sold with a specified percentage allowance for returned recordings.

11. The Plaintiff has numerous licenses issued to Ampex Corp. for duplicating recordings containing musical compositions owned and controlled by the Plaintiff utilizing recordings previously manufactured and sold by other recording companies. The licenses issued to Ampex Corp. by the Plaintiff or its agent, The Harry Fox Agency, Inc., clearly state that the Plaintiff or its agent The Harry Fox Agency, Inc. has been advised that the Ampex Corp. wishes to use the musical compositions owned by the Plaintiff under the compulsory license provision of the Copyright Law upon parts of instruments serving to reproduce mechanically the copyrighted work, and that upon doing so, the Ampex Corp. shall have all the rights which are granted to, and all obligations which are imposed upon, users of the Plaintiff's copyrighted works under the compulsory license provision of the Copyright Law. These license agreements to the Ampex Corp., on their face, indicate that the Ampex Corp. is duplicating recordings previously manufactured and sold by other recording companies and, as far as the Plaintiff is concerned, the acts of the Ampex Corp. are identical with the acts of the Defendants in this lawsuit in manufacturing duplicate recordings of works previously recorded and sold by other recording companies. The Plaintiff has clearly recognized and continues to recognize the acts of the Ampex Corp. as being within the compulsory license provision of the Copyright Law.

12. The Defendants have invested a substantial sum of money in advertising, equipment and the leasing of adequate facilities to accommodate the Defendants' manufacturing facilities as evidenced by the various checks of the Defendants and the lease agreement of the Defendants introduced into evidence by the Plaintiff. The evidence and the testimony of Mr. Auslander clearly shows that the Plaintiff's descriptions and characterizations of the Defendants as engaged in "hit-and-run bootlegging" were erroneous and without any substantial factual basis reasonably supporting such conclusions. Mr. Auslander did not, in fact, possess any information nor was he informed of any facts reasonably supporting such statements and references made relative to the Defendants in this case. Mr. Auslander's sources of information and belief, according to his testimony, consisted of documents contained in the files of the Plaintiff's counsel (Abeles, Clark & Osterberg). These documents consisted of a Xerox copy of a letter having the date and addressee blanked out, but allegedly addressed to an informant and supposedly written by Sherman from Colorado Springs and a list attached to the letter. Sherman testified that the list was not the property of any of the named Defendants and no evidence was introduced tending to show that the list was that of Defendants.

13. Mr. Auslander testified that this...