Edward B. Marks Music Corp. v. Colorado Mag., Inc.

• Decision Date: 28 February 1974
• Docket Number: No. 73-1395.,73-1395.
• Citation: 497 F.2d 285
• Parties: EDWARD B. MARKS MUSIC CORPORATION, Plaintiff-Appellant, v. COLORADO MAGNETICS, INC., d/b/a Sound Values, Inc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

497 F.2d 285 (1974)

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

No. 73-1395.

United States Court of Appeals, Tenth Circuit.

Submitted November 13, 1973.

Decided February 28, 1974.

As Modified on Rehearing May 28, 1974.

Simon H. Rifkind, New York City (James D. Fellers, Frank A. Gregory, Fellers, Snider, Baggett, Blankenship & Bailey, Oklahoma City, Okl., and of counsel, John C. Taylor, III, Stuart Robinowitz, Sidney S. Rosdeitcher, Steven B. Rosenfeld, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, Robert C. Osterberg, John S. Clark, Abeles, Clark & Osterberg, Charles B. Lutz, Jr., Speck, Philben & Fleig, Oklahoma City, Okl., on the brief), for plaintiff-appellant.

Jerry J. Dunlap, Oklahoma City, Okl. (Charles A. Codding, Dunlap, Laney, Hessin & Dougherty, Oklahoma City, Okl., on the brief), for defendants-appellees.

Before LEWIS, Chief Judge, and MURRAH and McWILLIAMS, Circuit Judges.

McWILLIAMS, Circuit Judge.

This is a so-called tape piracy case. Edward B. Marks Music Corporation, hereinafter referred to as Marks, is an independent music publisher and, as such, is the owner of copyrights in numerous musical compositions. Marks, through its licensing agent, the Harry L. Fox Agency, Inc., has authorized various record companies to make recordings of compositions in which it, Marks, owns the copyright. The recording companies thus licensed by Marks to reproduce or record its copyrighted musical compositions have hired artists who have made recordings of the musical compositions here involved. Such recordings are then offered for sale to the general public.

Colorado Magnetics, Inc., hereinafter referred to as Magnetics, with no authorization from Marks, has also made recordings of musical compositions in which Marks owns the copyrights and has offered its recordings for sale to the general public at a price well below the retail price of the recordings produced by those recording companies licensed by Marks to record its copyrighted compositions. Magnetics' modus operandi is to first purchase on the open market individual "hit" records thus made by those recording companies licensed by Marks to use its copyrighted compositions. Magnetics then duplicates or copies the recording with its own sound equipment on magnetic tape and offers for sale to the general public its duplicated or copied cassette tape recordings. Magnetics, of course, is able to undersell because, by simply copying the records made by others, it avoids the considerable expense incurred by the licensed recording companies in the hiring of arrangers, an orchestra, and the featured recording artists incident to their recordings.

It was in this general setting that Marks brought a copyright infringement action against Magnetics, seeking damages and injunctive relief. The gist of Marks' complaint is that Magnetics is making an unauthorized and unlawful use of musical compositions in which it, Marks, owns the copyrights. Magnetics, by answer, denied copyright infringement, and alleged that its use of Marks' copyrighted compositions is authorized by the so-called "compulsory license" provisions of the Copyright Law, namely, 17 U.S.C. §§ 1 (e) and 101(e). Additionally, and alternatively, Magnetics alleged that Marks was guilty of certain antitrust violations which preclude it from enforcing its copyrights.

The case was initially set down for hearing on Marks' request for a preliminary injunction. However, before such hearing was held, the parties agreed that a hearing on the merits would be combined with the hearing on the preliminary injunction. Upon trial, the only witness called was the president of Marks. Additionally, four depositions were offered, and received into evidence, the two principal owners of Magnetics having been among those thus deposed. Also, considerable documentary material was offered, and received, without objection. And this was the extent of the evidentiary matter before the trial court.

At the conclusion of the trial, the trial court asked the respective parties to submit proposed findings and conclusions. Thus the parties did and the trial court elected to adopt, virtually without change, the findings and conclusions submitted by Magnetics, all of which, needless to say, resulted in a smashing victory on all fronts for Magnetics. In this regard, we note that the Supreme Court in United States v. El Paso Natural Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12 L.Ed.2d 12 (1964), observed that findings and conclusions prepared by counsel and adopted, more or less verbatim, by a trial court are less helpful on review than findings and conclusions drawn with the "insight of a disinterested mind." We agree.

In any event, the trial court specifically found that Magnetics in its use of Marks' copyrighted musical compositions did not infringe on Marks' copyrights and that Magnetics' duplication of records playing Marks' copyrighted compositions was authorized by the compulsory license provisions of 17 U.S.C. §§ 1(e) and 101(e). Alternatively, and additionally, the trial court went on to find that Marks was guilty of certain antitrust violations which precluded recovery; that because of its "misuse" of the copyrights in question Marks was estopped; and that Marks' "unclean hands" also barred recovery. In line with such findings and conclusions, the trial court dismissed the proceedings and awarded Magnetics its costs and attorneys' fees. The complete findings and conclusions of the trial court are reported in Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 357 F.Supp. 280 (W.D.Okl.1973). In this regard, we note that though the trial court made written findings and conclusions, it did not render, as such, an opinion. From such judgment Marks now appeals. We reverse.

COMPULSORY LICENSE

In our view, the central issue in this case relates to the compulsory license provisions of 17 U.S.C. §§ 1(e) and 101(e). If Magnetics' use of Marks' copyrighted compositions falls within the ambit of that particular statutory provision, then Marks' present action must fail. However, if Magnetics' activities are outside the bounds of that statute, then Marks, as the copyright owner, is entitled to relief.

Although prior to 1909 a composer could obtain a copyright on his musical composition, Congress in 1909 considerably extended the copyright interest of the composer to the end that thereafter the copyright owner of a musical composition could himself control the mechanical reproduction of his composition.¹ At the same time, fearful that by permitting a musical composition to be thus copyrighted it was permitting an absolute monopoly,² Congress tacked on a proviso or exception to the statute authorizing the copyrighting of musical compositions. It is this proviso, which is a part of 17 U.S.C. § 1(e), with which we are here concerned. Such proviso reads as follows:

Provided, . . . as a condition of extending the copyright control to such mechanical reproductions, that whenever the owner of a musical copyright has used or permitted or knowingly acquiesced in the use of the copyrighted work upon the parts of instruments serving to reproduce mechanically the musical work, any other person may make similar use of the copyrighted work upon the payment to the copyright proprietor of a royalty of 2 cents on each such part manufactured, to be paid by the manufacturer thereof; . . . .

As indicated, Magnetics claims that its use of Marks' copyrighted composition in its duplication of records made by others is authorized by the foregoing statutory provision, which provides for a so-called compulsory license, in lieu of an express license from the copyright owner. In this general regard, it should be noted that Magnetics did file a notice of intent as required by 17 U.S.C. § 101(e) and did make a tender, of sorts, of the 2 cent royalty called for in 17 U.S.C. § 1(e). Marks refused the tender, and then instituted the present proceeding. We need not here concern ourselves with whether the tender complied with the statute, as, in our view, Magnetics' use of Marks' copyrighted compositions necessarily involved in its duplication or copying of the records of others, who are themselves licensed by Marks to record, finds no sanction in 17 U.S.C. § 1 (e).

At the outset, we note that we are here concerned with a proviso or exception to the statute vesting a copyright interest in the composer of a musical composition and granting him the exclusive right to determine the use to be made of his copyrighted composition. In this regard, it is the general rule that a proviso should be strictly construed to the end that an exception does not devour the general policy which a law may embody. Shilkret v. Musicraft Records, Inc., 131 F.2d 929 (2d Cir. 1942), cert. denied, 319 U.S. 742, 63 S.Ct. 1030, 87 L.Ed. 1699 (1943).³

As we read the statutory provisions here under consideration, one who owns the copyright in a musical composition has, in the first instance at least, absolute control over who records his composition. He may elect not to allow anyone to record his composition. However, when the composer elects to license another to "use . . . the copyrighted work upon the parts of instruments serving to reproduce mechanically the musical work," then the compulsory license provisions of the statute may be invoked. Specifically, the statute provides that once the composer has licensed another to reproduce by recording the composer's composition, then, upon payment of the statutory royalty, ". . . any other person may make similar use of the copyrighted work . . . ." This means, to us, that one who complies with royalty payment called for by the statute, though not having any authorization from the copyright owner, may nonetheless then "use," not a third party's record, but the copyrighted composition, which has been characterized as the "raw material," in a...