Frank Music Corp. v. Metro-Goldwyn-Mayer Inc., METRO-GOLDWYN-MAYER

• Citation: 886 F.2d 1545
• Decision Date: 27 September 1989
• Docket Number: 87-6321,Nos. 87-6257,METRO-GOLDWYN-MAYER,s. 87-6257
• Parties: , 1989 Copr.L.Dec. P 26,475, 12 U.S.P.Q.2d 1412 FRANK MUSIC CORP.; Robert Wright; George Forrest; Anne Lederer as Executrix of the Last Will of Charles Lederer; Luther Davis; Edwin Lester, Plaintiffs-Appellants-Cross-Appellees, v.INC., et al., Defendants-Appellees-Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1545

886 F.2d 1545

58 USLW 2242, 1989 Copr.L.Dec. P 26,475,

12 U.S.P.Q.2d 1412

FRANK MUSIC CORP.; Robert Wright; George Forrest; Anne

Lederer as Executrix of the Last Will of Charles

Lederer; Luther Davis; Edwin Lester, Plaintiffs-Appellants-Cross-Appellees, v. METRO-GOLDWYN-MAYER INC., et al.,

Defendants-Appellees-Cross-Appellants.

Nos. 87-6257, 87-6321.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 4, 1989.

Decided Sept. 27, 1989.

David H. Kornblum, Los Angeles, Cal., for plaintiffs-appellants-cross-appellees.

Charles M. Stern, Wyman, Bautzer, Kuchel & Silbert, Los Angeles, Cal., for defendants-appellees-cross-appellants.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, BOOCHEVER and REINHARDT, Circuit Judges.

FLETCHER, Circuit Judge:

In Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505 (9th Cir.1985) (Frank Music I ), we affirmed the district court's holding that defendants infringed plaintiffs' copyright in the dramatico-musical play Kismet, but remanded for reconsideration of the amount of profits attributable to the infringement and for consideration of whether defendants Donn Arden and Metro-Goldwyn-Mayer, Inc. (MGM, Inc.) should be liable in addition to MGM Grand Hotel, Inc. (MGM Grand). On remand, the district court awarded plaintiffs $343,724 against MGM Grand, dismissed the action against MGM, Inc. and Arden, and awarded plaintiffs $115,000 in attorney's fees. Plaintiffs appeal and defendants cross-appeal. We affirm in part, reverse in part, and remand.

I. FACTS

The facts are fully set out in Frank Music I, 772 F.2d at 509-11. We reiterate only selectively. Plaintiffs are the copyright owners and authors of Kismet, a dramatico-musical work. MGM, Inc. under license produced a musical motion picture version of Kismet. Beginning April 26, 1974, MGM Grand presented a musical revue entitled Hallelujah Hollywood in the hotel's Ziegfeld Theatre. Hallelujah Hollywood was largely created by an employee of MGM Grand, Donn Arden, ¹ who also staged, produced and directed the show. The show comprised ten acts, four billed as "tributes" to MGM motion pictures. Act IV was entitled "Kismet", and was a tribute to the MGM movie of that name. It was based almost entirely on music from Kismet, and used characters and settings from that musical. Act IV "Kismet" was performed approximately 1700 times, until July 16, 1976, when, under pressure resulting from this litigation, MGM Grand substituted a new Act IV.

Plaintiffs filed suit, alleging copyright infringement, unfair competition, and breach of contract. In Frank Music I, we affirmed the district court's conclusion that the use of Kismet in Hallelujah Hollywood was beyond the scope of MGM Grand's ASCAP license and infringed plaintiffs' copyright. In this appeal, the parties focus on the adequacy of damages and attorney's fees.

II. DISCUSSION

A. Apportionment of Profits

1. Direct Profits

In Frank Music I, 772 F.2d at 514, we upheld the district court's conclusion that the plaintiffs failed to prove actual damages arising from the infringement, but vacated the district court's award of $22,000 in apportioned profits as "grossly inadequate," id. at 518, and remanded to the district court for reconsideration.

On remand, the district court calculated MGM Grand's net profit from Hallelujah Hollywood at $6,131,606, by deducting from its gross revenues the direct costs MGM Grand proved it had incurred. Neither party challenges this calculation.

In apportioning the profits between Act IV and the other acts in the show, the district court made the following finding:

Act IV of "Hallelujah Hollywood" was one of ten acts, approximately a ten minute segment of a 100 minute revue. On this basis, the Court concludes that ten percent of the profits of "Hallelujah Hollywood" are attributable to Act IV.

Memorandum of Decision and Order (Decision II ) at 4.

Plaintiffs assert that this finding is in error in several respects. First, they point out that on Saturdays Hallelujah Hollywood contained only eight acts, not ten, and that on Saturdays the show ran only 75 minutes, not 100. Frank Music I, 772 F.2d at 510. Second, Act IV was approximately eleven and a half minutes long, not ten. Id. Because the show was performed three times on Saturdays, and twice a night on the other evenings of the week, id., the district court substantially underestimated the running time of Act IV in relation to the rest of the show. ²

If the district court relied exclusively on a quantitative comparison and failed to consider the relative quality or drawing power of the show's various component parts, it erred. See ABKCO Music, Inc. v. Harrisongs Music, Ltd., 508 F.Supp. 798, 800 (S.D.N.Y.1981), modified on other grounds, 722 F.2d 988 (2d Cir.1983); Lottie Joplin Thomas Trust v. Crown Publishers, 456 F.Supp. 531, 538 (S.D.N.Y.1977), aff'd, 592 F.2d 651 (2d Cir.1978). However, the district court's apportionment based on comparative durations would be appropriate if the district court implicitly concluded that all the acts of the show were of roughly equal value. Cf. Frank Music I, 772 F.2d at 518 ("Each element contributed significantly to the show's success, but no one element was the sole or overriding reason for that success.") While a more precise statement of the district court's reasons would have been desirable, we find support in the record for the conclusion that all the acts in the show were of substantially equal value.

The district court went on to apportion the parties' relative contributions to Act IV itself:

The infringing musical material was only one of several elements contributing to the segment. A portion of the profits attributable to Act IV must be allocated to other elements, including the creative talent of the producer and director, the talents of performers, composers, choreographers, costume designers and others who participated in creating Act IV, and the attraction of the unique Ziegfeld Theatre with its elaborate stage effects.... While no precise mathematical formula can be applied, the Court concludes that ... a fair approximation of the value of the infringing work to Act IV is twenty-five percent.

Decision II at 4-5.

The district court was correct in probing into the parties' relative contributions to Act IV. Where a defendant alters infringing material to suit its own unique purposes, those alterations and the creativity behind them should be taken into account in apportioning the profits of the infringing work. Cf. Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, 49-51 (2d Cir.1939), aff'd, 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940); see also Comment: An Improved Framework for Music Plagiarism Litigation, 76 Calif.L.Rev. 421, 454-55 (1988). However, the district court appears to have ignored its finding in its previous decision that defendants used not only the plaintiffs' music, but also their lyrics, characters, settings, and costume designs, recreating to a substantial extent the look and sound of the licensed movie version of Kismet. Memorandum of Decision and Order (Decision I ) at 10-11.

While it was not inappropriate to consider the creativity of producers, performers and others involved in staging and adapting excerpts from Kismet for use in Hallelujah Hollywood, the district court erred in weighing these contributions so heavily. In performing the apportionment, the benefit of the doubt must always be given to the plaintiff, not the defendant. Sheldon, 106 F.2d at 51. And while the apportionment may take into account the role of uncopyrightable elements of a work in generating that work's profits, see Sheldon, 106 F.2d at 50-51 (considering role of movie's actors, scenery, producers and directors); cf. McCulloch v. Albert E. Price, Inc., 823 F.2d 316, 320 (9th Cir.1987) (substantial similarity analysis can include examination of uncopyrightable elements), the apportionment should not place too high a value on the defendants' staging of the work, at the expense of undervaluing the plaintiffs' more substantive creative contributions. See Comment: An Improved Framework, supra, at 454-56. Production contributions involving expensive costumes and lavish sets will largely be taken into account when deducting the defendants' costs. Indeed, defendants concede that had they produced Kismet in toto, it would have been proper for the district court to award 100% of their profits, despite their own creative efforts in staging such a production.

The district court found that defendants' staging of the Kismet excerpts was highly significant to Act IV's success. While we believe that a defendant's efforts in staging an infringing production will generally not support more than a de minimis deduction from the plaintiff's share of the profits, we cannot say the district court's conclusion that the defendants' contributions were substantial in this case is clearly erroneous. We recognize that there will be shows in which the attraction of the costumes, scenery or performers outweighs the attraction of the music or dialogue. On the other hand, a producer's ability to stage a lavish presentation, or a performer's ability to fill a hall from the drawing power of her name alone, is not a license to use freely the copyrighted works of others.

We conclude that apportioning 75% of Act IV to the defendants grossly undervalues the importance of the plaintiffs' contributions. Act IV was essentially Kismet with contributions by the defendants; it was not essentially a new work incidentally plagiarizing elements of Kismet. A fairer apportionment, giving due regard to the district court's findings, attributes 75% of Act IV to elements taken from the plaintiffs and 25% to the defendants' contributions. ³

2. Indirect Profits

In Frank Music I, we held that the plaintiffs were entitled to recover, in addition to direct profits, a proportion of ascertainable...