Shapiro, Bernstein & Co. v. Remington Records, Inc.
| Decision Date | 03 April 1959 |
| Docket Number | Docket 25216.,No. 86,86 |
| Parties | SHAPIRO, BERNSTEIN & CO., Inc., Plaintiff-Appellant-Appellee, v. REMINGTON RECORDS, INC., Defendant-Appellee-Appellant, Donald H. Gabor, Defendant. OXFORD MUSIC CORPORATION, Plaintiff-Appellant-Appellee, v. REMINGTON RECORDS, INC., Defendant-Appellee-Appellant, Donald H. Gabor, Defendant. ST. NICHOLAS MUSIC, INC., Plaintiff-Appellant-Appellee, v. REMINGTON RECORDS, INC., Defendant-Appellee-Appellant, Donald H. Gabor, Defendant. MERIDIAN MUSIC CORP., Plaintiff-Appellant-Appellee, v. REMINGTON RECORDS, INC., Defendant-Appellee-Appellant, Donald H. Gabor, Defendant. |
| Court | U.S. Court of Appeals — Second Circuit |
COPYRIGHT MATERIAL OMITTED
Julian T. Abeles, New York City (Abeles & Bernstein, New York City, on the brief), for plaintiffs-appellants-appellees.
Maxwell Okun, New York City, for defendant-appellee-appellant.
Before MEDINA, LUMBARD and BURGER, Circuit Judges.
Four different plaintiffs, all music publishers, brought suit against Donald H. Gabor and Remington Records, Inc. Gabor and his wife own all the stock of Remington, a phonograph record manufacturer and distributor.1 These actions were brought under the provisions of the Copyright Act (Title 17 U.S.C. § 1 et seq., and 28 U.S.C. § 1338) relating to the compulsory licensing of phonograph records. The claims of all four plaintiffs are based on substantially the same conduct on the part of the defendants. The complaints charged that defendants had infringed copyrights of plaintiffs by reproducing on records plaintiffs' copyrighted musical compositions without complying with the statutory provision requiring prior notice and payment of royalties.
Section 1(e), Title 17 U.S.C., provides that, when a copyright proprietor has once permitted or acquiesced in the use of his copyrighted work, others may make similar use by paying the owner a royalty of two cents on each record manufactured; it also requires monthly production reports to be furnished in support of the royalty payments if the copyright owner so requests.2
The Copyright Act also provides:
"Whenever any person, in the absence of a license agreement, intends to use a copyrighted musical composition upon the parts of instruments serving to reproduce mechanically the musical work, relying upon the compulsory license provision of this title 17 U.S.C. § 1 (e), he shall serve notice of such intention, by registered mail, upon the copyright proprietor at his last address disclosed by the records of the copyright office, sending to the copyright office a duplicate of such notice; and in case of his failure so to do the court may, in its discretion, in addition to the sums hereinabove mentioned, award the complainant a further sum, not to exceed three times the amount provided by section 1, subsection (e) "payment to the copyright proprietor of a royalty of 2 cents on each such part manufactured" * * * by way of damages * * *". 17 U.S.C. § 101(e).
Plaintiffs moved for summary judgment and for the appointment of a special master to determine the amount of royalties due. Defendants, in their answer, denied failure to give notice, but they admitted manufacture of records of copyrighted compositions and admitted liability in some amount for royalties under § 1(e). The only issues left were the amount due each plaintiff under the two cents per unit royalty provision and whether punitive damages under § 101 (e), costs and attorney fees should also be charged against defendants. On the admissions of defendants summary judgment was entered finding liability, and a special master was appointed to ascertain the amount of royalties due and the damages and costs, if any, to be allowed.
The Special Master conducted a total of nine separate hearings extending over a period of more than three years. His findings, report and award, which were adopted in full by District Judge Conger, fixed royalties due each of the plaintiffs and awarded the maximum amount of punitive damages permitted by § 101(e). His computation is set out in the footnote.3
The District Judge then ordered defendants to pay attorneys' fees, set at $1,000 for each of the four plaintiffs and to pay the Special Master a fee of $1,200 or $300 for each plaintiff, making a total of $4,200 in costs assessed against defendants in addition to the total award of $4,472.48.
Defendants, Remington and Gabor, appeal from the allowance of the maximum permissible (treble) punitive damages, attorneys' fees and costs. Defendants also challenge the finding that they failed to give plaintiffs the notice required by the Copyright Act. We hold that the appeals of the defendants from the allowance of statutory damages, costs, and attorneys' fees are without merit.
Plaintiffs' appeals are based on the ruling of the District Judge approving the Master's striking of certain expert opinion testimony as to the number of records manufactured by defendants. The plaintiffs, after developing by testimony of Gabor and officers of Remington that the defendants had consciously and deliberately failed to keep any account of a substantial part of their production of plaintiffs' copyrighted records, offered as an expert witness one Albert Berman to show the estimated volume of copying. After showing his knowledge and experience in connection with the phonograph record industry,4 Berman was permitted to testify that, in his opinion, defendants had manufactured, according to what he described as a "conservative estimate * * * 30,000 of each record" in question prior to a fixed date as to each composition.5 This testimony was received over objection and then stricken by the Master "on the ground that no proper foundation * * * was laid and in my opinion such testimony in the form given is not within the realm of expert testimony and is purely speculative." In affirming the Master's ruling, Judge Conger, with obvious reluctance,6 said that "there are not sufficient facts in this hypothetical question on which an expert can base an answer."
The relations which give rise to this litigation flow in part from the applicable statutory scheme and in part from the practices of some elements within the phonograph record industry. Once a copyright owner makes his musical work available to any record manufacturer it becomes subject to the compulsory licensing provisions of the Copyright Act and may be copied by others simply upon their giving notice of intention and thereafter paying the royalty fixed by the statute. 17 U.S.C. §§ 1(e), 101(e). Defendant Remington's method of operation under this statute — a method apparently typical of some segments of the record industry — was described by several witnesses, including Lee Weiser, Remington's secretary and in charge of its accounting department at the time of the disputed conduct.
Weiser testified that Remington would never produce a popular recording until the song had already established itself "in the top ten listing." When it made these copies, Remington did not advertise the records, but relied on the popularity already achieved and the sales promotion efforts of the first publisher. It appears, beyond question, that in order to exploit this situation, defendants had to have a "crash program" which would get the largest possible volume of records into the market while the song's popularity and resulting demand were at their peak. This was made necessary by the relatively short duration (measurable in terms of weeks) of the song's position on the "top ten listing." If Remington's copying venture was to be profitable, speed was essential.
Consistent with this pattern of operations the evidence indicates that by far the greater amount of Remington's total production of these records occurred at the outset and before the first shipment of records was made to the distributors, i. e., before the "initial shipment" described in the testimony. Once it became apparent that a song was to be a hit, Remington would rush into production with a large initial pressing, with the later and diminishing demand supplied, if the demand continued, by subsequent production.
In this case it is the quantity of records manufactured before the initial shipment date, i. e., production under the "crash program," which is crucial but unknown except for the estimate of the expert witness Berman whose testimony was rejected by the Special Master. Defendants, after much delay, produced an account of the lesser number of records that they manufactured after the initial shipment, and the judgment below represents the royalties and damages only for those records. It was the view of the Special Master that, were the true figures available as to production before the "initial shipment" date, plaintiffs' awards would be substantially greater. Had Berman's opinion testimony been accepted, it would have more than doubled plaintiffs' recovery.
Before proffering Berman's opinion testimony plaintiffs made extensive efforts to adduce direct documentary proof of defendants' production prior to the initial shipment or "release" date, but they were frustrated by the defendants. Plaintiffs tried to use certain inventories and sales records secured from defendants, but these proved incomplete or patently inaccurate. At one hearing before the Master defendant Gabor testified that certain inventory and sales records, which were available, would be sufficient for computing the total number of records manufactured before the initial shipment. Yet, when these documents were produced, after much delay and upon order, they shed no light on the production preceding the initial shipment. Even a cursory examination of these records shows their inadequacy. The record plainly shows that plaintiffs made exhaustive efforts to procure better evidence before they offered Berman's opinion.
Taken altogether the evidence discloses that by one means or another defendants prevented...
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