Shapiro, Bernstein & Co. v. Goody

• Decision Date: 28 September 1957
• Docket Number: Docket 24392.,No. 238,238
• Citation: 248 F.2d 260
• Parties: SHAPIRO, BERNSTEIN & CO., Inc., Gershwin Publishing Corporation, Edward B. Marks Music Corporation, Miller Music Corporation, Lewis Music Publishing Company, Inc., and Mutual Music Society, Inc., Plaintiffs-Appellants, Helen D. Miller, Individually and as Executrix of the Estate of Alton G. Miller, Deceased, Plaintiff, v. Sam GOODY and Portem Distributing, Inc., Defendants-Appellees, Sidney Turk and Harold Grossbardt, individually and doing business as Colony Record & Radio Center, Colony Record & Radio Center, Inc., Arcade Music Shop, Inc., Rivoli Music Center, Inc., and Joseph Krug, individually and doing business as A. F. N. Record Co., Defendants.
• Court: U.S. Court of Appeals — Second Circuit

248 F.2d 260 (1957)

SHAPIRO, BERNSTEIN & CO., Inc., Gershwin Publishing Corporation, Edward B. Marks Music Corporation, Miller Music Corporation, Lewis Music Publishing Company, Inc., and Mutual Music Society, Inc., Plaintiffs-Appellants Helen D. Miller, Individually and as Executrix of the Estate of Alton G. Miller, Deceased, Plaintiff, v. Sam GOODY and Portem Distributing, Inc., Defendants-Appellees Sidney Turk and Harold Grossbardt, individually and doing business as Colony Record & Radio Center, Colony Record & Radio Center, Inc., Arcade Music Shop, Inc., Rivoli Music Center, Inc., and Joseph Krug, individually and doing business as A. F. N. Record Co., Defendants.

No. 238, Docket 24392.

United States Court of Appeals Second Circuit.

Argued February 13, 1957.

Decided September 28, 1957.

Julian T. Abeles (of Abeles & Bernstein), New York City, for plaintiffs-appellants.

A. M. Lowenthal (of Telsey & Lowenthal), New York City (Leon G. Telsey, New York City, on the brief), for defendant-appellee, Sam Goody.

Before HINCKS, LUMBARD and WATERMAN, Circuit Judges.

HINCKS, Circuit Judge.

The plaintiffs-appellants, music publishers, and the defendants-appellees, Goody and Portem Distributing, Inc., moved for summary judgment on the following facts.

Joseph Krug, an original defendant below, manufactured two long-play phonograph disks on which were recorded propaganda radio broadcasts made by Major Alton "Glenn" Miller and his orchestra during the Second World War. These records included nine copyrighted musical selections the copyrights to which were owned by the six publisher-appellants each of whom had previously authorized its said copyrighted selections to be recorded. However, Krug had not been licensed to make the recordings involved, nor had he filed the notices nor paid the statutory royalties required by 17 U.S.C.A. §§ 1(e) and 101(e).

The records were labeled "Major Glenn Miller and His A.E.F. Orchestra," "An A.F.N. Presentation." The same legends were on the jackets which also bore a photograph of Miller in uniform. On both disk and jacket the customary disclosure of the manufacturer was absent except for the cryptic reference to "A. F.N." Krug, who made the records by tape recording off-the-air radio broadcasts, was thus spared the expense to which "legitimate" record producers are put for the talent of musical performers and the skill of recording technicians. Such practice is known to the trade as "disklegging," "bootlegging" or record "piracy."

Krug sold these records to dealer customers including the defendants, Sam Goody and Portem Distributing, Inc., who, in turn, sold them to the public at a considerably lower price than those produced by the Radio Corporation of America to whom the Millers, in so far as they had power to do so, had given exclusive rights to make and sell records of the performance involved.

It is a curious fact that although the Copyright Law has remained without relevant change since 1909 this case should present a question both basic and novel. Does either the Copyright Act or the common law provide copyright owners with a remedy against non-manufacturing sellers of unauthorized phonograph recordings of copyrighted songs?

On this appeal, we are concerned only with the rights of copyright owners. The plaintiff, Helen D. Miller, suing for the estate of her husband, is not a party to this appeal and her claims are not before us. Nor is the defendant Joseph Krug a party to the appeal because the appellants after obtaining a default judgment against him, Miller v. Goody, D.C., 125 F.Supp. 348, agreed to a dismissal, with prejudice, as to the action against him upon the payment to them of $2,000 which, the appellants claim, was compensation for some of the expenses of the suit. In releasing Krug the appellants reserved all rights against the other defendants, including the appellees.

In 1908 the Supreme Court held that player piano rolls were not "copies" and hence did not infringe musical copyrights. White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1, 28 S.Ct. 319, 52 L.Ed. 655. The rationale of the opinion clearly included phonograph records within that group of mechanical reproductions which were not deemed to be copies for purposes of the then existing Copyright Act. Partially in response to that decision, the House Committee on Patents of the 60th Congress reported out a bill, which was later enacted and is now the law, carefully limiting the effect of the White-Smith decision. But by the very structure of the new law the case was not "overruled," as is best shown by the words of the Committee itself, viz.:

"Your committee have felt that justice and fair dealing, however, required that when the copyrighted music of a composer was appropriated for mechanical reproduction the composer should have some compensation for its use and that the composer should have the further right of forbidding, if he so desired, the rendition of his copyrighted music by the mechanical reproducers. How to protect him in these rights without establishing a great music monopoly was the practical question the committee had to deal with. The only way to effect both purposes, as it seemed to the committee, was, after giving the composer the exclusive right to prohibit the use of his music by the mechanical reproducers, to provide that if he used or permitted the use of his music for such purpose then, upon the payment of a reasonable royalty, all who desired might reproduce the music." House Rep. No. 2222 on H. R. 28192, 60th Cong. 2d Sess., p. 6.

The provisions necessary to implement the legislative scheme were incorporated into the 1909 Act and have remained unchanged to the present time. We set them forth in the margin.¹ Section 1(e), by its terms, concerns the compulsory licensing of the "manufacturer" of mechanical reproductions of the copyrighted work, and provides that if the 2¢ per "part" royalty is not paid by the manufacturer, the court in its discretion may award as damages to each owner whose copyright is infringed by the record ("part") the 2¢ royalty due plus three times that amount.

Section 101(e) provides that whenever the copyright owner has permitted the making of one mechanical reproduction the unauthorized "manufacture, use, or sale" of a record (mechanical reproduction) constitutes an infringement and entitles the owner to an injunction and a recovery, in lieu of profits and damages, of the royalty provided in § 1(e). It also directs "any person" who, in the absence of a license agreement, intends to use the copyrighted music, once it has been licensed to another, to serve notice to that effect on the copyright owner thereof and the copyright office. It further provides that, upon failure to comply with the compulsory licensing provision, the court in its discretion may award the owner "a further sum, not to exceed three times the amount provided by section 1, subsection (e), of this title, by way of damages * * *."

A natural reading of these sections leads us to the conclusion that a seller of unauthorized records of copyrighted music, although having no connection with the manufacturer, is an infringer and liable for damages which the Act provides. But the appellees urge us to eliminate from the phrase "manufacture, use, or sale of interchangeable parts, such as disks * * *" (§ 101(e)) the word "sale." Failure to do so, they contend, would create conflict with what the appellees claim is the basic purpose of the entire compulsory licensing scheme. To substantiate this, the appellees point to certain alleged injustices which would result from such interpretation.

First, appellees claim that such construction would hinge their liability as non-manufacturing sellers on the acts or omissions of the manufacturer, over whom they have no control. Even if this be true, it is no more burdensome than the liability of any non-manufacturing seller who, without knowing it, infringes a copyright. Such sellers genererally have no more control over their supplier's compliance with the Act than these appellees, yet are held liable. F. W. Woolworth Co. v. Contemporary Art, 344 U.S. 228, 229, 73 S.Ct. 222, 97 L.Ed. 276. Cf. 35 U.S.C.A. § 271(a). That records are not "copies," will not save the record bootlegger from the rule of the Woolworth case because § 101(e) clearly classifies the sale of unauthorized records as an infringement.

Also, the appellees urge that in their case it would be unjust to burden them with the impractical responsibility of ascertaining at their peril whether records they sell have been authorized by the Copyright Act or by the owners of all copyrighted music thereon, especially in view of the fact that other authorized recordings (since not "copies") do not carry a compulsory copyright notation. But this burden, we think, it not unduly onerous; most reputable manufacturers can easily demonstrate to their customers that their records are authorized. When dealing with unknown manufacturers the burden on a purchaser for resale to exercise caution is no greater than that required of the buyer of any merchandise which might infringe. Cf. F. W. Woolworth Co. v. Contemporary Art, supra. Since, as will be shown, the dollar liability for selling unauthorized records is usually less (because of the generally small value) than that imposed upon other non-manufacturing infringers, 17 U.S.C.A. § 101(b), we cannot say that the burden of diligence is so great as to overcome what we would otherwise conclude is the statutory scheme.

The appellees further urge that it would be anomalous to hold the seller liable, when the manufacturer, according to the doctrine of G. Ricordi & Co. v. Columbia Graphophone Co., 2 Cir., 263 F. 354, may at any time, even after judgment, file for a compulsory license and free the subject records from their infringing status. This argument misconceives the holding of the Ricordi case. As we understand that case, there were two sets...