Leadsinger, Inc. v. Bmg Music Pub., 06-55102.

• Decision Date: 02 January 2008
• Docket Number: No. 06-55102.,06-55102.
• Citation: 512 F.3d 522
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: LEADSINGER, INC., Plaintiff-Appellant, v. BMG MUSIC PUBLISHING, a division of Bertelsmann, e/s/a BMG Songs, Inc., e/s/a Careers-BMG Music Publishing, Inc.; BMG Songs, Inc.; Careers-BMG Publishing, Inc.; Zomba Enterprises, Inc., e/s/a Zomba Songs, Inc.; Zomba Songs, Inc., Defendants-Appellees.

512 F.3d 522

LEADSINGER, INC., Plaintiff-Appellant, v. BMG MUSIC PUBLISHING, a division of Bertelsmann, e/s/a BMG Songs, Inc., e/s/a Careers-BMG Music Publishing, Inc.; BMG Songs, Inc.; Careers-BMG Publishing, Inc.; Zomba Enterprises, Inc., e/s/a Zomba Songs, Inc.; Zomba Songs, Inc., Defendants-Appellees.

No. 06-55102.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 18, 2007.

Filed January 2, 2008.

Anthony H. Handal, Brown Rudnick Berlack Israels LLP, New York, NY, for plaintiff-appellant.

Karen R. Thorland, Loeb & Loeb LLP, Los Angeles, CA, for defendants-appellees.

Appeal from the United States District Court for the Central District of California Virginia A. Phillips, District Judge, Presiding. D.C. No. CV-04-08099-VAP.

Before: DIARMUID F. O'SCANNLAIN and MILAN D. SMITH, JR., Circuit Judges, and MICHAEL W. MOSMAN,^* District Judge.

MILAN D. SMITH, JR., Circuit Judge:

This case requires us to determine how the Copyright Act, 17 U.S.C. §§ 101-1332, applies to karaoke devices that enable individuals to sing along to recordings of musical compositions, which is a matter of first impression in this circuit. In the district court, Plaintiff-Appellant Leadsinger, Inc., a karaoke device manufacturer, filed a complaint for declaratory judgment against music publishers, Defendants-Appellees BMG Music Publishing and Zomba Enterprises, Inc. ("BMG"). Leadsinger sought a declaration that it is entitled to print or display song lyrics in real time with song recordings as long as it obtains a compulsory mechanical license under 17 U.S.C. § 115, or that it is entitled to do so under the fair use doctrine, 17 U.S.C. § 107. The district court dismissed the complaint without leave to amend for failure to state a claim. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Karaoke devices necessarily involve copyrighted works because both musical compositions and their accompanying song lyrics are essential to their operation. BMG owns or administers copyrights in musical compositions and through its licensing agent, the Harry Fox Agency, has issued to Leadsinger compulsory mechanical licenses to copyrighted musical compositions under § 115 of the Copyright Act. In addition to the mechanical fee required to secure a compulsory license, BMG has demanded that Leadsinger and other karaoke companies pay a "lyric reprint" fee and a "synchronization fee." Leadsinger has refused to pay these additional fees and filed for declaratory judgment to resolve whether it has the right to visually display song lyrics in real time with song recordings, as well as print song lyrics, without holding anything more than the § 115 compulsory licenses it already possesses.

In its complaint, Leadsinger describes the karaoke device it manufactures as "an all-in-one microphone player" that has recorded songs imbedded in a microchip in the microphone. When the microphone is plugged into a television, the lyrics of the song appear on the television screen in real time as the song is playing, enabling the consumer to sing along with the lyrics. Though most karaoke companies put their recordings on cassettes, compact discs, or use a compact disc + graphic ("CD + G") or DVD format, these other karaoke devices, much like Leadsinger's, display lyrics visually when played in a device that is connected to a television.

Leadsinger's device sometimes displays licensed reproductions of still photographs as a background for the onscreen lyrics. And, on occasion, Leadsinger includes with the device a printed copy of the lyrics to the songs recorded on the microchip. According to Leadsinger's complaint, the purpose of both the printed and visually displayed song lyrics is to "facilitate the customer's ability to read the lyrics and/or sing along with the recorded music." Leadsinger further claims that both in and outside the karaoke context, the inclusion of printed lyrics assists buyers in understanding song lyrics and enables parents to control "the lyrical content that children are exposed to."

The district court concluded that a § 115 compulsory license does not grant Leadsinger the right to display visual images and lyrics in real time with music, and that the allegations in Leadsinger's complaint do not support its fair use claim. Leadsinger, Inc. v. BMG Music Publ'g, 429 F.Supp.2d 1190, 1193-97 (C.D.Cal.2005). The district court dismissed Leadsinger's complaint without leave to amend, concluding that amendment would be futile. Id. at 1197. This appeal followed.

II. STANDARD OF REVIEW AND JURISDICTION

We review a district court's grant of a motion to dismiss de novo. Silvers v. Sony Pictures Entm't, Inc., 402 F.3d 881, 883 (9th Cir.2005) (citation omitted). Dismissal for failure to state a claim is proper only "if it appears beyond doubt" that the non-moving party "can prove no set of facts which would entitle him to relief." Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir.2007) (internal quotations and citation omitted). In making this determination, we accept all allegations of fact as true and construe the complaint in the light most favorable to the non-moving party. Id. We have jurisdiction under 28 U.S.C. § 1291.

III. DISCUSSION

A. The Copyright Act

In deciding whether the district court properly dismissed Leadsinger's complaint, we are guided by the language of the Copyright Act. Section 102 of the Copyright Act extends copyright protection to, among other original works of authorship, literary works, musical works (including any accompanying words), and sound recordings. 17 U.S.C. § 102. Though 17 U.S.C. § 106 grants copyright owners the exclusive right to reproduce copyrighted works "in copies or phonorecords" and to "distribute copies or phonorecords of the copyrighted work to the public by sale," 17 U.S.C. § 115 limits copyright owners' exclusive rights with respect to phonorecords.

Phonorecords are defined as:

[M]aterial objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term "phonorecords" includes the material object in which the sounds are first fixed.

17 U.S.C. § 101 (emphasis added). Section 115 subjects phonorecords to a compulsory licensing scheme that authorizes any person who complies with its provisions to obtain a license to make and distribute phonorecords of a nondramatic musical work if: (1) the work has "been distributed to the public in the United States under the authority of the copyright owner"; and (2) the person's "primary purpose in making phonorecords is to distribute them to the public for private use." Id. § 115(a)(1). As the definition of phonorecords indicates, audiovisual works are not phonorecords. See id. § 101. Thus, § 115's compulsory licensing scheme does not apply to audiovisual works.

The Copyright Act defines audiovisual works as:

[W]orks that consist of a series of related images which are intrinsically intended to be shown by the use of machines, or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied.

Id.; see 1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 2.09[A] (2007)[hereinafter Nimmer on Copyright]. Though it is not explicit in the Copyright Act, courts have recognized a copyright holder's right to control the synchronization of musical compositions with the content of audiovisual works and have required parties to obtain synchronization licenses from copyright holders. See Maljack Prods., Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 884-85 (9th Cir. 1996) (recognizing the concept of synchronization rights); ABKCO Music, Inc. v. Stellar Records, Inc., 96 F.3d 60, 63 n. 4 (2d Cir.1996) ("A synchronization license is required if a copyrighted musical composition is to be used in `timed-relation' or synchronization with an audiovisual work.") (citation omitted); see also 6 Nimmer on Copyright § 30.02[F][3] ("A license is necessary if an existing musical composition is to be used in synchronization or `timed-relation' with an audiovisual work.").

The Copyright Act defines literary works as "works, other than audiovisual works, expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, phonorecords, film, tapes, disks, or cards, in which they are embodied." 17 U.S.C. § 101. Song lyrics are copyrightable as a literary work and, therefore, enjoy separate protection under the Copyright Act. See id. § 102(a)(1) (extending copyright protection to "literary works"); Zomba Enters., Inc. v. Panorama Records, Inc., 491 F.3d 574, 578 n. 1 (6th Cir.2007); ABKCO Music, 96 F.3d at 64; 1 Nimmer on Copyright § 2.05[B] (lyrics "alone are nevertheless copyrightable as a literary work").

B. Karaoke Devices As "Audiovisual Works"

The district court concluded that Leadsinger would not be entitled, under any set of facts, to a declaration that a § 115 compulsory license to make and distribute phonorecords authorizes it to display song lyrics in real time with song recordings. While our reasoning differs slightly from that of the district court, we agree with the district court's conclusion.

The district court reasoned that Leadsinger's device falls outside of the definition of phonorecord because the device contains more than sounds. Leadsinger, Inc. v. BMG Music Publ'g, 429 F.Supp.2d 1190, 1194-95 (C.D.Cal.2005); see 17 U.S.C. § 101 ("Phonorecords are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed. . . ."). While it is true that the microchip in Leadsinger's device stores visual images...