Palladium Music, Inc. v. Eatsleepmusic, Inc.

• Citation: 398 F.3d 1193
• Decision Date: 14 February 2005
• Docket Number: No. 04-6097.,No. 04-6061.,04-6061.,04-6097.
• Parties: PALLADIUM MUSIC, INC., Plaintiff-Appellant-Cross-Appellee, v. EATSLEEPMUSIC, INC., and Tennessee Production Center, Inc., d/b/a Chartbuster Karaoke, Defendants-Appellees-Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

398 F.3d 1193

PALLADIUM MUSIC, INC., Plaintiff-Appellant-Cross-Appellee, v. EATSLEEPMUSIC, INC., and Tennessee Production Center, Inc., d/b/a Chartbuster Karaoke, Defendants-Appellees-Cross-Appellants.

No. 04-6061.

No. 04-6097.

United States Court of Appeals, Tenth Circuit.

February 14, 2005.

Philip O. Watts (Beverley Q. Watts, with him on the briefs), Watts & Watts, Oklahoma City, OK, for Plaintiff-Appellant-Cross-Appellee.

R. Bradford Brittian, Melinda L. Doss, Raymond E. Stephens, and Morgan L. Fitch IV, on the briefs, Pitts & Brittian, P.C., Knoxville, TN, for Defendants-Appellees-Cross-Appellants.

Before SEYMOUR, and HOLLOWAY, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff, Palladium Music, Inc., (Palladium) appeals the district court's grant of summary judgment in favor of defendants, EatSleepMusic Inc., (ESM) and Tennessee Production Center, Inc., d/b/a Chartbuster Karaoke (TPC) in a copyright infringement action brought pursuant to 28 U.S.C. § 1338(a). ESM and TPC cross-appeal the district court's denial of their motion for attorneys fees, requested under 17 U.S.C. § 505. This court has jurisdiction pursuant to 28 U.S.C. § 1291, and affirms.

I.

Since 1996, Palladium has been in the business of producing original master sound recordings of popular hits, commonly referred to as "karaoke music tracks." The tracks are designed to allow consumers of the music to sing along with their favorite songs. Palladium hires musicians and technicians to record music made popular by other artists. The recordings it produces sound similar to the original artist and are produced "in the style" of that artist. Palladium does not, however, incorporate any previously recorded sound components in its production and it does not attempt to change in any way the original musical compositions it uses. The final product is an original sound recording of a previously copyrighted musical composition. For example, Palladium's sound recording number PE2391 is entitled "... Baby One More Time" and is Palladium's re-recorded version of the song by the same title made popular by Britney Spears.

It is undisputed that from 1996-1999 Palladium produced its sound recordings without licensing from the copyright owners of the underlying musical works.¹ It sold its sound recordings to third-party manufacturers, like defendant TPC, who then combined the sound recordings with synchronized lyrics to produce private label karaoke products such as "Compact Disc plus Graphics" (CD+G), Digital Video Discs (DVD), Video Compact Discs (VCD) and Cassette Tapes. These products were then sold to consumers in the retail market.

In 1999, Palladium decided to launch its first retail product line by offering its sound recordings directly to consumers through digital downloads on the Internet. It also began the process of filing for copyrights for all of the recordings it had previously produced since 1996, along with copyrights for all of its new recordings. Palladium filed bulk registrations as "unpublished collections" to offset some of the expense of filing for several thousand works. It has continuously filed such registrations since receiving its first approved copyright certificate in 1999.

After launching its first retail line on the Internet in June 2000, Palladium asked all of its manufacturing customers like TPC to sign licensing contracts in an attempt to better define approved products and sales channels with regard to online digital markets. The proposed license would permit the continued incorporation of Palladium sound recordings into traditional karaoke products, but would restrict the sale and use of its sound recordings over the Internet. It would also prohibit any sub-licensing to third parties. Although TPC refused to sign the proposed licensing agreement, Palladium continued to sell its recordings to TPC.

In November 2002, Palladium discovered that defendant ESM was delivering Palladium's sound recordings through ESM's online digital delivery services. Employing embedded digital watermarks, Palladium was able to determine that the files ESM was distributing online were originally sold to TPC for its CD+G line of products. Following this discovery, Palladium brought this action against defendants ESM and TPC alleging copyright infringement for marketing Palladium's sound recordings online without a license.² Defendants moved for summary judgment claiming that Palladium's copyrights were invalid and unenforceable because Palladium produced the sound recordings at issue without the authority of the copyright owners of the underlying musical compositions. Following the district court's grant of defendants' motion for summary judgment and denial of their motion for attorney's fees, Palladium appeals and defendants cross appeal. Only two issues are presented on appeal: (1) whether Palladium owned valid copyrights for its sound recordings, enabling it to establish copyright infringement; and (2) whether the district court abused its discretion in denying an award of attorney's fees to the defendants, pursuant to 17 U.S.C. § 505.

II.

A. Palladium's Copyright Infringement Claim

This court reviews a grant of summary judgment de novo with an examination of the record and all reasonable inferences that might be drawn from it in the light most favorable to the non-moving party. Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1216 (10th Cir.2002). Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden of showing the absence of a genuine issue of material fact, and an entitlement to judgment as a matter of law is upon the movant, but a party opposing summary judgment "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio Corporation, 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Thus, "the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

To establish copyright infringement, a plaintiff must prove (1) ownership of a valid copyright and (2) unauthorized copying of constituent elements of the work that are original. See Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991); Jacobsen v. Deseret Book Co., 287 F.3d 936, 942 (10th Cir.2002). A plaintiff's presentation of a certificate of registration from the U.S. Copyright Office usually constitutes prima facie evidence of a valid copyright and of the facts stated in the certificate. 17 U.S.C. § 410(c). Upon presentation of such a certificate, the defendant bears the burden to overcome the presumption of validity. Autoskill Inc. v. National Educational Support Systems, Inc., 994 F.2d 1476, 1487 (10th Cir.1993). To rebut the presumption, however, a defendant sued for infringement "must simply offer some evidence or proof to dispute or deny the plaintiff's prima facie case of infringement." Entertainment Research Group, Inc. v. Genesis Creative Group, Inc., 122 F.3d 1211, 1217 (1997).

To prove ownership of a valid copyright, Palladium presented evidence of twenty certificates of registration obtained for the musical sound recordings it has produced.³ Each certificate identifies Palladium as the author and lists no preexisting works or materials. Nonetheless, defendants argued that Palladium did not own valid and enforceable copyrights in the sound recordings. To overcome the presumption of validity created by the certificates, defendants presented evidence that the sound recordings Palladium had registered are based upon preexisting musical compositions,⁴ and that Palladium had failed to obtain either compulsory or consensual licenses from the copyright owners of those preexisting musical compositions.

The district court agreed with defendants that Palladium's sound recordings are "derivative works" of the underlying musical compositions and that such derivative works are only protected by the Copyright Act if there is lawful use of the preexisting material. The district court found that Palladium had failed to obtain a license from the copyright owners of the underlying musical compositions as provided in 17 U.S.C. § 115, and thus was not lawfully using the preexisting material. As a result, the district court concluded Palladium's copyrights were therefore invalid and unenforceable.

Palladium contends that the district court erred by concluding its sound recordings are derivative works of the underlying musical compositions. Palladium argues it was not required to obtain the compulsory or consensual licenses for derivative works described in the Copyright Act because its sound recordings are original recordings, and not derivative of the underlying musical compositions.

The Copyright Act defines a derivative work as "a work based upon one or more preexisting works[.]" 17 U.S.C. § 101. Examples of a derivative work provided by the Act include, among others, a "translation," "musical arrangement," and most relevant for our purposes, a "sound recording." Id.; See also 2 M. Nimmer, Nimmer on Copyright § 2.10[A] n.8 ("A sound recording is a derivative work in relation to the musical work recorded therein, just as a motion picture is a derivative work in relation to the novel or screenplay upon which it is based."); Pamfiloff v. Giant Records, Inc., 794 F.Supp. 933, 938 (...