RSO Records, Inc. v. Peri

• Decision Date: 24 October 1984
• Docket Number: No. 79 Civ. 5098-CSH.,79 Civ. 5098-CSH.
• Citation: 596 F. Supp. 849
• Parties: RSO RECORDS, INC., MCA Records, Inc., Warner Bros. Records Inc., RCA Corporation, CBS Inc., Casablanca Records and Filmworks, Inc., Elektra/Asylum/Nonesuch Records, a division of Warner Communications, Inc., Plaintiffs, v. Joseph PERI, Carl Feuerstein, Sam Peri, Dynasty Graphics, Inc., Creative Disc, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

596 F. Supp. 849

RSO RECORDS, INC., MCA Records, Inc., Warner Bros. Records Inc., RCA Corporation, CBS Inc., Casablanca Records and Filmworks, Inc., Elektra/Asylum/Nonesuch Records, a division of Warner Communications, Inc., Plaintiffs, v. Joseph PERI, Carl Feuerstein, Sam Peri, Dynasty Graphics, Inc., Creative Disc, Inc., Defendants.

No. 79 Civ. 5098-CSH.

United States District Court, S.D. New York.

October 24, 1984.

COPYRIGHT MATERIAL OMITTED

Meyers, Tersigni, Kaufman, Debrot, Feldman & Gray, New York City, for plaintiffs; Anthony L. Tersigni, Marye L. Elmlinger, New York City, of counsel.

Alan J. Kraft, New York City, for defendants.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This is a civil action for willful copyright infringement. Plaintiffs are the producers, manufacturers, and distributors of some thirty-five copyrighted sound recordings which they claim have been infringed by the defendants.¹ The corporate defendants are Creative Disc, Inc. ("Creative"), which manufactured and packaged phonograph records, and Dynasty Graphics, Inc. ("Dynasty"), which prepared photographic materials used in the printing of labels and paper packaging for phonograph records and prerecorded cassette and eight-track tapes. Both are New York corporations. Creative has never answered the complaint. The individual defendants have all been involved in the manufacture of sound recordings. Defendants Joseph Peri ("Joe Peri") and Carl Feuerstein have admitted being officers and shareholders in Dynasty, and the evidence demonstrates that both were also in control of operations at Creative. Salvatore "Sam" Peri ("Sam Peri") worked in a cassette and eight-track tape duplicating facility called Delmonico Audio Sounds, Inc. ("Delmonico"), which was housed in the same building as Creative. Plaintiffs accuse defendants of copying plaintiffs' copyrighted sound recordings and the packaging of those recordings — in essence, of record counterfeiting. They have requested damages, attorney's fees, and destruction of various tools of reproduction seized from the corporate defendants' places of business. The action was tried to the Court sitting without a jury over the course of seven trial days. This opinion constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a), Fed.R.Civ.P.

I. Liability

Section 106 of the Copyrights Act of 1976, 17 U.S.C. § 106(1) and (3), grants copyright holders exclusive rights of reproduction and distribution of copyrighted works. Cf. Alfred Bell & Co. v. Catalda Fine Arts, Inc., 191 F.2d 99, 105 (2d Cir. 1951). Those who violate these exclusive rights are classed as "infringers" and may be subject to various statutory remedies pursuant to §§ 502-505 of the Act, including damages. 17 U.S.C. § 501. The severity of the damage award for which an infringer may be held liable depends in part on whether the infringement was "willful." 17 U.S.C. § 504(c)(2). Equally liable with direct infringers are "contributory" infringers, those who with knowledge of or reason to know of the infringing activity of another materially contribute to the infringement. Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir.1971); Encyclopedia Britannica Educational Corp. v. Crooks, 558 F.Supp. 1247, 1256 (W.D.N.Y. 1983). Whether a participant in an infringing activity is classed as a contributory infringer does not depend upon his or her "quantitative contribution" to the infringement. "Rather, resolution of the issue ... depends upon a determination of the function the alleged infringer plays in the total reproduction process." Gershwin Publishing, supra, 443 F.2d at 1162 n. 8, quoting Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 396-397, 88 S.Ct. 2084, 2087, 2088, 20 L.Ed.2d 1176 (1968). Cf. Sony Corp. of America v. Universal City Studios, Inc., ___ U.S. ___, 104 S.Ct. 774, 786, 78 L.Ed.2d 574 (1984).

Defendants are accused of two varieties of infringement. First, it is alleged that they produced "counterfeit" copies of plaintiffs' copyrighted sound recordings. Counterfeit records and tapes are exact copies of sound recordings made without the permission of the copyright holder. Like counterfeit money, counterfeit recordings ideally differ from non-counterfeit items only in their source. Generally, counterfeit² phonograph records are produced by copying legitimate (licensed) phonograph records which are purchased in the open market. The counterfeiter makes a tape recording of the legitimate record, and this tape is used to produce the "stampers"³ which the counterfeiter uses for producing new, unlicensed copies of the record. If the counterfeiter is careful, there need not be a significant difference in quality between the legitimate and counterfeit records. Counterfeit tapes are similarly produced from legitimate phonographic records. A legitimate record is recorded onto a "master" eight-track or cassette tape, and this master tape is then duplicated endlessly to produce counterfeit copies of the original recorded work.

In addition, defendants are accused of contributing to the production of counterfeit records and tapes through production of materials essential to the printing of packaging for counterfeits. A key ingredient of successful counterfeits is the inclusion of proper packaging materials — labels and jackets for records, labels and cardboard boxes for tapes. These packaging materials are known in the parlance as "graphics," for they generally include drawings or photographs which are designed to complement the recording. In order to escape detection, the counterfeit graphics must be printed to look exactly like those of the original. This is accomplished by photographing the labels and packaging of the originals and using these photographs as the basis for the printing of counterfeit graphics. A critical component of this process is the production of "color separations." A color separation is a series of four negative or positive photographs, each in a different color, of the same set of graphics. These four photographs can be used as the basis for reproducing four-color printed copies of the original graphics. Defendants are accused of producing color separations which reproduced the graphics for many of plaintiffs' copyrighted sound recordings.

Record and tape counterfeiting is quite plainly copyright infringement. Sound recordings are specifically accorded copyright protection by 17 U.S.C. § 102(a)(7). Counterfeiting consists of the exact duplication and subsequent sale of these sound recordings. It consequently violates the copyright holders' exclusive rights of both reproduction and distribution. 17 U.S.C. § 106(1), (3). Cf. Heilman v. Bell, 583 F.2d 373, 375 (7th Cir.1978), cert. denied, 440 U.S. 959, 99 S.Ct. 1499, 59 L.Ed.2d 771 (1979), and cases cited therein; RCA Records v. All-Fast Systems, Inc., 594 F.Supp. 335 (S.D.N.Y.1984).

The question of whether the making of color separations of copyrighted graphics constitutes infringement leaves more room for dispute. Graphic works, too, are expressly granted copyright protection, 17 U.S.C. § 102(a)(5), but color separations are not exact reproductions of copyrighted graphics. While they do reproduce the copyrighted image, they split its color scheme into four parts and frequently portray the image in that distorted manner familiar from photographic negatives. The issue rarely requires resolution, however, because color separations have little use except as one step toward the printing of exact copies of the copyrighted graphics. Because the step is an essential one, their makers are ordinarily contributory infringers even if not technically infringers, and they are liable as though they had infringed. Further, even if the specific graphics copied are not copyrighted, thus making their reproduction infringement, reproduction of the graphics is essential to successful counterfeiting of a copyrighted sound recording. Because the making of an accurate color separation is a crucial step in the process of record counterfeiting, those making the color separation may be held liable for infringement of the recording itself.

A. The Evidence

Dynasty and Creative had production facilities in Mount Vernon, New York. As its name implies, Dynasty specialized in producing artwork for record jackets and tape boxes. Its tools were primarily cameras and photographic film. (Transcript 90-91; Plaintiffs' Exhibit 2). Creative operated a manufacturing plant which stamped out phonographic records and packaged them with labels, sleeves, jackets, and "shrink wrap," the familiar clear plastic sheathing in which most records are sold. (Tr. 89). Delmonico, a non-party which employed Sam Peri, was located in the same building as Creative and performed similar manufacturing processes in producing pre-recorded tapes. As noted, Joe Peri and Feuerstein admit to being officers and shareholders of Dynasty. (Answer, ¶¶ 5, 6). The evidence is clear, however, that they also played major roles in Creative. Joe Peri maintained an office at Creative (Tr. 89), Feuerstein admitted to being production manager at Creative (P. Ex. 10, at 23-24), and defendants' witnesses, legitimate customers of Creative and Dynasty, repeatedly referred to both defendants as the people responsible for running the Creative operation. In addition, Joe Peri was an expert at pre-recorded tape reproduction and spoke of Delmonico's operations knowledgeably and in a proprietary fashion. (P. Ex. 16 and 17, generally; P. Ex. 44, at 43). He, perhaps Feuerstein, and others owned Delmonico. (P. Ex. 44, at 32; P. Ex. 10, at 24). Joe Peri and Feuerstein ran the company's operations. (P. Ex. 44, at 32). The general impression conveyed by the evidence is that Creative, Dynasty, and Delmonico were all part of an integrated sound recording reproduction business run by Joe Peri. The evidence indicates that Feuerstein played a particularly...