Tempest Publ'g, Inc. v. Records

• Decision Date: 18 March 2015
• Docket Number: CIVIL ACTION NO. H-12-736
• Parties: TEMPEST PUBLISHING, INC., Plaintiff, v. HACIENDA RECORDS AND RECORDING STUDIO, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

TEMPEST PUBLISHING, INC., Plaintiff, v. HACIENDA RECORDS AND RECORDING STUDIO, INC., et al., Defendants.

CIVIL ACTION NO. H-12-736

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 18, 2015

MEMORANDUM AND OPINION SETTING OUT PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. Introduction: The Issues

Tempest Publishing, Inc. sued Hacienda Records and Recording Studio, Inc., Hacienda Records, L.P., and Latin American Entertainment, LLC (together, "Hacienda"), alleging infringement of the copyrights to four songs and seeking damages and attorneys' fees under the federal Copyright Act, 17 U.S.C. § 101 et seq. The court granted Hacienda's motion for partial summary judgment, dismissing Tempest's claims relating to two of the songs, Buscando un Cariño and Morenita de Ojos Negros. (Docket Entry No. 104.)

The court held a bench trial on the remaining two songs, Mi Amor es Tuyo and Somos Dos Gatos. The parties admitted exhibits and presented argument. At the close of Tempest's case, the court granted a directed verdict in Hacienda's favor on one of the songs, Mi Amor es Tuyo, leaving Tempest's copyright-infringement claim as to Somos Dos Gatos and both parties' requests for attorneys' fees.

Based on the pleadings; the briefs and exhibits; the testimony, the arguments of counsel, and exhibits presented at the three-day bench trial; the posthearing briefs and submissions; and the applicable law, the court enters the following findings of facts and conclusions of law:¹

• Hacienda infringed Tempest's copyright for the song Somos Dos Gatos;

• the infringement was not innocent;

• the infringement was willful;

• Hacienda must pay Tempest $5,000 as damages; and

• no party recovers its attorneys' fees.

The reasons for these findings and conclusions are explained in detail in this Memorandum and Opinion.

II. The Applicable Law

A. Copyright Infringement

"To maintain a copyright infringement claim, the owner of the copyright must have registered it." Geoscan, Inc. of Tex. v. Geotrace Techs., Inc., 226 F.3d 387, 392 (5th Cir. 2000) (citing 17 U.S.C. § 411(a)). "An action for copyright infringement requires the plaintiff to show 'ownership' of the material and 'copying' of the material by the defendant." Id. at 392-93 (citing Lakedreams v. Taylor, 932 F.2d 1103, 1107 (5th Cir. 1991)); see also Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 499 (5th Cir. 2012) ("To prove copyright infringement a party must show that '(1) he owns a valid copyright and (2) the defendant copied constituent elements of the plaintiff's work that are original.'" (quoting Positive Black Talk Inc. v. Cash Money Records, Inc., 394 F.3d357, 367 (5th Cir. 2004), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010))). To establish the "ownership" element, the plaintiff must show that the material is original and can be copyrighted, and that the plaintiff has complied with all statutory formalities. Id. The "copying" element is met by proving "(1) factual copying and (2) substantial similarity." Id. at 393 (quoting Lakedreams, 932 F.2d at 1107).

"'A copyright owner may grant a license in his work, thereby waiving his right to sue the licensee for copyright infringement.'" Recursion Software, Inc. v. Interactive Intelligence, Inc., 425 F. Supp. 2d 756, 771 (N.D. Tex. 2006) (quoting Pavlica v. Behr, 397 F. Supp. 2d 519, 526 (S.D.N.Y. 2005)). "[T]he existence of a license authorizing the use of copyrighted material is an affirmative defense to an allegation of infringement." Carson v. Dynegy, Inc., 344 F.3d 446, 451 n. 5 (5th Cir. 2003). The defendant has the burden of proving that a license exists. Id.; see also Ramirez v. Nichols, No. 10-20806, 496 Fed. App'x 383, 2012 WL 5377683, at *1 (5th Cir. 2012) (unpublished) ("Defendants maintain they had either an exclusive or implied license to exploit Ramirez' and Guerrero's works. The burden is on Defendants to prove having a license because it is an affirmative defense to a copyright-infringement claim."); Lulirama Ltd. v. Axcess Broad. Servs., Inc., 128 F.3d 872, 884 (5th Cir. 1997) (citing CMS Software Design Sys., Inc. v. Info Designs, Inc., 785 F.2d 1246, 1248 (5th Cir. 1986)).

Any person may obtain a compulsory license to use a musical composition even if the music publisher cannot be located or refuses to grant a license. 17 U.S.C. § 115(b)(1). To obtain a compulsory license, the distributor must, before or within 30 days of making a recording, and before distributing any copies, serve notice on the copyright owner declaring the distributor's intent to seek a compulsory license. If the copyright owner cannot be located, the distributor may file the noticeof intention with the copyright office. Id. The distributor may use the song if it files the required notice, credits the copyright owner, and pays the owner royalties at a rate set by statute. 17 U.S.C. § 115(c).

B. The Transfer of an Ownership Interest in Intellectual Property

A transfer of ownership interest in intellectual property generally "is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204(a). "Section 204(a)'s requirement, while sometimes called the copyright statute of frauds, is in fact different from a statute of frauds." Lyrick Studios, Inc. v. Big Idea Productions, Inc., 420 F.3d 388, 391 (5th Cir. 2005) (citing Konigsberg Intern. Inc. v. Rice, 16 F.3d 355, 357 (9th Cir. 1994)). "Rather than serving an evidentiary function and making otherwise valid agreements unenforceable, under § 204(a) 'a transfer of copyright is simply 'not valid' without a writing.'" Id. (quoting Konisberg, 16 F.3d at 357). "If the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn't have to be the Magna Charta; a one-line pro forma statement will do." Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990). State contract law governs the construction of copyright assignments, licenses, and other writings effecting transfers of intellectual property. See P.C. Films Corp. v. Turner Entm't Co., 954 F. Supp. 711, 714 n. 6 (S.D.N.Y. 2007); Key Maps, Inc. v. Pruitt, 470 F. Supp. 33, 38 (S.D. Tex. 1978) ("Principles of contract law are generally applicable in the construction of copyright assignments, licenses and other transfers of rights.").

In Texas, a valid contract requires: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; (5) executionand delivery of the contract with the intent that it be mutual and binding; and (6) consideration. Rice v. Metro. Life Ins. Co., 324 S.W.3d 660, 670 (Tex. App. — Ft. Worth 2010, no pet.).

In interpreting a contract, the court's primary concern "is to ascertain the true intentions of the parties as expressed in the instrument." J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333-34 (Tex. 2011). A court considers a contract as a whole. See id. ("[W]e must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless."). "The language in an agreement is to be given its plain grammatical meaning unless to do so would defeat the parties' intent." DeWitt Cnty. Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 101 (Tex. 1999). A contract is ambiguous only if, considered as a whole, it is "reasonably susceptible to more than one meaning." Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). A court will not find a contract ambiguous if it may properly be given a certain legal meaning or interpretation. J.M. Davidson, 128 S.W.3d at 229. "Courts interpreting unambiguous contracts are confined to the four corners of the document, and cannot look to extrinsic evidence to create an ambiguity." Tex. v. Am. Tobacco Co., 463 F.3d 399, 407 (5th Cir. 2006) (citing Sun Oil Co. v. Madeley, 626 S.W.2d 726, 732-33 (Tex. 1981); Gen. Accident Ins. Co. v. Unity/Waterford-Fair Oaks, Ltd., 288 F.3d 651, 657 (5th Cir. 2002)). "The objective intent as expressed in the agreement controls the construction of an unambiguous contract, not a party's after-the-fact conduct." In re Dillard Dep't Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006).

III. Findings of Fact

A. The Parties

Hacienda Records LP is an independent music-recording studio based in Corpus Christi, Texas. Latin American Entertainment, LLC, is its general partner. In 1999, Hacienda Records acquired the assets of Hacienda Records & Recording Studio, another independent music-recording studio based in Corpus Christi. Hacienda has recorded and released over 1,000 Tejano music albums. (Garcia Testimony, Oct. 22 Tr., Vol. 2, p. 15). Hacienda and its executive vice-president in charge of licensing, Rick Garcia, are experienced in the music industry and familiar with the process for obtaining a license to use a copyrighted song. (Id. at pp. 15-19). Hacienda has released over 1,000 Tejano albums and Garcia has filed copyright registrations for songs he composed. (Id. at pp. 15-16).

Tempest Publishing Inc., a Texas corporation, is a music publisher doing business as Musica Adelena and Musica Arroz.

B. Somos Dos Gatos

Joe Martinez and Lee Quirino composed Dos Gatos, and in March 1992, signed a Songwriters Contract granting the exclusive rights to Dos Gatos to Tessitura Music Trust. (Tempest Ex. 10; Hacienda Ex. 22). The first paragraph of the Songwriters Contract stated: "The Writer hereby sells, assigns, transfers and delivers to the Publisher, its successors and assigns, all his rights, title and interest in and to certain heretofore unpublished original musical works, as annexed hereto, written...