Recordings Over the Internet

December 22, 2000


Michael I. Rudell

Record Companies Allowed to Distribute Recordings Over the Internet

(Originally published in the Entertainment Law column in the New York Law Journal, December 22, 2000.)

A federal judge has dismissed the claim of four well- known recording groups against several record labels and MP3.COM, Inc., alleging that recordings of their performances can not be distributed by means of the Internet without their permission.1 The decision adds to the line of cases that construe provisions in agreements made decades ago in light of new technologies.

During the 1950’s and 1960’s, The Chambers Brothers, The Coasters, the Original Drifters and The Main Ingredient made recordings which became commercially successful. Each had signed a recording agreement with its record company that contained language identical or equivalent to the following: “All recordings, phonograph record masters and reproductions made therefrom, together with the performances embodied therein, shall be entirely [the Record Company’s] property. [The Record Company] shall have the unrestricted right to manufacture, use, distribute and sell sound productions of the performances recorded hereunder made by any method now known, or hereafter to become known…”

Spurred by the actions of defendant MP3.COM, Inc. in converting their recordings to digital format, these groups brought an action under federal copyright law, federal trademark law and sections 50 and 51 of the New York Civil Rights Law seeking money damages and injunctive relief, as well as a declaration of their rights under these laws with respect to the use of such of their recordings as were made prior to February 1, 1996, the effective date of the Digital Performance Rights in Sound Recordings Act of 1995. Defendants moved to dismiss the action.

The decision notes that although the amended complaint asserts nine separate counts, most are based on the contention that the plaintiffs own property rights in the digital versions of the recordings. It states that most of plaintiffs’ arguments are premised on trivial differences in the wording of the various contracts that in no way alters their basic meaning. For example, one plaintiff argues that a clause giving the record company the exclusive right to manufacture and sell “records embodying the Recordings” refers only to vinyl recordings and not to digital recordings. This restrictive meaning, however, is refuted by the rest of the sentence on which plaintiff relies which gives the record company the right to manufacture such records “by any method now or hereafter known.”

Similarly, the contract gives the record company the right “to perform the records publicly and to permit public performances thereof by means of radio broadcast, television or any other method, medium or technology now or hereafter known.” It provides generally that the record company owns “all rights, title and interests in and to the Recordings and all reproductions derived therefrom and performances embodied therein, from the inception of recording thereof, free and clear from the claims of you or anybody claiming through you.” The Court concludes that reading these provisions together, no reasonable person could understand the contract to assign only the rights relating to vinyl records, with plaintiffs retaining the digital rights.

The contracts for the other plaintiffs define “records” more liberally. One states that a “record” is “any reproduction of a master recording in any form now known or later developed in which sounds with or without visual images are fixed by any method now known or later developed and from which sounds with or without visual images can be perceived, reproduced or otherwise communicated either directly or with the aid of a machine or device and includes the material object in which sounds with or without visual images are fixed, including but not limited to disc records, soundtracks, film, tape and tape cartridges.”

At oral argument, plaintiffs’ counsel argued that even if the contractual language is sufficient to encompass digital versions of the recordings, it is effectively narrowed by the definition of “recording” contained in some of the versions of the National Code of Fair Practice for Sound Recordings of the American Federation of Television and Radio Artists (the “AFTRA Code.” )

Putting aside the fact that the record companies do not appear as signatories on any of the versions supplied by plaintiffs, there is no language in any of them that may be held to narrow, or override, the plain language of the recording agreements. At most, they show that prior to 1965, the definition of “recordings” in the AFTRA Code arguably was limited to phonograph records, but the AFTRA Code merely sets forth the minimum required terms for the recording contracts they cover and are in no way intended to prohibit broader provisions or definitions.

Refuting the contention of plaintiffs that several cases contradict the interpretation favored by the Court, the decision first notes the dates of the cases (1920, 1916 and 1933) and then distinguishes them by indicating that they deal with construction of contracts that make no provision for the future reproduction of assigned works “by any method now known or hereafter to become known,” which language is present in the instant case. The decision then states that “Obviously in the absence of such language courts might be hard pressed to determine that reproduction of recordings by a new method such as a digital recording was covered by the assignment. But where, as in the instant case, such language is present, courts have had no difficulty in construing these contracts to extend the assignment to reproductions of the recordings by new methods or in new mediums.”

The Court concludes that plaintiffs have assigned to the record companies all of their rights in the digital reproductions of the recordings here in issue, and consequently dismisses most of the plaintiffs’ claims.

The decision then addresses plaintiffs’ claim that the record companies, by creating and marketing compact discs that allow customers to copy the works recorded therein without sacrificing quality, have breached contractual and fiduciary duties under state and common law to protect the copyrights of the artists’ works and, in turn, the royalty stream that flows to the artists from the legitimate sale of those works. Although indicating skepticism of an argument which, taken to its logical end, would lead to the destruction of most existing compact discs, the Court indicates that it need not reach this issue, for having disposed of all of the plaintiffs’ claims against the record companies that are grounded in federal law, it declines to exercise supplemental jurisdiction over remaining claims grounded in state law.

The decision next addresses plaintiffs’ claims that defendant MP3.COM, Inc., which had no contractual relationship with plaintiffs, violated the provisions in The Lanham Act against false description of goods and services and false designation of origin, because when the plaintiffs’ names are typed into the search engine on MP3.COM’s website a box appears with the following language: “Want to hear [artist’s name] online? Try MP3.COM, where you can beam your CD’s and listen to them anytime, anywhere.”

Plaintiffs argue that by including the artist’s name in this language, MP3.COM creates a false impression in the use of the database that the artist endorses the services or has some other relationship with it. However the Court finds that such language is simply a permissible “nominative use” which is a fair use of the artist’s name as a necessary means of accurately identifying the inventory in question offered by MP3.COM.

In a footnote, the Court addresses plaintiffs’ claims that the record companies lacked the right to use their names and likenesses in connection with digital reproductions. It concludes that the broad provisions in the record contracts that expressly authorized the use of plaintiffs’ names and likenesses in connection with the advertising, sale and exploitation of the recorded performances and the reproductions therefrom does not in any way limit the right of the record companies to use plaintiffs’ names and likenesses solely in connection with the sale of vinyl records.

This opinion joins the line of cases which stress the importance which courts attach to phrases similar to “by any method now known or hereafter to become known” in interpreting whether rights granted for use in a then existing technology also are granted with respect to new technologies.


1 Lester Chambers d/b/a The Chambers Brothers et al. v. Time Warner, Inc. et al. 00 Civ. 2839, United States District Court, Southern District of New York (December 5, 2000)