Court Reinstates Tenenbaum Damage Award

The First Circuit reinstated the jury’s $675,000 damage award to Sony BMG in its copyright infringement case against music-sharer Joel Tenenbaum, but the decision did not reach the merits of District Court Judge Nancy Gertner’s holding that the original award was so excessive as to violate Tenenbaum’s Constitutional right to due process. Instead the court ruled that before addressing the Constitutional issue Gertner should have used her power of remittur (“the procedural process by which a verdict of the jury is diminished by subtraction,” Black’s Law Dictionary, 5th Ed.*) to reduce the award, which would have given Sony the choice either to accept the reduced award or seek a new trial. Sony wins this round with a warning that the court or Congress may drop the other shoe.

*Old I know–it’s the edition I bought in law school.  The current edition is the 9th.

“We Can’t Let You Go”

A story in today’s Globe is a lock to appear in the coming academic year’s copyright law discussions. Titled “Pay to Play–Strict enforcement of copyrights jeopardizing live music in small venues,” the story addresses campaigns by Performance Rights Organizations (PROs)–ASCAP, BMI, and SESAC–to require coffeehouses, cafes, and other small dining venues to obtain performance licenses and pay licensing fees for live music on site.  Venue owners claim the PROs are “aggressive” and “brusque” and are over-reaching:  “Magret Gudmundsson, who until recently hosted a monthly acoustic open mike in her Middleborough cafe, Coffee Milano[, said] ‘I like having it here, but we’re not making any money from it and they wanted $332 a year.  The town really needs something like this. They ruined it.’’  ASCAP has a different view:  “‘They’re selling coffee for four dollars and they can’t afford a dollar a day for music? If they don’t think it’s worth it, that’s their choice. But I have to say that most people recognize that music is a value to their business. Every now and then we run into people that think, ‘I’m just a small little bar; they’re not going to sue me,’ and that’s a mistake. Frankly, once you’re on our radar we can’t let you go.’’’ Which reminds me, but not quite, of the Jackson Five song, Never Can Say Goodbye.*

In 1996 ASCAP’s sledgehammer tactics–or alleged sledgehammer tactics, if you prefer–created a public-relations nightmare, when it (in the Globe’s words) “attempt[ed] to collect licensing fees from the Girl Scouts for singing campfire songs.”  Coincidentally, Legal Blog Watch points to a post on Overlawyered that asks why the Fox network’s high-school musical show “Glee” has failed to address copyright law, since “some of the activities depicted could result in some hefty fines.”  Legal Blog Watch also mentions–and provides a link to a 1996 NYTimes article about–the ASCAP-Girl Scouts dustup.  If you have any interest in music performance licenses, or would just enjoy reading about a PRO falling splat! on its face, the Times article is worth a look.

*Or maybe I Can’t Quit You, Baby

Music Industry Panel Debate

Next Tuesday, March 3, from 7:00-9:00 PM in the School of Management auditorium I am moderating a panel discussion–titled “What Lies Ahead”–on the future of the music industry. Audience Q & A will follow the moderated discussion.   For more information see the event website or the poster below.  Register for the event by joining the Facebook group.


Today’s pirate is tomorrow’s CEO*

Speaking of piracy, last week David Pogue wrote in the New York Times about The Generational Divide in Copyright Morality. He related how during talks he walks audiences down a continuum of activities that clearly do not infringe copyright at the start and then go over a line where many or most listeners believe the activity does infringe copyright. He tried this talk with an audience of 500 college students. None believed that the activities at the most problematic end of his continuum to infringe copyright. Pogue continues:

Finally, with mock exasperation, I said, “O.K., let’s try one that’s a little less complicated: You want a movie or an album. You don’t want to pay for it. So you download it.”

There it was: the bald-faced, worst-case example, without any nuance or mitigating factors whatsoever.

“Who thinks that might be wrong?”

Two hands out of 500.

He states “to see this vivid demonstration of the generational divide, in person, blew me away.”

I’ve been teaching college students for a decade or so, coinciding with the rise of Napster and era of music-sharing. At the beginning I did not believe it would become a widespread phenomenon. Now, hundreds of conversations later, I don’t see how it will ever go away. I was blown away when a student in my first Internet law course in 2001 baldly stated “I don’t see why I would ever pay for music again for the rest of my life.” Since then our relationship with the music industry has changed irrevocably. There is no going back. The question is what comes next.

*or CFO or corporate lawyer or state prosecutor or professor of ethics

Music Without Shackles

If you can’t beat ’em, join ’em.

News reports out of Midem, the music industry’s annual trade fair in Cannes, show the major labels moving in a new direction: downloaded music in unrestricted, non-digital-rights-management-controlled formats. The industry is facing slower growth in online music sales and at least some industry insiders have “a new appreciation” for music sold online in unrestricted formats, according to this New York Times article. EMI group may be leading the pack, announcing last week that it will stream music for free on Chinese Web site RealNetworks CEO Rob Glaster predicted the shift to unrestricted formats “will happen between next year and fives years from now, but it is more likely to be in one to two years.”

Microsoft-Universal Royalty Agreement

Microsoft yesterday announced a licensing deal with Universal Music Group under which Microsoft will pay Universal royalties of about $1.00 per unit from sales of its new Zune portable music player, in addition to royalties on downloads from Zune’s online store. Universal said that it would, in turn, pay about half of the royalties it receives to its artists.

This licensing deal represents a shift in industry practices. Apple, for example, pays music companies a royalty on sales from its iTunes online music store but pays nothing on sales of iPods. The recording companies have been trying to get a piece of hardware sales because royalties from online music purchases are only a small piece of the Apple pie. Each iPod contains, on average, about 20 songs purchased from iTunes. At about 4 megabytes/song, that works out to about 80 megabytes — about 1/12th the capacity of the $79 one gigabyte iPod Shuffle or 1/1000th the capacity of the $349 top-end 80 gigabyte model. Apple sold 14 million iPods in the last quarter of 2005 alone, and over 42 million total since introducing the iPod.(1) That’s a lot of non-revenue-generating capacity for record companies to ignore. $1.00 per unit may not seem like a lot compared to the royalty potential in even 11/12ths of the capacity of the iPod Shuffle but it is $1.00 more than the record companies get now.

The Microsoft-Universal deal sets a benchmark for other music industry deals with Microsoft. If the Zune is successful these deals will put pressure on Apple to consider similar deals. Apple has had considerable leverage in its negotiations over music rights because of its 42 million + units sold, but every Zune purchase that results in an unsold iPod shifts the balance of power.

Jeff Leeds, Microsoft Strikes Deal for Music, The New York Times, 09-Nov-06; (1) Mike Musgrove, Big Hit of the Holidays: 14 Million iPods Sold, The Washington Post, 11-Jan-06.