Michael L. Agee, D/B/A L & H Records v. Paramount Communications, Inc.
Docket: 893
Court: Court of Appeals for the Second Circuit; June 26, 1995; Federal Appellate Court
The case involves Michael L. Agee, the owner of L. H Records, who appeals a judgment from the Southern District of New York that granted summary judgment against him in a copyright infringement claim against Paramount Communications, Inc. and its affiliates. The central issue is whether Paramount's incorporation of Agee's copyrighted sound recordings into the soundtrack of a television production infringes his exclusive right of reproduction under the Copyright Act of 1976. The court determined that Paramount did infringe Agee's copyright by copying his sound recordings for a segment of the program "Hard Copy," but found that the television stations' subsequent copies of the program were protected under the "ephemeral recording" exemption of the statute. The court upheld the dismissal of Agee's Lanham Act and unfair competition claims. Consequently, the court affirmed in part, reversed in part, and remanded the case for further proceedings. Agee holds copyrights to two recordings but not to the underlying musical compositions, while Paramount is responsible for producing and transmitting the "Hard Copy" television program.
Paramount recorded the "Caught on Tape" feature on February 15, 1993, for integration into the Hard Copy program and transmitted it to TV stations, including Agee's copyrighted work in both the program and a promotional commercial without obtaining a license or crediting Agee. On September 10, 1993, Agee filed a copyright infringement lawsuit against Paramount and the TV stations for unauthorized copying, creating a derivative work, and public distribution of his recording, also alleging unfair competition and violations of the Lanham Act. Agee sought a temporary restraining order on November 19, 1993, which was initially granted but later dissolved after the defense stated the program would not be rebroadcast. Before discovery, the defendants moved for dismissal and summary judgment.
The District Court dismissed Agee's state law and Lanham Act claims, granting summary judgment on the copyright infringement claim, ruling that the defendants did not infringe Agee's rights under the Copyright Act. It concluded that the synchronization right, while part of a music publisher's reproduction rights, did not extend to the sound recording copyright owner's reproduction rights, which only prohibited unauthorized sale or public distribution of phonorecords, not applicable in this case. The court found no evidence of remixing or transformation of Agee's recording to support a claim for derivative works. Furthermore, the court ruled that the transmission of the program to TV stations and their subsequent broadcast constituted public performances rather than distributions, as sound recording copyright owners lack exclusive performance rights. Lastly, the court noted that the TV stations' copies were protected under the ephemeral recording exemption, allowing them to make a single copy for transmission under certain conditions.
The District Court determined that Agee's claims under the Lanham Act and unfair competition law were insufficient. Agee's complaint did not assert that Paramount misrepresented the music's source or claimed copyright over his sound recordings. His Lanham Act claim was based on the same facts as his failed copyright claim—specifically, Paramount's alleged unauthorized use of his sound recording in a television program without compensation or credit. For the unfair competition claim, the court noted Agee did not provide evidence that the defendants' use impacted his record sales or licensing revenues.
On appeal, the court addressed Paramount's use of Agee's sound recording in the "Hard Copy" program. It concluded that this use infringed Agee's exclusive right to reproduce his work, despite the program being broadcast only once and not sold or rented. However, the court found no violation of Agee's distribution rights. Although there might have been an infringement of Agee's right to prepare derivative works, this issue was deemed unnecessary to resolve given the protection offered by the ephemeral recording exemption for the TV stations' actions.
The statutory background includes Section 106 of the Copyright Act, which grants copyright owners exclusive rights including reproduction, preparation of derivative works, and distribution. However, the rights associated with sound recordings are more limited, as they exclude a performance right and restrict reproduction to duplicating the actual sounds of the recording. The derivative work right is confined to alterations of the sounds fixed in the recording.
Section 114 of the Copyright Act provides an exemption for broadcasters regarding "ephemeral recordings," allowing them to make one copy of a transmission program that includes a performance or display of a work without it being considered infringement. To qualify for this exemption, a transmitting organization must meet three criteria: (1) the copy is exclusively for use by the transmitting organization and cannot be reproduced further, (2) it is used solely for the organization’s transmissions within its local service area or for archival purposes, and (3) the copy must be destroyed within six months of the program’s initial public transmission unless it is exclusively for archival purposes.
The primary aim of Congress in granting sound recording copyright owners exclusive reproduction rights was to prevent unauthorized duplication that was financially harming the recording industry. Legislative history indicates that this was intended to combat "record pirates." Additionally, the statutory language regarding the reproduction right encompasses a synchronization right, necessitating authorization for reproducing sound recordings in audiovisual works. Legislative history confirms that unauthorized duplication in this context constitutes infringement. However, while the sound recording legislation primarily targets piracy, it also applies to certain reproductions that do not involve public distribution. The District Court viewed synchronization as an extension of the reproduction right, but there is disagreement on this interpretation, asserting that synchronization is a direct exercise of reproduction rights granted under section 114(b).
The Copyright Act allows specific entities to reproduce sound recordings in soundtracks, provided the copies are not distributed to the public. Section 114(b) grants noncommercial broadcasting entities the right to use sound recordings in educational broadcasts, with the stipulation that these recordings are not commercially distributed. This implies that commercial entities, such as Paramount, cannot reproduce sound recordings in audiovisual works, regardless of synchronization.
Paramount acknowledges that using Agee's sound recordings constituted reproduction but argues that this was incidental to a single, tape-delayed television performance, akin to a live broadcast. It claims that it could have legally synchronized Agee's recording with a live performance without infringing on copyright.
In the Sony case, the Supreme Court determined that consumers taping television shows for later viewing did not infringe on copyrights, noting that such recordings were fair use since they were made from free broadcasts and did not affect the market for the original works. The Court highlighted that time-shifting allowed viewers to access previously aired content without harm to market value.
However, in this case, it is unnecessary to decide if all commercial copying for time-shifting infringes copyright, as Paramount's reproduction of Agee's recording served more than just that purpose. Paramount benefited commercially from the reproduction by enhancing the performance fidelity and preserving the program for future distribution.
Paramount's claim of merely performing a time-shift is contradicted by its additional uses of the taped synchronization, including promotional material and commercials that incorporated Agee’s work. While Paramount did not distribute Hard Copy copies publicly, its various uses reveal the additional value it gained from reproducing Agee's sound recording beyond mere time-shifting.
Paramount acquired Agee's sound recording but failed to secure a license for its reproduction in the program "Hard Copy," resulting in an infringement of Agee's reproduction rights upon incorporating portions of his recording into the show's soundtrack. Agee further alleges that Paramount infringed his exclusive right to create derivative works from his recording, as outlined in the Copyright Act, which defines a "derivative work" as one based on preexisting works. For sound recordings, the Act mandates that alterations must rearrange, remix, or change the recording's sequence or quality to qualify as a derivative work. The court noted that simply synchronizing Agee's sound recording with visuals does not constitute a transformation under this definition. Although Agee claimed that Paramount edited his recordings by adding sound effects and narration, the District Court found that these additions were intended solely to enhance the visual elements rather than alter the original recording. The court concluded that even if some alterations occurred, determining whether a derivative work was created was unnecessary for establishing infringement, given Paramount's unauthorized reproduction of Agee's recording. Additionally, Agee's assertion that Paramount violated his distribution rights by transmitting "Hard Copy" via satellite was deemed without merit.
The Copyright Act does not define "distribution," but courts have equated it with the exclusive right of "publication" outlined in the 1909 Act. The 1976 Act specifies that "publication" involves distributing copies or phonorecords to the public through various means, including sale, rental, or lending, and includes offering copies for further distribution or public display. In this context, Paramount's transmission of Agee's recording to TV stations was not considered a "distribution." Courts have previously ruled that transmissions from cable networks to local companies qualify as "public performances" under the Copyright Act. This interpretation protects copyright owners by preventing producers from evading liability through local stations. Notably, Congress did not foresee the rise of organizations like SMC that indirectly broadcast their programs. Paramount did not attempt to evade liability since it had the rights to perform Agee's work.
Furthermore, simply transmitting a sound recording over the airwaves does not amount to "distribution," which typically requires a physical transfer of a material object containing the copyrighted work. Non-material dissemination, such as TV performances, does not constitute publication, regardless of audience size. While not all distributions must be physical, the distinction between material and non-material forms, alongside Paramount's broadcasting practices, indicates that its actions constituted a performance rather than a distribution of Agee's recording.
The District Court determined that the ephemeral recording exemption under 17 U.S.C. Sec. 112(a) applies to TV stations, allowing them to make a single copy of a copyrighted work for broadcast under specific conditions. Paramount, identified as a program supplier, conceded it does not qualify as a "transmitting organization" and is therefore ineligible for this exemption. The TV stations met the preconditions for the exemption by creating a single copy of Agee's sound recording for transmission and agreeing to destroy or return the tape to Paramount.
Agee argued that the TV stations could not invoke the exemption because they copied an unauthorized reproduction of his work. He claimed that the TV stations needed his permission to broadcast the program, as it was "tainted" by Paramount's unauthorized use. However, this argument was rejected because Agee lacks exclusive performance rights under 17 U.S.C. Sec. 114(a), allowing the TV stations to broadcast without his consent. The statute permits the broadcasting of Agee's sound recording, and even if Paramount prepared a derivative work, the TV stations’ role as broadcasters does not change their rights under the exemption.
Moreover, the TV stations could also perform a derivative work created by Paramount using Agee's recording, as the statute does not restrict the performance of derivative works. Instead, it reserves the exclusive right to prepare derivative works for sound recording copyright owners. Since the TV stations could broadcast the altered sound recording within the limitations specified by section 114(a), they are protected by the ephemeral recording exemption.
Agee's claims under the Lanham Act and state law for unfair competition lack sufficient grounds. To succeed under the Lanham Act, he must demonstrate a false representation of the source of his sound recording and consumer confusion regarding that source. Agee contends that Paramount misrepresented the source by omitting his name in the credits of Hard Copy while using his recording. However, he fails to provide evidence that the appellees engaged in deceptive practices or that any consumer confusion occurred as a result. The court noted that Agee's claim relied solely on unauthorized use of his recording without compensation or credit, which does not meet the criteria for a Lanham Act claim. Additionally, Agee's unfair competition claim is unsupported by facts indicating any economic harm or diminished goodwill resulting from the association of his recording with the program. Consequently, the court affirmed the dismissal of Agee's Lanham Act and state law claims, while reversing the summary judgment in favor of Paramount regarding copyright infringement, directing a summary judgment for Agee on that issue, and remanding for relief determination.
