Category Archives: Entertainment Industry News

TIVO v. ECHOSTAR

Editors Note:  The following is a research paper from one of the students in my Entertainment Law & Licensing class I teach at Belmont University’s Curb School of Music.

By G. GRANT GUINANE

tivo_logo_man-744939-790582 On July 30, 1998 Tivo Inc. registered a patent for their multimedia time warping system that allows a user to store selected television programs while simultaneously watching or reviewing another program. They patented their process for making this then phenomenon so as to protect their discovery and to become the exclusive financial beneficiaries of this technology. In 1999 it was announced by Dish Network that along with their affiliate Echostar would soon have the time shifting abilities that Tivo was spearheading. This was the warning sign of what would end up being years of court battles between Tivo and the Echostar-Dish Network team.

Tivo filed suit for patent infringement in January of 2004, once they realized that the patent they obtained was being violated, to seek financial retribution and an injunction against Echostar to halt the production of infringing DVR systems that they were producing. Tivo alleged that Echostar was infringing two software claims, “The process for the simultaneous storage and play back of multimedia data, and the apparatus as well” (Tivo v. Echostar, 2). In addition to the software claims, Tivo asserted that Echostar was violating their hardware patent as well.

The suit was first filed with the United States District Court for the Eastern District of Texas. The court found Echostar to be in violation of both claims by Tivo. The judge issued a permanent injunction against EchoStar ordering them:

(1) to stop making, using, offering to sell, and selling the receivers that had been found infringing by the jury and (2) to disable the DVR functionality in existing receivers, with the exception of select receivers that had already been placed with its subscribers”

(Tivo v. Echostar, 3). In addition, the court awarded Tivo $74 million in lost profits.

echostar-to-dish At that time, Echostar did not appeal the permanent injunction imposed by the court, but it also did not discontinue providing the DVR service. In response, Tivo requested that the district court hold Echostar in contempt. Echostar claimed that it redesigned its product so that it was not infringing any longer.

The district court evaluated EchoStar’s modifications to the infringing DVR software and concluded that the modifications were also infringing. The court concluded

Even if EchoStar had achieved a non-infringing design-around, EchoStar would still be in contempt because it had failed to comply with the disablement provision in the district court’s order requiring it to disable DVR technology completely from the receivers

(Tivo v. Echostar, 4-5).

Dish and EchoStar had argued that it was entitled to a trial to determine if its altered products infringe the patent. The company said it “paid 15 engineers to spend 8,000 hours on the redesign, which took a year” (Decker and McQuillen). Tivo argued against this point saying that the changes made to their DVR players do not make a “colorable” difference.

The court agreed with Tivo stating,

We have made it clear that a lack of intent alone cannot save an infringer from a finding of contempt”

( Tivo v. Echostar, 12).

Echostar claimed that the injunction was unclear, but Tivo claimed the opposite and the record of the court reflected the clarity of the injunction. Also important to note is that the DVR’s time warping software was the only aspect of the boxes required to be disabled; not all of the actual units and hardware, the DVR functionality is just one of many functions that the Echostar Broadcom and 50X receivers performed. Since Echostar never directly appealed the injunction it was judged as a lost cause for them and the court fined them nearly $90 million and amended the previous injunction requiring EchoStar to seek the court’s approval before implementing future DVR software.

The final decision by the Federal Court of Appeals was to uphold the decision made by the district court in a divided 2-1 decision. TiVo said it will be entitled to a total of about $300 million in damages and contempt sanctions through July 1, 2009, and it will seek additional cash for continued infringement after that date. That’s in addition to $100 million Dish paid TiVo after the original appeals court ruling (Decker and McQuillen). While it is a victory for Tivo, they only got a portion of the $1 billion they were seeking.

This case made a huge impact on the DVR industry as well as Tivo’s stock, which skyrocketed following the May 4th decision by the federal court. Tony Wible, an analyst with Janney Montgomery Scott LLC in Philadelphia, wrote in a note today. “The courts have ruled in TiVo’s favor numerous times over the past five years, which should help the company in the company’s litigation against AT&T, Verizon and Microsoft” (Decker and McQuillen).

It is a good that courts are protecting intellectual properties such as Tivo’s patent in this case, so as to discourage the stealing of ideas and encourage the promotion of innovative thinking. The court’s decision to find EchoStar in violation was a good decision, as Tivo should be the sole beneficiaries of their intellectual property, i.e., the patent.

To play devil’s advocate, however, such decision does stifle competition in the industry, namely, EchoStar was the only true competing DVR provider with any clout.  Generally speaking, it is not good to promote a monopolist environment in any industry. This is essentially the state of the DVR industry until Tivo’s patent expires in 2018.

This decision confirms the principal that the twenty years of exclusive ownership granted by patent law is a positive thing—without that right someone could easily profit off of another’s innovation and inventive nature.  It is reassuring to see that judges like those in this case are still interested in the protection of important intellectual discoveries such as Tivo’s time warping technology. It also also reinforces the fact that courts will enforce their injunctions against parties and do not take it lightly when a defendant tries to skirt the injunction or slyly work around it. EchoStar’s was penalized an extra $90 million because they tried to do things their own way and work around the court.

These proceedings took over five years, but Tivo still has many legal proceedings ahead of them, probably enough to last the entirety of their patent ownership and beyond! Nonetheless, the EchoStar decision is the most positive sign that Tivo could have received in the midst of the myriad of legal battles they are still facing. This case proves that if one want to protect valuable ideas and methods they had better be ready to fight tooth and nail in the court system for years on end—luckily the reward can be great.

Works Cited

Tivo v. Echostar. No. 2009-1374. U.S. Court of Appeals for the Federal Circuit. 4 March 2010.

Decker, Susan, and William McQuillen. "TiVo Wins Court Ruling Against Dish, EchoStar (Update4)." Businessweek.com. Ed. David E. Rovella. Bloomberg, 4 Mar. 2010. Web. 11 Apr. 2010.

gg Grant Guinane is a recent graduate of Belmont University.  He obtained a B.A. in Entertainment Industry Studies with a focus in writing and music, as well as a minor in marketing.  Originally from St. Joseph, Michigan, Grant came to Nashville to pursue music.  He currently lives in Detroit, Michigan.

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The Limewire Ruling: New King of the Hill for Illegal Downloading Decisions

The U. S. District Court for the Southern District of New York ruled against LimeWire and its parent company, Lime Group, finding them liable for inducement of copyright infringement based on the use of their service by subscribers. 

U.S. District Judge Kimba Wood issued the 59-page decision Wednesday, siding with the 13 record companies that sued Lime Wire LLC and founder and Chairman Mark Gorton through the RIAA claiming copyright infringement and unfair competition.lime_220x147

In finding the company liable, Wood opined that LimeWire had optimized its application to "ensure that users can download digital recordings, the majority of which are protected by copyright," and that the company actively "assists users in committing infringement."  Wood also found that the defendants knew their technology was being used to download copyrighted tunes and took no "meaningful steps" to prevent the infringement. In addition, Lime Wire marketed its software to people "predisposed to committing infringement" and assisted those people, the judge ruled.

Major labels, as represented by the RIAA, were predictably thrilled with the outcome.  "This definitive ruling is an extraordinary victory for the entire creative community.  The court made clear that LimeWire was liable for inducing widespread copyright theft," RIAA chairman and CEO Mitch Bainwol relayed.

Lime Wire Chief Executive George Searle issued a statement saying the company "strongly opposed the court’s recent decision."  The statement continued:

"Lime Wire remains committed to developing innovative products and services for the end-user and to working with the entire music industry, including the major labels, to achieve this mission," Searle said.

Searle did not say whether Limewire would appeal the ruling.

The Recording Industry Association of America proclaimed the decision was "an important milestone" in the battle against online copyright infringement, because Gorton was found personally liable, in addition to the company of which mitch-bainwol-riaa he was the chairman.  Personal liability against a corporate director is rare.

"The court has sent a clear signal to those who think they can devise and profit from a piracy scheme that will escape accountability," Mitch Bainwol, chairman and chief executive of the RIAA, said in a statement.

LimeWire, launched in 2000, is one of the largest remaining commercial peer-to-peer services left on the Web. The company claims to have more than 50 million monthly users.  The company has managed to defend itself against major label legal action for years.  

In issuing her opinion, Wood relied heavily on the 2005 Grokster ruling, in which the Supreme Court said that a file-sharing service was liable when customers were induced to use it for swapping songs and movies illegally.  The test established by the Supreme Court in MGM v. Grokster for provider liability is whether the company actively induced users to commit infringing activities.  While LimeWire argued that it did not, Judge Wood noted that the company actively  “markets LimeWire to users predisposed to committing infringement.”

The record companies that sued Lime Wire included Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers.

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HR 848 passes committee

Rep. John Conyers, Chair of the House Judiciary Committee brought the Performance Rights Act (HR 848) up for markup this morniJohn Conyersng. 

HR 848 created no small amount of disagreement among radio broadcasters, minority broadcasters, trade unions and civil rights groups.  However, a group  of minority artists, including Duke Fakir of the Four Tops, Dionne Farris and Jon Secada, recently sent a letter indicating support for Rep. Conyers and this legislation.  The letters stated in part: 

As minority artists, we support a strong and vibrant local radio industry. We know that minority broadcasters play a vital role in our communities. And we support efforts to create accommodations in the legislation for small, minority-owned stations. But the creation of a fair performance right cannot be delayed further. We have already waited far too long. “Not now” is not an acceptable answer.

To address the concerns of minority broadcasters, Conyers offered the following amendments at today’s markup:

Affordable payment for small, rural, nonprofit, minority, religious and educational broadcasters

· Any station that makes less than $100,000 annually will pay only $500 annually for unlimited use of music

· Any station that makes less than $500,000 but more than $100,000 annually will pay only $2500 (half of the amount in introduced bill) annually for unlimited use of music

· Any station that makes less than $1,250,000 but more than $500,000 annually will pay only $5000 (the amount in introduced bill) annually for unlimited use of music

Relief for current economic situation

· No payment for 2 years by any station that makes less than $5,000,000 annually

· No payment for 1 year by any station that makes more than $5,000,000 annually

Parity for all radio services

· Establishes a “placeholder” standard to determine a fair rate for all radio services that will encourage negotiations between the stakeholders

Cannot hurt local communities

· Assures that this legislation cannot affect broadcasters public interest obligations to serve the local community

Assures consideration of relevant evidence

· Evidence relevant to small, noncommercial, minority, and religious broadcasters and religious and minority royalty recipients must be considered by the Copyright Royalty Judges

Other minority and civil rights groups that sent letters expressing support for the act included the Leadership Conference on Civil Rights, Pennsylvania Legislative Black Caucus, Rhythm and Blues Foundation and the A. Phillip Randolph Institute.

The executive director of the musicFIRST Coalition, Jennifer Bendall, supported the committee’s decision:

“We applaud Chairman Conyers and Committee members for their work on the Performance Rights Act and for supporting artists, musicians and rights holders in their fight for fair compensation when their music is used by AM and FM radio stations.

The Performance Rights Act will bring fairness to artists, musicians and rights holders and one that’s fair to radio and its counterparts. It also includes accommodations for small and minority-owned broadcasters. musicFIRST looks forward to the next chapter and to Congress to ensure that U.S. artists and musicians receive the performance right they deserve.”

Now that HR 848 has cleared the committee, it will be brought in front of the entire House for debate and vote. 

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Politico’s interview with Corgan following his testimony before Judiciary Committee on HR 848

Link to Politico Interview

As a follow up to my previous post on the subject, the radio widget above should play Politico’s interview with Smashing Pumpkin’s founder and frontman Billy Corgan following his testimony in front of the House Judiciary Committee in support of HR 848, the Performance Rights Act.

Corgan testified on Capitol Hill on behalf of the musicFIRST Coalition yesterday.  Corgan testified that the current sytems is “hurting the music business” because of radio stations’ failure to compensate musicians for performing their music.

My readers know my thoughts on this subject.  While I agree with Corgan’s overall sentiment, I stand by my emphasis yesterday that the legislation as it is written may be drafted in favor of the record labels more so than the performing artists. 

HR 848 should have a provision that provides for direct payment of royalties to the artists who performed on the sound recording and which specifically does NOT rely on the record labels to distribute these royalties “in accordance with the terms of the artist’s contract.”  (See my previous post).  This kind of language contained in the House version of the legislation at Section 6 only assures that the record labels would receive all the performance royalties and that performing artists would have to overcome numerous obstacles to ever see any of the additional income, inevitably leading to more disputes with the record label.   The current artists agreements with record labels simply do not contain provisions addressing payment of these types of royalties and, even if they did, the artists who have unrecouped balances on their ledger sheets would never see a dime. 

My proposal is that the current system for collection and distribution of performance royalties for musical compositions be utilized.  Specifically, why not allow BMI, SESAC and ASCAP to collect and distribute the performance royalties for sound recording copyrights on behalf of member artists, allowing these organizations to pay 50% of the income directly to the artists (the original owners of the sound recordings) and 50% to the record labels (the assignee owners of the sound recordings).  This structure is identical to the distribution of performance royalties for owners of the musical composition copyright.  It’s a systems that has functioned well since the turn of the 20th century and it is a systems that, overall, works fairly well. 

In general, members of the performance rights organizations have fewer royalty disputes with these entities over  than artists do with record labels, since these entities, for the most part, do not function as profit generators.  There is no doubt that this idea has some flaws as well, but in comparing the alternative, it seems to me that this would benefit the artists and musicians much more than giving the money to the record labels.

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Judiciary Committee holds hearings on HR 848, the “Performance Rights Act”

The House Judiciary Committee will hold hearings on H.R. 848 (this year’s version of HR 4789) tomorrow morning at 10:00 a.m.  Although the Committee’s website does not identify any witnesses at this time, I am informed by musicFIRST that Smashing Pumpkins’ founder Billy Corgan and Mitch Bainwol, chairman and CEO of the RIAA will be speaking on their behalf at the hearing.

Billy Corgan H.R. 848 was introduced to the 111th Congress by Rep. John Conyers on February 4, 2009 then referred to committee on the same day.  It was co-sponsored by Tennessee representative, Marsha Blackburn.  If passed, HR 848 would amend The Copyright Act (specifically Title 17) to provide “parity in radio performance rights” under the Copyright Act.  In other words, the Bill would grant a performance rights in sound recordings performed over terrestrial broadcasts (i.e., traditional radio broadcasts, not satellite).   S. 379 is the Senate’s complimentary bill, introduced by Senator Patrick Leahy.

The act has certain provisions to accommodate concerns by the broadcast industry, such as the provision which establishes a flat annual fee in lieu of payment of royalties for individual terrestrial broadcast stations with gross revenues of less than $1.25 million and for non-commercial, public broadcast stations; the provision which grants an exemption from royalty payments for broadcasts of religious services and for incidental uses of musical sound recordings; and the provision which grants terrestrial broadcast stations that make limited feature uses of sound recordings the option to obtain per program licenses. 

The Act specifically states that it will not adversely affect the public performance rights or royalties payable to songwriters or copyright owners of musical works.   In particular, the Act prohibits taking into account the rates established by the Copyright Royalty Judges in any proceeding to reduce or adversely affect the license fees payable for public performances by terrestrial broadcast stations. Requires that such license fees for the public performance of musical works be independent of license fees paid for the public performance of sound recordings.

The full text of the bill can be found at govtrack.us.

One provision I found interesting was Section 6, (1)(A), regarding payment of certain royalties, that states, in full:

A featured recording artist who performs on a sound recording that has been licensed for public performance by means of a digital audio transmission shall be entitled to receive payments from the copyright owner of the sound recording in accordance with the terms of the artist’s contract.

Emphasis added.  This last clause intrigues me.  What I find interesting about it is that under the current structure, the record labels own most, if not all, of the commercial sound recording masters, i.e., they are the “copyright owner of the sound recording.”  This clause entitles the “featured recording artist,” e.g., Madonna, Michael Jackson, etc., to receive payments from the owner “in accordance with the terms of the artist’s contract.” 

In most artists’ contracts, payments are based on a percentage of the gross revenues from sales of physical units – current artist contracts do not have provision for payment of performance royalties on the sound recording.  It would seem that under the Act as written, there is silence as to what happens in this instance where these specific payments of performance royalties are not addressed in the artist’s contract.  One possible remedy would be for the legislators to draft language that would apply, such as what they have done with regard to the “non-featured artists in subsection (B) of the same Section 6.   This Section 6 is not found in the Senate’s version of the legislation.

All of this makes me curious about what will happen to performance royalties that are paid under this Act to the owners of the sound recording copyrights, i.e. the record labels if there is no language in the artists’ recording agreements to specify as to what percentage the artist is entitled?  One thing is certain:  an artist who is not recouped under his artist recording agreement will never see any of these performance royalties under such time as his balance is recouped.

One proposal you might suggest to your representatives is that they consider a payment structure similar to that of the current performance rights organizations that collect and pay performance royalties for musical compositions, wherein one half of the royalties go directly to the songwriter and the other half directly to the publisher.  If this were the case under the new Act, half of the royalty payments would filter directly to the artist and the other half would go to the record labels.  If there truly is a concern about the recording artists not getting paid for his or her performances, this is the only method that would assure this happens.

If you are a recording artist whose performances are being playing on local FM and AM radios, you should investigate the impact this legislation will have on you.  Call you Senators and Representatives and ask them to keep you updated.

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WSM’s “Bluegrass Underground” moves to Saturdays

Beginning this Saturday, Feb. 14, legendary radio station 650 AM WSM will move its acclaimed Bluegrass Underground series to a new time slot. The program will now broadcast on WSM every Saturday night from 5 p.m. – 6 p.m. CST and stream worldwide at www.WSMonline.com.

WSM A performance by Nashville bluegrass band, The Steeldrivers, will be featured on the first show broadcast at the new time slot.

“Having Bluegrass Underground as a part of the weekly WSM broadcast schedule enhances the diversity of our programming, which no other Nashville radio station can stake claim to,” says WSM program director Joe Limardi.

It is the perfect lead-in to our ‘crown jewel’ of programming, the Saturday Night WSM Grand Ole Opry.”

WSM’s first official broadcast day was October 5, 1925. The Nashville-based station is the radio home for the Grand Ole Opry, which has been broadcast live over the airwaves on WSM since its inception.  The 50,000 watt, low frequency station can be picked up in 38 states on 650 AM and heard worldwide at www.WSMonline.com.

Bluegrass Underground Each Bluegrass Underground show is taped live in the Volcano Room, a naturally formed amphitheater located 333 feet below ground at Cumberland Caverns in McMinnville, Tennessee. Since it began in August 2008, the show has featured performances by The Infamous Stringdusters, Tim O’Brien, The Steeldrivers, The Grascals and Cadillac Sky

“WSM is synonymous with the original American music form called bluegrass, and Cumberland Caverns is one of the world’s most unique show caves,” says Bluegrass Underground creator and producer Todd Mayo. “We are proud to broadcast our show from such a magical location as The Volcano Room, and we think our new time slot on legendary 650 WSM provides a great platform for this genre, particularly on the station that’s always been a friend to bluegrass music.”

The unique venue also has surprisingly pleasant acoustics, according to Bluegrass Underground recording engineer Phil Harris. “The sound in here is phenomenal,” he says. “It has a really nice, warm sound, unlike a lot of other man-made things that you encounter. The room is fantastic!”

Upcoming performers scheduled to be on the show include The Travelin’ McCourys with Ronnie Bowman (Mar. 14), Steep Canyon Rangers [April 18] and CherryHolmes [June 27].

Visit Bluegrass Underground for tickets and more information.

 

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musicFIRST defends rights of artists

By Jennifer Bendall, Executive Director of musicFIRST

Did you know that every time you hear your favorite artist’s hit songs over the airwaves he or she doesn’t receive a single penny from the radio stations broadcasting the song? Sounds crazy, right? While AM and FM music broadcasters rightly pay the writers of these songs, they refuse to compensate the performing artist as the performer of the song.

In fact, AM and FM music radio stations earn a cool $16 billion a year in advertising revenue without compensating the artists and musicians who bring MusicFirstmusic to life and listeners’ ears to the radio dial.

The fight for a fair performance right on radio has been going on in the U.S. for more than 80 years. Frank Sinatra was a leader in this fight 20 years ago, and his daughter Nancy carries the legacy today. In 2008, Nancy Sinatra testified before a House subcommittee on behalf of the musicFIRST (Fairness in Radio Starting Today) Coalition, telling members of Congress about the life of an artist:

Imagine struggling in your job, perhaps for years, to make the best product you can – a product made of your blood, sweat and tears. Now imagine people taking that product to use to build their own hugely successful businesses. Just taking it – no permission, no payment, and no consequence.

A fair performance right is not only beneficial for the musicians and artists behind the music, but also for the U.S. economy. Currently, the U.S. is the only member of the 30-country Organization of Economic Cooperation and Development (OECD) that does not fairly compensate performing artists when their songs are played on the radio. This puts the U.S. in the company of countries such as Iran, China and North Korea who don’t pay royalties to performers for their intellectual property. Plus, since we don’t have a performance right here in the U.S., artists lose out on the royalties collected overseas for the play of American sound recordings.

The musicFIRST Coalition, a group of artists, musicians and music community organizations, supports the creation of a performance right on AM and FM radio. The Coalition formed in June 2007 to ensure that all performers – from aspiring and local artists, to background singers and well-known stars – are fairly compensated when their music is played on the radio. On February 4, 2009, bipartisan legislation – the “Performance Rights Act” – was reintroduced in the House and Senate. MusicFIRST supports this measure and plans to remain at the forefront of the fight for fair pay for airplay.

AM and FM radio remains the lone holdout in providing a fair performance right for artists and musicians. All other music platforms – Internet radio, satellite radio and cable television music channels – pay a fair performance royalty for the use of music. It’s time that radio broadcasters are held to the same standard.

Eighty years is far too long for AM and FM radio stations to refuse to compensate performers for their work. Let this be the year fairness is provided to the talented performers who bring to life the music of our lives.

My special thanks to guest author of today’s article, Jennifer Bendall, and Lindsay Dahl for making this happen.  For more information about musicFIRST and the great work they’re doing, go to www.musicfirstcoalition.org, or click on the picture above.

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