Southfield Music, Inc. v. Diamond Time, Ltd. ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Bridgeport Music, Inc. v. Nos. 03-5003/5656
ELECTRONIC CITATION: 2004 FED App. 0181P (6th Cir.) Diamond Time, et al.
File Name: 04a0181p.06
Before: GUY and GILMAN, Circuit Judges; BARZILAY,
Judge.*
UNITED STATES COURT OF APPEALS
_________________
FOR THE SIXTH CIRCUIT
_________________ COUNSEL
BRIDGEPORT MUSIC , INC.; X ARGUED: Richard S. Busch, KING & BALLOW,
WESTBOUND RECORDS, INC., - Nashville, Tennessee, for Appellants. R. Horton Frank III,
STEWART, ESTES & DONNELL, Nashville, Tennessee, for
Plaintiffs-Appellants, - Appellee. ON BRIEF: Richard S. Busch, D’Lesli M. Davis,
- Nos. 03-5003/5656
- KING & BALLOW, Nashville, Tennessee, for Appellants.
SOUTHFIELD MUSIC , INC.; > R. Horton Frank III, STEWART, ESTES & DONNELL,
,
NINE RECORDS, INC., Nashville, Tennessee, for Appellee.
-
Plaintiffs, -
_________________
-
v. - OPINION
- _________________
-
DIAMOND TIME, LTD .,
- RALPH B. GUY, JR., Circuit Judge. Plaintiffs, Bridgeport
Defendant-Appellee, -
Music, Inc., and Westbound Records, Inc., appeal from the
- decision granting summary judgment to defendant Diamond
IRVING LORENZO , d/b/a DJ Irv - Time, Ltd., a copyright clearance company, on their claims of
Music; TVT MUSIC , INC.; - common law negligence and copyright infringement
TVT RECORDS, INC., a/k/a - involving the use of samples in the rap release “4 My Click.”
- Plaintiffs argue that the district court erred both in finding
Tee Vee Toons, - these claims were barred by the applicable statutes of
Defendants. - limitations and in rejecting equitable estoppel as a basis to
N avoid the limitations bar. In a separate appeal, plaintiffs
Appeal from the United States District Court challenge the post-judgment award of attorney fees and
for the Middle District of Tennessee at Nashville. nontaxable costs to Diamond Time as a prevailing defendant
No. 01-00702—Thomas A. Higgins, District Judge. under 17 U.S.C. § 505. No other parties or claims are before
Argued: April 28, 2004
Decided and Filed: June 18, 2004 *
The Honorab le Judith M. Barzilay, Judge for the United States Court
of International Trade, sitting by designation.
1
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 3 4 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
us.1 After review of the record and the applicable law, we Diamond Time’s business included sample clearance
find no error and affirm. services, which refers to the process of obtaining permission
to use a sample in a new musical work. According to
I. Diamond Time’s website, it offered sample clearance services
in two phases. The first included locating the copyright
The claims against Diamond Time, a copyright clearance owners, requesting permission to use the sample, and
company, were initially asserted in a complaint filed May 4, negotiating the fees for its use. The second phase, called
2001. That original complaint alleged nearly 500 counts “Licensing/Contract Administration,” included negotiating
against approximately 800 defendants for copyright agreeable terms with the copyright holders; issuing a Usage
infringement and other state law claims based on music Report confirming the terms and requesting a formal written
sampling. “Sampling,” common in rap, hip-hop, and urban agreement; and overseeing the trafficking, execution, and
music, typically involves making a digital copy from a master payment of those agreements.
sound recording and using a piece in the making of a new
work. Sound recordings and their underlying musical Catherine Carapella, Diamond Time’s representative,
compositions are separate works with their own distinct testified that when engaged to perform clearance services,
copyrights. Bridgeport Music, Inc. v. Still N The Water Diamond Time’s practice was to contact the proprietor or
Publ’g, 327 F.3d 472, 475 n.3 (6th Cir.), cert. denied, 124 S. owner of the copyrights in the material its client wanted to
Ct. 399 (2003). use, identify itself and the client on whose behalf it was
acting, describe the proposed use and ask for terms on which
The amended complaint, filed after the district court it would permit the use. The owner would normally advise
severed the initial pleading into 476 separate actions, alleged Diamond Time of its terms and Diamond Time would seek
that the rap CD single “4 My Click” sampled from the the consent of its client. This would end phase one, at which
composition “The Most Beautifullest Thing In the World time Diamond Time’s client would decide how it wanted to
(Green Eyed Remix)” (“The Most”), and from both the proceed. The client then dictated what phase two services, if
composition and sound recording “Funky Worm.” Bridgeport any, it would have Diamond Time undertake.
Music claims to own copyrights in both music compositions,
while Westbound Records claims to hold a copyright in only On January 24, 1995, TVT Records released the CD single
the sound recording “Funky Worm.”2 containing three versions of “4 My Click” by the rap artists
known as Cash Money Click. TVT Records owned the sound
recording “4 My Click,” while TVT Music and DJ Irv Music
1 each held a 50% interest in the composition “4 My Click.”
Southfield Music and Nine Records do not appeal. In the wake of
a settlement with TVT M usic and TVT Records, Bridgeport and TVT Records had a policy of requiring clearance of all
W estbound voluntarily dismissed the ap peal against all defendants except samples in its releases and depended on the “creative types”
Diamond Time. to identify any samples in a new recording. TVT Records
2 hired Diamond Time to handle clearance of the sample from
Although it appe ars that the district co urt only p artially reso lved
questions concernin g the ownership interests of Bridgeport and
W estbound Records, we assume for purposes of this appeal that
Bridgeport and W estbo und hold the copyrights they claim in “T he M ost” and “Funky W orm.”
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 5 6 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
“The Most” in “4 My Click.” Diamond Time maintains that stated: “Jane: Joan @ PolyGram has quoted 50% © pro-rata
it was not asked to obtain clearance for use of any other with Bridgeport. Is this o.k. with you? Please advise so we
sample in “4 My Click.” can wrap this matter up quickly. Zomba Music (who has
some publishing on this as well) has agreed to go pro-rata.
In January 1995, on the same day that “4 My Click” was Thanks! Drea.” Under this, also handwritten, is Peterer’s
released, TVT Records obtained permission to use the sample response: “Ok, Jane Peterer, 11-20-95.”4 On November 27,
“The Most” in “4 My Click” from Songs of Polygram. On 1995, Kaplon sent Peterer a Usage Report confirming the
October 3, 1995, Diamond Time representative Drea Kaplon terms offered; indicating that Diamond Time’s client, TVT
wrote to Jane Peterer, the administrator for Bridgeport Music, Records, was proceeding in reliance on the quote; and
seeking permission from Bridgeport to use the sample from requesting that Peterer prepare and forward a formal
the composition “The Most.”3 The letter states that she was agreement directly to TVT Records.
unaware, until this matter was well into the licensing On December 10, 1995, Peterer sent a formal agreement,
process, that Zomba Music could only give clearance on called a Release and Agreement, directly to TVT Records for
the “green-eyed” version of “The Most Beautifullest signature by TVT Music and DJ Irv Music. Under that co-
Thing In The World” and that Bridgeport Music was a publishing agreement, Bridgeport would receive an 8.33%
co-publisher on this song along with Zomba Music and interest in the composition “4 My Click.” Peterer sent
PolyGram Music. Kaplon a copy of the cover letter relating to this agreement on
the belief that Diamond Time would continue to participate
Accordingly, enclosed please find a cassette of both the until the formal agreement and mechanical licenses were
new and sampled song for your review. We would like signed. Peterer placed a copy of that letter in a file of
to obtain clearance for the use of “The Most Beautifullest “pending matters,” where it remained until her deposition in
Thing In The World (Green-eyed version)” in “4 My June 2002.
Click” from Bridgeport Music on a pro-rata basis with
both Zomba and PolyGram Music as per the On the same day that the Release and Agreement was sent
writer/publisher splits listed in the draft of the Zomba to TVT Records, Peterer faxed a separate request to Kaplon
Publishing Agreement. asking for information that was needed to prepare the
mechanical license for TVT Records. Kaplon did not respond
Jane, I look forward to your response so that we may to that request. Diamond Time maintains that its involvement
finalize this in a timely manner. Please call me should in the clearance process for “4 My Click” ceased once the
you have any questions. Usage Report had been sent. Plaintiffs dispute this, arguing
On November 20, 1995, Kaplon made a handwritten note
on a copy of this letter and faxed it to Peterer. Kaplon’s note 4
Peterer claimed that if she had been aware of the alleged samp le
from “Funky Wo rm,” she would have demanded a higher percentage of
ownership in “4 M y Click” for B ridgeport as well as p ayment to
3
W estbound for use of the sound recording. Plaintiffs indicate that, despite
Peterer was authorized to negotiate and agree to terms on which having been provided a tape of “4 My Click,” they only discovered the
permission to use Bridgeport’s copyrighted material would be granted. alleged sample from “Funky Worm” in preparing to file this action.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 7 8 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
that Diamond Time “dropped the ball” and failed to complete statement for the artist Cash Money Click was prepared
its assignment from TVT Records to oversee the trafficking through December 31, 1998, in order to be sure that it
and execution of the formal agreement. The district court did included all sales and returns. TVT Records stated, however,
not attempt to resolve this dispute.5 that it did not receive any returns or unsold copies after April
1997. Plaintiffs argued that there must have been sales
Whatever the extent of the services Diamond Time had because the online service All Music Guide reported that “4
been engaged to provide in this case, Peterer admitted that she My Click” was still “in print” as of August 2000. Granting
had no further written correspondence about “4 My Click” summary judgment to the TVT defendants, the district court
with either TVT Records or Diamond Time. The only contact found plaintiffs had failed to present evidence that any sales
Peterer claimed to have had occurred in several telephone or returns had occurred after May 4, 1998. Plaintiffs’ appeal
conversations with Kaplon relating to “4 My Click” and other from that decision was voluntarily dismissed as a result of a
matters, during which Peterer urged Kaplon to see that the settlement reached between plaintiffs and the TVT
Agreement was signed. Peterer claims that she relied on defendants.
Kaplon’s assurances that she would “get the deal finalized.”
There is, however, no indication of when these conversations Diamond Time sought summary judgment on the grounds
took place. that it committed no acts of direct or contributory
infringement, that it owed no duty on which the negligence
On September 5, 1996, TVT Records issued a Deletion claim could be based, that the negligence claim was
Notice for a number of titles, including “4 My Click,” which preempted by the Copyright Act, and that both the copyright
meant that no further copies would be manufactured or sold. infringement and negligence claims were barred by the
The notice advised that requests for return of any of the listed respective three-year statutes of limitations. Over plaintiffs’
products had to be made in writing no later than November 4, opposition, the district court granted summary judgment to
1996, and that the products had to be received by TVT Diamond Time on statute of limitations grounds.
Records no later than January 10, 1997. The profit and loss
Judgment was entered November 5, 2002, and plaintiffs
appealed. On March 26, 2003, the district court granted
5
Carapella testified that TV T Rec ords had a mod ified arrangement
Diamond Time’s post-judgment motion for attorney fees and
with Diamo nd Time under which Diam ond T ime would provide phase costs as a prevailing defendant under 17 U.S.C. § 505.
one sample clearance services for a fee of $2 00 and wo uld end its phase Bridgeport Music, Inc. v. Irving Lorenzo, 255 F. Supp. 2d 795
two work with the issuance of the Usage Reports for a fee of $40 each. (M.D. Tenn. 2003). Plaintiffs appealed from that order as
She conceded, however, that she had no personal knowledge of the well.
clearance work done on “4 My Click.” In add ition, when Ka plon left
Diamond Tim e in 19 97, no one took over her responsibilities until
sometime in 1 99 9. D iamo nd Tim e’s p hysical file conc erning “4 M y II.
Click” was destroyed in September 2000, along with other files from
samp le clearances from 1991 through 1995, to save on storage costs. The district court’s decision granting summary judgment is
Diamond Tim e was able to produce a co mpu ter-gene rated tracking grid reviewed de novo. Smith v. Ameritech, 129 F.3d 857, 863
for “4 My Click” which noted that Zomba had “waived phase two,” but (6th Cir. 1997). Summary judgment is appropriate when
did not no te as to B ridgeport or Polygram either that phase two was there are no genuine issues of material fact in dispute and the
“waived” or that the jo b was “done.”
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 9 10 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
moving party is entitled to judgment as a matter of law. FED . F.2d 11, 11 (6th Cir. 1981) (per curiam); Mount v. Book-of-
R. CIV . P. 56(c). In deciding a motion for summary the-Month Club, Inc., 555 F.2d 1108, 1110-11 (2d Cir. 1977).
judgment, the court must view the evidence and reasonable
inferences in the light most favorable to the nonmoving party. Contributory infringement occurs when one, “with
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. knowledge of the infringing activity, induces, causes or
574, 587 (1986). The nonmoving party may not rest on his materially contributes to the infringing conduct of another.”
pleadings, but must come forward with evidence from which Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443
a rational trier of fact could find in his favor. Anderson v. F.2d 1159, 1162 (2d Cir. 1971); see also Ellison v. Robertson,
Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). 357 F.3d 1072, 1076 (9th Cir. 2004). Liability for
contributory infringement is based on the defendant’s
A. Copyright Infringement relationship to the direct infringement. Ez-Tixz, Inc. v. Hit-
Tix, Inc., 919 F. Supp. 728, 732-33 (S.D.N.Y. 1996). There
Plaintiffs disavowed any claim that Diamond Time can be no contributory infringement without a direct
committed direct acts of infringement, but argued that infringement. Matthew Bender & Co. v. West Publ’g. Co.,
Diamond Time was liable instead as a contributory infringer 158 F.3d 693, 706 (2d Cir. 1998); Subafilms, Ltd. v. MGM-
because its failure to shepherd the clearance process through Pathe Communications Co., 24 F.3d 1088, 1092 (9th Cir.
execution of the written Release and Agreement materially 1994).
contributed to the direct infringement by the TVT defendants.
The district court did not determine whether the evidence 1. Statute of Limitations
could support a finding that Diamond Time was a
contributory infringer, concluding instead that any such claim Conceding that Diamond Time took no actions within the
was barred by the statute of limitations because “there [was] period, plaintiffs argue for the first time on appeal that their
no evidence in the record that defendant Diamond Time claims against Diamond Time are not time-barred because
engaged in any acts whatsoever regarding ‘4 My Click’ after TVT Records committed acts of direct infringement within
May 4, 1998.” the limitations period to which Diamond Time’s earlier
conduct materially contributed. The short answer is that the
A civil action under the Copyright Act must be district court found plaintiffs had failed to present evidence of
“commenced within three years after the claim accrued.” any direct infringement by TVT within three years preceding
17 U.S.C. § 507(b). A cause of action accrues when a the filing of the complaint. Without proof of direct
plaintiff knows of the infringement or is chargeable with such infringement, there can be no liability for contributory
knowledge. Roley v. New World Pictures, Ltd., 19 F.3d 479, infringement.
481 (9th Cir. 1994). Because each act of infringement is a
distinct harm, the statute of limitations bars infringement Even if there was evidence of direct infringement within the
claims that accrued more than three years before suit was filed period, however, plaintiffs may not “piggy back” Diamond
but does not preclude infringement claims that accrued within Time’s conduct from outside the period onto the alleged
the statutory period. Id; Stone v. Williams, 970 F.2d 1043, direct infringement of another within the period. Just as
1049-50 (2d Cir. 1992); Hoste v. Radio Corp. of Am., 654 claims against a direct infringer who commits no acts within
the three-year limitations period are time barred, claims
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 11 12 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
against a contributory infringer who commits no acts within Cir. 1994), and declined to follow the lead of the Seventh
the limitations period are also time barred. This is not a new Circuit in Taylor v. Meirick, 712 F.2d 1112, 1118-19 (7th Cir.
proposition, as the discussion in Mount v. Book-of-the-Month 1983). The defendant in Makedwde, Lyman Jones,
Club makes clear. participated in the alleged copyright infringement but
completely terminated his connection to the infringing
There, the publisher of the plaintiff’s book sent proof defendants outside the three-year limitations period. The
copies to the defendant Book-of-the-Month Club so it could plaintiff reasoned that claims against Jones should not be time
decide if it wanted to adopt the work for the club. The barred because his actions outside the period led to
defendant gave the copy to someone it hired to read incoming subsequent acts of infringement by others within the period.
work, who turned it over to a friend, David McKibbin. Rejecting this argument and following the lead of Hoste,
McKibbin, in turn, allegedly infringed the copyright in the Stone, and Roley, the court concluded Jones could only be
book by copying material in a pamphlet he wrote on the same held liable for his acts of infringement committed within three
subject. The pamphlet continued to be sold within the years before suit was filed. Makedwde, 37 F.3d at 182.
limitations period. The Second Circuit concluded that claims
against the book club were barred by the statute of Similarly, we find no error in the district court’s
limitations, explaining: determination that the copyright infringement claims are
barred by the statute of limitations absent a showing that
We need not consider whether defendant could escape defendant should be equitably estopped from relying on the
liability simply because the reader to whom it sent the limitations bar.
proofs of plaintiff’s work was an independent contractor.
In any case the claim is foreclosed by limitations. Even 2. Equitable Estoppel
if defendant participated in an infringement through the
sending on of the proofs to McKibbin, that event Equitable estoppel, sometimes referred to as fraudulent
occurred in the Fall of 1955, almost twenty years before concealment, is invoked in cases where the defendant takes
this action was begun. There is no proof or allegation of active steps to prevent the plaintiff from suing in time, such
any further connection of Book-of-the-Month with as by hiding evidence or promising not to plead the statute of
McKibbin’s pamphlet. Unless the statute’s running has limitations. Hentosh v. Herman M. Finch Univ., 167 F.3d
been tolled or prolonged, the claim is undoubtedly long 1170, 1174 (7th Cir. 1999); EEOC v. Ky. State Police Dep’t,
since time-barred. 80 F.3d 1086, 1095 (6th Cir. 1996); Cada v. Baxter
Healthcare Corp., 920 F.2d 446, 450-51 (7th Cir. 1990).
555 F.2d at 1110. Application of equitable estoppel “‘should be premised on a
defendant’s improper conduct as well as a plaintiff’s actual
Although plaintiffs deny it, their argument rests essentially and reasonable reliance thereon.’” Hentosh, 167 F.3d at 1174
on a “continuing wrong” theory. That is, they argue that the (citation omitted).
defendant’s conduct outside the limitations period contributed
to direct infringement by another party within the limitations In the district court, plaintiffs asserted fraudulent
period. The Fifth Circuit rejected a similar argument in concealment as the basis for equitable estoppel. Hill v.
Makedwde Publishing Co. v. Johnson, 37 F.3d 180, 182 (5th United States Dep’t of Labor, 65 F.3d 1331, 1335 (6th Cir.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 13 14 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
1995); Prather v. Neva Paperbacks, Inc., 446 F.2d 338, 340- from relying on the limitations period as a bar to their claims
41 (5th Cir. 1971). On appeal, however, plaintiffs have of copyright infringement.
shifted their equitable estoppel claim to argue that defendant’s
misconduct “lulled [them] into believing that it was not B. Negligence
necessary for [them] to commence litigation.” Cerbone v.
ILGWU, 768 F.2d 45, 50 (2d Cir. 1985). See also Buttry v. The parties agree that New York law applies to plaintiffs’
Gen. Signal Corp., 68 F.3d 1488, 1493 (2d Cir. 1995); Netzer common law negligence claim against Diamond Time. The
v. Continuity Graphic Assocs., Inc., 963 F. Supp. 1308, 1316- statute of limitations for negligence claims under New York
18 (S.D.N.Y. 1997).6 law is three years from accrual of the cause of action. N.Y.
C.P.L.R. § 214 (McKinney 1996). Without deciding whether
Specifically, plaintiffs contend that they were lulled into there was a duty or whether such a claim would be preempted
delaying suit by the assurances Peterer received during by the Copyright Act, the district court found any such claim
several telephone conversations with Kaplon at unspecified was long barred by the statute of limitations.
times after December 10, 1995. To invoke equitable estoppel,
a plaintiff must “demonstrate that his ignorance is not This negligence claim rested on the theory that Diamond
attributable to a lack of diligence on his part.” Netzer, 963 F. Time owed a legal duty to plaintiffs that arose from a “dual
Supp. at 1316. Accepting for purposes of this appeal that agency” relationship analogous to that of a real estate agent
Kaplon said more than once that she would see the written working for both buyer and seller, or an insurance broker
agreement was signed, nothing at all happened after the working for both the insurer and the insured. Out of this
Agreement was sent to TVT Records on December 10, 1995. alleged “dual agency” relationship, plaintiffs argue, arose a
Plaintiffs cannot establish that it was reasonable to rely on legal duty, owed to the copyright holders, to complete the
these empty assurances to forego litigation until more than clearance process and to notify the copyright holders when its
five years after the Agreement had been forwarded to TVT for involvement in the clearance process concluded. Plaintiffs
signature. See, e.g., Buttry, 68 F.3d at 1494; Weber v. Geffen assert that the following passage represents an implicit
Records, Inc., 63 F. Supp. 2d 458, 466-67 (S.D.N.Y. 1999) finding that such a duty arose in this case.
(no equitable estoppel because plaintiff had unreasonably
relied on an “unexceptional string of empty promises” to The plaintiffs allege that Ms. Peterer contacted Diamond
remedy infringements and protracted negotiations to Time on or about December 10, 1995, requesting specific
implement those promises). Accordingly, plaintiffs failed to information needed to prepare the mechanical licenses
demonstrate that Diamond Time should be equitably estopped for use of “Most,” and that Diamond Time never
responded. The Court finds that Bridgeport’s cause of
action accrued shortly thereafter. Bridgeport was clearly
6
At one point, plaintiffs seem to argue that the “Funky Worm”
put on notice that Diamond Time was no longer working
samp le was fraudulently concealed. The claims against Diamond Time, on its behalf to procure the signed agreements when
however, rest on its failure to get the agreement signed concerning the use Diamond Time failed to respond to its request for
of the sample from “The Most” in “4 My Click.” Plaintiffs, who bear the necessary information. Adding a generous period of time
burden of proof, presented no evidence that could lead one to conclude for Diamond Time to respond, the Court finds that the
Diamond Time either knew of, or unde rtook to clear, any sample other negligence claim accrued on or about January 10, 1996,
than “T he M ost” in “4 My Click.”
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 15 16 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
and that the limitations period for the negligence claim of discretion. Coles v. Wonder, 283 F.3d 798, 804 (6th Cir.
expired January 10, 1999. 2002); Murray Hill Publ’ns, Inc. v. ABC Communications,
Inc., 264 F.3d 622, 639 (6th Cir. 2001). A district court
The only fair reading of this discussion is that the district abuses its discretion when it relies on clearly erroneous
court assumed without deciding that a duty could be factual findings, improperly applies the law, or uses an
established, and found that any negligence claim based on erroneous legal standard. Adcock-Ladd v. Sec’y. of Treasury,
such a duty would be barred by the statute of limitations. 227 F.3d 343, 349 (6th Cir. 2000).
This conclusion is further supported by the district court’s
observation in the order awarding attorney fees and costs that: The Copyright Act provides that the court in its discretion
“The plaintiffs have never cited any case law with analogous may allow the award of costs and reasonable attorney fees to
facts from which the Court could conclude that any legal duty the prevailing party in civil suits under the Act. 17 U.S.C.
of care was owed to the plaintiffs by the defendant, who was § 505.7 Plaintiffs argue at the outset that Diamond Time is
hired by a third party to perform its clearance work.” not a prevailing party because it did not “prevail” on the issue
Bridgeport, 255 F. Supp. 2d at 798 n.2. of preemption or the question of duty with respect to the
common law negligence claim. First, when a defendant
Similarly, we need not decide whether New York law succeeds in having summary judgment entered in its favor on
would recognize a legal duty owed to plaintiffs in this case. the copyright infringement claims asserted against it, that
Whether or not plaintiffs could ultimately prevail on their defendant can only be described as having “prevailed.”
negligence claim against Diamond Time, such a claim would Second, the district court properly deducted 20% of the
be barred because it was filed more than three years after it reasonable attorney fees incurred in this action to account for
would have accrued. In the alternative, plaintiffs again rely fees incurred in defense of the common law negligence claim.
on equitable estoppel to argue that the representations Finally, as noted earlier, the district court did not decide the
allegedly made by Kaplon “induced” or “lulled” them into issues of preemption or duty in granting summary judgment
believing that litigation was not necessary. For the same to Diamond Time.
reasons discussed earlier, we find that plaintiffs failed to
demonstrate that Diamond Time should be equitably estopped The discretion to grant attorney fees in copyright
from asserting the statute of limitations with respect to their infringement cases is to be exercised in an evenhanded
claim of negligence. Accordingly, we affirm the district manner with respect to prevailing plaintiffs and prevailing
court’s grant of summary judgment to Diamond Time. defendants, and in a manner consistent with the primary
purposes of the Copyright Act. Fogerty v. Fantasy, Inc., 510
III. U.S. 517 (1994). The Supreme Court squarely rejected what
Having affirmed the district court’s decision on the merits,
we turn to plaintiffs’ further appeal from the decision
7
awarding $64,371.23 in attorney fees and $963.00 in “In any civil action under this title, the court in its discretion may
nontaxable costs in favor of Diamond Time and against allow the recovery of full costs by or a gainst any party other than the
Bridgeport and Westbound, jointly and severally. The district United States or an officer thereof. Except as otherwise provided by this
court’s decision to award costs and fees is reviewed for abuse title, the court may also award a reasonable attorney’s fee to the
prevailing party as part of the costs.” 17 U.S.C. § 505.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 17 18 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
it called the “dual standard” under which prevailing plaintiffs A. Decision to Grant Attorney Fees
recovered attorney fees as a matter of course but prevailing
defendants were required to show the claims were frivolous The district court in this case correctly observed that
or were brought in bad faith. Id. at 534. At the other because the Fogerty factors are nonexclusive, not every factor
extreme, the Court also rejected the view that § 505 was must weigh in favor of the prevailing party and other factors
intended to enact the “British Rule” of automatic recovery of may be considered as well. Concluding that attorney fees and
attorney fees by the prevailing party. Id. Thus, the Court costs should be granted to Diamond Time “in the interest of
explained that “‘[t]here is no precise rule or formula for justice and in furtherance of the objectives of the Copyright
making these determinations,’ but instead equitable discretion Act,” the district court explained that:
should be exercised ‘in light of the considerations we have
identified.’” Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, the following factors . . . weigh in favor of an award:
436-37 (1983)).8 (1) the plaintiffs’ litigation strategy that resulted in suing
defendants against which they had little hope of
In closing, the Fogerty Court identified several recovering; (2) the plaintiffs’ motivation for failing to
nonexclusive factors that may be considered in making dismiss stale claims; (3) the interest in deterring further
awards to prevailing parties, as long as the factors are litigation of stale claims; and (4) the inherent weakness
“faithful to the purposes of the Copyright Act and are applied in the plaintiffs’ copyright claims against this defendant.
to prevailing plaintiffs and defendants in an evenhanded These factors dictate that the plaintiffs should be made to
manner.” Id. at 534 n.19. Those factors include answer for litigating this action, and the original action
“frivolousness, motivation, objective unreasonableness (both from whence it spawned, in a fashion that contributed to
in the factual and in the legal components of the case) and the the multiplication of fees amongst all the parties and
need in particular circumstances to advance considerations of resulted in an administrative morass for the Court.
compensation and deterrence.” Id. (quoting Lieb v. Topstone
Indus., Inc., 788 F.2d 151, 156 (3d Cir. 1986)). One of the consequences of the plaintiffs’ choice to sue
hundreds of defendants all at the same time, regardless of
the strength of the individual claims, was that the
plaintiffs’ dragnet inevitably swept up parties against
whom they had little or no chance of succeeding. Such
8 is the case here. While the ultimate decision to dismiss
Tho se considerations include: the primary objective of the
Copyright Act to “encourage the production of original literary, artistic, the claims against this defendant rested on the statute of
and musical expression for the good of the public”; the fact that limitations, the plaintiffs’ claims for contributory
defendants as well as plaintiffs may hold copyrights and run the gamut infringement and negligence were based on shaky facts
from large corporations to “starving artists”; the need to encourage
“defen dants who seek to advance a variety of meritorious copyright and even shakier legal arguments. In response to the
defenses . . . to litigate them to the same extent that plaintiffs are defendant’s motion for summary judgment, the plaintiffs
encouraged to litigate meritorious claims of infringement”; and the fact conceded that they had no claim for direct infringement.
that “a successful defense of a copyright infringement action may further Their claim for contributory infringement rested on few
the policies of the Co pyright Act every bit as much as a successful facts and on case law that was not factually analogous.
prosecution of an infringement claim by a holder of a copyright.” Id. at
524 and 527.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 19 20 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
While the Court did not reach the merits of the resources, timely filing of legal action against them
contributory infringement claim, the significance of the would increase the chance that the case is decided on the
statute of limitations defense to this and numerous other merits of the claim and not subject to the vagaries of
Bridgeport cases must be underscored. Many of the missing documents, faulty recollections and absent
songs in question were released in the early and mid witnesses.
1990's. Many of these cases involve license agreements
that were initially negotiated between the plaintiffs and The plaintiffs’ failure to weed out stale claims means
defendants during this same time period. Yet the that there remain in these cases numerous claims and
plaintiffs waited long after the three-year statute of defendants that will never make it to trial. The Court
limitations to bring suit. The Court found in this case must infer from the plaintiffs’ actions that these claims
that the last contact between Diamond Time and the remain for the sole purpose of extracting a settlement
plaintiffs was in December 1995, more than five years based on the cost of litigating further. This is not an
before the plaintiffs brought suit. This is not the only objective to be promoted under the Copyright Act; to the
Bridgeport case where the plaintiffs’ claims were contrary, the Court sees an opportunity here to deter
defeated by their failure to act promptly to protect their further misuse of the Court’s resources and encourage the
rights. prompt dismissal of clearly stale claims in the hundreds
of Bridgeport cases that remain before this Court.
The plaintiffs complained repeatedly that the dilatory
practices of the music industry, resulting in license 255 F. Supp. 2d at 798-99 (footnotes omitted).
agreements never or belatedly being signed and
payments never or belatedly being made, allowed the Plaintiffs accuse the district court of “palpable hostility”
defendants in these cases to abuse the plaintiffs’ position toward the legitimate copyright claims asserted in other
as a small company and flagrantly use their copyrighted Bridgeport cases, in which no discovery has even been
works without proper compensation. The plaintiffs claim conducted, and an intention to punish plaintiffs for bringing
that they did not bring suit in a more timely fashion all of their claims together. While the district court certainly
because these practices kept them from enforcing their did not mince words, the harsh criticism of the plaintiffs’
rights. The Court sees little merit to this argument (and litigation strategy was clearly focused on the resulting failure
in fact wholly rejected in this case the argument that of plaintiffs to weed out stale claims against defendants like
these practices amounted to a legal justification for Diamond Time.9
avoiding the statute of limitations).
Urging that we reverse the award, plaintiffs compare this
If their copyrights are as valuable as the plaintiffs case to Murray Hill, where the district court granted attorney
claim, then it behooves them to police their rights and
seek legal redress in a timely fashion, especially where 9
their opponents are huge entertainment conglomerates Plaintiffs complain that the harsh criticism makes them doubt that
that may not respond to any other pressure than the threat they are being treated evenhandedly with the defendant. Of course,
Fo gerty was concerned that courts be evenhanded in their treatment of
of a suit. And in the case of those defendants like prevailing plaintiffs and prevailing defendants; not losing plaintiffs and
Diamond Time that have limited operations or financial prevailing defend ants.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 21 22 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
fees to the prevailing defendant because the plaintiff’s claims Supp.2d at 799. Although plaintiffs deny such motivation,
were “utterly devoid of merit” and the voluminous case was the district court certainly had a basis to infer that the
burdensome to both the defendant and the court. 264 F.3d at litigation was undertaken and prosecuted in a fashion that
639. This court reversed, without much discussion, would multiply the fees and encourage nuisance settlement.
concluding that the case presented unsettled questions of law We can find no clear error in this regard.
and one or more colorable claims of infringement. Id. at 640.
When a plaintiff has advanced a reasonable, yet unsuccessful Finally, the district court explicitly relied on deterrence, a
position, an award of attorney fees to the prevailing defendant factor that has an unusual role in this case. Despite plaintiffs’
generally does not promote the purposes of the Copyright hyperbole about the district court’s desire to “close the
Act. Matthew Bender & Co., 240 F.3d 116, 122 (2d Cir. courthouse door” to its legitimate, albeit novel, copyright
2001); Lotus Dev. Corp. v. Borland Int’l, Inc., 140 F.3d 70, infringement theories, the district court was concerned with
75 (1st Cir. 1998) (In close infringement cases, “the need to deterring misuse of the court’s resources and encouraging the
encourage meritorious defenses is a factor that a district court prompt dismissal of clearly stale claims in the hundreds of
may balance against the potentially chilling effect of pending Bridgeport cases. Given the common origin of the
imposing a large fee award on a plaintiff[] who . . . may have pending cases and the possibility that similar strategies and
advanced a reasonable, albeit unsuccessful, claim.”). motivations may be at work with respect to at least some of
the asserted claims, deterrence is a particularly relevant factor
In this case, however, there can be no doubt that the district in this case weighing in favor of an award of attorney fees.
court found it was objectively unreasonable for plaintiffs to
have argued that the claims against Diamond Time were not B. Reasonableness of Award
time barred. In commenting on the factual and legal
weakness of the plaintiffs’ contributory infringement claims, Finally, having determined that an award of attorney fees
the district court clearly criticized the plaintiffs’ decision to was warranted, the district court made an independent review
sue hundreds of defendants at once without regard to the of the billing statements and determined that the initial
strength of the various claims.10 “lodestar” amount, representing reasonable attorney fees
incurred by Diamond Time in this case, was $80,464.04.
In addition, the district court inferred from the way the case That amount was then reduced by 20% to account for fees
was commenced and the fact that plaintiffs continued to incurred with respect to the negligence claim only. As a
prosecute this case against Diamond Time that the claims result, the district court awarded $64,371.23 in attorney fees
remained “for the sole purpose of extracting a settlement to Diamond Time.
based on the cost of litigating further.” Bridgeport, 255 F.
Plaintiffs do not challenge the calculation of this amount,
but argue that it is unreasonable because it does not account
for the defendant’s unwillingness to settle. The district court
10
To bolster their challenge, plaintiffs suggest the award in this case rejected this argument, explaining that:
is inconsistent with the denial of attorney fees to the prevailing defendant
in another Bridgep ort case in which a novel claim was found to be The deadline for filing dispositive motions in this case
objectively reasonable. The same issue was neither presented nor decided was June 21, 2002. The plaintiffs’ initial settlement
with respect to the claims against Diamond Time.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 23 24 Bridgeport Music, Inc. v. Nos. 03-5003/5656
Diamond Time, et al. Diamond Time, et al.
demand was not made until September 30, 2002. The do so, I ask that you take what I have told you in this
plaintiffs cannot be heard now to complain that the letter into account. If you do not intend to do so, my
defendant did not settle in a timely manner when the first client will simply move forward and continue to defend
offer to settle was not made until three months after the the litigation.
dispositive motion deadline, and just two months prior to
trial, at which point the defendant had already incurred Plaintiffs did not respond except by making the informal offer
almost two-thirds of the amount of attorney’s fees it now in June 2002. On July 31, 2002, Frank wrote to plaintiffs’
seeks. counsel as a “follow up” to that exchange and expressed
willingness to discuss settlement. On September 30, 2002,
255 F. Supp. 2d at 801-02. Plaintiffs contend that because this plaintiffs made its first written offer to dismiss all the lawsuits
conclusion rested on incorrect or incomplete facts concerning against Diamond Time for payment of $20,000.11
their first offer to settle, the district court abused its discretion
in refusing to further reduce the amount of attorney fees. Despite the failure of the district court to discuss plaintiffs’
oral offer to settle for “a very minimal amount,” we find no
First, plaintiffs argue that the district court “obviously abuse of discretion in the district court’s refusal to reduce the
overlooked” the short declaration submitted by their attorney, amount of the attorney fees to account for defendant’s
Richard Busch, in which he stated that defendant’s counsel, unwillingness to settle. Defendant did not display
Horton Frank, rebuffed an attempt to settle all the claims unwillingness to discuss settlement, only an unwillingness to
against Diamond Time in June 2002. That declaration pay plaintiffs money it did not have, in order to settle claims
specifically states that Busch approached Frank during a it believed would be dismissed with prejudice, when it had
break in depositions sometime in June 2002 and offered to already incurred significant attorney fees in defending itself.
dismiss the claims for “a very minimal amount of money.” Cf. Diamond Star Bldg. Co. v. Freed, 30 F.3d 503, 506-07
Frank apparently replied that plaintiffs would have to agree to (4th Cir. 1994) (reversing denial of attorney fees and finding
dismiss the claims with prejudice and to pay all or part of it an abuse of discretion to penalize the prevailing defendant
Diamond Time’s attorney fees and costs. It is true that the for refusing to admit liability and pay to settle a frivolous
district court did not mention this oral exchange in its action).
opinion. The court also did not mention the letters dated
April 8, 2002, and July 31, 2002, in which defendant’s
11
counsel asked that plaintiffs make a settlement demand. In Frank responded in a lengthy letter dated October 14, 2002,
the April letter, defendant’s counsel conveyed both that explaining that Diamond Time had no money to pay plaintiffs and had
Diamond Time had limited financial resources and that it had already incurred nearly $60,000 in attorney fees; that Diamond Time
expected to prevail on summary judgment and would seek attorney fees
begun incurring expenses in preparation of its dispositive under Fogerty; and that Diamond Time would settle if plaintiffs agreed
motion. The letter also stated that: to pay the fees incurred in this case. On October 24, 2002, Busch rejected
this offer as unrealistic and comm ented that it “seems tragic to me that
At the case management conference, Judge Higgins made there have been $60,00 0 worth of attorney’s fees charged to Diamond
it very clear that he expected you to “put a price on your Time for engaging in motion practice when all matters could have been
horse” and to let the Defendants in the case know what settled for less than that amount.” No further counter-offer was made in
that letter, and the summary judgment orders were entered shortly
the price was for purposes of settlement. If you intend to thereafter.
Nos. 03-5003/5656 Bridgeport Music, Inc. v. 25
Diamond Time, et al.
In concluding that the attorney fees incurred by defendant
were reasonable, the district court noted that Diamond Time
was represented by only a single copyright attorney and that
Diamond Time had limited its discovery and motion practice
due to its limited financial resources. Plaintiffs, on the other
hand, “chose to litigate aggressively each and every issue
against each and every defendant, regardless of a particular
defendant’s resources or the strengths of the claims against it.
The fees incurred by the defendant here were justified and
necessary to guard against the plaintiffs’ take-no-prisoners
tactics.” Bridgeport, 255 F. Supp. 2d at 802.
AFFIRMED.