Peer International Corp. v. Luna Records, Inc.

887 F. Supp. 560, 1995 WL 326440
CourtDistrict Court, S.D. New York
DecidedApril 28, 1995
Docket92 Civ. 9295 (SS)
StatusPublished
Cited by49 cases

This text of 887 F. Supp. 560 (Peer International Corp. v. Luna Records, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peer International Corp. v. Luna Records, Inc., 887 F. Supp. 560, 1995 WL 326440 (S.D.N.Y. 1995).

Opinion

SOTOMAYOR, District Judge.

AMENDED OPINION AND ORDER 1

This action arises from the alleged copyright infringement of seven musical compositions by defendants Luna Records, Inc., now known as Luna Music Corporation (“Luna”) and Abel De Luna, the individual in charge of Luna. For the reasons discussed below, plaintiffs’ motion for summary judgment is granted.

BACKGROUND

The compulsory license provision of the Copyright Act permits a user to produce and distribute phonorecords embodying a musical composition protected by a copyright upon compliance with statutory and regulatory requisites, including the service on the copyright owner of a notice of intention to make and distribute the phonorecords, and the regular, accurate payment of royalties. 17 U.S.C. § 115 (1988 & Supp. V 1993); 37 C.F.R. § 201.19 (1994). The Act allows the copyright owner to vary the terms set out in the Act upon written agreement with the user, and to terminate the compulsory license, upon thirty days notice, if the copyright owner does not receive payment or statements of account when due from the user. 17 U.S.C. § 115(c)(5). At times prior to the commencement of this action, Luna, a distributor of Spanish music, availed itself of the compulsory license provisions of the Copyright Act.

In 1989, Prager & Fenton, an accounting firm specializing in examinations of entertainment companies on behalf of copyright owners, performed an audit of Luna. The audit, which examined several hundred musical compositions embodied in phonorecords distributed by Luna from the time of the corporation’s inception in 1979 through 1988, revealed that Luna had substantially underpaid royalties for many compositions for which it had obtained compulsory licenses, *563 and owed a total of $722,165.51 in royalties plus interest. In addition, the audit showed that Luna was distributing phonorecords of compositions for which it had never obtained licenses. Aff. Abraham Kahaner, Ex. 1.

At issue in this action are only seven of the hundreds of compositions distributed by Luna: five of these were the subject of compulsory licenses (the “licensed compositions”), and two were never licensed (the “unlicensed compositions”). The two unlicensed compositions are owned by plaintiffs EMI Blackwood Music Inc. (“EMI”) and Temi Combine, Inc. (“Temi”). 2 De Luna Dep., attached to Affirmation of Scott L. Baker in Supp. Pis.’ Mot.Summ.J. at Exs. 5-22 [hereinafter De Luna Dep.], at 40-43, 156-158; Aff. Kenneth B. Higney ¶¶ 10-12. For the five remaining compositions, plaintiffs Peer International Corporation (“Peer”), Peermusic Ltd. (“Peermusic”), Leo Musical, S.A. (“Leo”), and Editorial Musical Latino Americana, S.A. (“EMLASA”), through their common agent, the Harry Fox Agency (“Fox”), had issued Luna written variations of the compulsory licenses. 3 The variations with Luna incorporated and preserved all statutory rights under 17 U.S.C. § 115, except the variations permitted Luna to dispense with the statute’s requirement that a notice of intention be filed with the copyright owner before or within thirty days after making and before distributing any phonorecords of a copyrighted work, see 17 U.S.C. § 115(b), and authorized Luna to pay royalties and submit account statements quarterly instead of monthly, see 17 U.S.C. § 115(c)(4).

On behalf of the plaintiffs representing the licensed compositions, their agent Fox sent Luna a notice on August 29, 1989 (the “August 1989 notice”) stating that the licenses would be terminated if Luna did not render $722,165.51, the full payment for the deficiencies uncovered by the audit, within thirty days. Luna did not render a partial payment until December 1989, in the amount of $9,747.00. A year later, on September 6, 1990, Fox sent Luna a second notice (the “September 1990 notice”), again stating that termination of the licenses would occur unless the default in royalty payments was remedied within thirty days. Luna did not make another payment within thirty days of the September 1990 notice, and continued to distribute all seven compositions. All plaintiffs contend that Luna’s continued distribution of the licensed and unlicensed compositions after receipt of the September 1990 termination notice constitutes willful infringement of their copyrights.

Luna argues that any infringement of plaintiffs’ copyrights was accidental in nature. Regarding the unlicensed compositions, Luna claims it was unaware that it was distributing music for which it had obtained no licenses, and points out that it made royalty payments on the two unlicensed compositions. Defs.’ Mem.Law Opp’n Pis.’ Mot. Summ.J. at 5-6. Regarding the licensed works, Luna contends that plaintiffs’ revocation of their licenses was invalid, as Luna was not aware that plaintiffs intended to revoke the licenses, but rather, believed that the parties were engaged in negotiations in the years 1989 and 1990 over the amount of Luna’s liability. Luna points out that Prager & Fenton’s original finding of liability in the amount of $722,165.51 was revised to less than half that amount, $354,948.41, subsequent to Luna’s making available to the auditors sales records and royalty data for the period 1979-83. In addition, Luna notes that because the texts of the August 1989 and September 1990 notices were identical, and because the August 1989 notice did not terminate the licenses, Luna had no reason to believe that the September 1990 notice did so either.

As evidence that the August 1989 notice was not meant to terminate the licenses, Luna points to a number of payments it made to plaintiffs through Fox after that notice: in addition to the December 1989 *564 payment for $9,747.00, Luna made two payments in March 1990 in the amounts of $27,-528.69 and $27,482.93, and one payment in August 1990 in the amount of $22,830.90. Aff. Opp’n Pis.’ MotSumm.J. ¶¶ 16-17. Luna also points to its attempts to make royalty payments after the September 1990 notice: On or about December 26, 1990, Luna sent a check to plaintiffs for partial payment in the amount of $35,377.59. Fox endorsed the check with the legend “Without prejudice as to claims of underpayment” and deposited it in an escrow account. Aff. Kevin Au Yeung ¶ 5. Thereafter, on or about July 19, 1991, Luna sent a series of thirteen postdated checks representing payments for the period ending September 30, 1990. Fox rejected the cheeks. No payment was attempted by Luna after the post-dated checks were refused. Id. ¶¶ 5-8.

Plaintiffs initiated this action for copyright infringement against defendants on December 28, 1992.

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Bluebook (online)
887 F. Supp. 560, 1995 WL 326440, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peer-international-corp-v-luna-records-inc-nysd-1995.