Mixtape Copyrights: Atlantic Records v BCD Music

Photo Credit: Adrian F (Creative Commons License)

BCD Music was sanctioned and forced to pay over a portion of its profits to Atlantic for violating a court order restricting it from using any content licensed or owned by Atlantic.  BCD also lost a motion to move the case to a Texas Federal Court from New York.  Atlantic Recording Corp v. BCD Music Group Inc., 2009 WL 1390848 (S.D.N.Y.) No. 08 Civ. 5201.

BCD Music is a Texas company known for, among other things, releasing mixtapes.  Atlantic Records sued BCD alleging copyright infringement over some of the mixtapes that BCD released.  Perceptions about the company seem to differ; according to hiphopruckus.com, BCD is known as a “reputable organization,” which I assume means they put forth an effort to license the music they use, but some of the comments on a hiphopdx post covering the story are less than favorable.

On June 20, 2008, Atlantic Recordings and BCD music agreed to a preliminary injunction that prohibited BCD music

“[f]rom reproducing, distributing publicly performing by digital audio transmission, or preparing derivative works of any other sound recording known by BCD to be owned by or exclusively licensed to [Atlantic] or any of its affiliates without express written authority from [Atlantic] or the appropriate affiliate.”

Apparently, after the injunction BCD made several recordings of artists works that were owned or licensed by Atlantic including TI, Attitude, and Lil Scrappy.  BCD claimed that it used internet searches and Replicheck to ensure they weren’t using copyrighted material, but that they mostly relied on “the representations and warranties of the contracting parties” to ensure it wasn’t violating the injunction.

Atlantic Records sought to hold BCD in contempt for violating the preliminary injunction order.  Since BCD is a Texas company, with all of its employees living and working in Texas, BCD moved to transfer the case there.  BCD lost on both counts.

In an opinion by Judge William Pauley of the Southern District of New York, the court sanctioned BCD  for violating an injunction and denied BCD’s motion to “transfer venue” or move the case to Texas.

Background

BCD Released a statement about the lawsuit that is very informative both about the case and the music industry in general, particularly with respect to mixtapes.  This letter was posted on hiphopruckus.com.

BCD Disputes Atlantic’s Claims
BCD is a reputable Texas-based independent music and video distributor engaged in the distribution of finished master sound recordings. BCD has an excellent reputation in the independent marketplace and is well-respected in the world of independent retail. BCD has over 500 titles in its catalog ranging from urban, to rock and alternative, to classical, to country, to comedy, and to children’s titles.

BCD legitimately believes that it had proper authorization from the respective artists’ representatives as well as employees of Atlantic’s marketing department to distribute the Plies “Real Definitions” mixtape and the Gucci Manes “No Pad No Pencil” mixtape. However, promptly after receiving notice from Atlantic’s legal department (and prior to the legal action being commenced) BCD stopped selling both mixtapes – and BCD advised Atlantic that it would cooperate to resolve the dispute without the need for litigation. Even so, Atlantic maliciously filed suit against BCD in Federal Court in the Southern District of New York alleging copyright infringement.

Although BCD cooperated in removing the mixtapes from the distribution chain, BCD vigorously disputes Atlantic’s position in the case. BCD believes that the marketing people at Atlantic condone the sale of mixtapes to build awareness of a particular artist’s forthcoming studio album but, in a classic case of the right hand not knowing what the left hand is doing, the Atlantic legal department then comes to court with “unclean hands” and tries to punish BCD for doing precisely what Atlantic authorized it to do.

BCD fully expects to prevail in the event that Atlantic pursues the case any further.

How the Record Business Marketplace Works

Four “major” record company distributors, Universal Music Group, EMI/Capitol, SONY/BMG and Warner Music (of which plaintiff, Atlantic Records, is a subsidiary) generally control the marketplace for recorded music in a near monopolistic fashion.

Despite the ongoing efforts of these major record labels to control the marketplace and eliminate the smaller independent competitors, there is still a small, niche market in which independent distributors, such as BCD, thrive and survive.

How the Mixtape Marketplace Works

BCD sometimes distributes what are commonly known in the record industry as “mixtapes” which are usually sold in small quantities prior to the formal release by a major record company of a hip-hop recording artist’s studio-made album.

The mixtape format has become increasingly popular as a way of generating awareness and publicity for urban hip-hop artists. An unsigned artist might release several mixtapes to generate a grassroots groundswell of interest (or what is know in the industry as a “buzz”), leading to interest in that artist from the major record labels. An artist already signed to a major record label might release a mixtape album with full knowledge and support of the major label to promote a future studio album, relying on word of mouth about that mixtape to increase the artist’s credibility (or “street cred”) with the artist’s fans. The personnel in the marketing and promotion departments of the major record labels often encourage this behavior while the label executives and legal department look the other way since it benefits the artist’s public profile and leads to increased awareness and, therefore, increased sales of the forthcoming studio album and increased revenues for the major record companies. That is precisely what happened in this case.

Often each individual song recorded (referred to individually as a “track”) on a promotional hip-hop mixtape will feature a particular artist and contain numerous collaborations, remixes, freestyles and voice-overs, often arranged in a specific flowing fashion by a particular remix DJ (who may also add verbal flourishes or “shout outs” between and during the various tracks naming the artist and maybe even its record label so the artist’s fans build awareness of the forthcoming studio album). Most hip-hop mixtapes are professionally packaged with a pressed CD and artwork, Hip-hop mixtapes are usually given out at the artist’s live shows, or sold on the street, through independent record dealers or by mail order. Many mixtapes are also sold or given away for free in Mp3 format over the internet.

In a recent documentary film entitled “Mixtape, Inc.” the filmmakers attempted to show the importance of the practice and how it relates to the growing popularity of this music genre. Hip-hop mixtapes have been instrumental in supplementing the marketing and promotional endeavors of the major record labels, and are generally utilized by major recording acts with the implicit support of their major record labels. In some cases there are even provisions in an artist’s recording contract that acknowledge and permit such activities.

The Legal Details

Venue

A court may transfer an action to any other district where the case might have been brought if the transfer serves “the convenience of the parties and witnesses, [and is] in the interest of justice.”28 U.S.C. § 1404(a).  After determining that the action could have been brought in the transferee forum, the court goes on to consider whether the following factors clearly favor transfer:

(1) the convenience of witnesses; (2) the convenience of the parties; (3) the locus of operative facts; (4) the location of relevant documents and relative ease of access to sources of proof; (5) the availability of process to compel the attendance of unwilling witnesses; (6) the forum’s familiarity with the governing law; (7) the relative financial means of the parties; (8) the weight afforded plaintiff’s choice of forum; and (9) trial efficiency and the interests of justice generally. of witnesses and parties.  AEC One Stop Group, Inc. v. CD Listening Bar, Inc., 326 F.Supp.2d 525, 528 (S.D.N.Y.2004).

Atlantic first argued that by agreeing to the injunction, BCD waived its right to contest venue.  The court disagreed, because “[w]aiver of objection to improper venue only pertains to a motion to dismiss or transfer on the basis of improper venue pursuant to 28 U.S.C. § 1406(a), not to a motion to transfer for convenience and the interest of justice pursuant to 28 U.S.C. § 1404(a).” Smart v. Goord, 21 F.Supp.2d 309, 318 n. 6 (S.D.N.Y.1998) (collecting cases).

The court went on to balance the factors, and ultimately held that “BCD has not made the “clear and convincing” showing required to transfer this case to the Southern District of Texas. Accordingly, its motion to transfer pursuant to 28 U.S.C. § 1404(a) is denied.”

Contempt

Civil contempt requires the “movant [to] establish that (1) the order the contemnor failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the contemnor has not diligently attempted to comply in a reasonable manner.” Latino Officers Ass’n City of New York, Inc. v. City of New York, 558 F.3d 159, 164 (2d Cir.2009).

The court found the order was unambiguous, and rejected BCD’s suggestion that it was overbroad.  BCD argued that the order essentially rendered any artist found on the Atlantic website untouchable by BCD.  Despite the terms, the injunction was upheld “because BCD consented to it.”  In addition, the remedy for an overbroadness is modification, not violation.

As to proof of noncompliance, the court had no problem finding adequate evidence.  BCD argued that it properly contracted for the use of these recordings, and thus had a good faith belief that it was within its rights, but the court held “[t]he fact that the prohibited act was done inadvertently or in good faith, … does not preclude a citation for civil contempt,….” Vuitton et Fils S.A. v. Carousel Handbags, 592 F.2d 126, 129 n. 2 (2d Cir.1979).

Finally, the court stated that “the record offers clear and convincing evidence that BCD’s efforts to comply with the terms of the Prelim-inary Injunction Order were haphazard and sporadic.”

Sanctions

The court held “Since each album contains one infringing recording, BCD shall disgorge a percentage of the profits derived from that album equal to the infringing song’s proportionate share of the total number of songs on the album.”