January 10, 2012 7:25pm PT by Eriq Gardner
Karaoke CD Manufacturer Strikes Back At Sony's $1 Billion 'Scheme'
Has your local bar obtained all the appropriate licenses to run "Karaoke Night"? If not, it could be singing a sad song to the tune of more than a billion dollars.
Sound a bit much? Well, one manufacturer and distributor of karaoke discs has just taken Sony/ATV Music Publishing to California federal court to get a declaration that it doesn't owe $1.28 billion for 6,715 acts of alleged infringement. The plaintiff not only wants to limit its liability, but also is seeking to punish the music publisher for unfair trade practices.
Karaoke might be fun, but it's also proved legally dangerous over the years.
One of the main reasons for this is that karaoke embodies various different rights. The use of the original music as the background score requires a license over the master recording. The use of the song composition requires a mechanical license too. When songs are performed in public, that requires payment to a PRO like ASCAP or BMI. When the music is matched to video images, it requires a synchronisation license. And if the lyrics are being republished, that might require an additional fee too.
But KTS Karaoke, a manufacturer of discs, is making a new challenge against Sony/ATV, which is a joint venture between Sony and the estate of Michael Jackson.
In its lawsuit, KTS says that SonyATV has long since known about its operation, and rather than take reasonable steps to stop such products at its source, the defendant has:
"instead committed copyright misuse by seeking to secure multiple license fees for the same allegedly infringed work by suing each link on the distribution chain, by demanding license fees for licensed goods and by attempting to obtain more than one statutory damage award for the continuing infringement (i.e., down stream distributions of the infringing work) of a SINGLE WORK."
In other words, if karaoke creates horizontal liability because record companies, music publishers, performance rights organizations, etc. can all demand a cut, there's also vertical liability because the karaoke machine is manufactured, the karaoke disc is produced, then distributed, then performed.
KTS wants a declaration that Sony is only eligible for one statutory award per work, which would trim the nearly $1.3 billion that Sony allegedly says it is due, but perhaps just as importantly, the karaoke manufacturer is bringing a bold copyright misuse claim that seeks to punish the publisher for trying to "recover multiple times for the same allegedly infringing conduct at rates greater than if the claims had been asserted against the manufacturers."
The company goes on to state that this "scheme" is not meant to stop the infringement, but rather to encourage it for the purpose of illegally extracting multiple recoveries. KTS wants damages for unfair competition and unfair trade practices and to order Sony/ATV to be permanently enjoined from such behavior.