Music Publishers v. MP3.com

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK


MPL COMMUNICATIONS, INC. and PEER INTERNATIONAL CORPORATION

Plaintiffs,

vs.

MP3.COM, INC.,

Defendant.


Case No.: 00 CIV. 1979



COMPLAINT FOR
COPYRIGHT
INFRINGEMENT




MPL Communications, Inc. ("MPL") and Peer International Corporation ("Peermusic"), by their attorneys Paul, Weiss, Rifkind, Wharton & Garrison, upon information and belief (except as to allegations regarding plaintiffs and the rights they assert herein) allege for their complaint as follows:



NATURE OF ACTION

1. Plaintiffs are music publishers that own or control copyrights in musical compositions and bring this action for copyright infringement to redress the pervasive and willful theft of their copyrighted music by defendant. Defendant MP3.com, Inc. has publicly boasted that it has deliberately copied over 80,000 compact discs ("CDs") containing copyrighted musical compositions onto its computer servers without seeking or obtaining the copyright owners' permission. Defendant is currently using those copies to make unauthorized digital phonorecord deliveries, within the meaning of 17 U.S.C. 115, of copyrighted musical compositions over the Internet. Despite written notice that its actions constitute copyright infringement, defendant has continued to make unauthorized copies of copyrighted musical works at the astonishing rate of 1,500 additional CDs per day.

2. By this action, plaintiffs seek judgement (a) declaring that defendant's unauthorized copying of plaintiffs' copyrighted musical works specified below (the "Copyrighted Works"), onto defendant's file server willfully infringes plaintiffs' copyrights in violation of the Copyright Act, 17 U.S.C. 101 et seq. ("Copyright Act"); (b) declaring that defendant's unauthorized digital phonorecord deliveries of the Copyrighted Works over the Internet willfully infringe plaintiffs' copyrights; and (c) awarding plaintiffs legal and equitable relief, as specified below, to remedy defendant's willful and continuing violation of plaintiffs' copyrights in the Copyrighted Works.


JURISDICTION AND VENUE

3. This court has jurisdiction over these claims pursuant to 28 U.S.C. 1331 and 1338(a). This court has venue under 28 U.S.C. 1391(b) and (c) and 1400(a).


THE PARTIES

4. Plaintiff MPL is a New York corporation, with its principal place of business at 39 West 54th Street, New York, New York, and is actively engaged in the business of music publishing, whereby it licenses the recording, reproduction and distribution of musical works for which it either owns or controls the copyrights.

5. Plaintiff Peermusic is a New Jersey corporation, with its principal place of business at 810 Seventh Avenue, New York, New York, and is actively engaged in the business of music publishing, whereby it licenses the recording, reproduction and distribution of musical works for which it either owns or controls the copyrights.

6. Defendant is a public corporation organized under the laws of the State of Delaware, with its principal place of business in San Diego, California. Defendant maintains a commercial Web site (http://www.mp3.com) that provides, among other things, digital phonorecord deliveries of musical works. Defendant's service is targeted to and used by residents of the State of New York and this District, among others, and infringes plaintiffs' copyrights in this District.


FACTS

The Copyrighted Works

7. MPL owns the copyrights in the musical compositions "Heartbeat," written and composed by Bob Montgomery and Norman Petty, for which the Register of Copyrights duly issued Registration Certificates No. EU 538477 and No. EP 125819 and Renewal Registrations No. RE 290-918 and No. RE 290-928; "Oh Boy!," written and composed by Sunny West, Bill Tilghman and Norman Petty, for which the Register of Copyrights duly issued Registration Certificate No. EP 114842 and Renewal Registration No. RE 251-107; "Rave On," written and composed by Sunny West, Bill Tilghman and Norman Petty, for which the Register of Copyrights duly issued Registration Certificates No. EU 506585 and No. EP 119481 and Renewal Registrations No. RE 251-148 and No. RE 298-044; and "Real Wild Child (Wild One)," written and composed by Johnny O'Keefe, Johnny Greenan and Dave Owens, for which the Register of Copyrights duly issued Registration Certificates No. EU 514372 and No. EP 122746 and Renewal Registrations No. RE 291-563 and No. RE 291-552.

8. Peermusic owns the copyrights in the musical compositions "Besame Mucho," written and composed by Consuelo Velasquez, for which the Register of Copyrights duly issued Registration Certificate No. EF No. 65106 and Renewal Registration No. R 436261; "Preciosa," written and composed by Rafael Hernandez, for which the Register of Copyrights duly issued Registration Certificate EU 156635 and Renewal Registration No. R 625775; and "Walk Like an Egyptian," written and composed by Liam Sternberg, for which the Register of Copyrights duly issued Registration Certificate No. PA 278-841.

The Infringing Activities

9. Defendant was incorporated in March 1998 and went public 16 months later on July 21, 1999, with an initial market capitalization of over $4.3 billion. From its formation through the present time, defendant has generated substantial operating losses and has never reported a profit.

10. Defendant copies sound recording containing musical works onto its computer servers, enabling it to transmit musical works to consumers over the Internet. Defendant utilizes a non-proprietary technology protocol commonly known as "MP3" to accomplish this.

11. Prior to the events giving rise to this action, defendant maintained that it contracted for the music on its Web site, most of which consisted of songs by lesser-known, emerging artists. Defendant was frequently criticized in the press for providing mediocre music and not promoting its more promising bands. Defendant's chief executive officer Michael Robertson admitted this in the January 12, 2000 issue of The Industry Standard: "One of the complaints with MP3.com and it's a warranted complaint is that people say, 'You're doing all these great things with music, but it's not the music I like.' We need to have all the music . . ." (emphasis added).

12. Reflecting this fundamental weakness in its business model, defendant's share price plummeted from nearly $60 in early November 1999 to as low as $28-1/4 in late December 1999. Defendant's market capitalization fell commensurately, by over one-half -- from $ 4.1 billion to $ 1.9 billion.

13. Defendant's principal source of operating income is not directly from the sale of digital phonorecord deliveries of music by lesser-known artists, but from the sale of advertising space on its Web site to third parties. According to defendant's public filings with the U.S. Securities and Exchange Commission, income from selling advertising space constituted between 70 and 90% of defendant's net revenues during 1998-99. Defendant's SEC filings further disclosed that its "success depends on having a Web site that offers high quality and diverse music choices, all of which come from outside artists" that "attract consumers to our website frequently" (emphasis added).

14. In order to meet that demand for "quality" content from "outside artists" -- and prop-up its sagging share price -- defendant, on our about January 12, 2000, introduced a new "service," called "My.MP3.com." According to defendant's press release announcing My.MP3.com, "[t]he new service, currently free to consumers, contains two breakthrough products -- Instant Listening and Beam-it -- that allow consumers to store, customize and listen to their CDs from anywhere, anytime using the open portals of web-enabled devices."

15. Contrary to defendant's January 12, 2000 press release, defendant's new service does not enable customers to store and listen to their CDs. Users do not and cannot copy their CDs onto defendant's servers. Instead, as defendant admitted in The Wall Street Journal on March 1, 2000, MP3.com has itself systematically copied tracks from over 80,000 copyrighted audio CDs onto its computer servers in order to enable it to transmit these works to consumers for a profit.

16. When a user accesses sound recordings through My.MP3, the user accesses these infringing copies and not, as defendant has misrepresented to consumers, the user's own CDs. Upon request, a sound recording is transmitted from defendant's Web site over the Internet and "downloaded" to the user's personal computer.

17. Prior to launching its new My.MP3 service, defendant was fully aware that its new service would infringe the copyrights in tens of thousands of musical works. Defendant's CEO Robertson told The Wall Street Journal that "[w]e said this is going to send an explosion through the industry" and therefore gave his then secret project a code name -- "Da Bomb." Defendant dubbed its CD copying operation "Da Bomb Factory."

18. Defendant's new "service" is a cynical attempt to exploit the value of famous songs without the copyright owners' consent in order to attract greater "traffic" to its website so as to boost its advertising revenues and flagging share value. Indeed, defendant has already announced its intention to transform My.MP3 into a subscription service for which consumers will have to pay, thus generating even more revenue from the unauthorized use of copyrighted works.

19. Defendant has copied sound recordings of plaintiffs' Copyrighted Works from CDs onto its computer servers and is making digital phonorecord deliveries of those compositions to consumers over the Internet. Defendant neither sought nor obtained any license or other authorization from plaintiffs to make such copies or digital phonorecord deliveries of their Copyrighted Works.

20. Plaintiffs have advised defendant that (i) copying their Copyrighted Works onto defendant's computer server and (ii) making digital phonorecord deliveries of their Copyrighted Works over the Internet violates their exclusive statutory rights under the Copyright Act. Plaintiffs have urged defendant to stop its infringing activities. Defendant has refused to do so and continues to maintain copies of the Copyrighted Works on its server and to make digital phonorecord deliveries of the Copyrighted Works over the Internet.


FIRST CAUSE OF ACTION
(For Copyright Infringement By MPL and Peermusic Against MP3.com)

21. Plaintiffs repeat and reallege the allegations contained in paragraphs 1-20 as if fully set forth herein.

22. The unauthorized copying of plaintiffs' Copyrighted Works onto defendant's computer server infringes plaintiffs' exclusive rights to reproduce these compositions under Sections 106 and 115 of the Copyright Act.

23. Defendant's infringement of the copyrights in the Copyrighted Works has been and continues to be intentional, willful, and with full knowledge of plaintiffs' copyrights.

24. Defendant's conduct, as set forth herein, is causing and, unless enjoined and restrained by this Court, will continue to cause plaintiffs irreparable harm.


SECOND CAUSE OF ACTION
(For Copyright Infringement by MPL and Peermusic Against MP3.com)

25. Plaintiffs repeats and reallege the allegations contained in paragraphs 1-24 as if fully set forth herein.

26. The unauthorized making of digital phonorecord deliveries of plaintiffs' Copyrighted Works over the Internet infringes plaintiffs' exclusive rights to reproduce and distribute those compositions under Sections 106 and 115 of the Copyright Act.

27. Defendant's infringement of the copyrights in the Copyrighted Works has been and continues to be intentional, willful, and with full knowledge of plaintiffs' copyrights.

28. Defendant's conduct, as set forth herein, is causing and, unless enjoined and restrained by this Court, will continue to cause plaintiffs irreparable harm.

WHEREFORE, plaintiffs respectfully request judgment against defendant as follows:

(a) declaring that defendant's unauthorized copying of plaintiffs' Copyrighted Works onto defendant's file server willfully infringes plaintiffs' copyrights in violation of the Copyright Act;

(b) declaring that defendant's unauthorized digital phonorecord deliveries of plaintiffs' Copyrighted Works over the Internet willfully infringes plaintiffs' copyrights in violation of the Copyright Act;

(c) ordering that defendant remove all copies of plaintiffs' Copyrighted Works from defendant's computer servers and Web site;

(d) ordering that defendants deliver up for destruction all infringing materials, including all discs, drives or other storage media, that contain infringing copies of plaintiffs' Copyrighted Works;

(e) awarding plaintiffs, at their election, either (i) actual damages and the profits derived by defendant as a result of their infringing activities, pursuant to 17 U.S.C. 504(b), or (ii) statutory damages in the maximum amount of $150,000 with respect to each of plaintiffs' Copyrighted Works, pursuant to 17 U.S.C. 504(c);

(f) enjoining defendant and its respective agents, employees, officers and directors, attorneys, successors, licensees, and assigns, and all those persons acting in concert and combination therewith, from further infringement of plaintiffs' copyrights in the Copyrighted Works; and

(g) granting plaintiffs such other and further relief as this Court deems just and proper.




Dated: New York, New York
March 14, 2000

Respectfully submitted,

PAUL, WEISS, RIFKIND, WHARTON & GARRISON



[signature]
Carey R. Ramos (CR-7880)
Aidan Syncott (AS-0224)
Michael C. Keats (MK-2342)



1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000



Attorneys for Plaintiffs MPL Communications, Inc.
and Peer International Corporation





Of Counsel:

Charles J. Sanders
The Harry Fox Agency
711 Third Avenue
New York, New York 10017
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