Thought this might be of interest.
June 2, 2003 (naxos.com)
New York, USA - On November 22, 2002 Capitol Records, Inc.
brought an action against Naxos of America in the United States
District Court, Southern District of New York. Capitol brought
the action for unfair competition, misappropriation of property,
unjust enrichment and common law copyright infringement. Capitol
challenged Naxos' distribution of historic recordings dating
from the 1930's featuring performances by Yehudi Menuhin, Edwin
Fisher and Pablo Casals. Capitol claimed to be the owner of all
rights in the United States to the original recordings. Capitol
complained that Naxos sold and distributed its restorations of
the original recordings throughout the United States in bad
faith, at substantially discounted prices in direct competition
with Capitol's recordings of the same performances, often in the
same retail outlets.
The Court, in finding for Naxos, noted that Naxos used the
original discs, the so-called shellacs (78rpm shellac discs) to
restore the performances. The restorations involved artistic
choices and the use of the latest digital software. Naxos has
distributed and sold its restorations at discount prices since
about October, 1999 throughout the United States. The Court
took notice of the fact the Naxos restorations have been widely
praised by classical music critics.
Naxos had claimed that EMI expressly disclaimed any exclusive
commercial interest in the original recordings made more than
50 years ago and that Capitol had, furthermore, failed to pursue
many other companies engaging in restorations of the original
recordings. The Court completely agreed with Naxos.
The Court found that Capitol has no rights in the original
recordings and that the English copyrights in the recordings had
long since expired. The Court also found ambiguity concerning
Capitol's chain of title in all agreements. The Court further
found that Capitol waived or abandoned any interests it had in
the original recordings. Capitol's lax practices were found
consistent with EMI's disclaimer of any intellectual property
rights in any sound recordings made prior to 1957 and which are
more than 50 years old. Naxos therefore operated under the good
faith belief that the recordings at issue are in the public
domain, said the Court.
The Court further found that Naxos has not competed unfairly.
Since Capitol has no rights in the original recordings it cannot
charge Naxos with unfair competition. Naxos never falsely
advertised its restored products as duplicates of the originals
and did not simply copy Capitol/EMI's restorations. Naxos
employed significant effort to create entirely new and commercially
viable products. Naxos did not profit from the labour, skill,
expenditures, name and reputation of others but rather created
and marketed new products relying on its own labour, skill, and
reputation.
The Court found that the quality and nature of the restorations
stand as evidence to the fact that Naxos did not aim to simply
duplicate the original recordings and capitalize on Capitol's
efforts. Instead, Naxos worked to create new products with
superior sound.
The Court agreed that the Naxos restorations do not discourage
but rather encourage the preservation and dissemination of fine
performances. The Court even felt that it was possible that the
Naxos restorations have revived the relevant market in historical
classical performances to Capitol's benefit. The Naxos restorations
help ensure that quality historic performances are commercially
available for the present generation and well preserved for the
next, the Court said.
The Court clearly concluded that Naxos lacks the bad faith
necessary in a common law unfair competition claim because Naxos
neither attempted to sell its records as Capitol's, nor sell
Capitol's records as its own. Naxos did not misappropriate
Capitol's labour and expenditures, but rather sought to profit
from its own efforts and ingenuity.
The Naxos motion to dismiss the Capitol action was granted by
the court and converted to a summary judgment. The Capitol
motion for partial summary judgment was denied. All substantive
issues were decided in the favour of Naxos.
Cary Ginell
Sound Thinking Music Research
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Karl
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