Addressing for the first time whether obtaining a compulsory license to reproduce musical compositions on karaoke machines also allows for song lyrics to be displayed in coordination with the music, the U.S. Court of Appeals for the Ninth Circuit held that a compulsory license does not include the right to print or display song lyrics with the recordings. Leadsinger, Inc. v. BMG Music Publishing, Case No. 06-55102 (9th Cir., Jan. 2, 2008) (Smith, Jr., J.).

Leadsinger manufactures an “all-in-one” karaoke player. Instead of using the traditional compact disc and graphic (CD+G) format, Leadsinger imbeds “song chips” containing songs and lyrics inside a microphone. When connected to a television, Leadsinger’s microphone plays music through the TV’s audio system while the song lyrics appear on the TV screen.

Karaoke versions of songs may be created without the copyright holder’s permission by paying a statutory royalty fee for a “compulsory license” under Section 115 of the Copyright Act. Leadsinger had already paid for a compulsory license to reproduce and distribute the songs in its machines, but the owner of the lyric copyrights, BMG, said that the license did not allow Leadsinger to display the lyrics in sync with the music or reprint the lyrics in a booklet. BMG demanded that Leadsinger and other karaoke companies pay a “lyric reprint fee” and a “synchronization fee” to use the lyrics.

Leadsinger refused and filed for declaratory judgment asking the district court to declare that it had the right to print or display song lyrics with song recordings arguing that its karaoke products fall under the definition of “phonorecord,” like CDs or records, which are covered by a compulsory license. Alternatively, Leadsinger argued that its use of the lyrics was allowed as a fair use because the synchronized lyrics served “educational” purposes.

The district court, after concluding that a compulsory license did not allow Leadsinger to display visual images and lyrics in real time with music and that the allegations in Leadsinger’s complaint did not support its fair use claim, dismissed Leadsinger’s complaint. Leadsinger appealed.

A three-judge panel of the Ninth Circuit affirmed, determining that a compulsory license did not permit Leadsinger’s use of the song lyrics because Leadsinger’s karaoke device was not a phonorecord, but was rather an “audiovisual work” due to the lyrics and content being displayed in connection with the song. The Ninth Circuit thus follows the Second Circuit’s 1996 decision in ABKCO Music, Inc. v. Stellar Records, Inc. (the only circuit court precedent on the issue), where the Second Circuit held that CD+Gs are not covered by compulsory licenses because they are audiovisual works. The Ninth Circuit also held that Leadsinger’s use of the lyrics did not qualify as fair use based on its commercial nature.

As a result, the Court found that in addition to any compulsory licenses required to produce and distribute phonorecords and any reprint licenses required to reprint song lyrics, Leadsinger must obtain synchronization licenses to display images and song lyrics with the recorded music.

Practice Note: While Leadsinger aligns the Ninth Circuit with the Second Circuit, it conflicts with a May 2007 Utah district court decision holding that synchronization licenses are not required for karaoke products that display only the text of lyrics, because they represent a display of a literary rather than an audiovisual work. While the Tenth Circuit has not yet addressed the existence or scope of synchronization rights, a circuit split could materialize if the Utah case is appealed and the district court’s decision is upheld.