In a declaratory judgment action under the Copyright Act, the Ninth Circuit Court of Appeals affirmed the district court’s dismissal of the complaint seeking a declaration of non-infringement, where the devices manufactured by the plaintiff, a maker of karaoke machines, displayed the lyrics of musical compositions in sync with accompanying sound recordings. Although the plaintiff alleged it had obtained compulsory mechanical licenses to play the sound recordings, the Ninth Circuit ruled that the plaintiff’s devices were audiovisual works for which the compulsory mechanical licenses were insufficient. Accordingly, the court held the plaintiff was required to obtain a reprint license to print the lyrics as well as a synchronization license to play the sound recordings in timed-relation to the audiovisual display of the lyrics.
Noting that the “posture of this case is unusual because the district court decided the fair use issue on a motion to dismiss,” the Ninth Circuit nonetheless rejected the plaintiff’s fair use argument, holding that the plaintiff’s allegations, taken as true, were insufficient to establish fair use. Analyzing the plaintiff’s allegations under the familiar four-factor analysis, the court found: (1) the use was commercial in nature, and not transformative, (2) the infringed compositions are works of creative expression, (3) the plaintiff’s devices used the copyrighted lyrics in their entirety, and (4) the complaint failed to establish lack of harm to the commercial market for the lyrics. Notably, the court affirmed the district court’s dismissal without leave to amend, explaining that no amendments would change the fact that the karaoke devices are audiovisual works that are not covered by compulsory mechanical licenses. As to fair use, the court explained that while amendments to the complaint might affect the fourth prong of the analysis – the effect on the commercial market for the lyrics – no amendments could alter the ultimate conclusion that the display of the lyrics was not fair use. “That amendments relating to the fourth § 107 factor are a possibility is not enough to find that the district court abused its discretion given that the first three factors under § 107 militate against a finding of fair use.”