District court holds owners of Wolfgang’s Vault, collection of websites that offer streaming and downloading of thousands of recordings of live concert performances, liable for willful copyright infringement, ruling that Copyright Act’s compulsory mechanical license regime does not apply to audiovisual recordings, and finding that defendants were unable to show that they were entitled to compulsory licenses for their audio-only concert recordings.

Plaintiffs, a collection of six groups of music publishers, brought copyright infringement claims against defendants William E. Sagan, Bill Graham Archives LLC and Norton LLC, owners and operators of Wolfgang’s Vault, an online collection of recordings of thousands of live concert performances. The collections consisted primarily of audio and audiovisual recordings of concert performances from the 1960s to the 2000s by artists such as the Rolling Stones, The Who and the Grateful Dead. Defendants acquired the concert recordings primarily from the concert promoters and concert venues that recorded the concerts. Defendants converted those recordings to digital format and made them available for streaming or download to subscribers of their websites. Plaintiff music publishers asserted that defendants’ exploitation of the recordings constituted copyright infringement of more than 200 works to which they owned the copyrights.

The district court first noted that the Copyright Act grants holders of copyrights in musical works — the lyrics, melody, harmony and rhythm — the exclusive right to reproduce those musical works in copies or phonorecords, and to distribute those copies or phonorecords to the public. That exclusive right is limited by the narrow exception for compulsory mechanical licenses under Section 115 of the Copyright Act, which permits the making and distribution of phonorecords of musical works, as long as the compulsory licensee complies with certain requirements. Those requirements include sending advance notice of the licensee’s intention to make and distribute phonorecords. They also require licensees wishing to reproduce musical works contained in sound recordings fixed by another to show that (1) the recording was “fixed lawfully,” and (2) the recording was made with the authorization of the copyright holder, or, for recordings fixed before Feb. 15, 1972, with a compulsory or negotiated license from the owner of the underlying musical work.

In cross-motions for summary judgment, defendants argued that from 2007 to the present, they had valid licenses to exploit the works — either compulsory mechanical licenses under Section 115 or licenses obtained through third-party licensing agents or licensing vendors.

Plaintiffs first argued — and the court agreed — that defendants’ audiovisual recordings were not eligible for compulsory mechanical licenses because Section 115 applies only to “phonorecords,” which are defined by Section 101 of the Copyright Act as:

material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed ... and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term “phonorecords” includes the material object in which the sounds are first fixed.

The court found unpersuasive defendants’ argument that “the material object in which the sounds are first fixed” could include the audiovisual recordings of the concerts, which “first fixed” the sound of those recordings, concluding that audiovisual works were categorically excluded in the definition.

Plaintiffs next argued that defendants’ recordings were not “fixed lawfully,” as required by Section 115(a)(1). The parties agreed that Section 115 required defendants to obtain the consent of the performing artists whose performances are captured in the recordings, but disagreed as to whether defendants had properly obtained the consent, and as to whether lawful fixation also required the consent of the copyright owner of the underlying musical work. Addressing the issue of performer consent first, the court concluded that defendants’ reliance on the 2009 Joint Exploitation Agreements with certain record labels, executed decades after the recordings at issue were fixed, was misplaced, because the agreements did not purport to “acknowledge that the recordings were lawfully made,” provide written consent from the artists themselves, or make any representations as to whether the artists consented to the initial fixation of these recordings. Likewise, other third-party agreements upon which defendants relied were insufficient to establish performer consent.

Agreeing with plaintiffs that there was no evidence that performer consents had been obtained, and that contrary evidence established that consent did not exist, the court concluded that defendants’ recordings were not “lawfully fixed,” and thus not eligible for compulsory licenses under Section 115. For recordings created prior to Feb. 15, 1972, Section 115 further requires consent “by any person who fixed the sound recording pursuant to an express license from the owner of the copyright in the musical work or pursuant to a valid compulsory license for use of such work in a sound recording.” The court found that defendants were likewise unable to demonstrate that they had obtained such authorization from the holders of the copyrights.

Although defendants argued that they held licenses from the Harry Fox Agency for certain of the recordings at issue, the court held that the HFA licenses were merely slight variations of the compulsory license under Section 115, and that defendants therefore lacked valid HFA licenses for the same reason defendants were not eligible for licenses under Section 115.

As a further independent basis for finding defendants’ mechanical licenses invalid, plaintiffs argued that defendants filed the notices required under the Copyright Act months or years after they admittedly began exploiting those recordings, rather than before or within 30 days after making — and before distributing — any phonorecords of the musical works. Rejecting defendants’ argument that, as a legal matter, the incorrect date of distribution on their notices was “harmless error,” the court held that material issues of fact existed as to whether and which notices were actually timely submitted.

In sum, the district court found that defendants held no valid licenses to reproduce and distribute plaintiffs’ musical works, and that defendants’ use therefore constituted infringement. The court found that defendants’ infringement was willful with respect to the majority of works at issue, because there was undisputed evidence that defendants were on notice that the licenses they relied upon were invalid. The court also rejected defendants’ additional defenses, finding no implied licenses based on plaintiffs’ acceptance of royalty payments for certain of the recordings pursuant to ostensibly valid compulsory licenses, because defendants could not show a “meeting of the minds” between the parties. The court held that defendants failed to establish a basis for estoppel for similar reasons. The court held that Mr. Sagan was liable for infringement in his individual capacity, because all persons who participate in an infringement are jointly and severally liable as copyright infringers. The court denied plaintiffs’ request for a permanent injunction, however, finding that although there was “no question” plaintiffs had been harmed, that harm could be compensated.