'94 Sounds LLC v. Perez

Background

‘94 Sounds LLC brought one copyright-infringement claim against Alexander Gabriel Perez and Theory Entertainment LLC d/b/a 300 Entertainment. The complaint alleged that Perez used a musical recording—the “Work”—in two recordings of his own and that the Work was also used without permission in a music video. The complaint alleged that ‘94 Sounds had acquired rights to the Work under a “Buyout Agreement.” That agreement acknowledged that the Work’s original author had granted certain third parties nonexclusive licenses.

The complaint identified 300 Entertainment as Perez’s record label and alleged that, with Perez’s authorization, it reproduced, displayed, publicly performed, and distributed the Work as part of the allegedly infringing recordings.

Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a legal claim. They argued that their use of the Work was authorized by a “License Agreement.” The agreement was entered into by Joseph DeRose, who the defendants said acted as Perez’s manager. The defendants also asserted that DeRose had power of attorney under a management agreement to enter certain agreements for Perez, and that the alleged infringement fell within the license’s scope.

The defendants filed the License Agreement, but not the management agreement or another contract purporting to extend the license to the defendants.

Court’s Analysis

The court explained that a copyright-infringement plaintiff generally must show ownership of a valid copyright and unauthorized copying. A license is ordinarily an affirmative defense that the alleged infringer must plead and prove. But when the dispute concerns the scope of an existing license, rather than whether any license exists, the copyright owner must show that the copying was unauthorized under the license.

The court stated that license agreements may sometimes be considered at the motion-to-dismiss stage when they are incorporated into or integral to the complaint. Here, the License Agreement could properly be considered because it was incorporated into the Buyout Agreement referenced in the complaint. However, the court could not determine from the materials presented how the License Agreement applied to the defendants. On its face, the License Agreement identified DeRose as the licensee, and the defendants had not provided a basis to conclude that ‘94 Sounds had notice of a contractual or agency relationship making the agreement applicable to Perez or 300 Entertainment.

The court added that, if a power of attorney existed that defeated the complaint’s allegations of unauthorized use, further litigation could waste judicial resources. But the materials before the court did not establish that point at the motion-to-dismiss stage.

Disposition and Next Steps

The court denied the defendants’ motion to dismiss. It directed the parties, within 45 days after the order’s entry, to meet and confer about resolving the action without further court involvement. If they could not resolve the matter, the court encouraged them to agree to a brief period of expedited discovery concerning the License Agreement and the power of attorney. Within 30 days after that discovery, the parties were directed to submit a joint letter addressing the case’s status, including whether the defendants intended to seek summary judgment based on the License Agreement and related documents.

The order did not decide whether the defendants infringed the copyright or whether the license ultimately authorized their conduct.