No knowledge in secondary copyright infringement of Eminem's first album

Rap star Eminem (Marshal Bruce Mathers III) became famous after his second album in 1999. His lesser-known first album, 'Infinite', recorded in 1996 was less successful, but was the subject of this recent dispute before Judge Hacon in the Intellectual Property Enterprise Court.

Funky Bass Team Productions (FBT), a record company based in Detroit brought an action of copyright infringement against the defendants; Let Them Eat Vinyl Distribution (LTEV) a record company and Plastic Head Music Distribution (PHM) [related companies operating from the same address], after LTEV made vinyl copies of the Infinite album and supplied them to PHM who sold them, together with CD copies supplied by David Temkin (Boogie Up Productions).

There were two key issues in the case:

1. Whether FBT owned the copyright in the sound recordings

2. Whether PHM knew or had reason to believe that the vinyl copies of Infinite which it sold, and the CD copies which it imported and sold, were infringing copies of the sound recording.

Background

Brothers Mark and Jeff Bass (the Bass brothers) run a recording studio in Detroit known as FBT, they discovered local artist Eminem in 1995 and signed a recording contract with him, resulting in the Infinite album bring released on the Bass Brothers' 'Web Entertainment' label on 12 November 1996. In 1998 Eminem and the Bass Brothers signed an agreement with Aftermath Entertainment, a division of Universal Music, following which Eminem released his second album, The Slim Shady LP in 1999. 

A CD version of Infinite was later distributed in Europe by a German company called Intergroove Tonträger-Vertriebs who obtained a catalogue supplied Boogie Up Productions. Intergroove ceased trading in 2013 following which Mr Temkin approached PHM who signed a distribution agreement with Boogie Up on 1st August 2013.

In 2014, PHM were advised that Boogie Up had acquired the right to license the making of vinyl format copies of Infinite. PHM decided to approach the Mechanical Copyright Protection Society (MCPS) for a licence. MCPS responded that it had no claim in relation to Infinite and was therefore unable to grant the licence. Nevertheless, MCPS approved the manufacture of a maximum of 2,931 vinyl copies. The copies were made by LTEV, all of which were supplied to and distributed by PHM who distribution them until 9 October 2016.

1. Ownership of the copyright

The first owner of copyright in a sound recording is usually the person who owns the record on which the first recording was made, often meaning the producer - as the person who made the arrangements. The defendants attempted two arguments to demonstrate that FBT was not in fact the copyright owner of the sound recordings.

 

Would the real copyright holder please stand up?

First, the defendants argued that in the 1995 agreement with Eminem the Bass Brothers were defined as "Company"; speculating that there might be a real company, nowhere identified, which was the first owner of the copyright. The 1995 agreement assigned Eminem's copyright in his songs written or recorded, but there was no term governing the copyright in the sound recordings.

FBT's witness, Joel Martin (manager of FBT and former manager of business affairs for the Bass Brothers) gave evidence that the Bass Brothers were a partnership in 1995. He could not say why the attorney who drafted the 1995 agreement used 'Company' for the Bass Brothers.

Pointing to the definitions clause which specified that "'Company' means F.B.T. Productions, its licensees, lessees, affiliates, subsidiaries and assigns", Hacon was satisfied that since FBT was identified which was the trading name of the Bass Brothers partnership and the agreement was signed by Marshall Mathers and Mark Bass as Partner, F.B.T. Productions, there was no phantom other company.

The second argument pursued by the defendants regarding ownership of the copyright, concerned the 1998 agreement between Eminem, the Bass Brothers and Aftermath Entertainment which stated: "F.B.T. hereby irrevocably sells, transfers and assigns to Aftermath all right, title and interest in and to the Master Recordings listed in Schedule 1 hereto featuring Artist's performances which were recorded prior to the date hereof (the 'Acquisition Masters') from the Inception of Recording, including, without limitation, the copyrights in the Acquisition Masters and the right to secure such copyrights and all renewals and extensions of such copyright, perpetually and throughout the Territory." But, the plot thickens...Schedule 1 was blank.

In what Hacon called "wishful thinking" , the defendants speculated that there had been an incomplete disclosure by FBT and that Schedule 1 would reveal Infinite listed – resulting in Aftermath Entertainment being the copyright holder.

It could have been that the Bass Brothers (in the capacity of the producers) intended to sign Eminem to a production agreement (sometimes known as a lease-tape deal). Production teams such as Stock Aitken and Waterman were quite famous for doing this – where they sign an artist, develop them and then license/assign the recordings to a major label which does the marketing and distribution. If this was the intended purpose of the Aftermath deal, it could have legitimately included existing, as well as new, recordings and the blank schedule was therefore a mistake.

The introduction of the agreement specified its purpose of FBT furnishing to Aftermath the exclusive recording services of Eminem. Hacon stated that the agreement did no more than allow for the possibility of an assignment of copyright in earlier recordings, which would have been listed in Schedule 1 if that were so. In his view, Schedule 1 was blank because there was no agreement to assign copyright in earlier recordings and so held that FBT was the owner of the copyright.

2. Knowledge or Reason to Believe in Secondary Copyright Infringement 

By the end of the trial it was not in dispute that FBT owned the Copyright and so LTEV was liable for primary infringement by making vinyl copies of Infinite. The second issue discussed in the case concerned secondary infringement by PHM. 

Distribution of the vinyl albums and CDs by PHM constituted secondary copyright infringements under section 23 of the Copyright, Designs and Patents Act 1988, which specifies that copyright is infringed by a person who distributes, in the course of business, a work which they know, or have reason to believe is, an infringing copy of the work. The issue was whether PHM knew or had reason to believe that this was the case, specifically whether this was true of Mr Beatty, owner of LTEV, a shareholder in PHM and Managing Director of both companies.

See no evil, here no evil, liable for no evil

FBT referred the Court to Columbia Pictures Industries Inc v Robinson [1987] 1 Ch 38 where Scott J said that a person who deliberately refrains from inquiry and shuts their eyes to that which is obvious, cannot be heard to say that they lacked the requisite knowledge. In addition, in L.A. Gear Inc v Hi-Tech Sports plc [1992] FSR 121, Morritt J stated "…it seems to me that 'reason to believe' must involve the concept of knowledge of facts from which a reasonable man [person] would arrive at the relevant belief. Facts from which a reasonable man might suspect the relevant conclusion cannot be enough. Moreover, as it seems to me, the phrase does connote the allowance of a period of time to enable the reasonable man to evaluate those facts so as to convert the facts into a reasonable belief."

Hacon noted that often where 'reason to believe' has been in issue, liability had turned on what happened after the defendant received notice and questions of what constituted sufficient notice. In the present case, the cessation of sales was sufficiently brief to constitute a reasonable period.

In order to ascertain whether, viewed objectively, a reasonable record distributor in Mr Beatty's position would have arrived at the belief that they were infringing copies, the court must consider all the relevant facts known to him regarding the copies of Infinite he was distributing. In this context the reasonable person is not a lawyer and belief need not include a realisation of the full details of why there was an infringement of copyright, such as the identity and nature of the copyright work in question, precisely who owns the copyright or why there was no licence from the owner. It is enough, Hacon stated, if the facts would have led a reasonable person to believe that dealing in the copies would be in breach of a right in the nature of copyright held by some other person. However, merely suspecting that this is the case would not be enough.

Mr Beatty had approached MCPS, described by Hacon as actions of a man who wanted to ensure that he had obtained the necessary rights. MCPS informed him that it did not have the right to grant a licence but approved the making of a limited number of copies for which an 8.5% royalty was charged. This is peculiar since MCPS say that they collect royalties on behalf of their members. They weren't mandated by the composition owners in this case and yet did so anyway?! Nevertheless, since they agreed and Mr Beatty paid the royalty fee, this fell in his favour as demonstrating that he believed he was dealing in legal copies. In addition, the sleeve of the vinyl album provided that it was manufactured and distributed by PHM under licence from Boogie Up. Hacon considered this not to be the behaviour of a man who believed he was dealing in unlicensed 'bootleg' albums. Further, the CDs of the album had been sold for some time by Intergroove without complaint, Mr Beatty had a substantial business in lawfully selling albums and would not risk his reputation by "selling bootlegs" and responded quickly to the complaint.

FBT argued that Mr Beatty was experienced enough in the business to realise that further investigation was necessary and that a reasonable person in Mr Beatty's position would have expected to receive a master tape from a party offering a legitimate licence to make vinyl copies of Infinite.

However, Hacon stated that he fact that LTEV made its copies of Infinite from a WAV file rather than a Master Tape was not important and in his view Mr Beatty neither knew nor had reason to believe that the vinyl and CD copies of Infinite sold by PHM were infringing copies of another party's copyright work. 

Therefore, LTEV was found to infringe the copyright of FBT by creating vinyl copies of the Infinite album. However, neither of the defendants was liable for any of the secondary acts of infringement pleaded (importing, offering for sale and selling copies of the Infinite album).

Thank you to Alex Cole from Russells for his assistance with this post!