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5 April 2005

Capitol Records Wins Copyright Ruling before NY Court of Appeals
Mayer, Brown, Rowe & Maw LLP

5 April 2005, New York - The New York Court of Appeals today issued a decision in favor of Capitol Records, Inc, in its bitterly contested copyright dispute against Naxos of America, Inc. Mayer, Brown, Rowe & Maw LLP senior counsel Philip Lacovara argued the case on behalf of Capitol Records.

The Court of Appeals' decision has broad significance to the recording industry because it firmly establishes state common-law copyright protection for pre-1972 sound recordings, which are not protected by the federal copyright statute. Under this decision, the Court of Appeals clarified that pre-1972 recordings, including popular recordings by such artists as The Beatles, will be protected by New York common-law copyright until state law is preempted by federal law in 2067.

The dispute was over Naxos' "restored" versions of several historical classical musical performances, the rights to which are owned by Capitol. Naxos had obtained the original shellac recordings of these performances and, after attempting to upgrade the sound quality, sold CD versions of the recordings in competition with Capitol's own restorations. After Naxos rebuffed Capitol's demand to cease and desist, Capitol sued under various state law theories, including unfair competition and common law copyright infringement. However, the district court granted summary judgment against Capitol, holding that Naxos did not infringe any of Capitol's rights in the recordings because (1) the recordings were originally made in the U.K., where copyright protection had long since expired, (2) Capitol had not shown the "bad faith" necessary to establish unfair competition, and (3) Naxos' restorations, which upgraded the sound of the original recordings, were "new products".

In a broad opinion, the Court of Appeals held that (1) "New York law provides common-law copyright protection to sound recordings not covered by the federal copyright act, regardless of the public domain status in the country of origin, if the alleged act of infringement occurred in New York"; (2) "fraud or bad faith is not an element of an infringement action in modern New York law"; and (3) "even assuming that Naxos had created a 'new product' due to its remastering efforts that enhance sound quality, that product can be deemed to infringe on Capitol's copyright to the extent that it utilizes the original elements of the protected performances."

Philip Lacovara argued the case. Associates Todd Lundell and Deborah Wolmark helped research and draft the briefs.

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