Decision of Note

The US District Court for the Southern District of New York has decided that the negative impact of the Napster free file-sharing software on the ability to sell sound recordings over the Internet didn't give rise to a frustration of purpose defense in a suit over failure to pay the full license fee for the right to sell Who recordings online. Profile Publishing v. Musicmaker.com Inc., 01-2886 (Jan. 24).

In December 1999, Profile and Musicmaker signed an agreement that gave Musicmaker the exclusive right to sell several live recordings of the Who over the Internet worldwide for ten years. Musicmaker agreed to pay Profile a percentage of the sales price as well as an advance against royalties of $2.5 million.

Napster was founded in May 1999. Three weeks before the Profile-Musicmaker licensing agreement was signed, the Recording Industry Association of America sued Napster for copyright infringement. After shutting down its Web site in January 2001, Musicmaker failed to make a final $250,000 payment to Profile. When Profile sued Musicmaker for non-payment, Musicmaker raised an affirmative defense that the sound-recordings license had been frustrated by the unforeseeable 'cataclysmic' effect of Napster. But granting Profile's motion for summary judgment, the district court noted that, 'while it is obvious that Napster did make a mess of a lot of things, so do many events in unpredictable life, perhaps only partially perceived at the time, or even perceived. That, however, does not a legal frustration of purpose make, and while one can have a sympathetic emotional tug here, a contract is a contract, and Profile has stood ready to perform.'