Bit Parts

Artists' Digital Music Royalty Claims Are an “Open Book Account”

The U.S. District Court for the Northern District of California allowed an open book account claim by recording artists to proceed in class actions alleging agreements that the artists' record labels enter into with digital retailers are licenses, rather than normal retail channel sales that would yield the artists lower royalties. James v. UMG Recordings Inc., 11-01613. An open book account significantly extends the time within which the artists can go to back to recover royalties. In the suits by the estate of Rick James and such artists as Rob Zombie and Dave Mason, District Judge Susan Illston noted that UMG “contends that open book accounts cannot exist where they are balanced and 'closed' at various intervals, such as here where royalties were determined and paid out generally every six months. ' [But a]s neither side disputes that royalty payments to plaintiffs are ongoing, the Court cannot find that the accounts are 'closed' by virtue of the interval royalty payments.”

The U.S. District Court for the Eastern District of California decided that it lacked personal jurisdiction over non-New York defendants who, without authority from the New York-based plaintiff, gave a German company the German distribution rights to the plaintiff's films. Troma Entertainment Inc. v. Centennial Pictures Inc., 11 Civ. 1137. The Troma productions at issue are the spoof movies Citizen Toxic, Toxic Avenger IV and Poultrygeist, Night of the Chicken Dead. District Judge Brian M. Cogan noted that by citing Penguin Group (USA) Inc. v. American Buddha , 16 N.Y.3d 295 (2011), “In effect, plaintiff argues that any time there is a copyright infringement ' anywhere in the world ' and the copyright is held by a New Yorker, then the defendant has caused an injury 'within the state.'” Judge Cogan emphasized, however: “What Penguin Group was concerned with was not just copyrights, but the use of the internet to sell or exhibit purloined copyrighted material [owned by a New York company] to anyone, including potential New York buyers.” But in Troma Entertainment , the district judge found that “plaintiff's reference to the fact that it has German customers and that, in fact, subsequent to defendants' contract with [the German distributor] Silverline, it licensed the Films to a German distributor, does not alter the analysis. Nor does it matter that with regard to these German customers, plaintiff uses the [I]nternet for sales and communications. Personal jurisdiction has to be predicated on defendants' actions, not plaintiff's. One actual German customer is not the same as some potential or actual New York customers who use the [I]nternet, and the loss of the latter is required for long arm jurisdiction under [N.Y.] C.P.L.R. '302(a)(3)(ii).”