Copyrightable Karaoke Tracks Not Protected By Trademark Act

Because Slep-Tone's customers want to avoid having to insert a disc into their karaoke equipment and find the appropriate track, Slep-Tone permits customers to copy the purchased CD or MP3 in a process called “media-shifting” or “format-shifting.” The customer must: 1) purchase and maintain the track on its original medium for each hard drive to which it wishes to copy a track; 2) keep the purchased medium “on the shelf” and not use it for any purpose; 3) notify Slep-Tone every time it media-shifts the track; and 4) permit Slep-Tone to conduct an audit to certify compliance with the media-shifting policy.

Slep-Tone alleged that the Basket Case pub had engaged in widespread, unauthorized copying of its tracks. Basket Case offered free karaoke services to attract customers and sell more food and drinks. However, Basket Case loaded bootlegged copies of Sound Choice tracks onto its hard drives rather than authorized copies. When its customers performed karaoke songs, they would see Slep-Tone's Sound Choice mark and trade dress and could believe they were seeing legitimate, not unauthorized, copies of Slep-Tone's tracks. Slep-Tone claimed that Basket Case was “passing off” the unauthorized copies as genuine Slep-Tone tracks, alleging trademark infringement and unfair competition under the federal Lanham Act, and various state law claims. Slep-Tone alleged that the “tangible goods” whose source consumers would confuse were the tracks the singers were seeing and hearing.

Basket Case contended that it did not sell its unauthorized tracks, but merely played them for pub patrons, so that the patrons did not receive tangible goods but only the intangible content of the tracks. Patrons never saw the CD or MP3 media containing the original tracks that had been media-shifted, so Basket Case alleged that they could not be confused about the source of the tangible goods (the media) containing the tracks.

Although the songs and lyrics on the karaoke tracks were also copyrighted, Slep-Tone did not own the copyrights and therefore could not sue Basket Case for copyright infringement. Slep-Tone complained that the pub patrons would see the Slep-Tone trademark and its readily recognizable trade dress on the projected tracks and think that the copy was a genuine Sound Choice track made by Slep-Tone and purchased by or licensed to Basket Case. Slep-Tone argued that by using unauthorized copies, Basket Case lowered its cost of doing business and put illegitimate and unfair pressure on competitors using authorized tracks, discouraging legitimate operators from paying for genuine Slep-Tone tracks. Slep-Tone also complained that unauthorized copies could be inferior because of excessive data compression (although not noticeably so to the pub patrons) and injure its reputation for quality tracks. An unauthorized copy would evade Slep-Tone's audit process, intended to identify inferior copies.

Seventh Circuit: No Infringement

The District Court dismissed the complaint. The Seventh Circuit affirmed the dismissal, focusing on the unauthorized copying of the creative works. Because the only difference between an authorized and unauthorized track is Slep-Tone's permission to make the copy, a Slep-Tone customer who makes an authorized copy is also leading a viewer to believe that the copy is a genuine Sound Choice track. That, the Seventh Circuit concluded, makes the complaint sound more like a claim of copyright rather than trademark infringement. Even though the protected rights under copyright and trademark law are distinct, the court noted that they can be challenging to identify, particularly where the protected mark or trade dress is embedded in the creative content of the goods.

The Seventh Circuit declined to allow a trademark claim to substitute for what was really a copyright infringement claim, applying the principles of the Supreme Court's decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003). In Dastar, Twentieth Century Fox had produced a television series called Crusade in Europe from Dwight Eisenhower's book of the same name. The series entered the public domain when Fox did not renew the copyright registration. Fox later re-acquired rights to the TV series, with the exclusive right to distribute and license others to distribute the series on video. Dastar bought a copy of the original TV series, condensed it and made other modifications, retitled it World War II Campaigns in Europe, designed new packaging, and marketed the revised series on video as its own product, without crediting Fox. Fox sued for trademark infringement, alleging that Dastar committed “reverse passing off” by holding out to the public that Fox's product was Dastar's own product, a false designation of the origin of Dastar's goods.

The Supreme Court determined that the Lanham Act's meaning of “origin” and “goods” was the “source of the wares,” that is, the “producer of the tangible product sold in the marketplace.” The Supreme Court rejected an interpretation that included the creator of the content conveyed by the goods as the “origin.” Once the copyright expires, the producer of the creative content cannot make a “species of mutant copyright” that limits the public's right to copy and use public domain works, because allowing the use of trademark law to govern rights over the content of an artistic work would indefinitely extend the copyright. The Supreme Court held that the producer of tangible goods offered for sale (the videotapes) was Dastar and not Fox, so Dastar had not made a false representation of the origin of the goods.

The Seventh Circuit, although concluding that Dastar was not directly controlling because Basket Case did not put its own mark on Slep-Tone's product and present it to the public as theirs, held that allowing Slep-Tone's mark to remain on the karaoke track was not trademark infringement. Even assuming that a digital file such as the karaoke track is a “tangible good” for a trademark analysis, Basket Case is not selling CDs or other copies of digital files of karaoke tracks. What the patrons see is the performance of the creative work in the copies, the musical accompaniment and corresponding lyrics and graphics. The patron is actually seeing and hearing content created by Slep-Tone, who is the source of the tangible goods ' the CDs or MP3s. Any confusion by the patron is not about the source of those tangible goods, but about the creative content of the karaoke track with the Sound Choice logo embedded in it. As the court observed, if the copyright on a Metro-Goldwyn-Mayer Studios film expires, any member of the public may copy and use that film without committing trademark infringement because the MGM name or roaring lion is still present. Similarly, a movie theater can show a copy of the public domain version of the silent film Phantom of the Opera, without removing the Universal Studio registered trademark displayed in the film.

The Seventh Circuit noted that, although the owners of the copyrights in the tracks could sue for copyright infringement, routine display of Slep-Tone's embedded trademark during performance of the tracks is not trademark infringement or unfair competition. Basket Case does not use Slep-Tone's mark in its advertising or on its karaoke menus, so patrons have no reason to believe that Slep-Tone sponsors the performances or that the digital file copy was produced or approved by Slep-Tone. As Basket Case is not selling CDs with karaoke tracks and claiming they are genuine Slep-Tone products, the Seventh Circuit concluded that Basket Case was not committing trademark infringement.

Conclusion

This decision turned on the interpretation of “tangible good” in pushing the boundary of the Dastar opinion. If a defendant in a similar case used the plaintiff's trademark to advertise the defendant's services, made counterfeit CDs bearing the plaintiff's mark, created promotional goods such as posters, hats, or t-shirts bearing the plaintiff's mark, or otherwise passed off a tangible good sold in the marketplace as a genuine product of the plaintiff, the result would likely be different. There are two other Slep-Tone cases currently on appeal to the Sixth Circuit (involving Karaoke Candy) and Ninth Circuit (involving Canton Phoenix), so differing opinions might issue in the future.

Judith L. Grubner is a partner in the IP Group of Arnstein & Lehr and a member of this newsletter's Board of Editors. She can be reached at [email protected].