Who owns the licensing rights for early musical recordings by reggae legends Bob Marley and the Wailers? Universal Music Group, Inc. (UMG)—the largest record company in the world—claims to have purchased the exclusive licensing rights from a company called JAD Records in 2003. However, the music licensing company San Juan Music Group, Ltd. has, since 1980, been licensing recordings by Marley through an agreement with Lee Perry, the producer of many of Marley’s early recordings.
Rock River, a record producer, entered into a licensing agreement in 2006 with San Juan Music Group, whereby Rock River was granted a nonexclusive license to “sample” or “interpolate” certain Marley recordings. Rock River invested its time and creativity into creating new remixes of the recordings, registering copyrights, creating an album, and securing digital distribution with iTunes as well as distribution of physical albums in stores. There were also plans to use of the remixes in a motion picture and soundtrack. At the time, Rock River was unaware that San Juan’s authority to license the recordings was disputed.
In October 2007, UMG sent a cease-and-desist letter to Rock River claiming that UMG owned exclusive licensing rights to all the recordings involved and that Rock River therefore could not release its album without a license from UMG. UMG also began calling and sending letters to Rock River’s business partners asserting that Rock River’s album violated UMG’s exclusive licensing rights to the Marley recordings. As a result, the motion picture producers decided not use one of the remixes, Apple pulled the album from the iTunes store, and Rock River’s distributors ceased distribution of the physical album.
Rock River sued UMG alleging that UMG inappropriately blocked Rock River from distributing the album by wrongfully threatening to sue Rock River’s distributors. UMG responded by arguing that: (1) Rock River was required to prove that its business expectancy was “valid”—in other words, Rock River had to prove it was legally authorized to use all of the music on its album; (2) if San Juan did not have the right to license one or more of the recordings, then its attempt to license such recording to Rock River was invalid; and (3) thus, if San Juan did not have licensing rights for all the recordings, then Rock River’s use of the recordings was unauthorized by law, Rock River had no right to distribute its album, and Rock River lacked a lawful business expectancy with which UMG could have interfered. In short, UMG argued it cannot be held liable for interfering with an illegal business expectancy, such as album sales of an album that violates copyright law.
The district court agreed and granted summary judgment in favor of UMG. The district court found that Rock River had no evidence that San Juan was authorized to license some of the tracks on the album; therefore, Rock River had no evidence that it was legally authorized to distribute its album as a whole; and thus, Rock River did not have a valid, legal business expectancy with which UMG could have tortiously interfered. The case was dismissed and Rock River appealed. The Ninth Circuit Court of Appeals has now reversed.
Although the Ninth Circuit agreed with UMG’s basic premise that there can be no liability for interfering with a business expectancy that is invalid or illegal, the court of appeals held that it is UMG, as the defendant, who has the burden to prove the invalidity or illegality of the business expectancy. To prevail on its claims that UMG intentionally interfered with a prospective economic advantage, a plaintiff such as Rock River must prove the following elements:
- The plaintiff and a third party were in an economic relationship that probably would have resulted in an economic benefit to the plaintiff;
- The defendant knew of the relationship;
- The defendant intended to disrupt the relationship;
- The defendant engaged in wrongful conduct;
- The relationship was disrupted;
- The plaintiff was harmed; and
- The defendant’s wrongful conduct was a substantial factor in causing the plaintiff’s harm.
According to the Ninth Circuit, UMG was essentially arguing that plaintiff must also prove an additional element: the validity or legality of the plaintiff’s business expectancy. The court of appeals disagreed and held that this is not an element of the claim. Instead, the illegality of the expectancy is an affirmative defense that must be pled and proved by the defendant. Thus, the Ninth Circuit held that “UMG cannot obtain summary judgment based on the holes in Rock River’s claim to a valid license when the validity of UMG’s own licensing rights is equally spotty.” The court of appeals reversed the grant of summary judgment and remanded the case for trial.
Intellectual Property Law and Our Law Firm
At Heygood, Orr & Pearson, our attorneys have handled hundreds of commercial litigation cases ranging in value from tens of thousands of dollars to tens of millions. We have successfully represented businesses of all sizes, from small “mom and pop” businesses to some of the largest corporations in the world.
Whether we are representing a huge, multi-national corporation or a small local business, we understand that clients want their legal representation to be not only excellent but cost-effective and efficient. For that reason, we will often offer our clients flexible fee structures such as contingent fees, flat fees, reduced hourly fees with a bonus payment contingent on success and reverse contingent fees.
At Heygood, Orr & Pearson, our attorneys have handled numerous patent matters including prosecuting claims for infringement, as well as for interfered-with patent rights. We have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with its patent rights to liposome technology.
Our attorneys are capable of litigating patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.
Beyond our specific experience in the field of intellectual property, our ability to prosecute patent infringement action is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules is a must for attorneys handling patent infringement claims, there is no substitute for courtroom experience. At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex patent case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas** for several years in a row. Our firm is AV rated, the highest legal and ethical ranking available from the leasing law firm ranking service, Martindale-Hubbell.
If you or your company is in need of representation in an intellectual property matter, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by completing the free case evaluation form located on this page.
* Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.
** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2013.