IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks
April 15, 2009
Table of Contents
Sorbo, et al. v. Universal City Studios, LLLP, L.P., California Court of Appeal, Second Appellate District, April 8, 2009 (not for publication)
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Plaintiff Kevin Sorbo, former star of the popular television series Hercules, sued Universal for breach of contract, fraud, breach of implied covenant of good faith and fair dealing, and an accounting. The lower court found in favor of Universal on all claims, and the appeals court affirmed.
- Breach of contract, fraud, and breach of implied covenant of good faith and fair dealing relating to actor’s services in television series
Sorbo claimed that during the fourth season of Hercules, he suffered an aneurysm and multiple strokes, allegedly caused by the grueling production schedule of the series, resulting in serious health concerns. Sorbo told Universal that he did not want to continue starring in the series. Universal allegedly induced Sorbo to star in the final two seasons by promising him significant compensation, resulting from the sale of the series for syndication. Sorbo starred in the final two seasons. At the end of the sixth and final season in 1999, Sorbo attempted to renegotiate his compensation package. According to Sorbo, Universal convinced him that his favored nations clause meant that he did not need to renegotiate his contract.
A few years later, Sorbo audited Universal’s books and learned that two producers of the show had earned $8,325,000 in advances against contingent participation while Sorbo had not received any contingent participation because the series had yet to show a profit. On Sorbo’s 2003 profit participation statement, the $8,325,000 payment was listed as a deduction from gross revenue for “Other Participations and Payments.”
Sorbo sued Universal for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and an accounting. The lower court sustained Universal’s demurrer on the fraud and breach of implied covenant claims and granted summary judgment for Universal on the remaining claims. Sorbo appealed and the California Court of Appeal affirmed.
In order to state a claim for fraud in California, the plaintiff must plead the following elements: (1) a false representation as to a material fact, (2) knowledge of the falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage.
Sorbo contended that (1) the Universal producers and executives made knowingly false representations that he “would make big money above and beyond his guaranteed compensation and would make a fortune on the backend,” when they knew that the series would never show a profit; (2) he detrimentally relied on the false representations by giving up his right to withdraw under the force majeure clause of the agreement; and (3) he detrimentally relied on a Universal executive’s false representation that he had the same “very favorable definition” of modified gross profit as the two executive producers of the series had.
Regarding the fraud claim, the lower court held and the appeals court affirmed that Sorbo failed to allege fraud because Universal’s statements about Sorbo’s future payments were too vague and uncertain to constitute misrepresentations of fact, and that Sorbo failed to show detrimental reliance. The court did not accept Sorbo’s argument that he gave up his right to invoke the force majeure clause of his contract (due to serious health problems) in reliance on Universal’s promise of increased compensation. According to the court, “[i]t is well established that the continued performance of a preexisting agreement does not support a claim of detrimental reliance.”
Regarding breach of contract, the lower court agreed with Universal’s argument that the favored nations clause applied only to the formula used to determine adjusted gross revenue and did not apply to the producers’ right to receive advances against contingent participation based on the producers’ success meeting production and budget goals. The lower court granted summary judgment to Universal because there were no triable issues of material fact on this issue, or any of Sorbo’s challenges regarding deductions for barter sales, foreign syndication, distribution fees, production costs, sales in New Zealand, rerun broadcast rights, and video advertising costs, and the appeals court affirmed. Regarding Sorbo’s claim of breach of implied covenant of good faith and fair dealing, the court held that such a covenant does not exist outside of the insurance context and that this claim was essentially the same as Sorbo’s breach of contract claim.
Diplomatic Man, Inc. v. Nike, Inc., USDC S.D. New York, April 7, 2009
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The court awarded defendant Nike attorneys’ fees and costs totaling $324,855.69 after dismissing plaintiff Diplomatic Man, Inc.’s copyright infringement action with prejudice for failure to prosecute. Diplomatic Man sued Nike for infringement after Nike used the song The Second Coming, which was created by hip-hop artist Juelz Santana and producer Just Blaze, to promote its Air Force 25 shoe line. Finding that plaintiff’s claim had little merit and that plaintiff’s conduct was “characteristic of abusive litigation,” the court granted Nike’s fee request in full.
- Attorneys’ fees and costs in copyright infringement suit involving advertiser’s use of song allegedly co-owned by plaintiff
In 2006, hip-hop artist LaRon James, professionally known as Juelz Santana, collaborated with music producer Just Blaze to create the song The Second Coming. Santana and Blaze entered into licensing agreements with Nike, permitting Nike to use the song to promote its Air Force 25 shoes. At the time the song was created, Diplomatic Man acted as Santana’s production company. Prior to creation of The Second Coming, Diplomatic Man assigned its ownership interests in copyrights created by Santana to the Island Def Jam record label. Soon after the song was recorded, Nike shot a “making of” video, showing how the song was created and featuring footage of Santana and Blaze in the studio. The founder, sole shareholder and CEO of Diplomatic Man, the recording artist Cam’Ron, also appeared in the video. Cam’Ron authorized his agent to sign a release for Nike to use his image in the video.
Although Cam’Ron did not object during the filming of the video to Santana’s participation in the Nike promotion campaign or to the use of the song in a Nike commercial, Diplomatic Man commenced a copyright infringement action against Nike regarding the use of The Second Coming on January 8, 2008. During the months that followed, plaintiff failed to participate in discovery. Plaintiff did not respond to Nike’s requests for documents and supplemental discovery responses. On the date set for close of discovery, plaintiff’s counsel moved to withdraw on the grounds that plaintiff had ceased communications despite counsel’s repeated attempts to discuss discovery. In response to counsel’s motion, the court ordered plaintiff to send a representative to appear at a December 12, 2008, conference. Pursuant to the court’s order, when plaintiff did not send a representative to the conference or contact its counsel, the court dismissed the action with prejudice for failure to prosecute under Rule 41 of the Federal Rules of Civil Procedure.
Nike promptly moved for an award of attorneys’ fees and costs pursuant to § 505 of the Copyright Act. Exercising its discretion to award costs and fees to the prevailing party, the court considered Nike’s entitlement to an award based on the “equitable factors of frivolousness, motivation, objective reasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” The court found that plaintiff’s claim was “objectively unreasonable on the merits and this unreasonableness was further compounded by plaintiff’s conduct throughout the proceeding.” While the court stated that it was not even clear whether plaintiff owned the copyright in The Second Coming, plaintiff had, at a minimum, created an implied license through Cam’Ron’s appearance in the “making of” video. Furthermore, the court reasoned that, because the song is a work of joint authorship, co-author Blaze had the right to license the work to Nike without Santana’s permission. Nike was therefore immune to plaintiff’s infringement claim. The court emphasized that plaintiff should have been quite familiar with this aspect of joint authorship, as the principle was explained in “another meritless action brought by plaintiff concerning another of Santana’s songs.” See Diplomatic Man, Inc. v. Brown, No. 05 Civ. 9069, 2007 U.S. Dist. LEXIS 72699 (S.D.N.Y. Sept. 28, 2007). Going beyond its discussion of the merits of plaintiff’s claim, the court severely criticized plaintiff’s conduct throughout the action. The court found that plaintiff “basically abandoned the case” and failed “even to show up for [its] attorneys’ motion to withdraw.” “All of this conduct is characteristic of abusive litigation and further supports an award of fees and costs to Nike.” Concluding its discussion of Nike’s entitlement to an award, the court voiced its intent to “specifically curb this particular plaintiff’s propensity for bringing unreasonable actions.”
Nike sought an attorneys’ fee award of $311,072.50, which the court allowed in full. The court stated that it reviewed the fees charged and found that “they appear roughly reasonable.” Analyzing the hourly rates charged, the court stated that they were “perfectly reasonable,” as these are the rates Nike was willing to pay. The court confirmed the “general reasonableness” of the fees by reviewing counsel’s bills and finding “no obvious problems of excess or waste.” However, even under the court’s liberal standards, $25,628.60 of the $39,411.79 in requested costs were disallowed as double counting. Ultimately, the court awarded Nike $311,072.50 in attorneys’ fees and $13,783.19 in costs, for a total of $324,855.69, and gave Nike the opportunity to support an additional application for fees and costs incurred in December 2008. At Nike’s request, the court also dismissed Nike’s third-party complaint against Santana without prejudice.
Garcia v. Coleman, et al., USDC N.D. California, March 24, 2009
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The court denied defendants’ motion for judgment as a matter of law or a new trial on the issue of whether there was a causal nexus between defendants’ profits and the infringement of plaintiff’s copyrighted photograph.
- Establishing a causal nexus between defendants’ profits and defendants’ infringement of plaintiff’s photograph
Section 504(b) of the Copyright Act provides that a copyright owner is entitled to recover any profits of the infringer that are attributable to the infringement. According to the court, a copyright owner need only present evidence that the infringement at least partially caused the profits that the infringer generated as a result of the infringement.
Although the Copyright Act does not distinguish between direct and indirect profits, the court noted that a causal nexus is typically more easily shown in a case involving direct profits rather than indirect profits. (Direct profits are those generated by selling an infringing product while indirect profits cases typically involve a defendant using a copyrighted work to sell another product.)
In this case, defendants used plaintiff’s photograph on their Sonoma Ridge wine label. Relying on Polar Bear Prods. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004), the court held that since the photograph was an integral part of the product itself, rather than in an advertisement for the product, “this case is more akin to a direct profit case than an indirect profit case – and thus causation is more readily inferable.” Evidence of the prominence and centrality of the photo on the label – the label being a key aspect of the product's identify – “was sufficient to support a finding that the copyrighted photograph contributed to the sale of the wine.”
In addition, the court rejected defendants’ argument that there are many reasons why a consumer would have bought their wine that have nothing to do with the copyrighted photograph – for example, the price of the wine, the winery that produced the wine, the type of wine – and that this negates causation. The court explained that it was not plaintiff’s burden to show that the copyrighted photograph was the only reason why defendants' wine sold, nor was it his burden to show that the photograph was the main reason why the wine sold. Plaintiff need only have offered evidence that the photograph, featured prominently on the Sonoma Ridge wine label, may have actually influenced the purchasing decisions of consumers that bought the wine.
For more information, please contact Jonathan Zavin, W. Allan Edmiston, David Grossman, Jonathan Neil Strauss, Tal Dickstein or Meg Charendoff.
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