UMG Recordings, Inc. v. Veoh Networks, Inc. (not for publication)

The Supreme Court of New York declined to dismiss UMG Recordings’s common law copyright infringement claims against Veoh Networks on the basis that they are similar to UMG Recordings’s claims of copyright infringement under the federal Copyright Act which UMG is pursuing in an earlier-filed action in federal court in California. The court did, however, agree that California is a more convenient jurisdiction since both parties’ principal place of business is in California and witnesses are located in California.

UMG Recordings filed suit in New York state court against Veoh Networks for common-law copyright infringement and unfair competition in connection with the reproduction and distribution, on Veoh's website and through its member network, of pre-1972 sound recordings for which UMG holds the copyright. Veoh Networks owns and operates a website (veoh.com) where internet users can upload, view and share videos. Veoh also has created a software application (VeohTV) that enables members of the public to watch internet video from a variety of video sources, including CBS, PBS, MTV and Showtime, as well as from independent video producers.

UMG Recordings alleges that Veoh created and maintains a peer-to-peer internet network (Veohnet) through which Veoh members can make and distribute unauthorized copies of copyrighted works; that Veoh creates unauthorized copies of videos for distribution and display on its website, as well as on third party websites, which are available for free downloading; and that Veoh's software, and the other tools provided on its website, permit users to permanently download unauthorized copies of videos to users' computers and personal video players like iPods. UMG Recordings also claims that Veoh refuses to use available safeguards to prevent unlawful copying and distribution of copyrighted works.

The Copyright Act of 1976, 17 USC § 101 et seq., amended earlier copyright law to include sound recordings as copyrightable works for the first time under federal copyright law. The amended Copyright Act provided, however, that sound recordings created before February 15, 1972, the effective date of the amendment, will not be covered until February 15, 2067; pre-1972 recordings have been left to state law copyright protection. See 17 USC § 301 (c). UMG Recordings filed suit for common-law copyright infringement of its pre-1972 recordings.

In September, 2007, prior to the commencement of the New York action, UMG Recordings, along with seven music publishing companies which are part of the Universal Music Group, initiated an action against Veoh in the U.S. District Court for the Central District of California, seeking damages and injunctive relief for copyright infringement of post- 1972 sound recordings under the Copyright Act.

Under New York law, a party may move to dismiss an action based on “another action pending between the same parties for the same cause of action in a court of any state or the United States.” In this case, the New York court held that, although both actions arise out of the same type of allegedly infringing activities, plaintiff alleges two distinctly different causes of action. “Simply put, the instant action seeks relief under New York common law for copyright infringement of sound recordings made prior to February 15, 1972, while the California action seeks relief under the federal Copyright Act for copyright infringement of musical compositions as well as sound recordings made after February 15, 1972. Both the subject matter and the applicable law differ in the two cases. In addition, the relief plaintiff seeks in the state action includes punitive damages, which are not available in the federal action.” The court therefore denied the defendant’s motion to dismiss for this reason, but did grant the defendant’s motion to dismiss for forum non conveniens.

The doctrine of forum non conveniens, codified as New York CPLR 327, permits a court, in its discretion, to dismiss an action “where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere.” In this case, the court noted that neither party is a resident of New York; neither party maintain its principal place of business in New York; both parties are headquartered in California; and the majority of potential witness are in California.

Because the court granted the defendant’s motion to dismiss for forum non conveniens, the court did not reach the issue of whether the Communications Decency Act of 1996 (CDA), 47 USC § 230, bars the instant claims. The court noted, however, that the weight of authority does not support the conclusion that Veoh is entitled to immunity from this lawsuit under the CDA.

Section 230 (c) of the CDA provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” This immunity is limited by § 230 (e), which provides, in pertinent part, that “[n]othing in this section shall be construed to limit or expand any law pertaining to intellectual property.” It also provides that “[n]othing in this section shall be construed to prevent any State from enforcing any State law that is consistent with this section. No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” Id.

Veoh argued that § 230 (e) (2) applies only to federal intellectual property law, and therefore it is immune from prosecution under state intellectual property law. According to the court, there is disagreement among courts as to whether “any” law refers only to federal intellectual property law or whether it also applies to state intellectual property law.