Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.
772 F.2d 505 (1985)
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Rule of Law:
Under the 1909 Copyright Act, an infringer's profits may include indirect profits from related business activities that are promoted by the infringement, and deductions for overhead expenses are only permissible if the infringer proves those expenses were of actual assistance in producing the infringing work.
Facts:
- In 1911, Edward Knoblock wrote a dramatic play titled 'Kismet', which later entered the public domain.
- In the early 1950s, the plaintiffs created a new, copyrighted dramatico-musical version of 'Kismet' with original music, lyrics, and libretto.
- The plaintiffs' musical is set in ancient Baghdad and features distinct characters, songs, and settings.
- In 1974, defendant MGM Grand Hotel began performing a musical revue, 'Hallelujah Hollywood', produced by defendant Donn Arden.
- One 11.5-minute act of the revue, titled 'Kismet', was billed as a tribute to the film version of plaintiffs' musical.
- This act featured five songs from the plaintiffs' copyrighted score, performed by singers identified as characters from 'Kismet', who wore costumes and performed with scenery and props designed to evoke the play's setting.
- MGM Grand held a blanket license from ASCAP, which authorized public performances of 'non-dramatic renditions' of musical compositions.
- The revue ran for approximately 1,700 performances between 1974 and 1976.
Procedural Posture:
- Frank Music Corp. and other creators of the musical 'Kismet' (plaintiffs) sued MGM Grand Hotel, MGM, Inc., and Donn Arden (defendants) in the U.S. District Court.
- Plaintiffs' complaint alleged copyright infringement, unfair competition, and breach of contract.
- Following a bench trial, the district court found that the defendants had infringed the plaintiffs' copyrights.
- The district court awarded plaintiffs $22,000 as a share of defendants' profits, finding that plaintiffs had failed to prove any actual damages.
- The district court also dismissed the plaintiffs' claims for unfair competition and breach of contract.
- Plaintiffs (as appellants) appealed to the U.S. Court of Appeals for the Ninth Circuit, primarily challenging the adequacy of the damages award.
- Defendants (as cross-appellants) appealed, challenging the district court's finding of copyright infringement.
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Issue:
Does the performance of songs from a dramatico-musical play, accompanied by visual representations of the play's characters, costumes, and setting, exceed the scope of an ASCAP license that permits only 'non-dramatic renditions' and excludes performances with 'visual representation of the work from which the music is taken'?
Opinions:
Majority - Fletcher, J.
Yes. A performance of songs accompanied by visual representations of the work from which the music is taken is excluded from the ASCAP license. The court found that using characters, costumes, locale, settings, and props from the plaintiffs' play constituted sufficient 'visual representation' to place the performance outside the scope of the license. Regarding damages, the court affirmed the denial of actual damages as not clearly erroneous but reversed the calculation of infringer's profits. The court held that the defendants failed to meet their burden of proving that deducted overhead costs actually contributed to the production of the infringing work. Furthermore, the district court erred by not considering the recovery of 'indirect profits' from the hotel and gaming operations that the infringing show helped promote. The apportionment of profits was deemed grossly inadequate and remanded for a reasoned explanation.
Concurring - Reinhardt, J.
Yes. The concurring opinion agrees fully with the majority's reasoning on the scope of the license and the calculation of profits. However, the concurrence departs from the majority on the issue of actual damages. The author would have held that the district court clearly erred in finding the plaintiffs failed to establish any damages, reasoning that 1,700 infringing performances of 'Kismet' in a Las Vegas revue self-evidently reduced the market value of the plaintiffs' property in that specific market.
Analysis:
This decision significantly clarifies the boundary between 'dramatic' and 'non-dramatic' performance rights, establishing that the addition of costumes, characters, and settings associated with a musical play transforms a song's performance into a dramatic one requiring a grand rights license. It strengthens the hand of copyright holders in damage calculations by affirming the recoverability of indirect profits from an infringer's associated business ventures. The ruling also heightens the evidentiary burden on infringers, requiring them to specifically demonstrate how claimed overhead costs contributed to the infringing product, rather than merely allocating a general portion of expenses.
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