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This was sent me by Cary Ginell of Sound Thinking.  Informed comments
welcomed.

Steve Smolian

>
> > June 2, 2003 (naxos.com)
> >
> > New York, USA - On November 22, 2002 Capitol Records, Inc.
> > brought an
> > action against Naxos of America in the United States District Court,
> > Southern District of New York.  Capitol brought the action for unfair
> > competition, misappropriation of property, unjust enrichment and
> > common law copyright infringement.  Capitol challenged Naxos'
> > distribution of historic recordings dating from the 1930's featuring
> > performances by Yehudi Menuhin, Edwin Fisher and Pablo Casals.
> > Capitol
> > claimed to be the owner of all rights in the United States to the
> > original recordings.  Capitol complained that Naxos sold and
> > distributed its restorations of the original recordings throughout the
> > United States in bad faith, at substantially discounted prices in
> > direct competition with Capitol's recordings of the same
> > performances,
> > often in the same retail outlets.
> >
> > The Court, in finding for Naxos, noted that Naxos used the original
> > discs, the so-called shellacs (78rpm shellac discs) to restore the
> > performances.  The restorations involved artistic choices and the
> > use
> > of the latest digital software.  Naxos has distributed and sold its
> > restorations at discount prices since about October, 1999
> > throughout
> > the United States.  The Court took notice of the fact the Naxos
> > restorations have been widely praised by classical music critics.
> >
> > Naxos had claimed that EMI expressly disclaimed any exclusive
> > commercial interest in the original recordings made more than 50
> > years
> > ago and that Capitol had, furthermore, failed to pursue many other
> > companies engaging in restorations of the original recordings.  The
> > Court completely agreed with Naxos.
> >
> > The Court found that Capitol has no rights in the original recordings
> > and that the English copyrights in the recordings had long since
> > expired.  The Court also found ambiguity concerning Capitol's chain
> > of
> > title in all agreements.  The Court further found that Capitol waived
> > or abandoned any interests it had in the original recordings.
> > Capitol's lax practices were found consistent with EMI's disclaimer
> > of
> > any intellectual property rights in any sound recordings made prior
> > to
> > 1957 and which are more than 50 years old.  Naxos therefore
> > operated
> > under the good faith belief that the recordings at issue are in the
> > public domain, said the Court.
> >
> > The Court further found that Naxos has not competed unfairly.
> > Since
> > Capitol has no rights in the original recordings it cannot charge
> > Naxos with unfair competition.  Naxos never falsely advertised its
> > restored products as duplicates of the originals and did not simply
> > copy Capitol/EMI's restorations.  Naxos employed significant effort
> > to
> > create entirely new and commercially viable products.  Naxos did
> > not
> > profit from the labour, skill, expenditures, name and reputation of
> > others but rather created and marketed new products relying on its
> > own
> > labour, skill, and reputation.
> >
> > The Court found that the quality and nature of the restorations stand
> > as evidence to the fact that Naxos did not aim to simply duplicate
> > the
> > original recordings and capitalize on Capitol's efforts.  Instead,
> > Naxos worked to create new products with superior sound.
> >
> > The Court agreed that the Naxos restorations do not discourage but
> > rather encourage the preservation and dissemination of fine
> > performances. The Court even felt that it was possible that the
> > Naxos
> > restorations have revived the relevant market in historical classical
> > performances to Capitol's benefit.  The Naxos restorations help
> > ensure
> > that quality historic performances are commercially available for the
> > present generation and well preserved for the next, the Court said.
> >
> > The Court clearly concluded that Naxos lacks the bad faith
> > necessary
> > in a common law unfair competition claim because Naxos neither
> > attempted to sell its records as Capitol's, nor sell Capitol's records
> > as its own.  Naxos did not misappropriate Capitol's labour and
> > expenditures, but rather sought to profit from its own efforts and
> > ingenuity.
> >
> > The Naxos motion to dismiss the Capitol action was granted by the
> > court and converted to a summary judgment.  The Capitol motion for
> > partial summary judgment was denied.  All substantive
> > issues were
> > decided in the favour of Naxos.
>
> Cary Ginell
> Sound Thinking Music Research
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