Sybersound Records, Inc. v. UAV Corporation
Cite as 06-55221
CV-05-05861-JFW

District court’s Ruling affirmed

Sybersound and the Corporation defendants are competitors that produce and sell karaoke records. They primarily sell to a group of distributors and retailers that resell these records to the public.

This purchasing group (collectively, Customers) includes Anderson Merchandising, Handleman Entertainment Resources, Alliance Entertainment Corporation, Wal*Mart, KMart, Best Buy, Toys “R” Us, and Fry’s Electronics. . . .

Sybersound along with six music publishing companies filed a complaint in the district court for the Central District of California against the corporation defendants for:

• Copyright infringements;


• Violation of the Lanham Act;


• Intentional interference with prospective economic relations;


• Unfair competition under California Business and Professions code;


• Common law unfair competition;


• Unfair trade practices under California Business and Professions Code; and


• Seeking rescission and an accounting.

The corporation defendants then filed motions to dismiss for failure to state a claim, pursuant to Federal Rule of Procedure 12(b) (6).

The district court ruled and orders the following:

• The severance of music publishing plaintiffs from the suit and dismissed the claims for rescission of licenses and an accounting without prejudice; and


• Granted the motions, dismissing the remaining claims with leave to amend.

Sybersound then filed a First Amended Complaint (FAC) that included most of the alleged causes of action pled in the original complaint and have added claims against the Individual defendants for violations of Racketeer Influenced and Corrupt Organizations Act (RICO).

The corporation defendants and the individual defendants filed motion to dismiss the FAC for failure to state a claim.

The district court granted these motions, dismissing all claims with prejudice and entered final judgment for the defendants.

Sybersound Records appealed the district court’s judgment dismissing the first amended complaint it filed against competitors and their officers and employees.

On appeal, the United States Court of Appeals for the Ninth Circuit considers the following issues to resolve:

• Whether a party lacking standing to bring a copyright infringement suit under the copyright Act, but who complains of competitive injury stemming from acts of alleged infringements may bring a Lanham Act claim, RICO claim, or related state law unfair competition claims, whose successful prosecution would require the litigation of the underlying infringement claim.


• Whether the transfer of an interest in a divisible copyright interest from a copyright co-owner to Sybersound, unaccompanied by a like transfer from the other copyright co-owners can be an assignment or an exclusive license that gives the transferees a co-ownership interest in the copyright.

After full length discussion of the issues involved in the case, the Appellate court has these to say and ruled:

• Party lacking standing to bring a copyright infringement suit under the Copyright Act, but who complains of competitive injury stemming from acts of alleged infringement, may not bring a Lanham Act claim, Racketeer Influenced and Corrupt Organizations Act claim, or related state law unfair competition claims, whose successful prosecution would require the litigation of the underlying infringement claim.


• Transfer of an interest in a divisible copyright interest from a copyright co-owner to a third party, unaccompanied by a like transfer from the other copyright co-owners, cannot be an assignment or exclusive license that gives the transferee a co-ownership interest in the copyright.

In full, United States Court of Appeals for the Ninth Circuit court affirmed the judgment of the district court.