EEPR60002
1623/10
30. December 2014
Resumption in the 1st Instance and Extension of Action
File number: 21 O 25511/10
In the matter
of Elvis Presley Enterprises LLC, 3734 Elvis Presley Blvd., Memphis, Tennessee 38116, USA, a Limited Liability Company incorporated under the laws of the State of Delaware, represented by its Managing Member, the EPE Holding Corporation, in turn represented by its Members of the Board Mr. Howard J. Tytel, Mr. Thomas P. Benson and Mr. Kraig Fox, 650 Madison Avenue, 16th Floor, New York, NY 10022, USA
– Plaintiff –
| Legal representatives: | Law firm, BOEHMERT & BOEHMERT, Meinekestraße 26, 10719 Berlin |
v e r s u s
Arista Music (formerly: BMG Music), a company incorporated under the laws of the State of New York, represented by its Chief Executive Officer, Mr. Rolf Schmidt-Holtz, 550 Madison Avenue # 6, New York, NY 10022, United States of America
– Defendant 1 –
we hereby extend the Action versus the
company Sony Music Entertainment Germany GmbH, represented by its Managing Directors, Mr Philip E. Ginthör and Mr. Edgar Berger, Balandtstraße 73, Haus 31, 81541 München, Germany
– hereinafter: Defendant 2 –
and inform the Court that we will be filing the following motions in the oral hearing:
1. The Defendants to be ordered to consent, in respect of Defendant 1 to an alteration of the Buyout Agreement of 1 March 1973 with effect of 1 January 2008 and in respect of Defendant 2 to enter into a new agreement also with effect of 1 January 2008, such that the Defendants pay equitable remuneration to the Plaintiff, as set at the discretion of the Court, for the revenues and benefits it has obtained as a result of the exploitation of phonograms containing recordings of Elvis Presley in Germany whereby the remuneration shall, in particular, take into account exploitation on phonograms, digital exploitation and royalty earnings for public broadcast.
2. Defendant 2 to be ordered to pay the Claimant € 840,667.36 plus 5% interest above the basic rate for a period since the filing of the Extension of Claim.
Reasoning
The Plaintiff, initially filed an Action against Defendant for payment, information and contractual amendment because the Plaintiff was of the opinion that it was at least entitled, under § 32a German Copyright Act, to payment of equitable remuneration based on the exploitation of audio recordings containing renditions of the performing artist, Elvis Presley, in Germany. The Regional Court initially rejected the Action with a judgement of 23 November 2011. Upon appeal of the Plaintiff, the Appeal Court of Munich then dismissed the claims for contractual amendment and payment, which had been calculated up to 31 December 2007, with a partial and final judgement but ordered Defendant 1 to provide information for the period from 1 April 2008. The asserted claim for contractual amendment for the period from 1 January 2008 was left open because it is in a graduated relationship to the asserted claim for information. This previous head of claim 3 corresponds, in respect of Defendant 1, to the now asserted head of claim 1. Insofar as the Plaintiff additionally seeks special remuneration for the public broadcast of audio recordings of Elvis Presley in Germany, the Appeal Court of Munich dismissed the appeal. As the Appeal Court of Munich did not allow an appeal on points of law, the Plaintiff filed a Complaint against the Denial of Leave to Appeal with the German Federal Court of Justice. The German Federal Court of Justice dismissed the Complaint against the Denial of Leave to Appeal. The Plaintiff then filed a Constitutional Complaint; this is currently lodged with the German Federal Constitutional Court under case number 1 BvR 1998/14.
With its judgement of July 18, 2013, the Appeal Court of Munich took the opinion that Defendant 1 was only liable for the royalties which it received itself but that the equitable remuneration should not be calculated, in respect of Defendant 1, on the basis of the revenues earned in Germany. Defendant 1 has since presented copies of the licensing agreements it has concluded, in accordance with its obligation to disclose information set down in the judgement of the Appeal Court of Munich of July 18, 2013. From this, it follows that the exclusive licensee on the German market for Defendant 1 is Defendant 2, against whom the Plaintiff is now also taking action; this fact is firstly taken into account by the head of claim 1. The Plaintiff also deduced from the presented licensing agreements that Defendant 2 must also have been the licensee in a prior licensing agreement and that it therefore must also have marketed phonograms containing performances of Elvis Presley in Germany under license from Defendant 1 between 2005 and 2007. The Plaintiff is thus seeking equitable remuneration from Defendant 1, as per Sec. 32a German Copyright Act for the years 2005 to 2007. This is taken into account in head of claim 2.
I.
1. After the partial and final judgement of the Appeal Court of Munich of July 18, 2013 became legally binding, Defendant 1 initially provided information as to the extent to which the music works performed by Elvis Presley and which were recorded onto phonograms by the legal predecessor of Defendant 1, RCA Records, a Division of RCA Corporation, up to February 28, 1973 inclusive, were exploited in Germany from April 1, 2008 onwards. Within the information provided, Defendant 1 did not itemise the individual recordings and their different versions as the judgement of the Appeal Court of Munich of July 18, 2013 had stipulated. At least Defendant 1 did provide more detailed information as to the individual phonograms on which the recordings appeared as well as their titles. Furthermore, Defendant 1 itemised the sales achieved in that way and also the revenues earned from digital exploitation. However, Defendant 1 refused to specify cost factors and profits earned although that was also expressly required of it by the Appeal Court of Munich. Finally, essential information on royalties for example from the use of recordings in film, television, advertising and merchandising as well as all licensing agreements to be presented according to the operative provisions including names and addresses of licensors. In this context, Defendant 1 merely claimed that only 5 songs by Elvis had been used in four films – this over a period of five years – which seems absolutely implausible. In respect of the obligation to provide information regarding remuneration for public broadcast, as ordered in the operative provisions, Defendant 1 claimed these can only be roughly estimated.
However, the Plaintiff will initially make do, without waiving its right to the claim for information also claimed in the operative provisions, with the deficient information provided by Defendant 1 because the Plaintiff is still able to calculate, according to the current state of knowledge, a large part of the equitable remuneration it is due under Sec. 32a German Copyright Act, on the basis of the information available.
2. In the following lists contain the following abbreviations which we will explain here for ease of understanding:
PPD = Published Price to Dealer, German: HAP = Händlerabgabepreis
Net to owner = Royalties of Defendant 1, paid by Defendant 2
As the figures in the information supplied by Defendant 1 were located in a more or less unsorted Excel list and several emails, the Plaintiff had to seek the help of the accountants at Prager Metis, which are also analysing the information from Defendant 1 in the scope of the remaining contractual relationships. In the scope of their analysis, it emerged that the figures clearly originate from the “Sony International Clearing House” in the USA. The gist of the argument of Defendant 1, that it “had nothing to do with” the earnings of Defendant 2, is thus simply false as it checks and controls the billing process in the USA. We return to this point once more below. Furthermore, there is a certain degree of probability that not all uses of recordings containing performances of Elvis Presley in Germany are covered by the information and that in fact higher income was actually earned. The Plaintiff thus reserves the right to make a further motion to have the accuracy of the information sworn under oath.
3. The following figures emerge from the information provided by Defendant 1:
a) Phonograms
| Year | Revenues earned in Germany (according to PPD in US dollars) |
“Net to owner” (in US dollars) |
| 2008 | 1,522,500.591 | 295,331.322 |
| 2009 | 1,071,232.00 | 211,615.00 |
| 2010 | 1,114,899.00 | 233,559.00 |
| 2011 | 776,579.00 | 153,741.00 |
| 2012 | 820,138.00 | 151,614.00 |
| 2013 | 688,167.00 | 121,254.00 |
b) Digital exploitation3
| Year | Revenues (in US dollars) |
“Net to owner” (in US dollars) |
| 2008 | 92,888 | 26,473.00 |
| 2009 | 130,237 | 40,687.00 |
| 2010 | 147,360 | 47,156.00 |
| 2011 | 169,778 | 54,329.00 |
| 2012 | 191,129 | 58,922.00 |
| 2013 | 147,532 | 47,210.00 |
c) Other Income
| Year | Revenues (in US dollars) |
“Net to owner” (in US dollars) |
| 2008 | 15,970.93 | 11,978.20 |
| 2009 | 0.00 | 0.00 |
| 2010 | 17,127.18 | 12,845.38 |
| 2011 | 0.00 | 0.00 |
| 2012 | 10,789.39 | 8,092.04 |
| 2013 | 0.00 | 0.00 |
d) Remuneration received for public broadcast4
| Year | Revenues (in US dollars) |
“Net to owner” (in US dollars) |
| 2008 | 8,000.00 | 5,200.00 |
| 2009 | 8,000.00 | 5,200.00 |
| 2010 | 8,000.00 | 5,200.00 |
| 2011 | 8,000.00 | 5,200.00 |
| 2012 | 8,000.00 | 5,200.00 |
| 2013 | 0.00 | 0.00 |
Evidence:
Email of the legal representatives of Defendant 1 of 24 September 2014, Exhibit K 60a;
Letter of the legal representatives of Defendant 1 of 30 September, 2014, Exhibit K 60b;
Old information from Defendant 1 for the 1st quarter of 2008, Exhibit K 42;
detailed billing contained on CD regarding the revenues from exploitation in Germany in the period of 2nd quarter 2008 to 4th quarter 2013, Exhibit K 61;
additional information from Defendant 1 of18 September 2014, Exhibit K 62;
additional information letter of Defendant 1 of 29 October 2014, Exhibit K 63;
Summary of Estimated Revenue by Prager Metis of 29 December 2014, Exhibit K 64;
Summary of Royalties by Prager Metis of 29 December 2014, Exhibit K 65.
3. Defendant 1 also presented two licensing agreements, after the information it provided, according to which the licensing relationship between Defendant 1 and Defendant 2 is apparently as follows:
a) Defendant 1 first sublicensed the rights in the singing performances of Elvis Presley to the company, Sony BMG Music Entertainment (today apparently Sony Music Entertainment).
Evidence:
Email of the legal representatives of the Defendants of 9 December 2014, Exhibit K 66a;
Letter of the legal representatives of the Defendants of 16 December 2014, Exhibit K 66b;
Copy of the licensing agreement between the company, Sony BMG Music Entertainment and Defendant 1 of 8 September 2005, Exhibit K 67
b) That company, Sony BMG Music Entertainment (today apparently Sony Music Entertainment), passed the license “1 to 1” on to Defendant 2.
Evidence:
as above;
Copy of the licensing agreement between the company, Sony BMG Music Entertainment and Defendant 2 of 23 January 2008, Exhibit K 68
c) Both licensing agreements stipulate the following conditions:
aa) A royalty share of between 18.67% and 35.33% of the PPD depending on the method of marketing the recordings.
bb) Differentiated rules on, for example, “Third Party Licensing” with a share for Defendant 1 of 75% of royalties (Schedule (p. 18) although there were allegedly, according to the information of Defendant 1, only five instances of use in the period relevant to the information supplied.
cc) It is striking that the agreements provide for a payment of 65% of the royalties collected for public broadcast (clause 7, p. 17), although Defendant 1 claims that it is only able to “roughly estimate” those figures and despite the fact that Defendant 1 had previously claims that it did not receive anything in the USA for public broadcast in Germany.
4. In its judgement of July 18, 2013, the Appeal Court of Munich set the level of equitable remuneration, which the Plaintiff is entitled to demand for the exploitation of the singing performances of Elvis Presley on phonograms in Germany, as a percentage of the revenues, namely 13% of the recommended retail price, just as the parties had already agreed in the Amendment Agreement (Exhibit K 32) in the version of the Audit Settlement Agreement (Exhibit K 33) in respect of the exploitation of recordings released since 1 March 1973 (UA page 36; presumably, what is meant is the PPD). However, it should be noted that the Plaintiff already submitted arguments on page 10 of its Reply Brief of 16 August 2011, even providing an expert opinion in support of them, that it is standard practice in the case of licensing revenues for authors and performing artists that authors and performing artists have a 50% share of the royalties earned. The Plaintiff then repeated in its writ of 30 September 2011, end of p. 22, top of p. 23, that the equitable remuneration which the Plaintiff is entitled to seek is at least 13% of the recommended retail price for phonogram sales and 50% of the royalties from third parties and revenues from broadcasting as the parties had also agreed in the Amendment Agreement for the recordings falling under the Recording Agreement. Defendant 1 did not counter these submissions. Only after the Plaintiff once more specified, in its Reply to Appeal Response of 16 May 2012, that it is itself entitled to half of those royalties, if the “Net to Owner” is applied, did Defendant 1 dispute those submissions for the first time, with its Appeal Rejoinder of 8 August 2012, p. 15, albeit without substantiation. The judgement of the Appeal Court of Munich of July 18, 2013 does not address these submissions of the Plaintiff at all. At this point, we repeat, for the sake of precaution, our already presented expert opinion in support of the fact that it is standard practice in the case of licensing revenues for authors and performing artists that authors and performing artists have a 50% share of the royalties earned and that the equitable remuneration for performing artists of the status of Elvis Presley are at a level of a 50% share also in respect of royalties which the record producer earns. These also include revenues from digital exploitation because the Defendants do not sell those files themselves rather they grant exploitation licences to third parties, for example iTunes, Amazon.de or Spotify.
Evidence: Expert opinion
5. The Appeal Court of Munich also ruled in its judgement of July 18, 2013 that the full amount of the remuneration which Elvis Presley received on the basis of the Buyout Agreement (Exhibit K 29), namely USD 5,400,000.00, must be used as the basis and the amounts which Colonel Parker and All Star Shows, which are both also contracting parties in the Buyout Agreement (Exhibit K 29), cannot be deducted because the USD 2,900,000.00 which Colonel Parker and All Star Shows received on the basis of the Buyout Agreement merely constituted a payment modality (UA p. 31). The Appeal Court of Munich also ruled in its judgement that a share of 10% should be set for the exploitation of the recordings of Elvis Presley in Germany, so it can be said that Elvis Presley received, in 1973, a lump sum in the amount of USD 540,000.00 for the assignment of the exclusive exploitation rights to the legal predecessor of Defendant 1 in Germany (UA p. 31).
6. Phonogram recordings containing performances of Elvis Presley are and were protected in Germany as follows:
| Year of release | Original term of protection (25 years) to end of |
End of term of protection after 1990 extension (50 years) |
End of term of protection after 2013 extension (70 years) |
| up to 1965 | 1990 | 2015 | 2035 |
| 1966 | 1991 | 2016 | 2036 |
| 1967 | 1992 | 2017 | 2037 |
| 1968 | 1993 | 2018 | 2038 |
| 1969 | 1994 | 2019 | 2039 |
| 1970 | 1995 | 2020 | 2040 |
| 1971 | 1996 | 2021 | 2041 |
| 1972 | 1997 | 2022 | 2042 |
| 1973 | 1998 | 2023 | 2043 |
This leads to an average remaining term of protection for the phonogram recordings containing performances of Elvis Presley up to end of 2039. Computed backwards to the time the Buyout Agreement was concluded in 1973, viewed retrospectively, the phonogram recordings containing performances of Elvis Presley still had 66 years of protection (remaining on average).
7. Taking the assumption of the Appeal Court of Munich, in its judgement of July 18, 2013, that the part of the remuneration attributable to Germany which Elvis Presley received from the Buyout Agreement was USD 540,000.00, it can be said that Elvis Presley therefore received, for all performances released up to the conclusion of the Buyout Agreement on February 28, 1973, a yearly sum, calculated on the basis of the average remaining term of protection of 66 years, of USD 8,181,81 (540,000 / 66 = 8,181.81).
One can extrapolate from the dollar value from the year 1973 to produce inflation adjusted values for later years by using the calculation tool of the Federal Reserve Bank of Minneapolis, “What is a dollar worth?”. This calculation tool can be found at www.minneapolisfed.org. The Plaintiff therefore extrapolated the dollar values accordingly, using the tool of the Federal Reserve Bank of Minneapolis, thus arriving at the following figures:
| Year | Received for Germany from the Buyout Agreement per year (in US dollars) |
1.00 USD 1973 = | Extrapolated value (in US dollars) |
| 2008 | 8,181.81 | 4.85 | 39,681.78 |
| 2009 | 8,181.81 | 4.83 | 39,518.14 |
| 2010 | 8,181.81 | 4.91 | 40,172.69 |
| 2011 | 8,181.81 | 5.06 | 41,399.96 |
| 2012 | 8,181.81 | 5.17 | 42,299.96 |
| 2013 | 8,181.81 | 5.24 | 42,872.68 |
8. The following figures for equitable total remuneration have been calculated using the information provided and represent what the Plaintiff would be entitled to for the exploitation of the singing performances of Elvis Presley in Germany based on a 13% share of revenues on a PPD basis and 50% of royalties (digital and other):
a) 2008
| aa) | 13% of USD 1,522,500.59 = | USD 197,925.04 |
| bb) | digital: 50% of USD 92,888.00 = | USD 46,444.00 |
| cc) | other royalties: 50% of USD 15,970.93 = | USD 7,985.46 |
| dd) | public broadcast: 50% of USD 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 256,354.50 |
| ff) | actually received: | USD 39,681.78 |
| gg) | Difference: | 646 % |
b) 2009
| aa) | 13% of USD 1,071,232.00 = | USD 139,260.16 |
| bb) | digital: 50% of USD 130,237.00 = | USD 65,118.50 |
| cc) | other royalties: 50% of 0.00 = | USD 0.00 |
| dd) | public broadcast: 50% of 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 208,378.66 |
| ff) | actually received: | USD 39,518.14 |
| gg) | Difference: | 527 % |
c) 2010
| aa) | 13% of USD 1,114,899.00 = | USD 144,936.87 |
| bb) | digital: 50% of USD 147,360.00 = | USD 73,680.00 |
| cc) | other royalties: 50% of 17,127.18 = | USD 8,563.59 |
| dd) | public broadcast: 50% of 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 231,180.46 |
| ff) | actually received: | USD 40,172.69 |
| gg) | Difference: | 575 % |
d) 2011
| aa) | 13% of USD 776,579.00 = | USD 100,955.27 |
| bb) | digital: 50% of 169,778 = | USD 84,889.00 |
| cc) | other royalties: 50% of 0.00 = | USD 0.00 |
| dd) | public broadcast: 50% of 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 189,844.27 |
| ff) | actually received: | USD 41,399.96 |
| gg) | Difference: | 458 % |
e) 2012
| aa) | 13% of USD 820,138.00 = | USD 106,617.94 |
| bb) | digital: 50% of USD 191,129.00 = | USD 95,564.50 |
| cc) | other royalties: 50% of 10,789.39 = | USD 5,394.70 |
| dd) | public broadcast: 50% of 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 211,577.14 |
| ff) | actually received: | USD 42,299.96 |
| gg) | Difference: | 500 % |
f) 2013
| aa) | 13% of 688,167.00 = | USD 89,461.71 |
| bb) | digital: 50% of 147,532.00 = | USD 73,766.00 |
| cc) | other royalties: 50% of USD 0.00 = | USD 0.00 |
| dd) | public broadcast: 50% of USD 8,000.00 = | USD 4,000.00 |
| ee) | equitable total remuneration: | USD 167,227.71 |
| ff) | actually received: | USD 42,872.68 |
| gg) | Difference: | 390 % |
9. The equitable remuneration to which the Plaintiff is entitled for the exploitation of the performances of Elvis Presley in Germany has to be divided between Defendant 1 and Defendant 2, however, as, in the opinion of the Appeal Court of Munich in the judgement of July 18, 2013, in the case of claims based on Sec. 32 a German Copyright Act, each exploiter is only liable for its own revenues (UA p. 35). The Plaintiff expressly places the division of the equitable remuneration between the Defendants at the discretion of the Court. However, as the Plaintiff is only able to claim an equitable remuneration in the amount of 13% of the revenues earned from the use on the basis of PPD and 50% of the royalties collected, the following division would, in the opinion of the Plaintiff, appear to suggest itself:
a) Main division
aa) Defendant 1
The Appeal Court of Munich says, in its judgement of July 18 2013, that the monies paid to Defendant 1 by subsidiaries and other group companies primarily constitute income from royalties (UA p. 35). Therefore, the Plaintiff is entitled to a 50% share of the royalties of Defendant 1 which it has received “Net to Owner” from Defendant 2, as follows:
| 2008: | 50% of USD 338,982.52 = | USD 169,491.26 |
| 2009: | 50% of USD 257,502.00 = | USD 128,751.00 |
| 2010: | 50% of USD 298,760.38 = | USD 149,380.19 |
| 2011: | 50% of USD 213,270.00 = | USD 106,635.00 |
| 2012: | 50% of USD 223,828.04 = | USD 111,914.02 |
| 2013: | 50% of USD 168,464.00 = | USD 84,232.00 |
bb) Defendant 2
According to the judgement of the Appeal Court of Munich of July 18 2013, the Plaintiff is also entitled to equitable remuneration in the amount of a 13% share of the revenues earned according to PPD (UA p. 36; mistakenly based on recommended retail price there). However, as the Plaintiff cannot demand more than that 13% in total, the claims which the Plaintiff already has against Defendant 1, which the Plaintiff is entitled to against Defendant 2, must be deducted so that the following picture emerges against Defendant 2:
| Year | Equitable total remuneration (in US dollars) | Equitable remuneration of Defendant 1 (in US dollars) |
Remaining equitable remuneration of Defendant 2 (in US dollars) |
| 2008 | 256,354.50 | 169,491.26 | 86,863.24 |
| 2009 | 208,378.66 | 128,751.00 | 79,627.66 |
| 2010 | 231,180.46 | 149,380.19 | 81,800.27 |
| 2011 | 189,844.27 | 106,635.00 | 83,209.27 |
| 2012 | 211,577.14 | 111,914.02 | 99,663.12 |
| 2013 | 167,227.71 | 84,232.00 | 82,995.71 |
b) alternative division
If one were alternatively of the opinion that the Plaintiff is not entitled to 50% of the royalties from Defendant 1 but merely 13% as the Appeal Court of Munich assumed in its judgement of July 18, 2013 – albeit whilst failing to take into account the respective submissions of the Plaintiff – this would produce the following division:
aa) Defendant 1
13% of the royalties earned
| 2008: | 13% of USD 338,982.52 = | USD 44,067.73 |
| 2009: | 13% of USD 257,502.00 = | USD 33,475.26 |
| 2010: | 13% of USD 298,760.38 = | USD 38,838.85 |
| 2011: | 13% of USD 213,270.00 = | USD 27,725.10 |
| 2012: | 13% of USD 223,828.04 = | USD 29,097.64 |
| 2013: | 13% of USD 168,464.00 = | USD 21,900.32 |
bb) Defendant 2
13% of the revenues earned on the basis of PPD or 50% of the royalties received, taking into account the claims of the Plaintiff against Defendant 1:
| Year | Equitable total remuneration (in US dollars) | Equitable remuneration of Defendant 1 (in US dollars) |
Remaining equitable remuneration of Defendant 2 (in US dollars) |
| 2008 | 256,354.50 | 44,067.73 | 212,286.77 |
| 2009 | 208,378.66 | 33,475.26 | 174,903.40 |
| 2010 | 231,180.46 | 38,838.85 | 192,341.61 |
| 2011 | 189,844.27 | 27,725.10 | 162,119.17 |
| 2012 | 211,577.14 | 29,097.64 | 182,479.50 |
| 2013 | 167,227.71 | 21,900.32 | 145,327.38 |
10. As emerged from the presentation of the licensing agreements by Defendant 1, Defendant 2 has clearly been a licensee of Defendant 1 for a long time. In this context, the licensing agreement of January 23 2008 (Exhibit K 68), states that it takes precedence over and replaces the preceding agreements (clause 12.2).
Defendant 1 provided information in the pre-trial proceedings (Exhibit K 39 – K 41), that the following revenue had been earned in Germany from the exploitation of phonograms containing performances of Elvis Presley, in the following years:
2005: USD 2,771,603.90
2006: USD 2,857,278.68
2007: USD 2,749,785.48
11. The Appeal Court of Munich arrived at the opinion in its judgement of July 18 2013, that the exploitation of the performances of Elvis Presley on phonograms in Germany in the period 2005 – 2007 had not led to a conspicuous disproportion in respect of Defendant 1 within the meaning of Sec. 32a German Copyright Act existed in respect of the remuneration which Elvis Presley received from the Buyout Agreement, adjusted to include only Germany. The Appeal Court of Munich came to this conclusion because it assumed that whilst the equitable remuneration should be set at 13% of the revenues earned on the basis recommended retail price, as far as Defendant 1 was concerned, only 13% of the payments which it received from Germany could be used as a basis (UA p. 34 et seq.).
12. However, as far as Defendant 2 and the revenues it earned are concerned, a conspicuous
disproportion very much does exist, which arises as follows:
a) Remuneration actually received by Elvis Presley on the basis of the Buyout Agreement, extrapolated with the help of the calculation tool at www.minneapolisfed.org:
| Year | Received for Germany from the Buyout Agreement per year (in US dollars) | 1.00 USD 1973 = | Extrapolated value (in US dollars) |
| 2005 | 8,181.81 | 4.40 | 39,999.96 |
| 2006 | 8,181.81 | 4.54 | 37,145.42 |
| 2007 | 8,181.81 | 4.67 | 38,209.05 |
b) This leads to the following equitable remuneration:
aa) 2005
| Revenue: | USD | 2,771,603.90 |
| of which 13%: | USD | 360,308.51 |
| actually received: | USD | 35,999.96 |
| Difference: | 1,000% |
bb) 2006
| Revenue: | USD | 2,857,278.68 |
| of which 13%: | USD | 371,446.23 |
| actually received: | USD | 37,145.42 |
| Difference: | 999% |
cc) 2007
| Revenue: | USD | 2,749,785.48 |
| of which 13%: | USD | 357,472.11 |
| actually received: | USD | 38,209.05 |
| Difference: | 935% |
II.
The Plaintiff is entitled to an additional equitable remuneration from Defendant 1 under Sec. 32a (1) German Copyright Act and from Defendant 2 under Sec. 32a (2) German Copyright Act.
1. According to Sec. 32a (1) German Copyright Act, the performing artist has a right to an additional equitable participation if he or she has granted another an exploitation right under conditions which lead to the agreed consideration being conspicuously disproportionate, taking into account the entire relationship of the performing artist to the other party, to the earnings and benefits derived from the exploitation of the recordings containing his or her performances. According to Sec. 32a (2) Germany Copyright Act, a third party is directly liable towards the performing artist, under the criteria of paragraph (1), taking into account the contractual relationships in the licensing chain, if the other party has transferred the exploitation right and the conspicuous disproportion arises from the earnings or benefits of those third parties.
a) In order to answer the question of whether such a conspicuous disproportion exists, one must first establish what the remuneration agreed with the performing artist was and then the earnings and benefits achieved by the exploiter. Thereafter, the remuneration has to be determined which, viewed retrospectively, in particular taking into account the revenues and benefits, would be equitable within the meaning of Sec. 32 (2) sentence 2 German Copyright Act. Finally, one must examine whether the agreed remuneration is conspicuously disproportionate to the equitable remuneration. In this context, the German Federal Court of Justice has stipulated that a conspicuous disproportion is certainly said to exist if the agreed remuneration is only half of the equitable remuneration (BGH GRUR 2012, 496, para. 25 – Das Boot). Depending on the circumstances, slight differences could be enough to justify a conspicuous disproportion as the overall relationship between the author and the exploiter must be taken into account (BGH GRUR 2012, 496, para. 25, 40 – Das Boot).
b) The Appeal Court of Munich already found in its partial and final judgement of July 18 2013 that the earnings of Defendant 1 which fall after the 1 January 2008, namely within the meaning of the Action, the “future” earnings do constitute, with
high probability
grounds for a conspicuous disproportion (UA p. 43).
In our opinion, the Appeal Court of Munich did make an error when it stated that in respect of Defendant 1 only an equitable remuneration of 13% of the revenues earned by Defendant 1 itself, namely the royalties “Net to Owner”, which it received from its foreign subsidiary, should be taken as the basis and not, as agreed in the Amendment Agreement in the version of the Audit Settlement Agreement, the earnings abroad, thus also in Germany, according to the PPD. However, the Appeal Court has already previously established, in its judgement of July 18, 2013, that the equitable remuneration amounted to 13% of the sales revenues from the recordings falling under the Buyout Agreement (UA p. 36). In the opinion of the Plaintiff, even if one follows the opinion of the Appeal Court of Munich that in a corporate group, each company within it is only liable for the revenues they earn individually (UA p. 35), the conspicuous disproportion between the remuneration actually received and the equitable remuneration is established in the overall situation and not in respect of each company within the corporate group. On the one side, a situation like the one at hand, in which a parent company like Defendant 1 grants exploitation rights to a foreign subsidiary like Defendant 2, not even directly but via an intermediary company, and is then paid royalties in return for the exploitation, one can hardly determine how the remuneration which the performing artist received can be divided between parent company and subsidiary; ultimately, both parties are making use of the same exploitation rights in the same recordings. On the other side, if one applied the remuneration received by the performing artist in full both to the parent company and to the subsidiary and the compare the income and benefits which only that party earned, there would be a risk that clever contractual structures within the corporate group could be used to ensure, to the detriment of the performing artist, that a conspicuous disproportion never arises, for example by granting the exploitation rights in the recordings of the performing artist to not just one German subsidiary but to several (c.f. Schricker/ Loewenheim/ Schricker/ Haedicke, Urheberrecht, Kommentar, 4th Edition 2010, § 32a marg. no. 33).
c) Overall, the figures shown above are obtained, with differences between the equitable remuneration and the actually paid remuneration of
390 % to 1,000 %,
thus between almost four times and ten times what the claim according to Sec. 32a German Copyright Act more than justifies. The claim then has to be divided between the Defendants because they are apparently not jointly and severally liable under Sec. 32a German Copyright Act. The Plaintiff assumes, in respect of Defendant 1, that it is entitled to 50% of the royalties “Net to Owner” and at least 13% thereof, as the Appeal Court of Munich assumed in its judgement of July 18 2013. The claim in respect of Defendant 2 exists in the amount of the (full) equitable remuneration on the basis of all revenues and benefits which were achieved by Defendant 2 in Germany with the exploitation of the recordings containing the performances of Elvis Presley, after deduction of the payments which the Plaintiff is entitled to from Defendant 1.
d) The Court might also look at and check once more the well-foundedness of our claims: Defendants 1 and 2 earned revenues in their corporate group of at least USD 12,684,121.05 from the recordings of Elvis Presley in the years 2002 to 2007 alone; in the years 2008 to 2013, a further 6,330,997.00 was added. At the same time, Elvis Presley received an inflation adjusted remuneration for the years 2002 – 2007 of just USD 213,136.14 on the basis of the Buyout Agreement; for the years 2008 – 2013, the remuneration received was also low, at just USD 245,945.21. As there were at least 1,080 songs which were covered by the Buyout Agreement, the sum per song per year which Elvis received for all exploitations in Germany was a ridiculous USD 35.42 (after adjustment for inflation!).
The Appeal Court incorrectly denied the existence of a conspicuous disproportion in respect of the payment for the past asserted by us, due to the fact that the Court based its assessment on the wrong relevant time period (the Appeal Court did not apply the remuneration received to the entire term of protection but only to the period which had already elapsed; in that case, Elvis would not have received any payment at all for the future. Ultimately, that method of calculation would be dependent on the arbitrary point in time when the Action was instituted). The Court used the reasoning that only the internal revenues of Defendant 1 should form the basis for any assessment. In contrast, if one looks at the entire income, it becomes more than clear that the minimal percentage share received by Elvis easily represents a conspicuous disproportion.
This can also be described in another way: The Defendants cannot escape a claim under Sec. 32a German Copyright Act simply through clever distribution of their income within their corporate group. As Defendant 1 – as shown above – itself checks and controls the billing process, it should in fact be responsible in full itself.
e) Only after the oral hearing before the Appeal Court of Munich did the German legislator implement Art. 3 of the Term of Protection Directive, through Sec. 79a German Copyright Act. According to that provision, in cases where lump sum remuneration has been paid the performing artist is entitled to payment of an additional remuneration for the years 51 to 70 of the term of protection, in the amount of 20% of revenues from the record producer. The Court will have to take this into account when determining the equitable remuneration, at least from the 51st year of protection of the recordings containing the performances of Elvis Presley in Germany. In this context, it will have to be decided whether the legislator, through Art. 3 of the Term of Protection Directive and Sec. 79a German Copyright Act has not also set the level of equitable remuneration for the years up to the 50th year of protection and whether therefore 20% and not 13% would represent the equitable remuneration for that period.
2. We assert the claim against Defendant 1 (=contracting partner of the Plaintiff) in the form of a contractual amendment as provided for in Sec. 32a (1) German Copyright Act, as already applied for in the oral hearing before the Appeal Court of Munich (UA p. 20).
We also assert the claim against Defendant 2 in the form of a contractual structure claim, as the other party is liable “in accordance with paragraph (1)”. In this context, it is acknowledged that a claim is for the conclusion of an agreement with the purpose of granting an equitable remuneration (c.f. Dreier/ Schulze/ Schulze, UrhG, Kommentar, 4th Ed. 2013, § 32a marg. no. 48). The Plaintiff cannot be secured for the future in any other way, otherwise it would be forced to take action repeatedly against Defendant 2.
In this context, the Plaintiff is also entitled to assert a claim for equitable remuneration against Defendant 2 for the years 2005 to 2007, as per Sec. 32a (2) German Copyright Act, as it was only through the disclosure of Defendant 1 on 9 December 2014 that the Plaintiff received the information as to who the licensee of Defendant 1 in Germany even is; the licensing agreements were only presented with the letter of 18 December 2014.
3. The claims for additional equitable participation against Defendant 1 are not statute barred, according to the findings of the Appeal Court (UA p. 32).
4. The Plaintiff is entitled to extend the Action against Defendant 2 under Sec. 263 German Code of Civil Procedure by way of amendment to the Action, as this is helpful to the case at hand. This is because it concerns the same facts of the matter and companies within the same group are concerned.
In this context, we refer once more to our previous submissions, according to which it has been decided in case law in comparable areas of law, namely employee invention law, that claims for information and rendering of account exist directly against the contracting partner even regarding income earned by other companies within the corporate group (Regional Court of Duesseldorf, judgement of June 18, 1991, 4 OAO
254/90). Thus, if a direct claim exists against Defendant 1, an assertion against Defendant 2 as the group company affected, is certainly helpful to the case.
Two certified and two simple copies are enclosed, as well as a check for deposit for additional court costs due to the extension of claim for EUR 9,180.00.
BOEHMERT & BOEHMERT
Prof. Dr. Axel Nordemann, Attorney at Law
Prof. Dr. Christian Czychowski, Attorney at Law
Enclosures:
2 certified and 2 simple copies
Exhibits K 60 – K 68
Check for deposit of EUR 9,180.00
Footnotes
[1] 1st quarter, from old information (Exhibit K42): USD 409,161.59; 2nd to 4th quarters: USD 1,113,339.00.
[2] 1st quarter, from old information (Exhibit K42): USD 80,441.32; 2nd to 4th quarters: USD 214,890.00
[3] Calculated from digital download + digital streaming
[4] According to the information of the legal representatives of Defendant 1, “roughly estimated”
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