The opinion of the court was delivered by: Owen, United States District Judge
Plaintiff Profile Publishing and Management Corporation APS (Profile)
moves for: (1) summary judgment pursuant to Fed.R.Civ.P. 56(a) for the
balance due on a music licensing contract; (2) an Order dismissing
Defendant Musicmaker.com. Inc.'s (Musicmaker) counterclaims and
affirmative defenses; and (3) an Order imposing sanctions on Musicmaker
pursuant to Fed.R.Civ.P. 11(c). Musicmaker cross-moves For leave to amend
its answer and counterclaims pursuant to Fed R. Civ P. 15(a) to assert
the defense of frustration of purpose.
Profile and Musicmaker entered into a contract on December 28, 1999
whereby Profile licensed Musicmaker to use several live recordings by The
Who, the agreement giving Musicmaker the exclusive right to sell copies
of these recordings worldwide over the internet for a ten year term, and
the non-exclusive right to broadcast and/or publicly perform them for
that period. Profile retained the right to release recordings of this
material through normal retail channels. The agreement called for
Musicmaker to pay Profile a percentage of the sale price for each sale,
and to pay an advance against royalties of $2,500,000 — $1,500,000
upon receipt of the Master recording, and Four quarterly payments
thereafter in the amount of $250,000 each. Musicmaker received the master
recording on February 28, 2000, began selling the recordings over its
website, and made the first four required payments on time. In January
2001, Musicmaker shut down its web site and announced plans to liquidate
the company. Musicmaker then failed to make the final $250,000 payment
which was due on February 28, 2001 and is the subject of this action.
Some seven or eight months before the parties here entered into their
contract, in May 1999, Napster.com came into existence. It was a
peer-to-peer file sharing website that had the effect of making
copyrighted music available for free to anyone on the internet. However,
it was but one of many thousands of internet sites offering music for
free. Two months before the contract was signed here, contained in an
October 28, 1999 internet printout, puzzlingly put before me by
Musicmaker, the trade was being told internationally:
The following press release issued today by the
International Federation of the Phonographic Industry
(IFPI), announces a global attack on music piracy with
special attention to individuals and companies
uploading illegal MP3 files and Internet service
providers hosting illegal MP3 sites.
Fighting Internet piracy involves targeting two groups
— people who are uploading infringing material
on to the internet — commonly in the MP3 Format
— to be downloaded for Free.
IFPI launched a global structure two years ago to
Fight the proliferation of CD piracy, now worth $4.5
billion annually. The new global strategy to fight
Internet piracy reflects the recording industry's
concern over spreading online piracy in the next few
MUSIC ON THE INTERNET — KEY FACTS
It is estimated that 1 million illegal music Files are
posted on the Internet — yet few countries
outside the USA have adequate legislation to fight
Internet piracy. . . .
Exhibit B to the affidavit of Stuart Jackson. March 30, 2001.
Three weeks before the contract was signed here, on December 6. 1999,
the Recording Industry Association of America (RIAA), a trade group that
represents the U.S. recording industry, filed a highly publicized suit
against Napster for copyright infringement. The RIAA suit received
widespread coverage in the press. including the front page of Billboard
magazine. the trade newspaper for the music industry, in its December
18, 1999 issue.
Profile contends that Musicmaker's proposed defense of frustration of
purpose lacks merit and that the amendment would, therefore, be futile.
"[W]here, as here, the cross-motion is made in response to a
Fed.R.Civ.P. 56 motion for summary judgment, and the parties have fully
briefed the issue whether the proposed amended complaint could raise a
genuine issue of fact . . . the court may deny the amendment as futile
when the evidence in support of the. ...