Capitol Records, Inc. v. Naxos of America, Inc.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2003

Argued: January 26, 2004 Decided: June 21, 2004

Docket No. 03-7859

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CAPITOL RECORDS, INC.,
Plaintiff-Appellant,

v.

NAXOS OF AMERICA, INC.,
Defendant-Appellee.
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Before: NEWMAN and RAGGI, Circuit Judges; and
UNDERHILL,* District Judge.

Appeal from the August 11, 2003, judgment of the United States

District Court for the Southern District of New York (Robert W. Sweet,

District Judge), dismissing, on motion for summary judgment, suit

alleging common law copyright infringement of sound recordings, unfair

competition, and other torts.

Question concerning New York common law copyright certified to

New York Court of Appeals.

Philip Allen Lacovara, Mayer Brown Rowe
& Maw LLP, New York, N.Y. (Paul R.
Levenson, Kaplan & Levenson LLP, New
York, N.Y., on the brief), for
Plaintiff-Appellant.
Maxim H. Waldbaum, New York, N.Y. (Lora
Moffatt, Lori D. Greendorfer, Joseph
E. Petersen, Salans, New York, N.Y.,
on the brief), for Defendant-Appellee.

*
Honorable Stefan R. Underhill of the United States District Court
for the District of Connecticut, sitting by designation.
 (Todd E. Fitzsimmons, Dale M. Cendali,
O'Melveny & Myers LLP, New York, N.Y.;
Matthew J. Oppenheim, Stanley Pierre-
Louis, RIAA, Washington, D.C., submit-
ted a brief for amicus curiae Record-
ing Industry Association of America,
in support of Plaintiff-Appellant).

JON O. NEWMAN, Circuit Judge.

This appeal concerns issues of common law copyright under New

York law. The allegedly infringing works are restorations of sound

recordings of important classical performances originally recorded in

England in the 1930s. Plaintiff-Appellant Capitol Records, Inc.

(“Capitol”) appeals from the judgment of the District Court for the

Southern District of New York (Robert W. Sweet, District Judge)

dismissing its suit against Defendant-Appellee Naxos of America, Inc.

(“Naxos”). We conclude that the appeal raises unsettled issues of

state law that are appropriate for certification to the New York Court

of Appeals.

Background

The original recordings and the artists’ contracts. The
recordings at issue ("the original recordings") are: Yehudi Menuhin's

performance of Edward Elgar's "Violin Concerto in B minor, Opus 61,"

recorded on July 5 and 14, 1932, and Menuhin's performance of Max

Bruch's "Violin Concerto No. 1 in G minor, Opus 26," recorded on

November 25, 1931; Pablo Casals' performances of the J.S. Bach cello

suites recorded between November 1936 and June 1939; and Edwin

Fischer's performance of J.S. Bach's "The Well Tempered Clavier, Book

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I," recorded between April 1933 and August 1934, and Fischer's

performance of Bach's "The Well Tempered Clavier, Book II," recorded

between February 1935 and June 1936. The parties are in agreement

that all of the original recordings were made in the United Kingdom.

On March 24, 1931, Menuhin signed a contract with The Gramophone

Company Limited ("Gramophone"), now known as EMI Records Limited

("EMI"), stating that Gramophone would be "the absolute owner of all

rights in the Artiste’s personal performance and all rights of any

nature whatsoever in respect of the records made by the Artiste for

the Company that the Artiste shall at any time possess in any country

of the world where the [British] Copyright Act 1911 is not in force."

On November 24, 1933, Fischer signed a contract with Gramophone that

contained identical language. On November 29, 1936, Casals signed a

contract with Gramophone stating that Gramophone would be "entitled to

the sole right of production, reproduction, sale, use and performance

(including broadcasting) throughout the world by any and every means

whatsoever of the records of the works performed by the Artiste under

this Agreement."
Yale Library-EMI correspondence. On December 11, 1978, Richard

Warren, curator of historical sound recordings at the Yale University

Library, wrote to A.W. Dewdney, manager of EMI’s copyright department

in England, to inquire about setting up a procedure to handle the many

requests that the library received to copy historical EMI recordings.

In the letter, Warren, while stating that he was not a legal expert,

set out his understanding of the state of copyright law for historical

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recordings. He wrote that recordings made before 1972 were covered by

state copyright laws, which "seem to provide unlimited (and

retroactive) protection to all recordings without provision for

registration." He identified three categories of requests for copies

of recordings that his library had received: (1) copies for personal

use, (2) copies for broadcast, and (3) copies for reissue.

Dewdney replied ten days later. Explicitly cautioning that he

was "not . . . conversant with American copyright law," he explained

that in the United Kingdom a copyright exists in a recording for 50

years from the end of the year in which the recording was made.

Dewdney stated that, within that term, re-recordings must be used for

personal use and not for public performance or broadcasting, and no

further copies can be made without the written permission of the

owners of the rights in the recording. Beyond the 50-year term, no

permission would be necessary for the three categories of uses

identified in Warren's letter, so long as "the musical content is

public domain."

On September 30, 1986, Warren wrote to A.R. Locantro, manager of
licensing and repertoire exploitation for EMI, summarizing his

correspondence with Dewdney. Locantro replied that he "fully agree[d]

with the exchange of correspondence" between Warren and Dewdney "in

that it correctly set[] out the legal situation pertaining to public

domain recordings."

EMI’s licenses. EMI also does business as EMI Records (U.K.),

according to a declaration of Richard C. Lyttelton, president for

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classics and jazz of EMI Recorded Music, a division of EMI. In April

1996, EMI Records (U.K.) and EMI Music International Services Limited

("EMIMIS") entered into a Matrix Exchange Agreement (“EMIMIS Matrix

Agreement”), under which EMI Records (U.K.) granted to EMIMIS an

exclusive license to exploit the original recordings in the United

States. At the same time, EMIMIS and Capitol also entered into a

Matrix Exchange Agreement (“Capitol Matrix Agreement”), under which

EMIMIS exclusively licensed the same rights to Capitol.

The Naxos restorations and the lawsuit. In 1999, Naxos began to

sell restorations of the original recordings ("the Naxos

restorations") in competition with Capitol’s restorations. In October

2002, Capitol sued Naxos for unfair competition, misappropriation of

property, unjust enrichment, and common law copyright infringement.

Naxos moved to dismiss for failure to state a claim upon which relief

can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6).

Naxos submitted multiple declarations with its motion papers. Capitol

responded by moving for partial summary judgment on liability, a

permanent injunction, and an accounting. Capitol submitted its own
set of supporting declarations and documents. Naxos responded with

still more documents.

District Court opinions. The District Court issued two opinions

in this case. The principal opinion, Capitol Records, Inc. v. Naxos

of America, Inc., 262 F. Supp. 2d 204 (S.D.N.Y. 2003) (“Capitol I”),

granted Naxos’s motion for summary judgment, but gave Capitol time to

submit additional factual material. See id. at 216. After receipt of

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Capitol’s submission, the Court issued a second opinion, Capitol

Records, Inc. v. Naxos of America, Inc., 274 F. Supp. 2d 472 (S.D.N.Y.

2003) (“Capitol II”), which adhered to its prior ruling and expanded

on some of the Court’s reasoning.

In Capitol I, the Court first converted Naxos’s motion to dismiss

into a motion for summary judgment in view of the "well-developed

factual record" in the case and because both parties had had ample

opportunity to present relevant materials to the Court. 262 F. Supp.

2d at 207. The Court then noted the parties' agreement that the

original recordings are not protected by federal copyright law because

they are sound recordings “fixed before February 15, 1972.” Id. at 209

(internal quotation marks omitted).1 However, the Court recognized

that the recordings would be covered by any applicable state common

law protections until federal preemption occurs on February 15, 2067.

Id.; see 17 U.S.C. § 301(c).

Rejecting all of Capitol’s claims, the Court concluded that Naxos

was entitled to summary judgment. Some aspects of the Court’s ruling

are not entirely clear. Initially, the Court viewed Capitol as
asserting “a hybrid copyright, unfair competition cause of action,”

id. at 210, a designation that appeared to import the elements of an

1
For the quoted phrase "fixed before February 15, 1972," the Court
cited 17 U.S.C. § 104A(h)(6)(C)(ii), a provision of the Uruguay Round
Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994), concerning
restoration of copyright in certain public domain works. However,
that provision merely identifies one criterion of a class of works
that are eligible for restoration of copyright. The provision that
leaves sound recordings "fixed before February 15, 1972" unprotected
by federal copyright law (but subject to protection under state law
until February 15, 2067) is 17 U.S.C. § 301(c).

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unfair competition claim into Capitol’s claim of common law copyright

infringement. Moreover, the Court at no point stated that Capitol did

not have a common law copyright in the original recordings. But it

did rule that “the facts are inadequate to support Capitol’s claim of

intellectual property rights in the original recordings,” id. at 211,

and then separately considered and rejected Capitol’s claim of unfair

competition, id. at 213-16.

In support of the conclusion that Capitol lacked intellectual

property rights in the recordings, the Court gave both definitive and

tentative reasons. First, the Court noted that the U.K. copyrights

“have long since expired,” id. at 211, apparently reflecting the

Court’s view that this fact alone defeated Capitol’s claim for common

law copyright infringement. The Court then stated that “there is

ambiguity concerning Capitol’s chain of title and the agreement with

Casals.” Id. (emphasis added). The ambiguity in Capitol’s chain of

title, as explained in Capitol II, derived from the fact that the

EMIMIS Matrix Agreement was executed after the expiration of English

copyrights in the original recordings, see 274 F. Supp. 2d at 474, and
the fact that the first of Capitol’s licenses to distribute EMI’s

recordings in the United States contained no reference to the transfer

of rights from EMI to EMISIS, Capitol’s alleged licensor, id. The

ambiguity in the agreement with Casals was based on the assertion that

in the agreement “there is no identified (UK) copyright holder because

there is no specific mention of the ownership of the plate.” Capitol

I, 262 F. Supp. 2d at 211. The Court asserted that under U.K.

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copyright law “the owner of any copyright interest in a sound

recording depends upon ownership of the plate. Copyright Act, 1911,

§ 19 (‘[T]he person who was the owner of such original plate at the

time when such plate was made shall be deemed to be the author of the

work.’).” Id. After consideration of a submission by a lawyer

familiar with recording industry practice, the Court acknowledged that

a factual question precluded resolution on summary judgment of the

ambiguity in the Casals agreement, but concluded that this issue was

not dispositive. See Capitol II, 274 F. Supp. 2d at 475.

In Capitol I, the Court also stated that “Capitol appears to have

waived or abandoned any interests it had in the original recordings.”

262 F. Supp. 2d at 211 (emphasis added). After stating this last

point tentatively, the Court then ruled that waiver and abandonment

had occurred. Waiver was predicated on EMI’s correspondence with the

Yale library. See id. Abandonment was predicated on (1) the alleged

fact that EMI’s own restorations of the original recordings claim

copyright solely in the restorations, not the underlying original

works, (2) the Yale library correspondence, (3) Capitol’s failure to
pursue other companies selling restorations of the original

recordings, and (4) the lack of clarity as to when and how

consistently royalties had been paid. See id. at 212-13.

Turning to the claim of unfair competition in its first opinion,

the Court initially rejected the claim on the ground that Capitol had

no rights in the original recordings. See Capitol I, 262 F. Supp. 2d

at 213. In addition, the Court pointed out that Naxos had not claimed

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that its restorations were a “substitute” for or an “imitation” or

“duplicate” of the original recordings. See id. In the Court’s view,

Naxos had “create[d] an entirely new and commercially viable product,”

id. at 214, in contrast to the original recordings, which were “marred

by numerous sound imperfections,” id. and could be played only on

machines that had become obsolete and unavailable to most consumers,

id. The Court also noted that public policy concerns, which had

favored the plaintiff in New York cases such as Metropolitan Opera

Ass’n v. Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d

483 (Sup. Ct. 1950), favored Naxos. “[T]he Naxos restorations would

not discourage, but rather encourage ‘the preservation and

dissemination’” of ‘fine performances,’” Capitol I, 262 F. Supp. 2d at

215 (quoting Metropolitan Opera, 199 Misc. at 802, 101 N.Y.S.2d at

497), and might have “revived the relevant market in historic

classical performances to Capitol’s benefit,” id. Finally, the Court

stated that Naxos had not shown the bad faith necessary for a common

law claim of unfair competition. See id.

The Court’s subsequent opinion elaborated on the waiver and
abandonment rulings, but concluded with a repetition of the tentative

nature of its view on these points: “Capitol appears to have waived or

abandoned any interests it had in the original recordings.” Capitol

II, 274 F. Supp. 2d at 481 (emphasis added).

Discussion

I. Common Law Copyright

The District Court properly ruled, and the parties do not

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dispute, that, because the original recordings were fixed before

February 15, 1972, they are neither protected nor preempted by federal

copyright law, and Capitol’s copyright claim therefore depends on

state law protection until federal preemption occurs on February 15,

2067.2 See 17 U.S.C. § 301(c). The District Court and the parties have

assumed, correctly in our view, that the relevant state law is that of

New York, the jurisdiction where the alleged infringement occurred.

See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 153 F.3d

82, 91 (2d Cir. 1998). Since no New York statute provides a civil

remedy for infringement of the copyright in a sound recording,3 the

availability of such a remedy depends on the scope of a common law

copyright under New York’s common law.

In looking to New York’s common law, we need to make clear that

the phrase “common law copyright” has a broader meaning as applied to

sound recordings than it has as applied to most other forms of

intellectual property. For most forms of intellectual property, a

common law copyright was generally said to refer to an author’s

property right in his creation before publication. See Nimmer on

2
The 1976 Copyright Act ended common law copyright protection for
all works that are the subject of federal preemption. See 17 U.S.C.
§ 301(a); Nimmer § 2.02, at 2-18.
3
New York provides criminal penalties for unauthorized "transfers"
of sound recordings, see N.Y. Penal Law §§ 275.00-275.45 (McKinney
2000). Those provisions "shall neither enlarge nor diminish the
rights of parties in civil litigation." Id. § 275.45(2). See also
N.Y. Arts & Cult. Aff. Law § 31.01 (McKinney 1984) (civil and criminal
penalties for unauthorized sound recordings of performance).

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Copyright ("Nimmer") § 2.02, at 2-18 (2004).4 Protection after

publication was provided by federal statute.5 Id. However, when the

Supreme Court considered the scope of state law authority over copying

4
As the New York Court of Appeals explained more than a century
ago:

The author of a literary work or composition has, by law, a
right to the first publication of it. He has a right to
determine whether it shall be published at all, and if
published, when, where, by whom, and in what form. This
exclusive right is confined to the first publication. When
once published it is dedicated to the public, and the author
has not, at common law, any exclusive right to multiply
copies of it, or to control the subsequent issues of copies
by others. The right of an author or proprietor of a
literary work to multiply copies of it to the exclusion of
others is the creature of statute. This is the right
secured by the “copyright” laws of the different
governments.

. . . This common-law right "of first publication” is
sometimes spoken of as “copyright before publication,” while
the right to multiply copies secured by statute is called in
contra-distinction “copyright after publication.”

Palmer v. De Witt, 47 N.Y. 532, 536-37 (1872). Since Palmer concerned
an unpublished manuscript of a play (the published version of which
enjoyed federal statutory protection), its reference to "the right to
multiply copies secured by statute" has no current relevance to the
right to multiply copies of sound recordings, which, as will be
discussed, are subject to state law, both pre- and post-publication.

5
The expansion of the categories covered by the federal statute,
from “maps, charts, and books” in 1790, to the broad scope of the
current statute, see 17 U.S.C. § 102, is chronicled in Goldstein v.
California, 412 U.S. 546, 562 n.17 (1973). Because federal law
provided exclusive protection for published works and because
virtually all categories of works worth copying were brought within
the scope of the federal statute as technology advanced, there was
little occasion for state courts to consider whether their common law
should be adapted to extend some form of post-publication protection
to works not within the scope of federal protection, and federal
courts also had no reason to consider whether the federal statute’s
specification of protected categories precluded state law protection
for categories not federally protected.

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of sound recordings,6 which were not protected by federal statute until

1972, see Act of Oct. 15, 1971, Pub. L. No. 92-140, 85 Stat. 391, 391-

92 (1971), the Court made clear that state authority was not limited

to pre-publication protection. See Goldstein v California, 412 U.S.

546, 570 & n.28 (1973).7 As the Court explained, federal law makes the

concept of publication relevant only to federal copyright law, and

states can determine for themselves whether publication has any

relevance to copyright protection for works, such as pre-1972 sound

recordings, to which Congress has not extended the federal copyright

statute.8 And, as we have noted, the preemption provision of the 1976

6
The advent of technology for reproducing copies of the sounds of
musical performances fixed on tape or records created the occasion for
new state protection and for federal court challenge to such
protection. Sound recordings were not within the scope of the federal
statute until 1972, and then, as now, the federal protection extended
only to recordings fixed after February 15, 1972. See Act of Oct. 15,
1971, Pub. L. No. 92-140, 85 Stat. 391, 391-92 (1971); 17 U.S.C.
§§ 102(a)(7), 301(c). As record piracy became prevalent, it could be
expected that state law would endeavor to provide protection for pre-
1972 sound recordings and that federal law challenges would be brought
to such assertions of state law. California subjected record piracy
to statutory criminal penalties, and the validity of the statute was
promptly challenged, ultimately in the Supreme Court. See Goldstein,
412 U.S. 546.
7
Although the Court was considering state protection provided by
a criminal statute, the Court stated a broad view of state authority
over pre-1972 sound recordings: “California did not surrender its
power to issue copyrights.” Goldstein, 412 U.S. at 561.
8
The Court stated:

For purposes of federal law, “publication” serves only as a
term of the art which defines the legal relationships which
Congress has adopted under the federal copyright statutes.
As to categories of writings which Congress has not brought
within the scope of the federal statute, the term has no
application.

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Act explicitly preserved until 2067 state law authority over sound

recordings fixed before February 15, 1972. See 17 U.S.C. § 301(c).

Thus, as a result of Goldstein and section 301(c), it is entirely

up to New York to determine the scope of its common law copyright with

respect to pre-1972 sound recordings. As to such recordings, “common

law copyright” does not have only its traditional meaning of pre-

publication protection, but means protection against copying without

regard to publication. See Nimmer § 4.06[B], at 4-42.5 (“Until 2067,

state law protection (via common law copyright or otherwise) for such

pre-1972 sound recordings is not precluded by federal preemption under

the current Act, regardless of whether or not such sound recordings

have been published.” (footnote omitted)). As far as federal law is

concerned, a state court can develop post-publication protection for

pre-1972 sound recordings.9

In the pending case, the District Court’s ruling on common law

copyright raises at least one and likely three issues on which the

parties disagree and on which we are in doubt. The first and most

clear-cut issue is whether the expiration of Capitol’s copyright under
U.K. law precludes any claim under New York’s common law of copyright.

The second issue is whether copyright infringement under New York

common law requires some or all of the elements of the tort of unfair

Goldstein, 412 U.S. at 570 n.28.
9
Although publication is not relevant to the existence of state
law authority over sound recordings, we note that our Court has
understood New York not to deem the public sale of records to be a
publication. See Capitol Records, Inc. v. Mercury Records Corp., 221
F.2d 657, 663 (2d Cir. 1955).

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competition. The third issue is whether a claim of copyright

infringement under New York common law is defeated by showing that the

allegedly infringing work is a “new product,” either as a general

matter or at least under the circumstances of this case.

(a) Expiration of U.K. copyright. The United Kingdom copyrights

in the original recordings expired 50 years from “the making of the

original plate,” Copyright Act, 1911, 1 & 2 Geo. 5, c. 46, § 19, and,

as the District Court ruled, all of the recordings have therefore

entered the public domain in the U.K. The District Court apparently

assumed that the expiration of the U.K. copyrights precluded any

enforceable copyrights in the United States. That is not necessarily

so. If we were dealing with works protected by the Berne Convention

or the Universal Copyright Convention (“U.C.C.”), that assumption

would likely have been supported by the so-called “Rule of the Shorter

Term.”10 See Nimmer § 17.10[A], at 17-54. However, neither the Berne

Convention nor the U.C.C. applies to sound recordings. See Nimmer §

17.08[A], at 17-48.2. Such works are within the scope pf the so-

called Phonogram Convention, see The Convention for the Protection of
Producers of Phonograms Against Unauthorized Duplication of Their

Phonograms ("Phonogram Convention"), Oct. 29, 1971, 25 U.S.T. 309, 866

10
“No contracting State shall be obliged to grant protection to
a work for a period longer than that fixed for the class of works to
which the work in question belongs . . . in the case of published
works by the law of the Contracting State in which the work has first
been published.” U.C.C. (Paris Text), July 24, 1971, art. IV(4)(a), 25
U.S.T. 1341; see Berne Convention for the Protection of Literary and
Artistic Works (Paris Text), July 24, 1971, art. 7(8), S. Treaty Doc.
No. 99-27 (amended 1979).

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U.N.T.S. 67, but that Convention lacks a shorter term provision and,

in any event, does not apply to phonograms11 fixed prior to the date

the Convention entered into force in a contracting state, see id. art.

6(3). For the United States, that date was March 10, 1974. See

Nimmer app. 29, at 29-1.

Naxos contends that the expiration of the U.K. copyrights

precludes enforceable copyrights in the United States by virtue of the

Uruguay Round Agreements Act (“URAA”), Pub. L. No. 103-465, 108 Stat.

4809 (1994), particularly the provision of that Act that amends the

1976 Copyrights Act, see 17 U.S.C. § 104A. Section 104A restores

copyright protection for certain works of foreign origin that lack

copyright protection in the United States, including sound recordings

fixed prior to February 15, 1972. However, the restoration of

copyright does not apply to works that were in the public domain in

their source country prior to January 1, 1996. See id.

§ 104A(h)(6)(B). Naxos contends that, because the restoration applies

to works that are not in the public domain in the source country,

i.e., works still protected by copyright in the source country,
section 104A “reflects a Congressional policy of denying protection to

works in the United States where such protection is denied in the

country where the works originated.” Br. for Defendant-Appellee at 21.

The Naxos argument is an example of the logical fallacy of

11
“For purposes of this Convention: (a) ‘phonogram’ means any
exclusively aural fixation of sounds of a performance or of other
sounds.” Phonogram Convention art. 1(a)

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assuming that the inverse of a proposition is true.12 See Raymond J.

McCall, Basic Logic 125-26 (2d ed. 1952). An inverse statement of a

proposition is possibly but not necessarily true. See id. That a

work protected by a foreign copyright can have its United States

copyright restored does not necessarily mean that a work unprotected

by a foreign copyright cannot receive any protection in the United

States. Indeed, it is highly unlikely that Congress would have

impliedly repealed the state common law protection for sound

recordings fixed prior to February 15, 1972, preserved by section

301(c), by adopting section 104A. Nothing in the legislative history

of the URAA suggests such an outcome, and repeals by implication are

disfavored. See Branch v. Smith, 538 U.S. 254, 273 (2003); Morton v.

Mancari, 417 U.S. 535, 549 (1974). The restoration provision of

section 104A extends federal protection to otherwise unprotected works

within its coverage; it does not deny protection to works protected by

common law copyright.

Thus, nothing in federal law denies Capitol enforceable rights in

the original recordings simply because the U.K. copyrights have
expired. By virtue of section 301(c), the extent of Capitol’s

copyrights, if any, depends entirely on the protection provided by New

York’s common law copyright.

No New York court has ruled whether a Rule of the Shorter Term

would end a New York common law copyright for a work created in a

12
In logic, the inverse of the proposition “All A’s are B’s” is
“All non-A’s are non-B’s.” See McCall at 125.

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foreign country after the work has entered that country’s public

domain by reason of the expiration of the term of the foreign

copyright. We have ruled that federal copyright law protects a work

that enjoys no protection in the country where the work was created.

See Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192-93

(2d Cir. 1985) (toy design, unprotected in country of origin, entitled

to protection under United States law against infringement occurring

in the United States). New York might choose to follow the principle

of Hasbro and provide common law protection despite lack of United

Kingdom protection, but it might also rule that common law protection

ends in New York when protection ends in the country of creation.

This latter view might regard Hasbro, even if analogous to New York’s

common law, as applying only to protection for a work never entitled

to protection in the country of creation, as distinguished from

protection for a work whose term of protection in the country of

creation has expired. Such a view might also be predicated directly

on a New York common law version of the Rule of the Shorter Term.

Lacking any guidance from the New York courts on the question
whether a common law copyright remains available for a work that has

entered the public domain in the country of creation, we will certify

the question to the New York Court of Appeals.

(b) Copyright infringement and unfair competition. If New York

common law does not terminate the copyright in a foreign sound

recording upon expiration of the foreign copyright term, the next

question concerns the elements of copyright infringement under New

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York common law. Capitol contends that infringement requires only the

same elements needed for a federal copyright claim: ownership of a

valid copyright and copying. See Feist Publications, Inc. v. Rural

Telephone Service Co., 499 U.S. 340, 361 (1991). Naxos contends that

more is required, and appears to contend that the elements of unfair

competition must be shown. “New York common law does not even

recognize a cause of action for misappropriation of intangible rights

unless such a claim is paired with a claim for unfair competition.”

Br. for Defendant-Appellee at 24 (citing Ippolito v. Lennon, 150

A.D.2d 300, 303, 542 N.Y.S.2d 3, 6 (1st Dep’t 1989)).

The District Court appears to have substantially accepted Naxos’s

view of New York common law, referring to Capitol’s common law claim

as “a hybrid copyright, unfair competition cause of action.” Capitol

I, 262 F. Supp. 2d at 210.

In the absence of an authoritative ruling from the New York Court

of Appeals, we are in substantial doubt whether New York would import

elements of unfair competition into a cause of action for infringement

of a common law copyright. Our certification will therefore include
this question as well.

(c) Can a “new product” infringe a common law copyright? In the

course of rejecting Capitol’s cause of action for unfair competition,

the District Court stated that Capitol’s original recordings “are not

even salable because time-worn shellacs are marred by numerous sound

imperfections, and the types of machines which can extract sound from

sound shellacs became obsolete many years ago and are unavailable to

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the majority of consumers.” Capitol I, 262 F. Supp. 2d at 214. The

Court also ruled that Naxos “created and marketed a new product

relying on its own labor, skill, and reputation.” Id.

Although the Court’s “new product” analysis was included in its

rejection of Capitol’s unfair competition claim, the Court’s linkage

of that claim to Capitol’s copyright infringement claim implies, if

not states, that the Court did not believe that a “new product” could

infringe a common law copyright, at least where the allegedly

protected work has little if any current market.

If federal copyright law applied, the Court’s “new product”

analysis would not defeat an infringement claim. As long as a

defendant’s work incorporates protectable elements of a plaintiff’s

work, the plaintiff is entitled to relief. See 17 U.S.C. § 103;

Durham Industries v. Tomy Corp., 630 F.2d 905, 909 (2d Cir. 1980).

Nor would the lack of a market for the protected work matter. For

example, the proprietor of a copyright in a silent movie would have a

viable infringement claim against a defendant who used an original

screenplay of the silent movie (during the term of the movie’s
copyright) to remake the movie into a modern film with sound.

However, lacking guidance as to the contours of common law

copyright infringement in New York, we cannot be certain whether the

District Court’s “new product” analysis would defeat a claim for

common law copyright infringement, at least under the circumstances of

this case. Our certification will therefore also include this

question. II. Unfair Competition

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 Having linked Capitol’s common law copyright claim to unfair

competition, the District Court ruled that Naxos was entitled to

summary judgment on Capitol’s claim of unfair competition. Capitol I,

262 F. Supp. 2d at 213-16. This ruling was based not only on

Capitol’s lack of a protectable interest, resulting, in the Court’s

view, from the expiration of the U.K. copyright, but also on the

absence of bad faith on the part of Naxos; the fact that Naxos “never

falsely advertised its restored product as a ‘duplicate’ of the

original, and . . . did not take advantage of the ‘commercial

qualities’ and ‘salable properties’ of the original,” id. at 213

(quoting Fonotipia Ltd. v. Bradley, 171 F. 951, 964 (C.C.E.D.N.Y.

1909)); and the Court’s view that Capitol’s original recordings were

not salable and Naxos had created a “new product.”

We agree that Capitol cannot prevail on a cause of action for

unfair competition, unrelated to any copyright claim under state law.

In affirming on this claim, we need go no further than to agree with

the District Court that Capitol has not provided evidence to raise a

genuine issue of material fact concerning bad faith on the part of
Naxos. See Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044

(2d Cir. 1980) (“Central [to an unfair competition claim] is some

element of bad faith.”).

III. Waiver and Abandonment.

The District Court’s view of the Naxos claim that Capitol has

waived or abandoned its rights in the original recordings is unclear.

In the initial opinion, the Court stated that “Capitol appears to have

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waived or abandoned” its interests Capitol I, 262 F. Supp. 2d at 211

(emphasis added), and also stated that Capitol “waived and abandoned”

its rights, id. In the second opinion, the Court stated that EMI had

“expressly disclaimed” its interests, Capitol II, 274 F. Supp. 2d at

475, and then concluded that Capitol “appears” to have waived or

abandoned its interests, id. at 481.

Waiver. The waiver rulings, whether tentative or definitive, are

based entirely on the two letters from EMI officials Dewdney and

Locantro to a curator at the Yale Library. These letters, however, do

not establish waiver. Dewdney specifically stated that he was “not .

. . conversant with American copyright law.” Under New York law, a

claim of waiver requires proof of an “intentional relinquishment of a

known right with both knowledge of its existence and an intention to

relinquish it.” Airco Alloys Division, Airco Inc. v. Niagara Mohawk

Power Corp, 76 A.D.2d 68, 81, 430 N.Y.S.2d 179, 187 (4th Dep't 1980)

(internal quotation marks omitted). Since Dewdney was unaware of the

nature of EMI’s rights under law (federal or state) in the United

States, he could not have intended to relinquish a known right.
Locantro’s letter also gives no indication that it purports to waive

any rights existing under common law in the United States. It simply

agrees with Dewdney’s views with respect to public domain works.

Neither letter says anything about rights that might exist under state

law copyrights.

Naxos contends that even if the Dewdney and Locantro letters do

not establish waiver of common law rights in the United States, the

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Yale curator’s inquiry “should have prompted EMI to investigate

protections for sound recordings under U.S. law” and that EMI’s

failure to investigate “satisfied the ‘known right’ requirement for a

finding of waiver.” Br. for Defendant-Appellee at 47. Naxos attempts

to support this argument by citing Lauder v. First Unum Life Insurance

Co., 284 F.3d 375 (2d Cir. 2002).

Lauder provides no support for Naxos. Lauder, an ERISA case,

held that an insurer had waived a defense of which it had adequate

information when it failed to investigate the facts concerning the

defense and declined an insured’s claim on the basis of a different

defense. Id. at 380-82. Lauder noted that we had previously stated

that “under the law applicable to insurance policies, an insurer may

be barred from raising defenses not asserted in communications to the

insured denying coverage.” Id. at 380 (emphasis added) (quoting

Juliano v. Health Maintenance Organization of New Jersey, Inc., 221

F.3d 279, 288 (2d Cir. 2000)) (internal quotation marks omitted).

Lauder relied on our opinion in New York v. AMRO Realty Corp., 936

F.2d 1420 (2d Cir. 1991) for the proposition that “[a]n insurer is
deemed, as a matter of law, to have intended to waive a defense to

coverage where other defenses are asserted, and where the insurer

possesses sufficient knowledge (actual or constructive) of the

circumstances regarding the unasserted defense.” Lauder, 284 F.3d at

382 (emphasis added) (quoting AMRO Realty, 936 F.2d at 1431) (internal

quotation marks omitted). There is no comparable doctrine in

copyright law, even if the Yale curator’s inquiry created what might

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have been considered in the insurance context a duty to investigate.

Abandonment. The District Court’s abandonment rulings, whether

definitive or tentative, are based on three circumstances. First,

EMI’s own restorations of the original recordings “claim copyright

solely in the restored versions of the performances and not in the

underlying sound recordings.” Capitol I, 262 F. Supp. 2d at 212.

Second, Capitol “has failed to pursue the many other companies

presently selling restorations of the original recordings without any

authority from Capitol.” Id. Third, “it is unclear from the

documentation of royalty payments, the length of time in which

royalties were paid, or if they were consistently paid.” Id. at 213

(emphasis added).

The parties agree that the District Court invoked the correct

legal standard in stating that abandonment of copyright requires “(1)

an intent by the copyright holder to surrender rights in the work; and

(2) an overt act evidencing that intent.” Id. at 211 (internal

quotation marks omitted). Assuming that New York would apply this

standard to abandonment of a common law copyright, we note that
federal procedural law would normally render the issue of intent to

abandon inappropriate for summary judgment. See Cline v. 1-888-

Plumbing Group, Inc., 146 F. Supp. 2d 351, 364 (S.D.N.Y. 2001). In

the pending case, the circumstances relied on by the District Court do

not establish an intent to abandon to the degree of persuasiveness

sufficient to warrant summary judgment. Indeed, it is far from clear

that Naxos has produced enough evidence to create a genuine issue of

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disputed fact concerning such intent.

First, the notices on EMI’s restorations reserved “all rights,”

creating at least a factual issue as to whether those words applied

only to the restorations, as Naxos claims, or to all of Capitol’s

rights, including rights in the underlying original recordings, as

Capitol claims. More significantly, we find no indication that common

law copyright in New York requires notice for protection, much less

that the absence of notice indicates intent to abandon.13

Second, failure to pursue third-party infringers has regularly

been rejected as a defense to copyright infringement or as an

indication of abandonment. See, e.g., Paramount Pictures Corp. v.

Carol Publishing Group, 11 F. Supp. 2d 329, 337 (S.D.N.Y. 1998).

Third, the non-payment of royalties was acknowledged by the Court

to be “unclear,” and payment has been unequivocally asserted by a

senior EMI official. Moreover, it is by no means clear that some non-

payment of royalties would indicate abandonment of common law

copyright, as distinguished, for example, from some other plausible

defense available to royalty obligors.
In sum, waiver has not been established, and abandonment is at

least a factual issue that requires further exploration.

IV. Certification

What may well be the dispositive issue in this case--whether a

common law copyright under New York law expires when the work enters

13
Federal notice as a requirement was abandoned in 1988 for Berne
era works. See 2 Nimmer § 7.02[B], at 7-14.

-24-
the public domain in the country of origin--has never been decided by

any New York court, as far as our research discloses. The lack of a

state law answer to what may prove to be a determinative question, as

well as the absence of any indication of how New York would answer

this question, weigh in favor of certification. On the other hand, we

have indicated that certification is appropriate for questions “likely

to recur,” Kidney v. Kolmar Laboratories, Inc., 808 F.2d 955, 957 (2d

Cir. 1987), and we cannot be certain that state law issues concerning

copyright in sound recordings will recur. In addition, although a

ruling that the common law copyright has expired would end this

litigation, a ruling that U.K. public domain status does not terminate

the common law copyright would leave some issues for subsequent

determination, at least the factually disputed issue of abandonment.

Normally, we would prefer to limit certification to issues that are

necessarily dispositive of the litigation.

Recognizing that the New York Court of Appeals retains the

ultimate decision on whether to accept certification, we conclude that

we should certify in this case. The advent of modern technology to
produce digitally enhanced reproductions of historic sound recordings

makes it likely that a decision by the Court of Appeals will be

important for this emerging field. And, since many original sound

recordings were produced more than 50 years ago in the United Kingdom,

the issue of whether public domain status there terminates common law

copyright in New York can be expected to recur. We will therefore

certify the following question:

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 “In view of the District Court’s assessment of the undisputed

facts, but without regard to the issue of abandonment, is Naxos

entitled to defeat Capitol’s claim for infringement of common law

copyrights in the original recordings?" This overall question

subsumes the following sub-questions: (1) "Does the expiration of the

term of a copyright in the country of origin terminate a common law

copyright in New York?" (2) "Does a cause of action for common law

copyright infringement include some or all of the elements of unfair

competition?" (3) "Is a claim of common law copyright infringement

defeated by a defendant’s showing that the plaintiff’s work has slight

if any current market and that the defendant’s work, although using

components of the plaintiff’s work, is fairly to be regarded as a 'new

product'?"

Although we would welcome the responses of the Court of Appeals

to all of the sub-questions that we have identified within the overall

question (and to any other aspects of state law that the Court of

Appeals deems relevant to our case), we venture the view that if the

Court of Appeals answers sub-question 1 in the affirmative, no further
answers (and no further proceedings in the District Court) would be

needed for our resolution of this appeal. As is our custom, see,

e.g., Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris

USA Inc., 344 F.3d 211, 229 (2d Cir. 2003), we accord the Court of

Appeals flexibility in reframing our overall and subsidiary questions

if appropriate.

Conclusion

-26-
 Accordingly, the Clerk will transmit to the New York Court of

Appeals a Certificate containing this opinion with its identification

of the principal question and sub-questions being certified, together

with a complete set of the briefs, appendix, and record filed with

this Court by the parties. After a response from the New York Court

of Appeals, this panel will resume its exercise of jurisdiction over

the appeal. The parties are hereby ordered to bear equally such fees

and costs, if any, as may be requested by the New York Court of

Appeals.

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