Re: GNR Greatest Hits Lawsuit Document (03/15/04)
United States District Court, C.D. California,
W. Axl ROSE, et al., Plaintiffs,
GEFFEN RECORDS, a division of Umg Recordings, Inc., Defendant.
March 15, 2004.
I. INTRODUCTION AND SUMMARY OF ARGUMENT
The Application for a Temporary Restraining Order and an Order to Show Cause re Preliminary Injunction filed by Plaintiffs Axl Rose, Saul Hudson and Michael McKagan ('Plaintiffs') is completely without merit. As demonstrated below, they have not established either that they are likely to prevail on the merits of their claims or that they will suffer irreparable harm in the absence of provisional relief. Moreover, the 'balance of hardships' tips entirely in favor of defendant Geffen Records, a division of UMG Recording, Inc. (hereinafter 'UMG'). Among the defects in Plaintiffs' Application for emergency relief, any one of which requires denial of the Application, are the following:
'¢ The factual predicate for all of Plaintiffs' claims is wrong: All of Plaintiffs' claims, and particularly the Lanham Act claims which form the basis of the request for provisional relief, are premised on the assertion that UMG violated Plaintiffs' rights when it 'remastered' the songs on the Guns N' Roses Greatest Hits album (the 'Guns N' Roses GHLP'). That claim is demonstrably wrong. Not only is there no competent evidence to support that contention (the only evidence adduced by Plaintiffs is a hearsay exhibit printed out from a website of a company unaffiliated with UMG), but UMG has submitted evidence - including the declaration of Bill Levenson, the producer of the Guns N' Roses GHLP - that unqualifiedly proves that no song on the Guns N' Roses GHLP was either 'remastered' or remixed, or edited, or altered in any respect. As the merits of Plaintiffs' claims rest entirely on this rebutted assertion, they have no probability, nay, no possibility, of prevailing on the merits.
'¢ Plaintiffs Cannot Demonstrate Irreparable Injury: Plaintiffs' claims of irreparable harm are likewise entirely premised on the claim that their reputation, artistic vision and trademarks will be somehow harmed by the release of 'remastered' versions of their songs. As the premise underlying the claimed harm is demonstrably false, Plaintiffs are left with having made absolutely no showing of irreparable harm at all.
'¢ Plaintiffs' Lanham Act claims fail as a matter of law. Even if there were any factual basis for Plaintiffs' claims, they still could not provide a basis for equitable relief. Both of the Lanham Act claims are facially deficient. The first, for trademark infringement, fails because Plaintiffs have no standing even to bring such a claim. The U.S. Patent and Trademark Office records submitted by Plaintiffs show that a California partnership called 'Guns N' Roses,' and not the individuals who are plaintiffs here, owns the registered trademarks sued on in this action. The second Lanham Act claim, for 'False Designation of Origin,' completely disregards the Supreme Court's recent Dastar decision holding that for purposes of the Lanham Act, the 'origiN' of goods is 'not the person or entity that originated the ideas or communications' contained in the goods, but the manufacturer of the goods itself. There is no allegation, nor could there be, that UMG is not the true origin of the Guns N' Roses GHLP.
'¢ Plaintiffs have unduly delayed moving for provisional relief: A fundamental principle applicable to requests for emergency relief is that the party seeking such relief must move promptly to secure it. Here, Plaintiffs have known of the respective international and domestic release dates for the GHLP of March 15 and March 23, 2004 for many weeks - since January 22, 2004 - yet waited until the last business day before the release to seek relief. This delay belies their claims of irreparable harm and is, in itself, a basis for denying relief for several reasons. First, the only emergency is one created by Plaintiffs' delay; plaintiffs cannot create the need for a TRO by delay and then cry they must have one. Second, TROs are not issued to prevent harm that has already occurred. That is the case here; Plaintiffs have moved too late. The GHLP has been for sale in over 50 countries throughout the world for most of this day. Insofar as Plaintiffs (incorrectly) claim that their irreparable harm inures in the very release of the Guns N' Roses' GHLP, that harm has already occurred. Third, as explained below, Plaintiffs' delay in seeking relief has exacerbated the harm and hardship suffered by UMG if a TRO (or preliminary injunction) is issued.
'¢ The 'balance of hardships' tips entirely in favor of UMG: In contrast to the non-existent showing of harm by Plaintiffs, the harm that would be suffered by UMG, and third parties not before the Court, is enormous. The extent and magnitude of the harm cannot be adequately summarized in a paragraph or two. But as explained in detail below, the issuance of a TRO, particularly at this late date, would irreparably undermine UMG's carefully planned marketing efforts for the Guns N' Roses GHLP throughout the world, disrupt UMG's relationships with its customers in a manner that cannot be quantified or recompensed by damages and vitiate the multi-million dollar investment UMG has made in recent weeks in producing, promoting and distributing the GHLP.
For these, and all the other reasons explained below, Plaintiffs' Application for a TRO and an Order to Show Cause should be denied.
II. FACTUAL BACKGROUND
A. Background Facts Relevant To The Relationship Between UMG And Guns N' Roses
The relationship between Guns N' Roses and UMG's Geffen Records division dates back to 1986, when Geffen's corporate predecessor, The David Geffen Company, entered into a recording agreement with five individuals, Steven Adler, Izzy Stradlin, Michael 'Duff McKagan, Saul Hudson (p/k/a 'Slash') and W. Axl Rose, who were professionally known as 'Guns N' Roses.' Hoffman Decl. Â¶ 2. In 1992, Geffen's corporate predecessor entered into a new recording agreement with Messrs. Hudson, McKagan and Rose dated September 1, 1992 (hereinafter the 'Recording Agreement'). Prior to the signing of the 1992 Recording Agreement, Adler and Stradlin had left the band (although they still retained a royalty interest in master recordings created under the original 1986 agreement during their tenure in the band.) Id.
Since 1992, the parties have executed various amendments to the Recording Agreement, including most notably, two amendments dated as of May 1, 1998. One of these amendments, see Froeling Decl. Ex. D, confirmed Slash's and Duff's departure from the band and their status as 'Leaving Members' under the 1992 Recording Agreement, thereby relieving them of charges against their royalty accounts for the enormous recording costs and other expenses being incurred by Axl Rose (the only 'Remaining Member'[FN1] of Guns N' Roses) in connection with the recording of the new Guns N' Roses studio album. Hoffman Decl. Â¶ 3. Slash and Duff, like Stradlin and Adler before them, retained a royalty interest in masters created under the Recording Agreement prior to their departure from the band. Id In the other May 1, 1998 amendment, see Hoffman Decl. Ex. A, Axl Rose agreed, among other things, to deliver that new studio LP (which was even then long overdue under the Recording Agreement) no later than March 1, 1999 and received a substantial advance from Geffen in return. Hence, although other individuals have joined Axl Rose in performing under the name 'Guns N' Roses' since 1998, Rose is the only principal in the band. Id.
FN1. 'Leaving Member' and 'Remaining Member' are both defined terms as used in Paragraph 17.02 of the Recording Agreement.
B. Plaintiffs Were Notified Of The March 15 And March 23, 2004 Release Dates In January 2004
December 31, 2003 came and went without delivery of the studio LP, as had so many previous deadlines. Hoffman Decl. Â¶ 6. Accordingly, in January 2004, Geffen resumed its plans to release the GHLP. At that time, Mr. Hoffman asked Ms. Lori Froeling to send another notice to Guns N' Roses pursuant to the Recording Agreement, informing Guns N' Roses that the GHLP would be released on March 23, 2004 in the United States and Canada, and on March 15, 2004 in other international territories. Ms. Froeling sent such a notice on January 22, 2004. The January 22 notice also indicated that the previously approved track listing and sequence had not changed. Hoffman Decl. Â¶ 6; Froeling Decl. Â¶ 6 & Ex. F.
At no time after January 22, 2004 did Geffen Records ever indicate to Guns N' Roses, or any of its representatives, that Geffen was not intent on releasing the Guns N' Roses GHLP on the respective March 15 and March 23, 2004 release dates mentioned above. Hoffman Â¶ 7. The release dates were in fact confirmed in a subsequent letter to Plaintiff Rose dated February 2, 2004. Marenberg Decl. Â¶ 3; Ex. B. Froeling Decl. Â¶Â¶ 4, 5. Accordingly, Mr. Rose, the only 'Remaining Member' of Guns N' Roses (as that term is defined in Section 17.02 of the Recording Agreement) was advised no later than January 22, 2004 of the March 23 and March 15, 2004 release dates for the Guns N' Roses GHLP in the United States and Canada and other international territories, respectively. 14. Â¶ 6.
In connection with the release of the Guns N' Roses GHLP, Geffen has already paid $1 million dollars in advances to Rose and the four former members of Guns N' Roses. Hoffman Decl. Â¶ 8. Specifically, Rose has received an advance of $257,545 for the GHLP; Slash and Duff have received an advance of $568,565 for them to split; and Messrs. Stradlin and Adler, who are not plaintiffs in the present lawsuit (and whose interests could be adversely affected by the issuance of the relief requested by Rose, Slash and Duff), have received advances of $ 136,228 and $37,662, respectively. Notably, plaintiffs did not file this suit until after they received these advances, and none of the three plaintiffs in this case who has received advances on account of the GHLP has offered to return it. Id.
C. None of the Songs On The Guns N' Roses Greatest Hits LP Have Been Remastered Or Otherwise Altered
Plaintiffs' Application is based entirely on the belief that the GHLP contains remastered songs. See Pls.' Ex Parte App. at 1. In fact, none of the songs on the Guns N' Roses GHLP were remastered, nor were they edited, mixed, remixed or otherwise altered. Levenson Decl. Â¶ 3. Specifically, the Guns N' Roses GHLP was compiled utilizing the 1630 original EQ'd digital masters of previous Guns N' Roses albums (and one radio single) stored in UMG's tape library. Levenson Decl. Â¶ 4. A 1630 EQ'd digital master is the producer/artist approved master used to manufacture compact discs. Each song was transferred 'as is,' with no additional equalization or other remastering technique applied. Id.
Plaintiffs have submitted a declaration of Peter Asher, which describes various remastering processes that Mr. Asher claims cause alterations of original master recordings. Asher Decl. Â¶Â¶ 7-10. Mr. Asher mentions processes such as conversion (the transformation of an analog recording to a digital recording using an 'A to D converter'), 'equalization,' 'limiting and compressioN' and 'expansion.' Id. None of these processes, nor any other remastering technique, was applied to the master recordings of the songs that were compiled on the Guns N' Roses GHLP. Levenson Decl. Â¶ 5.
Never in the course of any discussions with representatives of Guns N' Roses, including the current band's manager, Mr. Merck Mercuriadis, was UMG ever asked if any of the songs on the Guns N' Roses GHLP had been remastered. Had UMG been asked, UMG would have informed Guns N' Roses that no song on the Guns N' Roses GHLP had been remastered. Hoffman Decl. Â¶ 7.
D. Because The Guns N' Roses GHLP Was Not Remastered, UMG Never Marketed The Album As Having Been Remastered And Any Reference To The Contrary Is Mistaken
Throughout preparation for the marketing and promotion of the Guns N' Roses GHLP release, it was understood that the songs on the Guns N' Roses GHLP had not been remastered in any way. Resnikoff Decl. Â¶ 9. Consistent with that understanding, none of UMG's marketing materials or campaigns include any reference to any remastering of songs on the Guns N' Roses GHLP. See Resnikoff Decl. Â¶Â¶ 11-20 and Ex. A (promotional 'flat' shipped to retailers in advance of album's release); Ex. B (written information provided to retailers); Ex. C (advertisement for use in Blender magazine); Ex. D ('snipe' poster used for promotion in metropolitan areas); Ex. E (advertisement for use in Hit Parade magazine); Ex. F (promotional poster); Ex. G (promotional poster); Ex. H (promotional poster); Ex. I (advertisement for use in Rolling Stone magazine); Ex. J (advertisement for use in WWE Smackdown magazine). Nowhere has UMG stated or implied that the Guns N' Roses GHLP contains remastered songs. Resnikoff Decl. Â¶ 9. Had the album in fact been remastered, this fact undoubtedly would have been a key component of UMG's advertising and marketing campaign. Id.
The sole basis for Plaintiffs' incorrect assertion that the album was remastered (and, in turn, the sole basis for this application) is a single reference on the website of CD Universe. See Pls.' Ex Parte App. at 5 (citing Ex. 4 to Mercuriadis Decl). This so-called evidence is rank, objectionable hearsay.[FN2] UMG has no affiliation whatsoever with CD Universe and does not create the content on the site. Resnikoff Decl. Â¶ 10. Plaintiffs submitted a printout from the CD Universe website attached to the Declaration of Merck Mercuriadis as Exhibit 4. The website's apparent representation under 'Additional Info' that that the Guns N' Roses GHLP was 'Remastered' is incorrect. Resnikoff Â¶ 10. UMG is unaware as to how CD Universe came to include such information on its website. Id. To UMG's knowledge, nobody associated with UMG ever informed CD Universe that the Guns N' Roses GHLP contained remastered songs. Id None of the marketing material ever provided to CD Universe or any other entity contains such a reference. Id. at 9.
FN2. UMG has concurrently filed, under separate cover, objections to this document and other evidence.
E. UMG Would Suffer Substantial And Irreparable Harm If A Temporary Restraining Order Were Issued
UMG would suffer substantial harm, some quantifiable and some not, if a temporary restraining order were issued by this Court at this late date. Planning for the release of the Guns N' Roses GHLP started many months ago and by now - only one week before the domestic release of that album and after the international release has occurred - much of that planning has already been implemented. A temporary restraining order at this late date would severely disrupt these plans, causing confusion in the marketplace and damage to retailers who have invested in the album. Further, UMG's relationship with its retail customer base would be damaged, and that damage is not quantifiable. Resnikoff Decl. Â¶ 4.
In addition, UMG could suffer substantial economic harm from the issuance of provisional relief. In the North American marketplace alone, UMG has already spent well over $1 million dollars on marketing, production and distribution expenses. Most of that investment, which will largely be lost if an injunction prohibiting the release were to issue, was made in the past few weeks, when Plaintiffs were aware of the projected release date of the Guns N' Roses GHLP and did not seek relief. In international markets, Universal Music Group's international affiliates have invested even larger sums - between 1.5 and 2 million Euros (nearly $2.5 million) - in connection with the Guns N' Roses GHLP. Were UMG prohibited from further distribution of the album, much of that investment too would be lost. Of course, these sums do not remotely account for the entire monetary loss that UMG would suffer. Demand for the Guns N' Roses GHLP has exceeded even UMG's high expectations. It is quite possible, to say the least, that several million copies of the CD can be sold, to the substantial economic benefit of UMG and the current and former members of Guns N' Roses, including at least two former members of the band who have not joined Plaintiffs in pursuing in this lawsuit. Those benefits too would be lost if the album were to be enjoined. Resnikoff Decl. 14.
1. Because Of The Extensive Marketing Efforts Undertaken By UMG, An Inability To Deliver The Album Would Cause Significant Irreparable Harm To UMG's Credibility And Goodwill With Customers And Retailers
In connection with the release of the Guns N' Roses GHLP, UMG has undertaken significant steps to promote the awareness of retailers and customers of the album's release and to launch the album at retail accounts pursuant to a marketing plan created for the album. The marketing efforts for the Guns N' Roses GHLP includes substantial print, radio, and television advertising and promotional events intended to focus retailers and consumers on the release of the Guns N' Roses GHLP. Resnikoff Decl. Â¶ 5. The irreparable harm UMG would suffer if an injunction were issued includes the disruption of its carefully planned marketing campaign, loss of customer goodwill, and damage to UMG's relationships and credibility with retailers. Resnikoff Decl. Â¶ 21.
In particular, UMG created a substantial print advertising campaign for the Guns N' Roses GHLP to run in a number of publications that was designed to coincide with the domestic release of the Guns N' Roses GHLP on March 23, 2004. These advertisements are created and prepared as long as six weeks in advance and cannot be changed on short notice at this late date. Resnikoff Decl. Â¶ 22.
In addition to the print advertisements in magazines, UMG was able to persuade its major retail customers to include advertisements for the Guns N' Roses GHLP in their weekly store circulars. Because of the significant lead time in publishing such magazines and the last minute timing of the Plaintiffs' application, not only will the costs of these advertisements be incurred regardless of the outcome of Plaintiffs' application, but the circulars will be distributed. Resnikoff Â¶ 6.
Additionally, UMG has prepared a large-scale television advertising campaign, including a number of high profile ads that feature retail stores as locations where the album can be purchased. Resnikoff Decl. Â¶ 7. With the other print advertisements, this marketing will drive customers to retail outlets on and after March 23, 2004 expecting to purchase the GHLP. When they cannot, both the retailers' and UMG's goodwill with these customers and UMG's relationships with the retailers will be damaged. The fact that the Guns N' Roses GHLP is a major release with significant retail and consumer demand magnifies the potential for damage to these relationships. The harm to UMG from this loss of credibility is impossible to quantify. Resnikoff Decl. Â¶ 24.
Another major component of the marketing plan for the Guns N' Roses GHLP is radio promotion. UMG has provided copies of the album to numerous radio stations throughout the country, including most rock, classic rock, classic hits, and college radio stations. In addition to the albums, a number of stations have received promotional packages to help promote the album on the air. Resnikoff Decl. Â¶ 8. UMG's relationships with radio stations would be severely injured if the album's release were enjoined. Resnikoff Decl. Â¶ 25.
2. UMG Will Also Suffer Substantial Economic Harm In The North American Marketplace
As noted, the North American release of the Guns N' Roses GHLP has been planned for March 23, 2004 for several months. Resnikoff Decl. Â¶ 27. Consistent with its view that the Guns N' Roses GHLP is a high profile album, UMG has made a substantial investment in the marketing and the production of the album. Specifically, UMG has already manufactured a large number of units of the album, even before the album has been released for sale. The CD has been very well received by retailers, measured by advance orders. Orders for more than 425,000 units of the Guns N' Roses GHLP have already been received by UMG's distribution company. UMG has already shipped 260,000 units of the album and expects to ship approximately 500,000 units of the album to retailers by the end of March. These strong orders have exceeded expectations and already make this release one of UMG's more successful catalog promotions. Resnikoff Decl. Â¶ 28.
Were this Court to enjoin UMG from releasing the album, UMG would lose the significant costs expended in the production, manufacturing, distribution and marketing of the album. The total manufacturing and production costs through March 12, 2004 incurred by UMG are approximately $700,000. This total includes the cost of over 550,000 units that have already been manufactured in order to meet the expected demand for the product. See Resnikoff Decl. Â¶ 29.
In terms of costs associated with marketing and promoting the release, UMG has already committed approximately $227,570 in print advertising and merchandising costs. See Resnikoff Decl. Â¶ 30; Ex. L. In addition, UMG has earmarked an additional $325,000 for television advertisement. The television advertisement has been filmed and a number of advertising spots have been reserved on over 20 selected television programs and cable networks that target the core audience of Guns N' Roses. Id. at Â¶ 30. An order prohibiting the release of the album will likely result in the loss of most, if not all, of the money spent thus far on television advertising. Id. at Â¶ 32.
In summary, were this Court to enjoin UMG from releasing the Guns N' Roses GHLP, UMG will likely suffer hard economic damages of more than $1.5 million, without even beginning to consider either: (1) the lost revenues and profits UMG expects to generate from sales of the Guns N' Roses GHLP itself, or (2) revenues and profits UMG expects to derive from additional sales of albums in its Guns N' Roses catalog, which would undoubtedly be increased in the wake of the successful release of the Guns N' Roses GHLP. Thus, the expected economic loss from an injunction could very well exceed several million dollars in the United States alone. Resnikoff Decl. Â¶ 31.
F. A Temporary Restraining Order Would Also Cause Severe Harm To International Release Of The Album
The release of the Guns N' Roses GHLP was a very important release for Universal Music International, Ltd. ('UMI'), UMG's international affiliate. UMI expected high demand from retailers and from public customers and these high expectations have been met or exceeded by the marketplace. UMI has already shipped close to 500,000 copies of the album to retailers internationally. Hole Decl. Â¶ 3. It would be difficult or impossible to cease distribution of the album at this time, and any such efforts would cause severe irreparable harm to UMI. Hole Decl. Â¶ 4.
1. Plaintiffs' Application Is Far Too Late To Prevent The International Release Of The Greatest Hits LP
The international release of the Guns N' Roses GHLP was scheduled, weeks ago, for Monday, March 15, 2004 in approximately 55 countries throughout the world. At this point in time, it is not possible to stop the release of this album in these international markets. In fact, by the time the Court reads this Opposition, retailers who will be selling the Guns N' Roses GHLP will have their copies of the album and sales of the Guns N' Roses GHLP will have been taking place in parts of the world for over a full business day. Hole Decl. Â¶ 5. Moreover, now that the album has reached the retailers, UMI has absolutely no ability to compel them to stop selling the albums that they have purchased and are in their possession. Hole Decl. Â¶ 6[FN3]
FN3. Even had this Court ordered UMI to stop the international release of the Guns N' Roses GHLP as early as Friday, March 12, 2004, it still would have been impossible to prevent the release Monday morning due to the significant lead time required to effectuate a release of an album simultaneously in approximately 55 countries. Trucks carrying copies of the album began shipping the copies of the album last week (and in some cases the week before) in order to deliver to the retail stores in time for Monday's release. Indeed, many retail stores were already in possession of the album prior to Friday, March 12. Hole Decl. Â¶ 7.
Like its sister company in the United States, UMI has already expended significant sums in manufacturing, marketing, promoting, and distributing the album. These sums are in addition to any sums spent in support of the album domestically. Hole Decl. Â¶ 8. The costs already incurred by UMI include approximately 750,000 to 1 million Euro on production and manufacturing costs and an additional 750,000 to 1 million Euro on marketing, promotion, and distribution of the album. In total UMI would suffer damage in the amount of approximately 1.5 to 2 million Euro, again without considering either: (1) the lost revenues and profits UMI expects to generate from sales of the Guns N' Roses GHLP itself, or (2) revenues and profits UMI expects to derive from additional sales of albums in its Guns N' Roses catalog, which would undoubtedly be increased in the wake of the successful release of the Guns N' Roses GHLP. Hole Decl. Â¶ 9.
2. Prohibiting The Continued Sale Of The Guns N' Roses Release Internationally Would Result In Significant Irreparable Harm To UMG
Equally important to UMI as the significant economic harm UMI would suffer if an injunction were issued by this Court, is the non-quantifiable injury that would result from an order prohibiting the further international marketing of the Guns N' Roses GHLP. The irreparable harm UMG would suffer includes the disruption of its carefully planned marketing campaign, loss of customer goodwill, and damage to UMI's relationship and credibility with retailers. Hole Decl. Â¶ 10.
As with UMG's domestic efforts, UMI has spent considerable time and effort raising the awareness of international retailers about the upcoming release. These efforts were geared to the international release date of March 15, 2004. As a result of those efforts, many retailers have decided to feature the Guns N' Rose GHLP release in their advertisements. These advertisements are created and prepared well in advance and cannot be changed on short notice. Just like in the United States, in reliance on these advertisements, customers will travel to the store to purchase the album and the unavailability of the record will create disruption in the market, adversely affecting customer goodwill both for the retailers and for UMI, and damaging the important relationship between UMI and retailers. Again, this harm to UMI from this loss of credibility is impossible to quantify. Hole Decl. Â¶ 12.
3. An Injunction Against Further Release At This Time Could Precipitate Widespread Counterfeiting And Piracy
In addition, because the injunction request was not brought to the Court prior to the international release of the record, so that copies of the Guns N' Roses GHLP are now widely available in the rest of the world outside North America, certain unique complications concerning piracy and counterfeit copies of the Guns N' Roses GHLP would arise were an injunction to issue now. Urie Decl. Â¶ 6.
Specifically, given the availability of the Guns N' Roses GHLP internationally (but not in North America), were any TRO to issue now, it is likely that the domestic market would be flooded with counterfeit copies and with 'bootleg' imports from overseas in order to meet the demand for the product in North America. Id. Â¶ 7. Physical piracy and bootlegging is common where an album is released in one region of the world and not another. Because the album will be readily available internationally, it would be impossible to prevent bootleggers from easily obtaining the CD to make counterfeit copies. Likewise, given the quantity of units available overseas, it would be easy for persons to transship international copies of the record to the United States and Canada in order to meet demand. Id The availability of counterfeit goods damages UMG in an obvious way, although the damage is difficult to quantify; UMG receives no revenue from the sale of counterfeit goods. Id
A. Plaintiffs Cannot Show A Likelihood Of Success Or Serious Questions On The Merits of Their Claims
To justify a temporary restraining order, Plaintiffs must show either (1) 'a likelihood of success on the merits and the possibility of irreparable injury,' or (2) 'that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor.' Clear Channel Outdoor, Inc. v. City of L.A., 340 F.3d 810, 813 (9th Cir. 2003). Because their claims rest on a faulty factual premise, and lack merit as a matter of law, Plaintiffs cannot show either any likelihood of success or serious questions as to the merits. Further, as Plaintiffs' entire 'showing' of irreparable harm and hardship rests on the mistaken claim that UMG remastered songs on the Guns N' Roses GHLP, they have not demonstrated and harm and the balance of hardships tips entirely toward UMG. Finally, Plaintiffs' inexplicable delay in raising these claims is sufficient alone to warrant denial of the injunction.
1. The Guns N' Roses GHLP Does Not Contain Any Remastered Songs
The merits of all of Plaintiffs' claims rest entirely on the allegation that UMG has 'remastered' or otherwise altered the songs on the Guns N' Roses GHLP. As noted above, Plaintiffs based their erroneous allegation on a single source: a hearsay advertisement from an Internet retailer, unaffiliated with UMG, which appears to mistakenly list the GHLP album as 'remastered.' Plaintiffs do not contend that they have heard, much less examined the GHLP album. In fact, none of the songs on the Guns N' Roses GHLP were remastered, nor were they edited, mixed, remixed or otherwise altered. Levenson Decl. Â¶ 3. Nor has UMG made any representations to this effect to anyone. Resnikoff Decl. Â¶ 9. Each song was transferred 'as is,' with no additional equalization or other remastering technique applied. Levenson Decl. Â¶ 4.[FN4] Accordingly, as the assertion underpinning Plaintiffs' allegations has been wholly disproved, they have made no showing of likely success or serious questions on the merits.
FN4. As Mr. Levenson explains in his declaration, none of the remastering processes mentioned by Plaintiffs' expert, Mr. Asher, were used with respect to the songs on the GHLP. See Levenson Decl. Â¶ 5.
2. Plaintiffs Do Not Have Standing To Bring Their Claim of Trademark Infringement
Not only are Plaintiffs' claims without factual support, they lack legal merit as well. For example, Count 1 of Plaintiffs' Complaint for 'Trademark Infringement' fails because Plaintiffs are not the registered owners of the trademarks at issue in this case, and thus do not have standing to bring a claim for infringement. It is elementary that only the trademark 'registrant,' or the registrant's legal representative, predecessors, successors or assigns, may sue for infringement. See 15 U.S.C. Â§Â§ 1114(1), 1127; Glow Indus, v. Lopez, 273 F. Supp. 2d 1095, 1106-07 (C.D. Cal. 2003). Plaintiffs' own filings indicate that the GUNS N' ROSES marks are registered to the GUNS N' ROSES Partnership. See Mercuriadis Decl., Ex. 2 at 57, 59 and 61, attached to Pls.' Ex Parte App. The GUNS N' ROSES Partnership is not a party to this litigation. Rather, this action was brought by Plaintiffs in their individual capacities. Accordingly, Plaintiffs lack standing to assert a claim of infringement and cannot, therefore, show any possibility of success on the merits.
3. Plaintiffs' Trademark Claims Would Fail Even If UMG Remastered Songs Because The License Agreement Between The Parties Is Not Limited By Paragraph 10.05 Of The Recording Agreement
Plaintiffs' Application fails for another independent reason. Plaintiffs' assertions that UMG exceeded the scope of the license agreement between the parties is wrong, and would be wrong even if UMG had remastered songs on the album. To the contrary, the license agreement between the parties, contained in Paragraph 9.03 of the Recording Agreement (attached to the Froeling Decl. as Exhibit A) grants UMG broad rights to use the GUNS N' ROSES trademarks at issue in this action ('GNR marks'). The relevant portion of the license agreement states:
Subject to paragraph 10.03, Geffen and any licensee of Geffen shall have the perpetual right, without liability to any Person, and may grant to others the right, to reproduce, print, publish or disseminate in any medium the Album Artwork, your name, the names, portraits, pictures and likenesses of the Artist ... and biographical material concerning them solely for purposes of advertising, promotion and trade in connection with you or Artist, the making and exploitation of Records[FN5] hereunder and general goodwill advertising for Geffen Records.
FN5. The term Records is defined in the Recording Agreement to include all forms of reproductions. Recording Agreement at paragraph 14.01.
Though this provision is expressly subject to paragraph 10.03 (unrelated to the present dispute), it is not, contrary to Plaintiffs' unsupported assertions, subject to or limited by the provisions of paragraph 10.05. Plaintiffs make the inexplicable leap that paragraph 10.05 somehow limits this license agreement. See Pls.' Ex Parte App. at 9 ('The Recording Agreement grants Geffen a license to use GNR's Mark ... However, the license contained in the Recording Agreement does not grant Geffen the right to remaster GNR's tracks ... In fact, the Recording Agreement limits the scope of Geffen's license in paragraph 10.05'). Plaintiffs jump to this conclusion despite the fact that nowhere does paragraph 9.03 purport to be subject to paragraph 10.05 and nowhere does paragraph 10.05 purport to limit paragraph 9.03. Indeed, it is clear from the express language of the license agreement, and admitted by Plaintiffs in their Application, that Geffen has the right to use the GNR marks in connection with the sale, advertisement, promotion and distribution of cassettes, compact discs and other recordings. Pis.' Ex Parte App. at 9. McCarthy makes clear that '[a] trademark licensee's right to use of the mark is defined by the valid terms of the trademark license.' McCarthy on Trademarks and Unfair Competition, Â§ 25.30 (4th ed. 2004).
Because the license agreement is broad and not limited by section 10.05, even had UMG remastered songs on the album (which UMG has not), such remastering would not be a violation of the license agreement and would not support a claim of trademark infringement. As such, the cases and treatise that Plaintiffs cite are inapposite. UMG cannot be infringing the GNR marks because UMG has not engaged in 'sales of goods or services under the mark which are outside the area of consent granted in the license.' Indeed, the sale of the Guns N' Roses GHLP, even with remastered songs, would plainly be within the scope of the license agreement and thus not an infringement of the GNR marks.
If Plaintiffs believed that UMG had violated the provision in paragraph 10.05 that prohibits Geffen from 'edit[ing], mix[ing], remix[ing] or otherwise alter [ing]' the original master, Plaintiffs' redress would be limited to a breach of contract claim based on that provision. Plaintiffs' efforts to transmute this breach of contract claim into a trademark claim cannot be supported by the contract.
4. Plaintiffs' Claim For False Designation of Origin Is Legally Flawed
Likewise, even if Plaintiffs' claim had a factual basis, they still could not prevail on their claim for false designation of origin. See Pls.' Compl. Â¶Â¶ 30-33. Plaintiffs' theory - that it is a false designation of origin for UMG to manufacture and distribute allegedly remastered songs as authored and recorded by the Guns N' Roses band - is clearly precluded by Supreme Court's recent decision in Dastar Corp. v. Twentieth Century Fox Films, 539 U.S. 23, 123 S. Ct. 2041 (2003). In Dastar, a unanimous Court concluded that, 'as used in the Lanham Act, the phrase '˜origin of goods' is ... incapable of connoting the person or entity that originated the ideas or communications that '˜goods' embody or contain.' 123 S. Ct. at 2047. Rather, 'the phrase refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.' 123 S. Ct. at 2049; accord Williams v. UMG Recordings, 281 F. Supp. 2d 1177, 1181-86 (CD. Cal. 2003). Indeed, after Dastar, certain cases cited by Plaintiffs are no longer good law. See, e.g. Pls.' Ex Parte App. at 11 (citing Benson v. Paul Winley Record Sales Corp., 452 F. Supp 516, 518 (S.D.N.Y. 1978)). Because UMG is correctly identified as the source of the tangible goods offered for sale (i.e., the GHLP album), Plaintiffs' claim necessarily fails.
5. Plaintiffs' Breach Of Contract Claim Fails Because They Have Not (And Cannot) Show That UMG Has Willfully Breached Paragraph 10.05
As discussed above in great detail, Plaintiffs cannot show that UMG violated paragraph 10.05 of the Recording Agreement because it is undisputed that UMG did not 'edit, mix, remix or otherwise alter' the master recordings delivered by Plaintiffs. However, even had UMG remastered the songs in some way, paragraph 10.05 requires more than just showing that UMG somehow altered the master recordings - paragraph 10.05(b) specifically states that '[a]n inadvertent failure by Geffen to comply with the provisions of this paragraph 10.05 shall not be deemed a breach of this agreement.' Therefore, even if Plaintiffs could show that UMG somehow violated the terms of 10.05 (which they cannot because UMG did not remaster the songs in any way), Plaintiffs would still be required to show that any such violation was intentional and not merely inadvertent.[FN6] Such a showing has not and cannot be made.
FN6. In addition, Plaintiffs are required under paragraph 16.06 of the Recording Agreement to give notice of, and an opportunity to remedy, any alleged breach before an action may be brought. Indeed, had Plaintiffs given the required notice, they would have been informed that the GHLP does not, in fact, contain any remastered songs, thus avoiding this unnecessary suit and emergency application.
B. Plaintiffs Cannot Show A Likelihood Of Irreparable Harm
As explained above, Plaintiffs premise their application for provisional relief on the erroneous claim that the songs appearing on the GHLP have been remastered. Indeed, all of the harm alleged by Plaintiffs is based upon this incorrect belief. See, e.g. Plaintiffs' Ex Parte App. at 15 ('Specifically, the sale, distribution, advertising, marketing and promotion of the planned compilation will cause irreparable damage to the goodwill inherent in the Mark by causing consumers to believe mistakenly that the remastered recordings have been authorized, approved or sponsored by [GUNS N' ROSES] ...') (emphasis added). Simply put, because the songs have in fact not been remastered, Plaintiffs will suffer none of the alleged harm.
Further, Plaintiffs' attempted reliance on the presumption of irreparable injury that is recognized in certain trademark cases is misplaced here. Claims of trademark infringement are presumed to involve irreparable injury only where the plaintiffs first establish a likelihood of confusion. International Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 827 (9th Cir. 1993); Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 612 n.3 (9th Cir. 1989). Plaintiffs contend that consumers will be confused 'if [UMG] is permitted to use [certain GUNS N' ROSES trademarks] outside the scope of the license in connection with a compilation containing tracks remastered without approval of, or any input by, the band.' Pls.' Ex Parte App. at 10 (emphasis added). Under Plaintiffs' own terms, there is no likelihood of confusion because none of the tracks appearing on the GHLP have been remastered. See supra Sec. II(B). Accordingly, Plaintiffs cannot rely on any presumption of irreparable harm here.[FN7]
FN7. Likewise, Plaintiffs' contract claim cannot justify equitable relief. Plaintiffs' Application states that a temporary restraining order is necessary to enjoin a breach of the Recording Agreement that will obtain by way of '[UMG's] threatened release of a Greatest Hits compilation containing remastered versions of well known [Guns N' Roses] recordings ...' Pls.' Ex Parte App. at 14 (emphasis added). Because the GHLP does not contain remastered songs, no such injury will obtain and thus emergency relief is not warranted.
C. The Balance of Hardships Tips Entirely In Favor Of Defendant
Even if Plaintiffs could demonstrate a possibility of success on the merits - which they cannot - the Court would still be required to consider the hardship Defendant would suffer and weigh it against Plaintiffs' threatened injury. Armstrong v. Mazurek, 94 F.3d 566, 568 (9th Cir. 1996); Southwest Voter Registration Educ. Project v. Shelley. 278 F. Supp. 2d 1131, 1143 (C.D. Cal.), aff'd en bane, 344 F.3d 914 (9th Cir. 2003). Because Plaintiffs will suffer no injury if the TRO is denied, and because UMG would suffer enormous hardship if it were granted, the TRO should not issue.
The GHLP has already been released internationally, and is scheduled for release in the U.S. and Canada on March 23. More than 500,000 albums have shipped to international retailers, while more than 260,000 albums had been shipped domestically as of March 12. As a result, it would be impossible in many cases to prevent release of the Album at this late date. Indeed, 'harm that has already occurred .... [is] not appropriately remedied by injunction.' In re Sanford's, Inc., 1991 U.S. Dist. LEXIS 884, at *2 (D. Or. 1991).
Further, a restraining order at this late date would cause severe irreparable harm to UMG, including disruption of its carefully planned marketing campaign, loss of consumer goodwill, and damage to UMG's relationships and credibility with retailers. UMG, together with its international affiliates, have incurred over $3.5 million in marketing, production and distribution expenses in connection with the scheduled release. Were UMG prohibited from further distribution of the album, much of that investment would be lost. In addition to lost revenue and profits expected from sale of the album, UMG's economic losses could very well exceed several million dollars in the United States alone and an additional several million dollars internationally
Aside from monetary loss, provisional relief will cause UMG to suffer significant harm to its credibility and goodwill with customers and retailers that is also detailed above. UMG has also undertaken a large domestic and international marketing campaign in anticipation of the scheduled release dates, including television, radio, print and advertising in cooperation with retailers. Because of the significant lead time required for these matching efforts, there is simply no way to change or cancel these promotional activities. UMG's marketing efforts will have been vitiated and retailers' and consumers' expectations will be disrupted.[FN8] In short, if the albums are not available as of the promised dates, UMG's goodwill with retailers and customers will be damaged. Accordingly, because the balance of hardships tips entirely against granting provisional relief, Plaintiffs' Application should be denied.
FN8. In addition, as noted above, significant counterfeiting problems would likely be occasioned by trie issuance of a TRO.
D. Plaintiffs' Delay In Seeking Provisional Relief Is Cause Itself For Denial Of Their Application
The evidence submitted by UMG establishes, beyond dispute, that Plaintiffs have known for almost all of two months that the Guns N' Roses GHLP would be released for sale internationally and domestically on March 15 and March 23, 2004, respectively. See supra at II(B).[FN9] Yet, they waited until the last business day before filing a lawsuit and seeking provisional relief. For several reasons, this delay alone is fatal for to their Application.
FN9. To summarize the evidence, Plaintiff Rose was originally informed by letter dated August 6, 2003 that UMG intended to release the Guns N' Roses GHLP, and of the specific tracks to be included on that album and their sequence. Froeling Decl. Â¶ 3; Ex. B; Marenberg Decl. Â¶ 2. Mr. Rose was informed in writing of the March 15 and March 23 release dates by letter dated January 22, 2004. Froeling Decl. Â¶ 6, Ex. F; Marenberg Decl. Â¶ 2, Ex. A. The January 22 letter also advised Mr. Rose that the previously approved track listing and sequence had not changed. Froeling Decl. Â¶ 6, Ex. F. The release dates were again confirmed in a subsequent letter to Mr. Rose dated February 2, 2004. Marenberg Decl. Â¶ 3, Ex. B.
First, it is well-settled that delay in seeking provisional relief belies a claim of irreparable harm. ''˜Plaintiff's long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm.' ' Miller v. California Pac. Med. Or., 991 F.2d 536, 544 (9th Cir. 1993) (quoting Oakland Tribune, Inc. v. Chronicle Pub. Co., 762 F.2d 1374, 1377 (9th Cir. 1985)). Indeed, '[t]he district court may legitimately think it suspicious that the party who asks to preserve the status quo through interim relief has allowed the status quo to change through unexplained delay.' Id at 544 (quoting Kobell v. Suburban Lines, Inc., 731 F.2d 1076, 1092 n.27 (3d Cir. 1984)). Here too, Plaintiffs' unexplained delay in petitioning the Court for this extraordinary remedy 'is powerful evidence that [the plaintiff] is not suffering irreparable harm,' and 'may be taken as an indication that the harm would not be serious enough to justify a preliminary injunction.' Ali v. United States, 932 F. Supp. 1206, 1209-10 (N.D. Cal. 1996).
Second, by waiting until the eve of the GHLP's release to file this Application, Plaintiffs have foreclosed themselves from seeking provisional relief. Courts do not issue TROs for harm that has already occurred. In re Sanford's, Inc., 1991 U.S. Dist. LEXIS 884, at *2. The GHLP has been available in international markets for most of this day. Plaintiffs' delay in bringing this Application has placed them in the position of asking the Court to 'unring the bell' of their alleged (and non-existent) irreparable harm. In addition, Plaintiffs' delay has exacerbated the harm and hardship suffered by UMG if a TRO were to be issued.
Third, by filing their Ex Parte Application at the last possible moment, Plaintiffs are misusing the ex parte process. In Mission Power Engineering Co. v. Continental Casualty Co., 883 F. Supp. 488 (C.D. Cal. 1995) (cited with approval in this Court's Procedures and Schedules webpage), in describing the 'showing necessary to justify ex parte relief,' the Court stated:
'Second, it must be established that the moving party is without fault in creating the crisis that requires ex parte relief, or that the crisis occurred as a result of excusable neglect.'
Id. 883 F. Supp. at 492. Plaintiffs cannot make that showing here. Given the substantial advance notice provided by UMG of the GHLP's release dates, Plaintiffs had ample time - several weeks - to bring this matter on a noticed motion basis. Instead, they dawdled and created the crisis of which they now complain. In short, their Application is an abuse of the ex parte process. In addition to all the other grounds on which the Application should be denied, it can and should be denied on this basis alone.
For the foregoing reasons, Defendant respectfully submits that Plaintiffs' application for a temporary restraining order should be denied.