Karen MusicA small record company has pulled off a David v. Goliath defeat in court against publishing giant EMI, as a U.S. District Court in New York has vacated a $100,000 judgment against Karen Records Inc. for copyright infringement and dismissed the complaint citing EMI Entertainment World Inc.’s lack of standing to bring a claim.

Karen Records Inc. describes itself as “the home of the best merengues, bachatas and sones.”  In 2005, EMI sued it for copyright infringement, claiming it owed unpaid statutory royalties on four songs Karen included on three CDs it released between 1999 and 2001: La Colegiala by Grover Walter Leon Aguilar;  Corazón Partío by Alejandro Sanz; Cuando Acaba el Placer by Nacho Mano; and  Fuiste Mia un Verano by Leonardo Favio and Vico Berti.

In 2009 the court granted summary judgment, finding that EMI had terminated Karens’ compulsory licenses to certain of the songs and that Karen never obtained a license to the remaining composition. And in 2011, the court found willful copyright infringement and granted EMI a $100,000 judgment.

Karen, in response, asked the court to set aside that judgment. It cited Federal Rule of Civil Procedure 60(b) (1), (3), and (4), arguing EMI lacked standing for its suit and that the court, therefore, lacked jurisdiction.  Chief U.S. District Judge Loretta A. Preska agreed with Karen and granted its motion to dismiss. The judge found that EMI subsidiaries, in fact, owned the copyrights to the songs and without direct ownership the firm lacked standing to file an infringement claim against Karen.

As the judge noted: Rule 60(b)(1) “permits a district court to grant relief from a judgment based on ‘mistake, inadvertence, surprise, or excusable neglect.’ And the ‘mistake’ found in this case being that all parties including the court assumed jurisdiction over Plaintiff based on Plaintiff’s representations that it was the owner of the copyrights at issue.  Furthermore, Rule 60(b)(4) provides that the court may vacate a judgment if “the judgment is void.”

EMI conceded it lacked direct copyright ownership but argued the rights were held by “wholly-owned” subsidiaries or parties it was authorized to act on behalf of.  The judge, however, looked to other decisions in the U.S. Court of Appeals for the Ninth Circuit, where judges found a parent company lacks standing to bring claims on behalf of its subsidiary. The judge also found that, after objections were raised, EMI failed to answer in timely fashion to get  the subsidiary copyright owners to ratify its claims or to join them as parties in real interest under Federal Rule of Civil Procedure 17; the court also could not see a reasonable basis for naming wrong parties at the outset.

And in case you’re unfamiliar with the music at the core of the case: