In May of 2016, "Cruz for President" and its ad agency (together "Cruz") were sued by a music downloading website and two artists (collectively "Leopona") for breach of contract and copyright infringement. Cruz downloaded two songs from Leopona, "Lens" by Sarah Schachner and "Fear of Complacency" by Brad Couture. Leopona, Inc. v. Cruz for President, 2016 WL 3670596 (W.D. Wash. July 11, 2016). Cruz agreed to a Small Business License agreement at the time of download. The license expressly prohibited either song from use "for political purposes" and "in any broadcast." Further, the license provided for a payment of $25,000 in liquidated damages for each breach. Cruz used the songs in two campaign ads, both of which were published on YouTube, accumulating thousands of views. The "Lens" ad was also broadcasted on Fox Business News 86 times.
After discovering the violations, Leopona warned Cruz, but the allegedly infringing use continued, and Leopona sued. Leopona claimed thousands of breaches of the license agreement, but rather than seeking $25,000 per breach (totaling over $2 billion in damages), Leopona sought an injunction and liquidated damages to be determined at trial. In addition to the breach of contract claims, both composers alleged copyright infringement claiming that neither the sound recording nor the compositions were ever licensed to Cruz for political use or broadcast.
Cruz sought to dismiss the case under rule 12(b)(6), arguing that the artists did not hold valid copyright registrations (the applications were pending), the liquidated damages claim for $2 billion is unsupported, the contract claims are preempted by the Copyright Act, and the request for injunction is moot because the campaign ended. The court rejected each argument. Although Cruz conceded that the receipt of a copyright application by the Copyright Office may satisfy the registration requirement, it argued there was no evidence the applications were ever received by the Copyright Office. Unpersuaded, the court held that the only reasonable inference from a claim that copyright applications were filed is that the Copyright Office has received those applications. The court also rejected Cruz's liquidated damage argument because the liquidated damages clause was not per se unenforceable and because Cruz misconstrued the Leopona position on damages: Leopona was clear that damages should be determined at trial after discovery regarding the number of breaches. With respect to the preemption argument, relying on Ninth Circuit precedent, the court held that the Copyright Act does not preempt contractual claims. Finally, the court found the injunction request was not moot because the ads were still available to the public, despite the formal end of the campaign.
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