Business Law, or the related course called the Legal Environment of the Economy, can be problematic for undergraduates. Law is interesting, but is also complex and mystifying. It sometimes uses language not commonly used, or in an uncommonly way. While business majors are burdened with other required courses that are equally if not more technical, the mastering of such courses appears easier, if only because they are within the students' chosen field and interest. At some point, however, the same students must take a required business law course.

For accounting majors, a basic knowledge of the law is necessary to not only pass the CPA examination, but to gain a feel for the future use of law, including the deciphering and application of tax codes. For the management major, the primary reason to study law is to be able to recognize a legal problem in the workplace, and to be able to later converse intelligently about it with the company lawyer.

Realistically, though any attempt by undergraduates to master in one semester or even a full year, legal concepts ranging from broad philosophical inquiries into the nature and use of law, to specific legal principles relating to a substantive area like contracts, or the procedures involved in drafting pleadings, is ridiculous. While undergraduates might spend a couple of days or weeks on contracts, students in law schools spend a full year tackling the subject. And, while an instructor may discuss elementary pleading forms like the complaint and answer, actual pleading is extremely complicated and often cumbersome. There is, of course, no way to do justice at the undergraduate level to any legal area. So then, what should be the goals of the law instructor in a business school?

It is evident that the main goals are to acquaint and excite the business student with law; to demonstrate that law permeates the entire fabric of business; and to confront the student with the fact that during his or her business career (or in any career for that matter) legal problems loom large. Therefore, no undergraduate business major can afford to ignore the law.

Furthermore, the law plays a part in either limiting or expanding individual, corporate, or group rights, thereby in a sense controlling society and business. Yet, most undergraduates are clueless regarding their most basic civil liberties. Few are sure of how to respond to police questioning after a simple traffic stop, or understand whether or not college officials may randomly search a dorm room, much less whether an employer may randomly search an employee's office. While an undergraduate business law course may not be geared to answer these specific questions (though it perhaps should the latter), it can prepare a student for solving such problems through his or her own legal research, and seeking the advice of an attorney. The same holds true in regard to specific business law areas. By the time a student leaves the course, he or she should be able to identify a legal problem and remember some specific issues, such as the difference between a partnership and a corporation, or whether certain activity may be both a tort and a crime. An accounting major, in particular, should also be able to recognize and recall basic substantive legal concepts, like the difference between a partnership and a limited partnership, when studying for the CPA examination.

Unfortunately, virtually all of the undergraduate business law textbooks are rather dry reading, and may be a hindrance. No matter how they are used in the classroom to spark student interest, the material itself is often too dull. This is unfortunate. It is as if all of the textbook publishers conspired to make business law dull. Occasionally, though, an exciting case excerpt is presented in the text, and the students react more positively. Sometimes, the motivating factor simply is student knowledge of a famous litigant, or the relevance of a particular case to the student age group.

Also, many teachers have little in common socially, and certainly historically, with their students. For many instructors of the 60's generation, it is hard to connect with the X generation. Yet, there is at least, perhaps, one inter-generational link: rock music. The 60's generation were raised during rock's golden age. And today's students listen to the musical artists of the past. In fact, a case can be made that they like the 50's and 60's music better than that of their own era. It is at least a fact that such middle-aged rockers as the surviving Beatles, Rolling Stones, The Who, and The Moody Blues, not to mention Eric Clapton whomever he plays with, today draw heavy subsistence from the X generation.

As a result, through the use of materials which present the subject through the eyes of rock n' roll, business law can be made more interesting to students. The music industry cases and materials, which are easily obtainable, whether concerning rock in general, or specific rock artists or recording companies, are interesting and fun to read. To often, undergraduates believe that the law as presented in dry texts and cases is itself rather dry and uninteresting. This is a fallacy that creative business law teachers can and should extinguish immediately.

From an economic point of view, rock n' roll is very big business. By reading rock music industry cases, not only can the student (and teacher) become more interested in the law as it is applied to a dynamic entertainment and social force, but he or she can see it twist and turn around a specific business industry that generates billions of dollars each year.

The cases and materials which can be developed in this regard should supplement a standard textbook. They should be chosen to highlight industry related problems, not to survey the entire legal field. Obviously, limited class time would preclude this. Furthermore, some of the available cases and materials would appear to be a bit outdated, though an instructor should strive for the more contemporary. Yet, this is not a major problem. The purpose of any undergraduate business law course is to make students aware of how lawyers and judges think, not to bring them up to speed with the newest legal developments, or fully prepare them for the Bar or CPA examinations. Stating the obvious, one does not become a lawyer or accountant after taking an undergraduate business law course. While the laws change, the manner in which law is applied to factual situations remains fairly static.

Also, an instructor can find many connecting links among the particular rock music cases and materials, both from a social and business perspective. This pulling together of a whole body of law as it applies to a specific business industry is left out of the texts. Generally, each chapter of a standard business law textbook deals with a specific legal area. Nowhere in these casebooks do the authors seriously attempt to tie it all together.

Of course, rock music cases and materials totally cannot do this either. But supplementing a standard text with such materials can partially succeed in a unique and satisfying way. From a fight over an injunction to prohibit James Brown from recording with another company, through a review of the New York City Landmark Commissioner's denial of a permit to alter rock's historic Beacon Theater, to an attempt to pin a suicide on Ozzy Osbourne's song lyrics, each case holds interest for students on its own merits and teaches an important legal principle, yet together show how the rock music industry is effected by the law.

The use of such materials as the class action complaint between Frank Music Corporation and Compuserve Incorporated, involving among other legal matters the storing and dissemination through computer downloading of copies of copyrighted musical material;

the civil jury instructions in the case of Yvette Marine against Virgin Records of America; and John Lennon's or Jerry Garcia's will,are also pertinent and highly interesting. By focusing on such cases and materials, students begin to notice that the whole body of legal principles studied may have application to a whole myriad of legal issues faced by a particular industry. It is only a short step further to realize that the law permeates the entire American workplace. From contract and sales questions, to a discussion of the legal framework and liability of business entities, environmental concerns, and labor/management disputes, just to name a few issues, the law is a powerful business force.

Actual music may also be played in the classroom. This is entirely appropriate to sometimes acquaint students with the subject, or personages of a particular case. When reading about an action by the Shriners, challenging being pictured on an album called "Frankenchrist," by The Dead Kennedy's, there are students who have never heard of, much less listened to this punk rock group. Some cases revolve around a specific song or lyrics. For instance, in 1990, 2 Live Crew sued Nicholas Navarro, the sheriff of Broward County, Florida. The complaint alleged that the sheriff's department had violated the groups civil rights by threatening store owners with prosecution for carrying and selling the album "As Nasty As They Wanna Be." The case is a first amendment obscenity dispute, and only by playing representative samples of the album's music and lyrics, can a student fully understand the problem. In the Ozzy Osbourne case already mentioned, playing the song "Suicide Solution," allows the student to determine, as did a judge, whether or not the song is in essence a suicide recommendation, or merely an ode to the evils of alcohol abuse.

At this point, it may be helpful to demonstrate how a particular action may be utilized and discussed in class.

At the apex of his initial solo career, the former Beatle, George Harrison was embarrassed by a suit alleging that he plagiarized a song. This copyright infringement case is interesting on several levels. Actually, there are three reported decisions: Bright Tunes Music Corp. v. Harrisongs Music, LTD; ABKCO Music, Inc. v. Harrisongs Music, LTD; and the appeal, ABKCO Music, Inc. v Harrisongs Music, LTD. All three of these reported cases may be found in appendix I.

In the first case, the issue is liability: whether or not George Harrison's "My Sweet Lord," is a copyright infringement of an earlier song, "He's So Fine," recorded by the Chiffons, and owned by Bright Tunes Music. Millions of dollars in royalties were at stake. By listening to both songs in class, the student learns that though the songs are later found to be the same, this is not so easy to discern by ear. "He's So Fine," for instance, is jumpy and rather trite. "My Sweet Lord," is slower and extremely contemplative. Therefore, merely playing the songs in front of a judge or jury (or class) is important, but not enough. What else is then required?

By reading the case, the student learns that in order for the plaintiff, Bright Tunes, to prevail, it was required to introduce expert testimony which demonstrated that the pleasing combination of sounds which make up "My Sweet Lord," are the exact same combination that produced "He's So Fine." While learning fundamental copyright law, the student realizes that cases may be decided by expert opinion, and that in business the use of experts in cases can be crucial.

Further, progressing through the case, it becomes clear that not all copyright violations are intentional. Harrison, with a little help from his friends, basically began composing "My Sweet Lord," by vamping some guitar chords backstage before a concert in Denmark. The rest of the band joined in by singing Hallelujahs, Hare Krishnas, My Sweet Lords, and Dear, Dear Lords. Later, in a recording studio, the melody and lyrics were formalized. No one involved consciously thought of "He's So Fine," during the making of "My Sweet Lord," but Harrison admitted that not only was he aware of the Chiffon's 1963 chart topping hit, but "that the two songs were substantially similar." This led Judge Owen to conclude that While Harrison did not deliberately plagiarize "He's So Fine," he did subconsciously do so, which in fact rises to the level of copyright infringement.

The second case determined damages. Initially, the student learns that an action may be bifurcated between liability and damages, and that it can take years before damages are assessed after the initial determination of liability. In this case, five years.

The student also learns about the mechanics of damage assessment, here the types of royalties earned by "My Sweet Lord." By apportioning the amount of earnings of "My Sweet Lord," from two albums and a single, the judge determined the gross amount to be $2,152,028. Accounting majors, especially, are then reminded that from this gross amount must be subtracted expenses, totaling "$18,712, thereby reducing the song's earnings to $2,133,316. After factoring in other contributions of such earnings, including George Harrison's name and artistic stature, and the special lyrics of "My Sweet Lord," the final determination was that $1,599,987 may be attributed to "He's So Fine."

Yet, this was not the end of the damages assessment. A very troublesome question remained. During the litigation, Allen B. Klein, George's former manager, injected himself into the case. After Harrison made an offer of settlement, Klein, through his company ABKCO, offered to purchase the claim of Bright Tunes for a higher amount. This then caused Bright Tunes to stop negotiating with Harrison, who had made the lower offer. The liability trial then ensued. Afterwards, after protracted settlement negotiations, and before the damages inquest, Klein paid the sum of $587,000 to Bright Tunes for the copyright to "He's So Fine," and its infringement claim against his former client, George Harrison. Concluding after the damages trial that Klein's "intrusion irreparably destroyed the ability of Harrison to further negotiate a settlement," the judge held that ABKCO was not entitled to profit from this detrimental impropriety. And, as a result of Klein's purchase price, Judge Owen was able to compromise the actual value of "He's So Fine," to a sum less than the original estimated $1,599,987. Sympathetic to George, he fashioned an equitable remedy that ordered Harrison to pay the sum of $587,000 back to ABKCO, which in turn was ordered to transfer the copyright of "He's So Fine," over to the rock star. In fact, Allen Klein, made nothing. ABKCO was forced to appeal.

Reading this damages case, the student learns not only that assessing damages is complex, but that in America even a lawsuit may be purchased! The student also learns that a manager who is in a fiduciary relationship with his client, should not profit from self-interested dealings. And, in such a situation, a judge may fashion an appropriate equitable remedy that compensates fairly the parties in interest.

The final case of this rock music triumvirate, is ABKCO's appeal and Harrison's cross-appeal, which occurred two years later. ABKCO presented two main arguments to the Second Circuit Court of Appeals. First, it claimed that it did not breach its fiduciary duty to Harrison, since no confidential information was improperly passed from ABKCO to Bright Tunes during the settlement negotiations, and its actions did not cause the pre-damage trial settlement breach between Harrison and Bright Tunes. Secondly, it argued that Judge Owen's award of damages was improper. Harrison simply cross-appealed on the issue of whether or not a copyright infringement could be subconscious.

The second circuit easily disposed of Harrison's claim by holding that "innocent intent should no more constitute a defense in an infringement action than in the case of conversion of tangible personality." As to ABKCO's two-pronged appeal, the court split. Regarding ABKCO's claim that it did not engage in fiduciary misconduct, it concluded that there was an egregious breach of a fiduciary duty, a factual issue properly addressed by the district court, and not "clearly erroneous or not in accord with applicable law." However, on the issue of damages, the court remanded the case back to Judge Owen for a proper determination of the damages amount in light of previous settlements between Harrison and ABKCO regarding foreign infringement claims.

By reviewing the three following cases involving the same players, the student not only has the opportunity to follow an action as it passes through various litigation stages, including an appeal, but how an appellate court reviews a lower court decision. The student also learns that an appellate court may partially affirm a holding below, and remand an issue back for a further determination in conformity with the appellate court's legal ruling. Here, also, the issue of fiduciary duty is discussed in great detail, and as a practical, not theoretical matter. This may lead into a class discussion of such ethical considerations.

This casebook is devoted to the idea that the study of business law, while complex, may also be made fun, or at least more interesting. It illustrates an attempt to relate the entire legal field taught in a standard business law textbook to a specific industry. And, it is suggested that rock music may be a tie binding both the instructor and student. As such, utilizing rock music cases both acquaints and excites the business student with the law. By focusing on a particular industry, in this case the rock music industry, the student learns that law permeates the whole fabric of business, and that he or she may be faced with similar legal problems in the more general business world.

However, teaching business law with such cases and materials forever could lead to boredom, at least for the instructor. One way to prevent this is to constantly change the materials. The Internet is now an ideal way to pull new rock music cases and materials together. Another tactic might be to change the focus from the music industry to entertainment in general. In that way, an instructor could utilize cases and materials from the movie, fashion, arts, or sports industry, as well. Focusing on "pop culture" would be more eclectic, and perhaps an even better source, as cases and materials regarding such issues as abortion, euthanasia, new religious movements, and other social affairs could be included.

It is too easy for instructors to teach from standard textbooks, which are for the most part rather dry reading. They are important, however, since it is difficult to teach business law from cases and materials entirely focused on one specific business industry. Further, there are other cases that are important for the student, especially landmark cases in a particular business law area. It is also a truism that the law is an effective social and business force, and not just another entertainment form. The suggestion here is not to dispose of the instructor's favorite textbook, but to spice it up with interesting cases and materials. Also, presented here are full blown cases, edited for sure, but not mere case excerpts as in standard texts. The student gains much from reading full cases during the term.

For sure, not all cases and materials relating to a specific industry need to be discussed in class. Yet, anything a teacher can do to keep a class from becoming bored or stagnant is beneficial. In any event, rock n' roll is here to stay!

BRIGHT TUNES MUSIC CORP. v. HARRISONGS MUSIC, LTD., et al., 420 F.Supp. 177 (1976)

Owen, District Judge.

This is an action in which it is claimed that a successful song, My Sweet Lord, listing George Harrison as the composer, is plagiarized from an earlier successful song, He's So Fine, composed by Ronald Mack, recorded by a singing group called the "Chiffons," the copyright of which is owned by plaintiff, Bright Tunes Music Corp.

He's So Fine, recorded in 1962, is a catchy tune consisting essentially of four repetitions of a very short basic musical phrase, "sol-mi-re," (hereinafter motif A),[FN1] altered as necessary to fit the words, followed by four repetitions of another short basic musical phrase, "sol-la-do-la-do," (hereinafter motif B).[FN2] While neither motif is novel, the four repetitions of A, followed by four repetitions of B, is a highly unique pattern.[FN3] In addition, in the second use of the motif B series, there is a grace note inserted making the phrase go "sol-la-do-la-re-do." [FN4]

George Harrison, a former member of The Beatles, was aware of He's So Fine. In the United States, it was No. 1 on the billboard charts for five weeks; in England, Harrison's home country, it was No. 12 on the charts on June 1, 1963, a date upon which one of the Beatle songs was, in fact, in first position. For seven weeks in 1963, He's So Fine was one of the top hits in England.

According to Harrison, the circumstances of the composition of My Sweet Lord were as follows. Harrison and his group, which include an American black gospel singer named Billy Preston,[FN7] were in Copenhagen, Denmark, on a singing engagement. There was a press conference involving the group going on backstage. Harrison slipped away from the press conference and went to a room upstairs and began "vamping" some guitar chords, fitting on to the chords he was playing the words, "Hallelujah" and "Hare Krishna" in various ways. [FN8] During the course of this vamping, he was alternating between what musicians call a Minor II chord and a Major V chord.

At some point, germinating started and he went down to meet with others of the group, asking them to listen, which they did, and everyone began to join in, taking first "Hallelujah" and then "Hare Krishna" and putting them into four part harmony. Harrison obviously started using the "Hallelujah," etc., as repeated sounds, and from there developed the lyrics, to wit, "My Sweet Lord," "Dear, Dear Lord," etc. In any event, from this very free-flowing exchange of ideas, with Harrison playing his two chords and everybody singing "Hallelujah" and "Hare Krishna," there began to emerge the My Sweet Lord text idea, which Harrison sought to develop a little bit further during the following week as he was playing it on his guitar. Thus developed motif A and its words interspersed with "Hallelujah" and "Hare Krishna."

Approximately one week after the idea first began to germinate, the entire group flew back to London because they had earlier booked time to go to a recording studio with Billy Preston to make an album. In the studio, Preston was the principal musician. Harrison did not play in the session. He had given Preston his basic motif A with the idea that it be turned into a song, and was back and forth from the studio to the engineer's recording booth, supervising the recording "takes." Under circumstances that Harrison was utterly unable to recall, while everybody was working toward a finished song, in the recording studio, somehow or other the essential three notes of motif A reached polished form. "Q. (By the Court): . . . you feel that those three notes . . . the motif A in the record, those three notes developed somewhere in that recording session? "Mr. Harrison: I'd say those three there were finalized as beginning there." "Q. (By the Court): Is it possible that Billy Preston hit on those (notes comprising motif A)? "Mr. Harrison: Yes, but it's possible also that I hit on that, too, as far back as the dressing room, just scat singing."

Similarly, it appears that motif B emerged in some fashion at the recording session as did motif A. This is also true of the unique grace note in the second repetition of motif B. "Q. (By the Court): All I am trying to get at, Mr. Harrison, is if you have a recollection when that (grace) note popped into existence as it ends up in the Billy Preston recording. "Mr. Harrison: . . . (Billy Preston) might have put that there on every take, but it just might have been on one take, or he might have varied it on different takes at different places." The Billy Preston recording, listing George Harrison as the composer, was thereafter issued by Apple Records. The music was then reduced to paper by someone who prepared a "lead sheet" containing the melody, the words and the harmony for the United States copyright application.[FN9]

Seeking the wellsprings of musical composition why a composer chooses the succession of notes and the harmonies he does whether it be George Harrison or Richard Wagner is a fascinating inquiry. It is apparent from the extensive colloquy between the Court and Harrison covering forty pages in the transcript that neither Harrison nor Preston were conscious of the fact that they were utilizing the He's So Fine theme.[FN10] However, they in fact were, for it is perfectly obvious to the listener that in musical terms, the two songs are virtually identical except for one phrase. There is motif A used four times, followed by motif B, four times in one case, and three times in the other, with the same grace note in the second repetition of motif B.[FN11]

What happened? I conclude that the composer,[FN12] in seeking musical materials to clothe his thoughts, was working with various possibilities. As he tried this possibility and that, there came to the surface of his mind a particular combination that pleased him as being one he felt would be appealing to a prospective listener; in other words, that this combination of sounds would work. Why? Because his subconscious knew it already had worked in a song his conscious mind did not remember. Having arrived at this pleasing combination of sounds, the recording was made, the lead sheet prepared for copyright and the song became an enormous success. Did Harrison deliberately use the music of He's So Fine? I do not believe he did so deliberately. Nevertheless, it is clear that My Sweet Lord is the very same song as He's So Fine with different words,[FN13] and Harrison had access to He's So Fine. This is, under the law, infringement of copyright, and is no less so even though subconsciously accomplished. Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 54 (2d Cir. 1936); Northern Music Corp. v. Pacemaker Music Co., Inc., 147 U.S.P.Q. 358, 359 (S.D.N.Y.1965).

Given the foregoing, I find for the plaintiff on the issue of plagiarism, and set the action down for trial on November 8, 1976 on the issue of damages and other relief as to which the plaintiff may be entitled. The foregoing constitutes the Court's findings of fact and conclusions of law.

So Ordered.

ABKCO MUSIC, INC. v. HARRISONGS MUSIC, LTD, 508 F.Supp. 798 (S.D.N.Y. 1981)

Owen, District Judge.

In this action by Bright Tunes Music Corporation for infringement of its copyright in the 1963 hit song "He's So Fine", I earlier concluded that defendant George Harrison had subconsciously plagiarized "He's So Fine" in arriving at the melody of his hit song, "My Sweet Lord", in 1971. Bright Tunes Music Corp. v. Harrisongs Music, Ltd., 420 F.Supp. 177 (S.D.N.Y.1976). I thereafter scheduled hearings to determine the damages flowing from that infringement and the parties responsible therefor, and extensive discovery commenced. Prior to the date for hearings, however, Bright Tunes sold, for $587,000.00, its copyright in "He's So Fine" and its rights in this litigation to ABKCO Music, Inc., of which Allen B. Klein, the "ABK" of ABKCO, is the moving spirit, owner, and principal officer. This immediately caused strong reaction from the Harrison interests [FN1] because ABKCO had been the exclusive business manager for George Harrison and his musical interests from November, 1970 to March 13, 1973,[FN2] the period in which the claim of infringement was first asserted.

Upon ABKCO being substituted as plaintiff herein, the Harrison interests amended their pleadings to assert, in one form or another, a breach of fiduciary duty by ABKCO, which, according to Harrison, disqualifies ABKCO from recovering in this action.

Testimony has now been taken on both the issue of damages and the question of ABKCO's disqualification. While I am of the view that ABKCO's conduct from 1975 to 1978 limits its recovery herein, see infra, it is nonetheless appropriate to determine first what the recovery would have been had ABKCO not become the plaintiff in the way it did, and to set forth the court's findings accordingly, albeit in somewhat summary fashion.

The earnings of the song "My Sweet Lord" have come from four principal sources: mechanical royalties,[FN3] performance royalties,[FN4] the sale of sheet music and folios, and the profits of Apple Records, Inc., the Harrison-owned manufacturer of the principal recordings of "My Sweet Lord".

Mechanical royalties attributable solely to "My Sweet Lord" total $260,103. Plaintiff contends that it is also entitled to some portion of the mechanical royalties Harrison received for the relatively unsuccessful songs on the same discs with "My Sweet Lord" which, it argues, would not have been earned but for the unusual popularity of "My Sweet Lord". In assessing plaintiff's argument, two things must be kept in mind. First, on the single record, the song "My Sweet Lord", a hit, was teamed with "Isn't It a Pity", a non-hit; on the twelve-inch album, "All Things Must Pass", "My Sweet Lord" was one of twenty-two Harrison songs, only one other of which achieved even modest popularity. Second, exactly the same mechanical royalty is payable to Harrison for each of his songs on any given record, whether memorable or not. Common sense dictates that a hit song contributes more to the sale of a record than does a less popular song. In such circumstance, mechanical royalties paid to a composer for a less-than-memorable song on the record are, in fact, earned by the memorable song which has caused the public to purchase the record. While not susceptible to quite the precision one might prefer, a reasonable determination of the total earnings allocable to "My Sweet Lord" can be made here and is an appropriate item of damage for the court to award.[FN5] Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 456 F.Supp. 531 (S.D.N.Y.1977), aff'd 592 F.2d 651 (2d Cir. 1978).

I turn first to the earnings of the single. By a ratio of sixteen to one disc jockeys played "My Sweet Lord" more frequently than the song on the single's flip side, "Isn't It a Pity". With respect to the album "All Things Must Pass", containing twenty-two songs, disc jockeys played "My Sweet Lord" seventy percent of the time that they aired any song from the album. I therefore find that, conservatively, seventy percent of the total mechanical royalties earned by the single were attributable to "My Sweet Lord".[FN6] In addition, I find, again calculating conservatively, that fifty percent of the mechanical royalties earned by the album "All Things Must Pass" are attributable to "My Sweet Lord".

The album entitled "The Best of George Harrison" is another matter. The trial record provides me with no guidance as to the relative popularity of a number of the album's songs. Since this album was issued several years after the initial release of "My Sweet Lord", has a number of different songs, and is entitled "The Best", I conclude that these are all songs with substantial popularity. With respect to "The Best of George Harrison", therefore, I find that plaintiff has failed to establish that "My Sweet Lord" earned more than its own mechanical royalties.

The foregoing findings yield the following calculation of gross earnings by "My Sweet Lord" from mechanical royalties: from the single, $54,526.00; from the album "All Things Must Pass", $588,188.00; from "The Best of George Harrison", $6,887.00; for a total of $646,601.00.[FN7]

Performance royalties, which came solely from BMI figures, total $359,794.00, and sheet music earnings total $67,675.00.

Apple Records, Inc., the Harrison-owned manufacturer of his records, has a "spread" [FN8] on the manufacturing of records, which constitutes earnings to Harrison. Applying the ratios comparing the air play given "My Sweet Lord" to the air play of the various other Harrison songs, i. e., the ratios used above to calculate mechanical royalties, see supra, I find that Apple's earnings from the "spread" that are attributable to "My Sweet Lord" are: from the single, $130,629.00; from "All Things Must Pass", $925,731.00; and from "The Best of George Harrison", $21,598.00; [FN9] for a total of $1,077,958.00.

The total gross earnings of "My Sweet Lord" as calculated above are $2,152,028.00. From this total the Harrison interests contend there must be deducted a number of expense items, which I now treat seriatim. The Euro-Atlantic management fee, legal and professional fees, certain salaries, certain telephone expenses, United States public relations and promotions, and certain income taxes, are all disallowed. Basically, Harrison has not proven, even with minimum specificity, that those expenses are attributable to "My Sweet Lord". A certain twenty percent ABKCO commission already paid to ABKCO and the three and one-quarter percent commission paid to the Harry Fox Agency, totaling $18,712.00, are both allowed, thereby reducing the total earnings figure set forth above to $2,133,316.00.

Next, I must determine the portion of the above income which should be attributed to factors, other than the plagiarized music, affecting public interest in the song "My Sweet Lord".[FN10] Several matters must be considered. Harrison, an artist with an international "name," supplied his own text. How much of the income is attributable to the text, to the selling power of his name? Although this is not an area susceptible to precise measurement, I conclude that three-fourths of "My Sweet Lord's" success is due to plagiarized tune and one- fourth to other factors, such as the words and the popularity and stature of George Harrison in this particular field of music.[FN11] I weigh the music heavily in this case because the music had already demonstrated its outstanding "catchiness" in 1963 when it carried the rather unexceptional, romantic text of "He's So Fine" to first place on the Billboard charts in the United States for five weeks.

Given all the foregoing, I conclude that $1,599,987.00 of "My Sweet Lord's" earnings are reasonably attributable to the music of "He's So Fine".

Now, however, I must turn to the troublesome question of whether ABKCO may be awarded the amount calculated above or whether its conduct vis-a-vis Harrison, its former employer, regarding this very litigation in any manner limits or destroys its right of recovery.

As has been stated earlier, in the years 1971-73, Allen B. Klein, through ABKCO, the present plaintiff, was the overall business manager of George Harrison and his musical interests. ABKCO took care of all the financial matters, including negotiating contracts and keeping the financial books and records. For these services ABKCO was paid twenty percent of the gross income from the Harrison ventures. As Harrison's business manager, Klein obviously was aware of both the artistic and financial success of "My Sweet Lord". It was during ABKCO's tenure as business manager that this suit was commenced by Bright Tunes. It was ABKCO that obtained an opinion from musicologist Harold Barlow as to the suit's lack of merit.[FN12] ABKCO thereafter engaged experienced counsel in New York City to defend; all of these actions were taken before ABKCO's own services were terminated by Harrison in March 1973. I do not find that any of the steps taken by ABKCO, while acting as Harrison's business manager, to defend this action were in any way inappropriate or other than in good faith.

More troublesome, however, is Klein's covert intrusion into the settlement negotiation picture in late 1975 and early 1976, immediately preceding the trial on the merits. At this crucial time Harrison made a settlement proposal which, at the time, Bright Tunes' lawyer regarded as "a good one." Unknown to Harrison, Klein, at that point still involved in bitter post-firing litigation with Harrison, made a substantially higher offer to purchase Bright Tunes' claim on behalf of ABKCO, thereby causing Bright Tunes to conclude that the level at which it had been negotiating with Harrison was far too low. [FN13] Bright Tunes reached this conclusion, in part, on the not-unjustified assumption expressed by one of its principals, that Klein, known to Bright Tunes as Harrison's former business manager, "may be in a better position to judge whether the infringement action will become more successful than we are. [FN14]

Thereafter, Harrison's unwillingness to discuss a larger settlement and Klein's failure to better ABKCO's offer Bright Tunes viewed that offer merely as an "opener" necessarily forced the case to trial on the merits. Harrison, after the trial, made no further serious efforts to deal with Bright Tunes' higher demands and the claim was finally bought by ABKCO in 1978 for a sum more than double Klein's own first offer.

I conclude that ABKCO's intrusion into and interference with Harrison's 1975 and January 1976 settlement efforts were to the probable detriment [FN15] of its former client. This is particularly so since Klein's proposals were regarded by Bright Tunes as being highly credible, i. e., based on Klein's intimate knowledge gleaned from his former relationship to Harrison. This impropriety was further compounded by the fact that in December, 1975, in the course of his discussions and in an effort to support his proposal, Klein covertly furnished Bright Tunes with certain of Harrison's financial schedules which he had acquired while Harrison's business manager. ABKCO now seeks to avoid the impact of this conduct by arguing that Bright Tunes, in any event, would have been entitled to this information in the course of discovery. At the time this information was furnished by Klein, however, Bright Tunes had not yet prevailed on the liability issue and was therefore not entitled to this information. Consequently, its submission by Klein to Bright Tunes at that time was impermissible. These actions, in my judgment, constituted a breach of ABKCO's duty to Harrison which is not to be rewarded by this court. See Byrne v. Barrett, 268 N.Y. 199, 197 N.E. 217 (1935) and Group Association Plans, Inc. v. Colquhoun, 466 F.2d 469 (D.C.Cir.1972).

While one cannot be certain on this record that Harrison would have been able to settle the plagiarism action prior to trial "but for" ABKCO's conduct, and while the contemporaneous letters of Seymour Barash, the major stockholder of Bright Tunes, reveal an attitude toward the case which might, in the final analysis, have gotten in the way of a settlement, it is nonetheless clear that good faith negotiations were going on and that the pending offer by Harrison was regarded by the attorney for Bright Tunes as a reasonable one. It is also evident that ABKCO's higher offer to purchase the claim for its own account, supported as it was by ABKCO's intimate knowledge of Harrison's financial affairs and records of the earnings of Harrisong and Apple Records, was viewed by Bright Tunes as an insider's disclosure of the value of the case. Klein's conduct, in any event, changed Bright Tunes' attitude toward the Harrison proposal. This intrusion irreparably destroyed the ability of Harrison to further negotiate a settlement in a range that Bright Tunes' lawyer had already determined to be "good."

I therefore conclude that ABKCO is not entitled to profit from its eventual purchase of all of Bright Tunes' rights in "He's So Fine" essentially Bright Tunes' only asset. In Re McCrory Stores Corp., 12 F.Supp. 267, 269 (S.D.N.Y.1935). On the other hand, I also conclude that ABKCO is not required to forfeit the cost of its acquisition. Had it been shown that Bright Tunes and Harrison were realistically close to a specific figure in their settlement negotiations, I could have utilized such a figure for the resolution of the issue here; absent such proof, I deem the figure at which ABKCO did purchase Bright Tunes' rights in "He's So Fine" to be the appropriate one. I therefore direct that plaintiff ABKCO is to hold the fruits of its acquisition of April 13, 1978 in trust for the Harrison interests to be transferred to Harrison or an appropriate designee upon the payment of $587,000.00 [FN16] together with interest from the date of acquisition for which amount plaintiff shall have judgment. Further relief by plaintiff against the Harrison interests is denied. The claims against Broadcast Music, Inc., and Hansen Publications, Inc. are dismissed. The counterclaims asserted against ABKCO Industries, Inc., and Allen Klein are dismissed. The foregoing constitutes the court's findings of fact and conclusions of law.

Settle order and judgment effectuating the foregoing.

ABKCO MUSIC, INC. v. HARRISONGS MUSIC, LTD., 722 F.2d 988 (1983)

Pierce, C.J.:

I. BACKGROUND

A. Events Leading to Liability Trial

On February 10, 1971, Bright Tunes Music Corporation (Bright Tunes), then copyright holder of the song "He's So Fine," composed by Ronald Mack, brought this copyright infringement action in the United States District Court for the Southern District of New York against former member of the musical group "The Beatles" George Harrison, and also against related entities (hereinafter referred to collectively as "Harrison Interests"), [FN1] alleging that the Harrison composition, "My Sweet Lord," (hereinafter referred to alternatively as "MSL") infringed the Ronald Mack composition, "He's So Fine," (hereinafter referred to alternatively as "HSF"). [FN2]

When this action was commenced, the business affairs of The Beatles, including Harrison Interests, were handled by ABKCO Music, Inc. (ABKCO) and Allen B. Klein, its President and "moving spirit." ABKCO Music, Inc. v. Harrisongs Music, Ltd., 508 F.Supp. 798, 799 (S.D.N.Y.1981). [FN3] ABKCO was Harrison's business manager during the initial stages of the copyright liability action herein, at which time the litigation was handled for Harrison by ABKCO's General Counsel.

The following events preceded the instant appeal. Shortly after this action was commenced in February, 1971, Klein (representing Harrisongs Music, Inc. and George Harrison) met with Seymour Barash (President and major stockholder of Bright Tunes) to discuss possible settlement of this lawsuit. [FN4] Although Klein, at trial, denied having specific knowledge of the details of this discussion, he testified that he had suggested to Barash, around February of 1971, a purchase of the entire stock of Bright Tunes as a way to dispose of this lawsuit. Thus, in 1971, Klein was acting on behalf of Harrison Interests in an effort to settle this copyright infringement claim brought by Bright Tunes, although no settlement resulted.

Subsequent to the Klein-Barash meeting, Bright Tunes went into "judicial dissolution proceedings." This infringement action was placed on the district court's suspense calendar on March 3, 1972, and was resumed by Bright Tunes (in receivership) in early 1973. Also in early 1973 (March 31), ABKCO's management contract with The Beatles expired. Bitter and protracted litigation ensued between The Beatles and ABKCO over the winding down of management affairs--a dispute that ended in 1977 with The Beatles paying ABKCO $4.2 million in settlement.

There is some disagreement as to whether further settlement negotiations took place between Harrison Interests and Bright Tunes between 1973 and mid-1975. [FN5] It appears undisputed, however, that Harrison Interests' attorney at least initiated settlement talks in the late summer of 1975; that in the period October 1975 through February 1976, settlement discussions took place between Bright Tunes' counsel and counsel for Harrison Interests regarding settlement of this infringement action (an offer by Harrison Interests based on United States royalties); and that those discussions were in the 50%/50% or 60%/40% range. These discussions culminated in a $148,000 offer by Harrison Interests in January of 1976 (representing 40% of the United States royalties).

At about the same time (1975), apparently unknown to George Harrison, Klein had been negotiating with Bright Tunes to purchase all of Bright Tunes' stock. That such negotiations were taking place was confirmed as early as October 30, 1975, in a letter from Seymour Barash (Bright Tunes' former President) to Howard Sheldon (Bright Tunes' Receiver), in which Barash reported that there had been an offer from Klein for a substantial sum of money. The same letter observed that "[Klein] would not be interested in purchasing all of the stock of Bright Tunes ... if there was any doubt as to the outcome of this litigation."

In late November 1975, Klein (on behalf of ABKCO) offered to pay Bright Tunes $100,000 for a call on all Bright Tunes' stock, exercisable for an additional $160,000 upon a judicial determination as to copyright infringement. In connection with this offer, Klein furnished to Bright Tunes three schedules summarizing the following financial information concerning "My Sweet Lord:" (1) domestic royalty income of Harrisongs Music, Inc. on MSL; (2) an updated version of that first schedule; and (3) Klein's own estimated value of the copyright, including an estimate of foreign royalties (performance and mechanical) and his assessment of the total worldwide future earnings. Barash considered the Klein offer only a starting point. He thought that a value of $600,000 was more accurate and recommended a $200,000 call, based on a $600,000 gross sales price. Also in December 1975, Barash noted, in a letter to counsel for the Peter Maurice Co., that Harrison Interests' counsel had never furnished a certified statement of worldwide royalties of MSL, but that from conversations between Stephen Tenenbaum (accountant for several Bright Tunes stockholders) and Klein, Bright Tunes had been given that information by Klein.

Shortly thereafter, on January 19, 1976, Barash informed Howard Sheldon (Bright Tunes' Receiver) of the Klein offer and of the Bright Tunes stockholders' unanimous decision to reject it. Barash noted that "[s]ince Mr. Klein is in a position to know the true earnings of 'My Sweet Lord', his offer should give all of us an indication of the true value of this copyright and litigation." Sheldon responded in a letter dated January 21, 1976, noting, inter alia, that Harrison's attorneys were informed that no settlement would be considered by Bright Tunes until total sales of MSL were determined after appropriate figures were checked. On January 30, 1976, the eve of the liability trial, a meeting was held by Bright Tunes' attorney for all of Bright Tunes' stockholders (or their counsel) and representatives of Ronald Mack. The purpose of the meeting was to present Bright Tunes with an offer by Harrison Interests of $148,000, representing 40% of the writers' and publishers' royalties earned in the United States (but without relinquishment by Harrison of the MSL copyright). At the time, Bright Tunes' attorney regarded the offer as "a good one." 508 F.Supp. at 802. The Harrison offer was not accepted, however. Bright Tunes raised its demand from 50% of the United States royalties, to 75% worldwide, plus surrender of the MSL copyright. The parties were unable to reach agreement and the matter proceeded to trial.

B. Liability Trial and Events Thereafter

A three-day bench trial on liability was held before Judge Owen on February 23-25, 1976. On August 31, 1976 (amended September 1, 1976), the district judge rendered a decision for the plaintiff as to liability, based on his finding that "My Sweet Lord" was substantially similar to "He's So Fine" and that Harrison had had access to the latter. Bright Tunes Music Corp. v. Harrisongs Music, Ltd., 420 F.Supp. 177 (S.D.N.Y.1976). The issue of damages and other relief was scheduled for trial at a later date.

Following the liability trial, Klein, still acting for ABKCO, continued to discuss with Bright Tunes the purchase of the rights to HSF. During 1977, no serious settlement discussions were held between Bright Tunes and Harrison Interests. Indeed, the record indicates that throughout 1977 Bright Tunes did not authorize its attorneys to give Harrison a specific settlement figure. By November 30, 1977, Bright Tunes' counsel noted that Klein had made an offer on behalf of ABKCO that "far exceeds any proposal that has been made by the defendants." [FN6]

On February 8, 1978, another settlement meeting took place, but no agreement was reached at that meeting. Although it appears that everyone present felt that the case should be settled, it also appears that there were no further settlement discussions between Harrison Interests and Bright Tunes subsequent to that date. The Bright Tunes negotiations with ABKCO, however, culminated on April 13, 1978, in a purchase by ABKCO of the HSF copyright, the United States infringement claim herein, and the worldwide rights to HSF, for $587,000, an amount more than twice the original Klein (ABKCO) offer. This purchase was made known to George Harrison by Klein himself in April or May of 1978. Harrison "was a bit amazed to find out" about the purchase. [FN7]

C. Damages Proceedings and Foreign Settlements

On July 17, 1978, ABKCO adopted Bright Tunes' complaint and was substituted as the sole party plaintiff in this action. In May 1979, Harrison Interests obtained leave to assert affirmative defenses and counterclaims against Klein and ABKCO for alleged breaches of fiduciary duty relating to the negotiation for and purchase of the Bright Tunes properties. [FN8] An eight-day bench trial was held on damages and counterclaims between August 27 and October 15, 1979.

While the matter was still sub judice, Harrison Interests, on April 3, 1980, entered into an agreement with Essex Music International, Ltd. (Essex), authorizing Essex to negotiate and enter into settlement agreements, on a 60%/40% basis, on behalf of Harrison Interests throughout the world (except the United Kingdom, the United States and Canada) with any party owning an interest in HSF. These terms were consistent with those of the Maurice-Harrison settlement of the United Kingdom claim, whereby the parties were to use "best endeavours" to obtain 60%/40% settlements throughout the world. [FN9] ABKCO then settled foreign claims with Essex, also on April 3, 1980.

The damages decision was filed on February 19, 1981. ABKCO Music, Inc. v. Harrisongs Music, Ltd., 508 F.Supp. 798 (S.D.N.Y.1981). Having determined that the damages amounted to $1,599,987, the district judge held that ABKCO's conduct over the 1975-78 period limited its recovery, substantially because of the manner in which ABKCO had become a plaintiff in this case. Particularly "troublesome" to the court was "Klein's covert intrusion into the settlement negotiation picture in late 1975 and early 1976 immediately preceding the trial on the merits." Id. at 802. He found, inter alia, that Klein's status as Harrison's former business manager gave special credence to ABKCO's offers to Bright Tunes and made Bright Tunes less willing to settle with Harrison Interests either before or after the liability trial. Moreover, the court found that in the course of negotiating with Bright Tunes in 1975-76, Klein "covertly furnished" Bright Tunes with certain financial information about MSL which he obtained while in Harrison's employ as business manager. The foregoing conduct, in the court's view, amounted to a breach of ABKCO's fiduciary duty to Harrison. The court held that although it was not clear that "but for" ABKCO's conduct Harrison Interests and Bright Tunes would have settled, he found that good faith negotiations had been in progress between the parties and Klein's intrusion made their success less likely, since ABKCO's offer in January 1976 was viewed by Bright Tunes as an "insider's disclosure of the value of the case." Id. at 803. Consequently, the district judge directed that ABKCO hold the "fruits of its acquisition" from Bright Tunes in trust for Harrison Interests, to be transferred to Harrison Interests by ABKCO upon payment by Harrison Interests of $587,000 plus interest from the date of acquisition.

II. ABKCO'S ARGUMENTS ON APPEAL

ABKCO presents two principal arguments on appeal. First, it is argued that ABKCO did not breach its fiduciary duty to Harrison because (a) no confidential information was improperly passed from ABKCO to Bright Tunes during the negotiations to purchase HSF, and (b) there was no causal relationship between ABKCO's actions and Harrison Interests' failure to obtain settlement. Second, appellant argues that the scope of the constructive trust imposed by Judge Owen is too broad because it covers foreign rights. ABKCO contends that the remedy thus jeopardizes the post-liability-trial settlements of the foreign infringement claims between ABKCO and Harrison Interests (through Essex). As to the first contention, we reject appellant's arguments and affirm the decision of the district judge. With respect to appellant's objection to the scope of the remedy, however, we modify the judgment and remand the case for further consideration in light of this opinion.

A. Breach of Fiduciary Duty

There is no doubt but that the relationship between Harrison and ABKCO prior to the termination of the management agreement in 1973 was that of principal and agent, and that the relationship was fiduciary in nature. See Meese v. Miller, 79 A.D.2d 237, 241, 436 N.Y.S.2d 496, 499 (4th Dep't 1981). The rule applicable to our present inquiry is that an agent has a duty "not to use confidential knowledge acquired in his employment in competition with his principal." Byrne v. Barrett, 268 N.Y. 199, 206, 197 N.E. 217, 218 (1935). This duty "exists as well after the employment is terminated as during its continuance." Id.; see also Restatement (Second) of Agency s 396 (1958). On the other hand, use of information based on general business knowledge or gleaned from general business experience is not covered by the rule, and the former agent is permitted to compete with his former principal in reliance on such general publicly available information. Byrne v. Barrett, 268 N.Y. at 206, 197 N.E. at 218; Restatement (Second) of Agency s 395 comment b (1958). The principal issue before us in the instant case, then, is whether the district court committed clear error in concluding that Klein (hence, ABKCO) improperly used confidential information, gained as Harrison's former agent, in negotiating for the purchase of Bright Tunes' stock (including HSF) in 1975-76.

One aspect of this inquiry concerns the nature of three documents-- schedules of MSL earnings--which Klein furnished to Bright Tunes in connection with the 1975-76 negotiations. Although the district judge did not make a specific finding as to whether each of these schedules was confidential, he determined that Bright Tunes at that time was not entitled to the information. 508 F.Supp. at 803. It appears that the first of the three schedules may have been previously turned over to Bright Tunes by Harrison. The two additional schedules which Klein gave to Bright Tunes (the detailed updating of royalty information and Klein's personal estimate of the value of MSL and future earnings) appear not to have been made available to Bright Tunes by Harrison. Moreover, it appears that at least some of the past royalty information was confidential. [FN10] The evidence presented herein is not at all convincing that the information imparted to Bright Tunes by Klein was publicly available. Cf. Franke v. Wiltschek, 209 F.2d 493, 495 (2d Cir.1953) (former fiduciary precluded from using confidential information in competition with former principal even if the information is readily available from third parties or by other means). Furthermore, the district judge was in a better position to assess the credibility aspects of evidence bearing on this question than we are.

Another aspect of the breach of duty issue concerns the timing and nature of Klein's entry into the negotiation picture and the manner in which he became a plaintiff in this action. In our view, the record supports the position that Bright Tunes very likely gave special credence to Klein's position as an offeror because of his status as Harrison's former business manager and prior coordinator of the defense of this lawsuit. See, e.g., letter from Barash to Sheldon, dated January 19, 1976 ("Since Mr. Klein is in a position to know the true earnings of My Sweet Lord, his offer should give all of us an indication of the true value of this copyright and litigation."). To a significant extent, that favorable bargaining position necessarily was achieved because Klein, as business manager, had intimate knowledge of the financial affairs of his client. Klein himself acknowledged at trial that his offers to Bright Tunes were based, at least in part, on knowledge he had acquired as Harrison's business manager.

Under the circumstances of this case, where there was sufficient evidence to support the district judge's finding that confidential information passed hands, or, at least, was utilized in a manner inconsistent with the duty of a former fiduciary at a time when this litigation was still pending, we conclude that the district judge did not err in holding that ABKCO had breached its duty to Harrison.

We find this case analogous to those "where an employee, with the use of information acquired through his former employment relationship, completes, for his own benefit, a transaction originally undertaken on the former employer's behalf." Group Association Plans, Inc. v. Colquhoun, 466 F.2d 469, 474 (D.C.Cir.1972); cf. Renz v. Beeman, 589 F.2d 735, 746 (2d Cir.1978) (opportunity for purchase that comes to [trustee] while in fiduciary capacity compels trustee to give right of first refusal to trust estate), cert. denied, 444 U.S. 834, 100 S.Ct. 65, 62 L.Ed.2d 43 (1979); Meinhard v. Salmon, 249 N.Y. 458, 467, 164 N.E. 545, 548 (1928) ("[T]here may be no abuse of special opportunities growing out of a special trust as manager or agent."). In this case, Klein had commenced a purchase transaction with Bright Tunes in 1971 on behalf of Harrison, which he pursued on his own account after the termination of his fiduciary relationship with Harrison. While the initial attempt to purchase Bright Tunes' catalogue was several years removed from the eventual purchase on ABKCO's own account, we are not of the view that such a fact rendered ABKCO unfettered in the later negotiations. Indeed, Klein pursued the later discussions armed with the intimate knowledge not only of Harrison's business affairs, but of the value of this lawsuit--and at a time when this action was still pending. Taking all of these circumstances together, we agree that appellant's conduct during the period 1975-78 did not meet the standard required of him as a former fiduciary.

In so concluding, we do not purport to establish a general "appearance of impropriety" rule with respect to the artist/manager relationship. That strict standard--reserved principally for the legal profession--would probably not suit the realities of the business world. The facts of this case otherwise permit the conclusion reached herein. Indeed, as Judge Owen noted in his Memorandum and Order of May 7, 1979 (permitting Harrison Interests to assert counterclaims), "The fact situation presented is novel in the extreme. Restated in simplest form, it amounts to the purchase by a business manager of a known claim against his former client where, the right to the claim having been established, all that remains to be done is to assess the monetary award." We find these facts not only novel, but unique. Indeed, the purchase, which rendered Harrison and ABKCO adversaries, occurred in the context of a lawsuit in which ABKCO had been the prior protector of Harrison's interests. Thus, although not wholly analogous to the side-switching cases involving attorneys and their former clients, this fact situation creates clear questions of impropriety. On the unique facts presented herein, we certainly cannot say that Judge Owen's findings and conclusions were clearly erroneous or not in accord with applicable law.

Appellant ABKCO also contends that even if there was a breach of duty, such breach should not limit ABKCO's recovery for copyright infringement because ABKCO's conduct did not cause the Bright Tunes/Harrison settlement negotiations to fail. See 508 F.Supp. at 803 & n. 15. Appellant urges, in essence, that a finding of breach of fiduciary duty by an agent, to be actionable, must be found to have been the proximate cause of injury to the principal. We do not accept appellant's proffered causation standard. An action for breach of fiduciary duty is a prophylactic rule intended to remove all incentive to breach--not simply to compensate for damages in the event of a breach. See Diamond v. Oreamuno, 24 N.Y.2d 494, 498, 248 N.E.2d 910, 912, 301 N.Y.S.2d 78, 81 (1969) ("[T]he function of [an action founded on breach of fiduciary duty] ... is not merely to compensate the plaintiff for wrongs committed by the defendant but ... 'to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates.' ") (emphasis in original). Having found that ABKCO's conduct constituted a breach of fiduciary duty, the district judge was not required to find a "but for" relationship between ABKCO's conduct and lack of success of Harrison Interests' settlement efforts.

[4] ABKCO argues further that the offer to sell substantially what had been gained in the purchase from Bright Tunes to Harrison for $700,000, and Harrison's rejection of that offer, see supra note 7, bars Harrison Interests from obtaining a constructive trust in this action, per Turner v. American Metal Co., 268 A.D. 239, 50 N.Y.S.2d 800 (1st Dep't 1944) (where former fiduciary offers former employer what he obtained in violation of fiduciary duty at price equivalent to his cost of acquisition and former employer refuses offer, fiduciary not held liable for breach of duty), appeal dismissed, 295 N.Y. 822, 66 N.E.2d 591 (1946). We find this argument unpersuasive. First, in Turner, unlike the case at bar, there was no finding of breach of fiduciary duty. Moreover, we find somewhat disingenuous ABKCO's claim that a $700,000 offer was a "price equivalent to his cost of acquisition," which had been $587,000. In any event, it is unclear whether that which ABKCO offered Harrison Interests was equivalent to that which ABKCO had brought from Bright Tunes.

Finally, on the facts herein, we agree that a constructive trust on the "fruits" of ABKCO's acquisition was a proper remedy. See Meinhard v. Salmon, 249 N.Y. at 467, 164 N.E. at 548 ("A constructive trust is then the remedial device through which preference of self is made subordinate to loyalty to others."); In re: McCrory Stores Corp., 12 F.Supp. 267, 269 (S.D.N.Y.1935) (agent prohibited from making profit by acquiring claims against principal (debtor) at discount immediately after resignation and enforcing them at greater amount); see also Restatement of Restitution s 200 (1937) (where fiduciary in violation of duty to beneficiary acquires property through use of confidential information, he holds the property so acquired in constructive trust for beneficiary); Restatement (Second) of Agency s 403 (1958) comment (d) (agent employed to settle claim who purchases the claim for himself holds such claim as a constructive trustee of the principal).

B. Scope of Constructive Trust: Foreign Settlements

Finally, appellant asserts that if this court is to affirm the district judge's finding of breach and its imposition of a constructive trust, the scope of that constructive trust should be limited to the American infringement claim. Appellant's argument is two-fold. First, appellant contends that because Harrison insisted on settling only the American infringement claim throughout the negotiations, and because the complaint in this case related only to the American claim, the remedy should be limited to that claim. Second, appellant argues that because the constructive trust encompasses foreign rights, the remedy serves to disturb settlement agreements that have already been achieved as to the foreign infringement claims against Harrison. As to appellant's first contention, in our view the district judge was not constrained by the scope of the settlement negotiations in fashioning this equitable relief. Moreover, it was within the discretion of the district court to provide a remedy not simply as to appellant's claims, but also as to appellee's counterclaims. See Alexander v. Hillman, 296 U.S. 222, 242, 56 S.Ct. 204, 211, 80 L.Ed. 192 (1935) ("[C]ourts of equity ... will decide all matters in dispute and decree complete relief.").

The second point raised by appellant, however, in our view, warrants modification of the judgment and remand to the district court for reassessment of the scope of the constructive trust. On April 3, 1980, after the damages trial, but before Judge Owen rendered his opinion, Harrison Interests, through its agent, Essex Music International, with full knowledge that its counterclaim was pending before Judge Owen, voluntarily entered into agreements with ABKCO, settling MSL infringement claims in various foreign territories as between HSF subpublishers and MSL subpublishers. As a general matter, we note first that courts favor the policy of encouraging voluntary settlement of disputes. See, e.g., Williams v. First National Bank, 216 U.S. 582, 595, 30 S.Ct. 441, 445, 54 L.Ed. 625 (1910); In re: Penn Central Transportation Co., 445 F.2d 811, 814 n. 6 (3d Cir.), cert. denied, 407 U.S. 915, 92 S.Ct. 2440, 32 L.Ed.2d 690 (1972); D.H. Overmyer Co. v. Loflin, 440 F.2d 1213, 1215 (5th Cir.), cert. denied, 404 U.S. 851, 92 S.Ct. 87, 30 L.Ed.2d 90 (1971); Petty v. General Accident Fire and Life Assurance Corp., 365 F.2d 419, 421 (3d Cir.1966). Bearing this principle in mind, we conclude that, since the parties or their agents entered into settlement agreements as to certain foreign infringement claims while the damages issues were sub judice, the trust should not include that portion of ABKCO's acquisition constituting a purchase of the foreign rights involved in those settlements. We remand the case to the district court to determine what portion of the $587,000 paid by ABKCO to Bright Tunes is attributable to the foreign rights involved in the April 3, 1980 settlement. That sum should be subtracted from the $587,000 to determine the amount the Harrison Interests must pay to acquire only the rights not affected by the April 3, 1980 settlement.

III. CROSS-APPEAL: COPYRIGHT INFRINGEMENT

"[I]t is well settled that copying may be inferred where a plaintiff establishes that the defendant had access to the copyrighted work and that the two works are substantially similar." Warner Brothers v. American Broadcasting Companies, 654 F.2d 204, 207 (2d Cir.1981). In this case, Judge Owen determined that "My Sweet Lord is the very same song as He's So Fine with different words, and Harrison had access to He's So Fine." Bright Tunes Music Corp. v. Harrisongs Music, Ltd., 420 F.Supp. at 180-81. He concluded that the substantial similarity coupled with access constituted copyright infringement, even though subconsciously accomplished. See id. at 180, 181 (citing Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 54 (2d Cir.1936); Northern Music Corp. v. Pacemaker Music Co., 147 U.S.P.Q. 358, 359 (S.D.N.Y.1965)).

Appellees argue on cross-appeal that the instant case differs significantly from those cases relied upon by the district court to support its conclusion of subconscious infringement, and from the only other case in this circuit which held that subconscious copying can constitute infringement, i.e., Fred Fisher, Inc. v. Dillingham, 298 F. 145 (S.D.N.Y.1924). In addition, they urge upon this court the position that it is unsound policy to permit a finding of copyright infringement on the basis of subconscious copying. We reject both arguments and affirm the decision of the district judge.

First, we do not find dispositive appellees' distinction between the instant case and Sheldon and Fisher cases. [FN11] Appellees point out that in those two cases, the infringing work was created very shortly after the infringer had had access to the infringed work. Here, in contrast, appellees note, Harrison's access to HSF occurred in 1963, some six years before he composed MSL. We disagree with appellees' position that such temporal remoteness precludes a finding of access. First, Harrison himself admitted at trial that he remembered hearing HSF in the early sixties when it was popular. Moreover, even if there had not been such direct evidence of access, access still may have been found because of the wide dissemination of HSF at that time. See Arnstein v. Porter, 154 F.2d 464, 469 (2d Cir.1946); 3 M. Nimmer, Nimmer on Copyright s 13.02[A] (1983). Indeed, in 1963, the year of Harrison's admitted access to HSF, the song was "Number One on the Billboard charts" in the United States for five weeks, and it was one of the "Top Thirty Hits" in England for seven weeks that same year. Thus, even if the evidence, standing alone, "by no means compels the conclusion that there was access ... it does not compel the conclusion that there was not." Heim v. Universal Pictures Co., 154 F.2d 480, 487 (2d Cir.1946).

As to the requisite finding of substantial similarity, we affirm the determinations of the district judge, since we do not find them to be clearly erroneous, Bright Tunes Music Corp. v. Harrisongs Music, Ltd., 420 F.Supp. at 178-80. Even Harrison conceded at trial that the two songs were "strikingly similar" as played by a pianist during the liability trial.

This case in unlike Darrell v. Joe Morris Music Co., 113 F.2d 80 (2d Cir.1940), cited by appellees. In Darrell, the Court of Appeals affirmed the district court's finding of no plagiarism, when there had been "substantial identity" between the songs at issue. The Darrell court found of particular significance that the songs' themes were trite and access had occurred some seven and a half years before the defendant's song was composed. The court noted: [S]uch simple, trite themes as these are likely to recur spontaneously; ... It must be remembered that, while there are an enormous number of possible permutations of the musical notes of the scale, only a few are pleasing; and much fewer still suit the infantile demands of the popular ear. Recurrence is not therefore an inevitable badge of plagiarism. Id. at 80. We find this case distinguishable. Indeed, on the facts herein, the district judge did not find repetition of "trite themes," but rather, "a highly unique pattern," 420 F.Supp. at 178. Moreover, in Darrell, the court found that the allegedly infringed song "had had very scant publicity" and credited the defendant's denial of ever having heard it. This is unlike the case at bar where HSF had had very substantial dissemination and where Harrison acknowledged that he had heard HSF at least a few times. We accept the Darrell court's observation that "recurrence is not ... an inevitable badge of plagiarism." However, on the facts presented herein, where the similarity was so striking and where access was found, the remoteness of that access provides no basis for reversal.

Appellees argue next that it is unsound policy to permit a finding of infringement for subconscious copying, particularly on the facts of this case. They assert that allowing for subconscious infringement brings the law of copyright improperly close to patent law, which imposes a requirement of novelty. See Alfred Bell & Co. v. Catalda Fine Arts, Inc., 191 F.2d 99, 103 (2d Cir.1951) (" 'independent reproduction of a copyrighted ... work is not infringement', whereas it is vis a vis a patent") (quoting Arnstein v. Edward B. Marks Music Corp., 82 F.2d 275, 275 (2d Cir.1936)). We do not accept this argument.

It is not new law in this circuit that when a defendant's work is copied from the plaintiff's, but the defendant in good faith has forgotten that the plaintiff's work was the source of his own, such "innocent copying" can nevertheless constitute an infringement. See Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d at 54; see also 3 M. Nimmer, Nimmer on Copyright s 13.08 (1983). We do not find this stance in conflict with the rule permitting independent creation of copyrighted material. It is settled that "[i]ntention to infringe is not essential under the [Copyright] Act," Buck v. Jewel- LaSalle Realty Co., 283 U.S. 191, 198, 51 S.Ct. 410, 411, 75 L.Ed. 971 (1931); see also Plymouth Music Co. v. Magnus Organ Corp., 456 F.Supp. 676, 680 (S.D.N.Y.1978); 3 M. Nimmer, Nimmer on Copyright, s 13.08 (1983) ( "Innocent intent should no more constitute a defense in an infringement action than in the case of conversion of tangible personalty."). Moreover, as a practical matter, the problems of proof inherent in a rule that would permit innocent intent as a defense to copyright infringement could substantially undermine the protections Congress intended to afford to copyright holders. We therefore see no reason to retreat from this circuit's prior position that copyright infringement can be subconscious. [FN12]

Because there was sufficient evidence of record to support the district judge's findings of substantial similarity and access, we affirm the finding of copyright infringement.

IV. CONCLUSION

Having considered all of the parties' arguments on appeal and cross-appeal, we affirm, with modification, the decisions of the district court and remand to the district judge for reassessment of the scope of the remedy, consistent with this opinion. Each party is to bear its own fees and costs.

1. Bright Tunes Music Corp. V. Harrisongs Music, LTD.

FN1. TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE

FN2. TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE

FN3. All the experts agreed on this.

FN4. TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE My Sweet Lord, recorded first in 1970, also uses the same motif A (modified to suit the words) four times, followed by motif B, repeated three times, not four. In place of He's So Fine's fourth repetition of motif B, My Sweet Lord has a transitional passage of musical attractiveness of the same approximate length, with the identical grace note in the identical second repetition.[FN5] The harmonies of both songs are identical.[FN6]

FN5. This grace note, as will be seen infra, has a substantial significance in assessing the claims of the parties hereto.

FN6. Expert witnesses for the defendants asserted crucial differences in the two songs. These claimed differences essentially stem, however, from the fact that different words and number of syllables were involved. This necessitated modest alterations in the repetitions or the places of beginning of a phrase, which, however, has nothing to do whatsoever with the essential musical kernel that is involved.

FN7. Preston recorded the first Harrison copyrighted recording of My Sweet Lord, of which more infra, and from his musical background was necessarily equally aware of He's So Fine.

FN8. These words ended up being a "responsive" interjection between the eventually copyrighted words of My Sweet Lord. In He's So Fine the Chiffons used the sound "dulang" in the same places to fill in and give rhythmic impetus to what would otherwise be somewhat dead spots in the music.

FN9. It is of interest, but not of legal significance, in my opinion, that when Harrison later recorded the song himself, he chose to omit the little grace note, not only in his musical recording but in the printed sheet music that was issued following that particular recording. The genesis of the song remains the same, however modestly Harrison may have later altered it. Harrison, it should be noted, regards his song as that which he sings at the particular moment he is singing it and not something that is written on a piece of paper.

FN10. Preston may well have been the "composer" of motif B and the telltale grace note appearing in the second use of the motif during the recording session, for Harrison testified: "The Court: To be as careful as I can now in summing this up, you can't really say that you or Billy Preston or somebody else didn't somewhere along the line suggest these; all you know is that when Billy Preston sang them that way at the recording session, you felt they were a successful way to sing this, and you kept it? "The Witness: Yes, I mean at that time we chose what is a good performance. "The Court: And you felt it was a worthy piece of music? "The Witness: Yes . . . ."

FN11. Even Harrison's own expert witness, Harold Barlow, long in the field, acknowledged that although the two motifs were in the public domain, their use here was so unusual that he, in all his experience, had never come across this unique sequential use of these materials. He testified: "The Court: And I think you agree with me in this, that we are talking about a basic three-note structure that composers can vary in modest ways, but we are still talking about the same heart, the same essence? "The Witness: Yes. "The Court: So you say that you have not seen anywhere four A's followed by three B's or four? "The Witness: Or four A's followed by four B's." The uniqueness is even greater when one considers the identical grace note in the identical place in each song.

FN12. I treat Harrison as the composer, although it appears that Billy Preston may have been the composer as to part. (See fn. 10 supra ). Even were Preston the composer as to part, this is immaterial. Peter Pan Fabrics, Inc. v. Dan River Mills, Inc., 295 F.Supp. 1366, 1369 (S.D.N.Y.), aff'd, 415 F.2d 1007 (2d Cir. 1969).

FN13. Harrison himself acknowledged on the stand that the two songs were substantially similar. This same conclusion was obviously reached by a recording group called the "Belmonts" who recorded My Sweet Lord at a later time. With "tongue in cheek" they used the words from both He's So Fine and My Sweet Lord interchangeably at certain points.

2. Abkco Music, Inc. V. Harrisongs Music, LTD.

FN1. The "Harrison interests" include Harrisongs Music Ltd., Harrisongs Music, Inc., George Harrison, Apple Records, Ltd., and Apple Records, Inc.

FN2. ABKCO was discharged in March of 1973, triggering bitter litigation which was eventually settled for $4.2 million.

FN3. A mechanical royalty is an amount per record payable by a manufacturer of a recording to the music publisher who licenses the use of the song on the record. When a record is made with a second song on the reverse side (a "single"), a separate mechanical royalty is payable for that second song as well.

FN4. Performance royalties are monies payable to the publisher and writer generated by the public performance of the composition and generally associated with radio broadcasts. In this case, Broadcast Music, Inc. (BMI), a performing rights society, was charged with the responsibility of collecting money from users of "My Sweet Lord" and paying said royalties.

FN5. This can be done on the basis of the BMI monitoring of air play by disc jockeys of each of the Harrison songs that were included on the album "All Things Must Pass". The results of this monitoring are entitled to substantial weight, for they are the basis on which BMI pays performing royalties on its catalogue. That monitoring, over the five-year period from December, 1970 to December, 1975 for the twenty-two Harrison songs on the album "All Things Must Pass", shows the following relative percentages of air play:

I'D HAVE YOU ANYTIME
MY SWEET LORD 70%
WAH-WAH 1%
ISN'T IT A PITY 4%
WHAT IS LIFE 20%
IF NOT FOR YOU
BEHIND THAT LOCKED DOOR
LET IT DOWN
RUN OF THE MILL
BEWARE OF DARKNESS 1%
APPLE SCRUFFS 1%
BALLAD OF SIR FRANKIE
AWAITING ON YOU 1%
ALL THINGS MUST PASS 1%
I DIG LOVE 1%
ART OF DYING
HEAR ME LORD
OUT OF THE BLUE
IT'S JOHNNY'S BIRTHDAY
PLUG ME IN
I REMEMBER JEEP
THANKS FOR THE PEPPERONI ----100%

FN6. While the BMI monitoring provides good evidence of the disc jockeys' collective opinion as to popularity, and this may well accurately mirror the public's opinion, other factors may conceivably have influenced sales. Such factors may include, for example, the display of a new Harrison release at the record store. These other possible factors cause me to regard the BMI figures as "some evidence" of popularity, but not absolutely binding upon me.

FN7. Canadian royalties are included. The lacquer masters, art work, packaging and licenses were all prepared in the United States. Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d Cir. 1939), aff'd 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940); Famous Music Corp. v. Seeco Records, Inc., 201 F.Supp. 560 (S.D.N.Y.1961).

FN8. A spread is the difference between the price Capitol Records Inc. charged Apple to press a record and the price at which Apple sold the finished record to Capitol Records Distributing Corp.

FN9. I decline to award statutory "in lieu" damages as to "The Best of George Harrison."

FN10. Had I earlier found that Harrison deliberately plagiarized the music. I would award the entire earnings of "My Sweet Lord." See, Shapiro, Bernstein & Co., Inc. V. Jerry Vogel Music Co., Inc., 115 F.Supp. 754 (S.D.N.Y.1953), rev'd on the other grounds, 223 F.2d 252 (2d Cir.1955).

FN11. In this case I conclude that the much-touted "hook" an introductory musical motive used by Harrison was a minimal factor.

FN12. Mr. Barlow later testified at the trial. Although the court found his testimony in this case unpersuasive, this in no way detracts from the appropriateness of ABKCO's utilizing his services, for Mr. Barlow is a highly knowledgeable musicologist.

FN13. Klein's offer was $100,000 for a call on 100% of the Bright Tunes' stock thus a world-wide settlement exercisable for an additional $160,000, in the event of a finding in favor of Bright Tunes at the liability trial. I note that Klein, in fact, bought Bright Tunes' rights in "He's So Fine" in 1978, after the finding of infringement, for $587,000. See, infra.

FN14. Letter of Tenenbaum, Receiver of Bright Tunes, to Barash, a major stockholder of Bright Tunes, December 3, 1975.

FN15. I do not believe that under the circumstances Harrison must show that a settlement was in hand, but merely, as has been proven, that good faith negotiations were in progress and that given the position of each of the parties, one would conclude that an eventual settlement was a reasonable possibility.

FN16. ABKCO paid $422,500.00 to Bright Tunes and an additional $165,000.00 to the composer's heir; the latter sum was paid partly in cash and partly to purchase a nine-year $15,000.00 annuity for heir's benefit.

3. Abkco Music, Inc. V. Harrisongs Music, LTD.

FN1. Suit was brought against Harrisongs Music, Ltd. (Harrison's English company), Harrisongs Music, Inc. (Harrison's American company), Apple Records, Inc. [hereinafter referred to collectively as Harrison Interests], as well as Broadcast Music, Inc. and Hansen Publications, Inc.

FN2. In 1973, a similar infringement action was brought in England by The Peter Maurice Music Co., Ltd. (Maurice), which in 1963, had received from Bright Tunes an assignment of all copyright rights for HSF worldwide (except the United States and Canada).

FN3. References to "ABKCO" or to "Klein" are to include ABKCO Music, Inc., its parent ABKCO Industries, Inc., and Allen B. Klein.

FN4. At this meeting Klein suggested purchasing the entire Bright Tunes catalogue (which included HSF) as a means of resolving the lawsuit, although apparently no precise dollar amount was mentioned. At the same time, Klein informed Barash that Harrison was unwilling to admit to copyright infringement. The substance of this settlement discussion was later recorded in a memorandum to file, dated January 3, 1973, of Eugene E. Murphy (an attorney for Bright Tunes' Receiver). According to Murphy's memorandum, Barash rejected Klein's suggested offer to purchase and counter-offered to pay Harrison half of the proceeds of the sale of MSL, with Bright Tunes receiving the other half, but with Harrison surrendering the MSL copyright to Bright Tunes.

FN5. According to Harrison's attorney, on September 9, 1975 Bright Tunes was offered $50,000 in settlement of the United States and Canadian rights; Bright Tunes counter-offered with a demand of $150,000; and in October 1975 the Harrison offer rose to $100,000, making the parties arguably close to an agreed settlement figure.

FN6. In a letter dated November 30, 1977 from Bright Tunes' counsel to the attorney for the estate of composer Ronald Mack, Tenenbaum and Sheldon, Klein's offer was set forth in detail: acquisition of the rights to HSF, including Bright Tunes' damages claim against Harrison Interests herein, in exchange for (1) payment of $150,000 to the estate of Ronald Mack (ten-year annuity of $15,000 per year); (2) payment to Bright Tunes' Receiver of either (a) $350,000 plus $50,000 for payment of legal fees incurred by Bright Tunes thus far, or (b) payment of $350,000 and agreement to turn over to Bright Tunes' Receiver or stockholders such legal fees and interest as may be awarded by the court at the conclusion of the action. Klein would agree that if the action were settled prior to an award, he would pay an additional $100,000 in lieu of court awarded interest and attorneys fees. In July 1977, the English infringement action between The Peter Maurice Music Company and Harrison was settled. Pursuant to that settlement, Harrisongs, Ltd. was to pay to Maurice 40% of the past and future monies received through exploitation of the MSL copyright in the United Kingdom, and the parties were to use "their best endeavours" to secure similar settlements throughout the remainder of the Maurice territory (i.e., foreign claims other than those arising in the United States and Canada). The agreement was embodied in an order of the High Court of Justice on June 30, 1977. This settlement was strongly opposed by Bright Tunes.

FN7. Some time after the April 1978 purchase of HSF by ABKCO, ABKCO contends that it offered to sell to Harrison Interests what it had purchased, for a price of $700,000 ($113,000 over ABKCO's purchase price from Bright Tunes). It is unclear, however, whether this offer was for the totality of what Klein had bought from Bright Tunes. In any event, this offer was not accepted.

FN8. Specifically, Harrison Interests alleges that the following conduct by Klein and ABKCO constituted such breaches of duty: (1) clandestine interference with Harrison Interests' settlement efforts; (2) covert furnishing of MSL financial data to Bright Tunes in connection with ABKCO's own efforts to obtain the HSF copyright; (3) covert furnishing to Bright Tunes of Klein's personal estimates of MSL financial expectations; (4) sideswitching in the present litigation; (5) use of information acquired as a fiduciary in prosecuting this action after the purchase of HSF; and (6) use of confidential information to compete with Harrison Interests and wrongful appropriation of an opportunity rightfully belonging to Harrison Interests.

FN9. See supra note 6.

FN10. For example, the royalty rate (as opposed to the exact figures which could have been gleaned from trade publications) was considered confidential. In addition, at the damages trial, the parties stipulated that certain Capitol Records information be kept confidential.

FN11. The other case cited by the district court, Northern Music Corp. v. Pacemaker Music Corp., 147 U.S.P.Q. 358 (S.D.N.Y.1965), simply reiterates the rule stated in Sheldon that copying may be subconscious. Id. at 359 ("[I]f copying did in fact occur; [sic] it cannot be defended on the ground that it was done unconsciously and without intent to appropriate plaintiff's work.").

FN12. We note that although a finding of innocent infringement does not affect liability, such a finding might constitute a factor to be considered in the fashioning of remedies in a given case. See generally 3 M. Nimmer, Nimmer on Copyright s 13.08 (1983), and cases cited therein.