## Facts

- Copyright owners of the stage musical *Kismet* held copyrights in the dramatico-musical work and in individual musical compositions.
- MGM’s predecessor had been licensed to produce a *Kismet* motion picture, which was released in 1955.
- MGM Grand Hotel presented a Las Vegas revue, *Hallelujah Hollywood*, consisting of ten acts; Act IV, titled “Kismet,” used multiple *Kismet* songs along with characters, settings, and staging elements associated with the musical.
- Act IV was performed about 1,700 times from 1974 to 1976, and was replaced after litigation pressure.
- After a bench trial, the district court found infringement, rejected unfair-competition and contract claims, and awarded plaintiffs $22,000 in profits.
- On first appeal, the Ninth Circuit affirmed infringement and the rejection of non-copyright claims, vacated the profits award as inadequate, and remanded for recalculation of profits and consideration of additional defendants’ liability.
- On remand, the district court found net revue profits of $6,131,606, awarded plaintiffs $343,724, dismissed MGM, Inc. and the show’s creative director, and awarded $115,000 in attorneys’ fees.
- On second appeal, the Ninth Circuit reviewed the recalculated profits, treatment of indirect profits and overhead, potential joint liability, and the fee award.

## Issues

1. Whether the “Kismet” act in the revue was a dramatic use exceeding a blanket license for nondramatic performances, constituting copyright infringement.
2. How profits are calculated and apportioned under 17 U.S.C. § 504(b), including the burden of proving deductible expenses and non-infringing profit components.
3. When overhead and other expenses may be deducted in computing profits attributable to infringement.
4. Whether casino and hotel revenues can be recovered as indirect profits attributable to the infringing performances, and what causal showing is required.
5. Under what conditions a corporate affiliate or an individual creative lead may be jointly (including vicariously or contributorially) liable for infringement.
6. How attorneys’ fees should be set under 17 U.S.C. § 505 in light of partial success and litigation history.

## Decision

- The Ninth Circuit affirmed the infringement determination that the revue’s “Kismet” act exceeded any nondramatic performance license by incorporating dramatic elements (music integrated with characters, settings, and staging).
- The court vacated the original low profits award and required a more accurate profits determination that reflects the infringing material’s contribution to overall revenues.
- In the later appeal, the court affirmed in part and reversed in part the remand calculations, holding that certain profit-apportionment and expense-deduction rulings required correction and further proceedings.
- The court recognized the availability of indirect profits (including hotel/casino-related revenues) where a causal connection to the infringing performances is shown, subject to the infringer’s proof of non-infringing causation.
- The court held that joint liability may extend to entities or individuals who control, supervise, or actively participate in the infringement, requiring fact-specific findings on remand.
- The court treated attorneys’ fees as discretionary and adjusted aspects of the fee award based on the results obtained.

## Legal Principles

- A blanket performance license for nondramatic public performances does not authorize a staged presentation that uses copyrighted musical compositions in combination with dramatic elements such as characters, settings, and story-related staging.
- Under 17 U.S.C. § 504(b), once the copyright owner shows the infringer’s gross revenues reasonably related to the infringement, the infringer bears the burden to prove deductible expenses and to apportion profits to non-infringing factors.
- Overhead deductions are permitted only to the extent the infringer proves both the existence and the amount of the claimed expenses and their relationship to the revenue-generating activity at issue.
- Profit apportionment must reflect evidence of the infringing material’s actual value to the enterprise; mechanical allocations that ignore the infringement’s contribution may be rejected.
- Indirect profits are recoverable when the plaintiff establishes a causal nexus between infringement and the claimed revenue stream; uncertainty created by the infringement is resolved against the infringer at the apportionment stage.
- Joint, vicarious, or contributory liability may attach where a party has the right and ability to supervise the infringement and a direct financial interest, or where the party actively participates in or induces the infringement.
- Attorneys’ fees under 17 U.S.C. § 505 are discretionary and may reflect the degree of success and the need to encourage enforcement and deter infringement.

## Conclusion

The Ninth Circuit confirmed that integrating copyrighted music with dramatic stage elements can exceed nondramatic performance licenses and constitute infringement, and it required rigorous application of § 504(b)’s burden-shifting framework for apportioning direct and indirect profits, limiting unsupported overhead deductions, and permitting fee awards commensurate with the results achieved.


Frank Music Corp. v. Metro-Goldwyn-Meyer, Inc., 886 F.2d 1545 (9th Cir. 1989)