Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 1 of 12 Page ID #:62
`
`GRODSKY & OLECKI LLP
`ALLEN B. GRODSKY (SBN 111064)
`allen@grodsky-olecki.com
`2001 Wilshire Blvd., Ste. 210
`Santa Monica, California 90403
`Telephone: (310) 315-3009
`Facsimile: (310) 315-1557
`Attorneys for Defendant and
`Counterclaimant Michelle Phan
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`Case No. 2:14-cv-05533-MMM-AGR
`
`DEFENDANT AND
`COUNTERCLAIMANT
`MICHELLE PHAN’S
`COUNTERCLAIM
`
`DEMAND FOR JURY TRIAL
`
`))))))))))))))))))))))))))))
`
`ULTRA INTERNATIONAL MUSIC
`PUBLISHING, LLC and ULTRA
`RECORDS, LLC,
`
`Plaintiffs,
`
`v.
`MICHELLE PHAN,
`
`Defendant.
`__________________________________
`MICHELLE PHAN,
`Counterclaimant,
`
`v.
`
`ULTRA INTERNATIONAL MUSIC
`PUBLISHING, LLC and ULTRA
`RECORDS, LLC,
`
`Counterdefendants
`__________________________________
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 2 of 12 Page ID #:63
`
`Counterclaimant Michelle Phan (“Phan”), as and for her counterclaims against
`Ultra International Music Publishing, LLC and Ultra Records, LLC (collectively
`“Ultra”), alleges as follows:
`
`JURISDICTION AND VENUE
`The Court has jurisdiction over this Counterclaim pursuant to 28 U.S.C.
`
`Venue is proper in this judicial district pursuant to principles of ancillary
`
`1.
`§ 1367(a).
`2.
`venue.
`
`THE PARTIES
`Phan is an individual residing in Los Angeles, California.
`3.
`Phan is informed and believes, and thereon alleges, that
`4.
`Counterdefendant Ultra International Music Publishing, LLC is a New York limited
`liability company with its principal place of business in New York, New York.
`5.
`Phan is informed and believes, and thereon alleges, that
`Counterdefendant Ultra Records, LLC is a Delaware limited liability company with its
`principal place of business in New York, New York.
`6.
`Phan is informed and believes, and thereon alleges, that at all times
`relevant hereto and in doing all that is alleged herein, each Counterdefendant was an
`agent or employee of the other Counterdefendants, acting within the scope of such
`agency or employment, directing, ratifying, or condoning the acts or omissions of
`these Counterdefendants alleged herein, and with the knowledge of each
`Counterdefendant attributable to the other Counterdefendant.
`
`GENERAL ALLEGATIONS
`Phan is a beauty and lifestyle celebrity and entrepreneur with a global
`7.
`audience. She has approximately seven million subscribers to her YouTube channel,
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 3 of 12 Page ID #:64
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`placing her in the top 1% globally on this social media platform. Phan receives
`income from YouTube derived from, among other things, advertisements that appear
`in association with her videos.
`8.
`Phan’s YouTube videos feature demonstrations of make-up techniques
`and other beauty and lifestyle tips. Her videos typically incorporate a broad range of
`music in the background for texture only; the music is never the focus of the video.
`9.
`Phan’s videos are so popular, and her fan base is so dedicated, that she
`has been able to build a significant business through advertisements that appear in and
`around her videos, and through large-scale partnerships with major media companies
`and brand advertisers.
`10.
`For example, Phan has a contract with Endemol Beyond, a wholly-owned
`division of Endemol North America, part of the second largest independent television
`company in the world. Phan also has a contract with L’Oreal Cosmetics, one of the
`world’s largest cosmetics manufacturers. These partnerships and others represent
`significant monetary commitments from Phan’s partners and significant revenue to
`Phan. They rely on Phan’s ability to reach millions of potential consumers through
`her active YouTube channel, and depend upon Phan’s YouTube channel remaining
`active and unencumbered.
`11. Due to the popularity of Phan’s videos, record labels have paid Phan to
`use their artists’ music as background in her YouTube videos and to include in the
`video a link to the iTunes store (which allows consumers to purchase the artist’s music
`immediately). Incorporating this iTunes link drives significant awareness of the
`artist’s music, and significant traffic to the iTunes store. Additionally, because
`rankings on the influential Billboard charts are based, in part, on data from YouTube
`(in addition to other sources), the significant viewership of Phan’s videos helps record
`labels in their efforts to see their music rise up in the charts.
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 4 of 12 Page ID #:65
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`Phan is informed and believes, and thereon alleges, that, like other record
`12.
`labels, Ultra too wanted Phan to use the music of artists on its label as background
`music in her YouTube videos along with an iTunes link.
`13. Beginning in July of 2009, Phan contacted Jason Kilgore, Ultra’s Senior
`New Media Manager, and asked him for permission to use the music of Kaskade, one
`of Ultra’s artists, in her YouTube videos. In her electronic communication to Kilgore,
`Phan pointed out that she has several videos with more than 1,000,000 views (and
`some with over 2,000,000 views) and offered, in consideration for the right to use
`Kaskade’s music in her videos, to credit the musician and include an iTunes purchase
`link in the video to make it easier for her subscribers to purchase Ultra’s music.
`14. Kilgore wrote in response that he was aware of Phan, that Ultra was
`“really happy to see you supporting Kaskade,” and that Ultra was “more than happy to
`let [Phan] use this content.”
`15.
`Phan and Kilgore then began to discuss in writing how this agreement
`would work in connection with YouTube’s “Content ID System.” The way
`YouTube’s Content ID System worked was as follows: Owners of copyrighted
`content (including record companies) would enter into an agreement with YouTube to
`use its Content ID System. Phan is informed and believes, and thereon alleges, that
`Ultra entered into such a contract. The owner of the content would then input all of its
`copyrighted material (in Ultra’s case, songs) into YouTube’s Content ID System,
`which would then search YouTube for matching content. Every time the Content ID
`System identified a video containing content that matched the copyrighted material
`uploaded by a content owner, YouTube would put a “claim” on the YouTube video
`that contained matching content.
`16.
`In 2009, content owners had varying arrangements with YouTube
`regarding their recourse when the Content ID System triggered a claim based on a
`video containing copyrighted material uploaded by the owner. For some owners,
`whenever the Content ID System triggered a claim, they would automatically receive a
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 5 of 12 Page ID #:66
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`specified share of any advertising revenue generated by the “claimed” video. Phan is
`informed and believes, and thereon alleges, that Ultra had such an arrangement with
`YouTube.
`17. As further confirmation that Ultra agreed to allow Phan to use its music
`(in consideration for her crediting the musician and including an iTunes purchase
`link), Kilgore promised Phan in writing that whenever YouTube made a claim on one
`of Phan’s videos using a Kaskade song controlled by Ultra, he would release that
`claim.
`18. Kilgore then offered to send, and did send, to Phan a promotional
`package of Ultra CDs featuring Kaskade and other artists. He said he was sending the
`CDs “to show [Ultra’s] thanks” for Phan using Kaskade’s music in her YouTube
`videos. Kilgore went on to say in an electronic communication sent a few days later
`that if there was any other music by Ultra artists that Phan liked, she should just let
`him know and he would send it to her.
`19. Only a few days later, Kilgore again thanked Phan for using another of
`Kaskade’s songs in one of her YouTube videos and further stated:
`especially thanks for including the iTunes buy link in the
`description and a title bar at the beginning. This is the
`perfect way to incorporate any of our videos.
`(Emphasis added.)
`20.
`In August 2009, Phan and Kilgore further communicated regarding
`Phan’s use of music by Ultra artists (including but not limited to Kaskade) in her
`YouTube videos. Part of this came in the context of Phan asking Kilgore to release
`“claims” made by YouTube on behalf of Ultra in connection with Phan’s use of music
`\\
`\\
`\\
`\\
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 6 of 12 Page ID #:67
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`by Ultra artists as background music in her videos. On August 11, 2009, Kilgore
`stated the following to Phan:
`Also just let me know if this happens again in the future and
`you need me to release a claim. This process happens
`automatically on youtube’s back end, but I can release
`whatever you may need.
`(Emphasis added.)
`21.
`The agreement between Ultra and Phan covered not only Kaskade, but all
`Ultra artists, as shown by Kilgore’s January 2010 electronic communication to Phan in
`which he stated: “If you use Ultra content please let me know when the video goes
`live so that I can make sure it doesn’t get claimed.” Phan is informed and believes,
`and thereon alleges, that Kilgore had express and/or implied authorization to enter into
`this agreement on behalf of Ultra and/or that the agreement was ratified by Ultra.
`22. Over the next four years, Phan – relying on her agreement with Kilgore –
`continued to use master recordings and compositions of Ultra artists as background
`music in her videos and, whenever YouTube indicated that Ultra had made a claim,
`she would contact Kilgore or others at Ultra who would immediately release the claim
`(whether it related to music by Kaskade or any other Ultra artist). This happened on
`multiple occasions.
`23. During this four year period, Ultra representatives offered suggestions to
`Phan as to particular tracks by Ultra artists that she should use as background music in
`her videos. A number of Ultra representatives, including Ultra’s Senior Director of
`Marketing and PR and Senior Manager of Interactive Marketing wrote to Phan that
`they loved what she was doing with the music by Ultra’s artists. Other Ultra
`representatives sent Phan music tracks by Ultra artists that they suggested that she use
`in her YouTube videos, asking only that she post a link to purchase for her
`subscribers. Ultra representatives posted comments to Phan’s YouTube videos
`thanking Phan for helping to support Ultra artists.
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 7 of 12 Page ID #:68
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`24. Consistent with her agreement with Ultra, whenever Phan incorporated
`
`music from Ultra artists in her videos, she credited the artist and included an iTunes
`purchase link. Phan is informed and believes, and thereon alleges, that during the time
`her videos have been posted on YouTube, Ultra has received substantial financial
`benefit from purchases of music by Ultra artists through the iTunes link included by
`Phan in her videos.
`25.
`Phan has received tremendous support for her videos from Ultra artists,
`including Kaskade and Late Night Alumni. These artists encouraged Phan and gave
`her permission – sometimes directly and sometimes through her representatives – to
`use their compositions and master recordings as background music in Phan’s
`YouTube videos because the videos provided substantial and valuable publicity for
`them. These artists sometimes provided Phan with digital copies of their songs to be
`used by Phan in her YouTube videos.
`26. On March 18, 2014, Ultra’s General Counsel wrote to Phan and insisted
`for the first time that any use by Phan of music by Ultra’s artists (including all the
`songs that Ultra had allowed Phan to use and which Phan had used for several years
`with Ultra’s knowledge and approval) was “unauthorized” and demanded that she
`cease and desist from using any music from Ultra’s artists.
`27.
`Phan is informed and believes, and thereon alleges, that in June and July
`of 2014, Ultra on three separate occasions, sent to YouTube takedown notices under
`the Digital Millennium Copyright Act (“DMCA”) for twelve of Phan’s videos
`containing music by Ultra artists even though Ultra had previously agreed that Phan
`could use music by Ultra artists in those videos. In each of the cases, when Ultra sent
`the takedown notice, YouTube removed the challenged video, thereby cutting off any
`advertising revenue to Phan. One of the videos subject to Ultra’s takedown notice is a
`video that, years earlier, had been claimed by Ultra and then specifically released by
`Ultra once Phan notified Kilgore about it.
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 8 of 12 Page ID #:69
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`Phan served DMCA counter-notifications for each of the takedown
`28.
`notices. Phan is informed and believes, and thereon alleges, that if the filer of the
`takedown notice does not take action in response to the counter-notifications, the
`videos are reinstated. Phan’s videos that were subject to the first set of takedown
`notices were reinstated by YouTube within 21 days of the date those takedown notices
`were served, suggesting that Ultra did not respond to Phan’s counter-notifications.
`The remaining challenged videos have not yet been reinstated.
`
`FIRST CLAIM FOR RELIEF
`(For Declaratory Relief)
`[Against All Counterdefendants]
`Phan hereby realleges and incorporates by reference the allegations of
`29.
`Paragraphs 1 through 28 of this Counterclaim as if fully set forth herein.
`30. Attached hereto as Exhibit A is a non-exhaustive list of Phan’s videos
`that use music by Ultra artists pursuant to Phan’s express and/or implied agreement
`with Ultra (the “Authorized Videos”). For each of these videos, Phan has credited the
`artist and included an iTunes purchase link pursuant to the agreement.
`31.
`Phan is informed and believes, and thereon alleges, that Ultra now
`contends that (1) the Authorized Videos infringe Ultra’s copyrights in and to various
`compositions and master recordings, and (2) if Ultra ever gave Phan permission to use
`those compositions and master recordings, Ultra has revoked that permission.
`32.
`Phan, on the other hand, contends that (1) she received from Ultra,
`Ultra’s consent to use compositions and master recordings by Ultra artists in the
`Authorized Videos; (2) Ultra gave its consent pursuant to an express and/or implied
`agreement; (3) Ultra’s consent was reiterated through several years of explicit support
`and coordination around Phan’s use of the compositions and master recordings; (4) in
`exchange for these permissions, Phan provided bargained-for consideration to Ultra
`(e.g., credit to the artist, promotion of Ultra’s music through its exposure to Phan’s
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 9 of 12 Page ID #:70
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`considerable fan base, and a clearly posted and valuable link to iTunes, from where
`the viewer could immediately purchase the music); and (5) accordingly, under
`controlling law, Ultra cannot revoke its consent.
`33.
`There is an actual and substantial controversy between Plaintiff and
`Defendant as to whether Ultra has irrevocably licensed its music for the Authorized
`Videos.
`
`SECOND CLAIM FOR RELIEF
`(Violation of Section 512(f) of Digital Millennium Copyright Act)
`[Against All Counterdefendants]
`Phan hereby realleges and incorporates by reference the allegations of
`34.
`Paragraphs 1 through 28 and 30 of this Counterclaim as if fully set forth herein.
`35.
`Phan is informed and believes, and thereon alleges, that the takedown
`notices sent to YouTube by Ultra were prepared and sent in bad faith, given Ultra’s
`express and/or implied agreement with Phan that she could use Ultra’s music in her
`videos in exchange for Phan’s promotion of the Ultra music by using it as background
`in her videos, crediting the artist, and including an iTunes purchase link.
`36.
`Phan is informed and believes, and thereon alleges, that Ultra has
`knowingly materially misrepresented that Phan’s use of compositions and master
`recordings by Ultra artists in Phan’s videos is infringing, within the meaning of
`17 U.S.C. § 512(f).
`37. As a direct and proximate result of Ultra’s bad faith actions, Phan has
`been damaged in an amount to be proven at trial. In addition, Phan is entitled to her
`reasonable attorney’s fees prosecuting this claim.
`\\
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 10 of 12 Page ID #:71
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`THIRD CLAIM FOR RELIEF
`(Intentional Interference With Contract)
`[Against All Counterdefendants]
`Phan hereby realleges and incorporates by reference the allegations of
`38.
`Paragraphs 1 through 28, 30, and 35 through 36 of this Counterclaim as if fully set
`forth herein.
`39.
`Phan has a valid contract with YouTube, by which she has a YouTube
`channel, participates in the YouTube Partners program, and receives substantial sums
`of revenue related to YouTube-sold advertisements that appear on her YouTube
`channel.
`Phan is informed and believes, and thereon alleges, that Ultra is aware of
`40.
`Phan’s contractual relationship with YouTube.
`41.
`Phan is informed and believes, and thereon alleges, that Ultra’s bad faith
`conduct, as alleged above, was designed to disrupt, and has in fact disrupted, Phan’s
`contractual relationship with YouTube.
`42. As a direct and proximate result of Ultra’s bad faith actions, Phan has
`been damaged in an amount to be proven at trial.
`43.
`Phan is informed and believes, and thereon alleges, that Ultra’s actions
`were taken with fraud, oppression, and malice. Punitive damages in an amount
`according to proof therefore should be awarded to Phan and against Ultra.
`
`WHEREFORE, Counterclaimant prays as follows:
`1.
`For a declaratory judgment that:
`A.
`Ultra issued a non-revocable license to Phan for the Authorized
`Videos;
`The Authorized Videos do not infringe on any Ultra copyright.
`B.
`For damages according to proof;
`For punitive damages according to proof;
`
`2.
`3.
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 11 of 12 Page ID #:72
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`4.
`5.
`
`For costs and attorney’s fees incurred herein;
`For such other and further relief as the Court deems just and proper.
`
`Dated: September 17, 2014
`
`GRODSKY & OLECKI LLP
`Allen B. Grodsky
`
`By // Allen B. Grodsky //
` Allen B. Grodsky
`Attorneys for Defendant and
`Counterclaimant Michelle Phan
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`Case 2:14-cv-05533-MMM-AGR Document 18 Filed 09/18/14 Page 12 of 12 Page ID #:73
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`DEMAND FOR JURY TRIAL
`
`Counterclaimant Michelle Phan hereby demands trial by jury of this matter.
`
`Dated: September 17, 2014
`
`GRODSKY & OLECKI LLP
`Allen B. Grodsky
`
`By // Allen B. Grodsky //
` Allen B. Grodsky
`Attorneys for Defendant and
`Counterclaimant Michelle Phan
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