1035-00003 · Flor de Luna Publishing, LLC · Analyses & Memos

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP

MEMORANDUM

TO: Alan Ngo, Partner

FROM: Christy Bauer, Associate

DATE: March 20, 2023

RE: Fonseca v. Crescendo Digital Media, Inc. — Copyright Infringement Analysis

MATTER NO.: 1035-00003

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I. INTRODUCTION

This memorandum analyzes the merits of Marguerite D. Fonseca's copyright infringement claims against Crescendo Digital Media, Inc. ("Crescendo"). The purpose of this analysis is to identify the applicable causes of action under the Copyright Act of 1976, as amended (17 U.S.C. §§ 101 et seq.), evaluate the potential defenses that Crescendo is likely to assert, assess the range of available remedies, and recommend a litigation strategy going forward.

This memorandum follows two significant pieces of pre-litigation correspondence. On March 6, 2023, this Firm sent a cease-and-desist letter to Priya Chandrasekaran, General Counsel and SVP, Legal Affairs of Crescendo, demanding immediate cessation of the unauthorized use, removal of Fonseca's works from all platforms and sublicensed content packages, preservation of all relevant records and data, a full accounting of revenue and streaming data, and payment of estimated back-royalties of not less than $1,087,200. The letter also referenced Crescendo's potential statutory damages exposure of up to $7,050,000 for willful infringement and imposed a fifteen-business-day response deadline of March 27, 2023. On March 17, 2023 — ten days before the stated deadline — Hargrove, Pennington & Cao LLP ("HPC"), acting as counsel for Crescendo, responded by letter. HPC's response disputed that any infringement had occurred, asserted that Crescendo acted in good faith reliance on a blanket license previously held through Peregrine Music Group, LLC ("Peregrine"), and did not commit to any takedown, accounting, or other remedial action. Crucially, HPC's response letter did not provide any legal basis for Crescendo's continued use of Fonseca's works beyond the expired Peregrine license.

Based on the analysis set forth below, it is my conclusion that Ms. Fonseca's claims are strong on both liability and damages, that Crescendo's anticipated defenses are weak and unlikely to withstand summary judgment, and that we should recommend proceeding by filing suit in the United States District Court for the Central District of California. I further recommend that we retain a forensic accounting expert with music industry experience to analyze Crescendo's streaming data and sublicensing revenue in order to quantify damages with precision.

II. FACTUAL BACKGROUND

A. The Client and Her Catalog

Marguerite D. Fonseca is a Grammy-nominated singer-songwriter and recording artist, age 54, who resides at 4827 Laurelgrove Avenue, Studio City, California 91604. Ms. Fonseca's career spans approximately twenty-eight years, during which she has released nine studio albums traversing the genres of Latin pop, jazz, and contemporary R&B. Over the course of her career, she has received three Grammy Award nominations and has been honored with two Latin Grammy Awards, establishing her as a critically and commercially recognized artist with a substantial catalog of original works.

Ms. Fonseca's catalog consists of 214 registered musical compositions with the United States Copyright Office, bearing PA-series registration numbers ranging from PA 1-742-891 through PA 2-318-406, and 188 registered sound recordings, bearing SR-series registration numbers ranging from SR 0-891-220 through SR 1-104-773. The catalog represents the creative output of nearly three decades of professional songwriting and recording.

The publishing rights to Ms. Fonseca's musical compositions are controlled through Flor de Luna Publishing, LLC ("FDL Publishing"), a California single-member limited liability company of which Ms. Fonseca is the sole member. FDL Publishing maintains its registered office at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015 (EIN: 82-4193507). The master recording rights to Ms. Fonseca's sound recordings are controlled through a separate entity, Mariposa Sound Recordings, LLC ("Mariposa Sound"), also a California single-member limited liability company with Ms. Fonseca as the sole member, maintaining the same registered office address (EIN: 84-2671058). This dual-entity structure is a common and commercially prudent arrangement in the music industry, separating the economic interests in the underlying compositions from those in the recorded performances.

Administration of Ms. Fonseca's catalog is handled by Thornfield Music Administration, Inc. (President: Raymond O. Sato), a Los Angeles-based independent music administration company. Thornfield administers the catalog on a non-exclusive basis, collecting mechanical royalties, performance royalties, and other income streams on behalf of FDL Publishing. Thornfield does not hold any ownership interest in the compositions or recordings; its role is purely administrative and fiduciary.

The combined annual royalty income generated by Ms. Fonseca's catalog, encompassing mechanical royalties, performance royalties, synchronization fees, and related income, has averaged approximately $1,820,000 per year over the five-year period preceding this dispute (2018–2022). This figure reflects the ongoing commercial value of the catalog and will be relevant to the damages analysis discussed in Section IV below.

B. The Defendant

Crescendo Digital Media, Inc. ("Crescendo") is a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758 (EIN: 81-3729164). Crescendo operates a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation platform under the consumer-facing brand name "Crescendo Stream."

Crescendo was founded in 2016 by its current Chief Executive Officer, Nikolai R. Sorensen, age 41. Prior to founding Crescendo, Mr. Sorensen served as Vice President of Content Licensing at a prior digital media startup, giving him direct professional experience in the licensing and rights management practices that are central to this dispute. Crescendo is a privately held company. In 2021, Crescendo raised a $75 million Series C funding round led by Ridgeline Ventures Partners, LP (General Partner: Warren Hu; based in San Francisco, California). For its fiscal year ending December 31, 2022 ("FY 2022"), Crescendo reported revenue of approximately $189 million, placing it firmly in the category of a substantial and well-resourced digital media enterprise.

Crescendo's business model centers on the curation and distribution of licensed music content through two primary channels. First, Crescendo operates a B2B sublicensing business in which it assembles curated music packages and sublicenses those packages to commercial clients, including fitness chains, hospitality brands, and retail environments. Second, Crescendo operates a direct-to-consumer streaming tier through the Crescendo Stream platform, which maintains approximately 2.3 million individual subscribers. To support its operations, Crescendo maintains licensing agreements with over 4,000 rights holders, reflecting a large-scale content licensing operation that necessarily requires robust rights management and compliance systems.

Crescendo's General Counsel and Senior Vice President of Legal Affairs is Priya Chandrasekaran. Ms. Chandrasekaran is specifically responsible for rights management and licensing compliance — functions that are directly relevant to the clearance failures at the heart of this dispute.

C. The Peregrine License and Its Expiration

Peregrine Music Group, LLC ("Peregrine") was a California limited liability company that operated as a digital music distributor and sub-licensor for independent artists and smaller music rights holders, including Ms. Fonseca. Through its relationship with Peregrine, Crescendo obtained the right to stream and sublicense certain works from Peregrine's distributed catalog, including works by Ms. Fonseca.

Peregrine and Crescendo were parties to a blanket license agreement (the "Peregrine License") that was effective as of January 1, 2016 and that expired by its own terms on December 31, 2018. The Peregrine License was a three-year agreement with a fixed term. Based on a review of the Peregrine License agreement obtained from Ms. Fonseca's files, the key terms relevant to this analysis include the following:

• The license was expressly non-transferable and non-assignable, meaning that Peregrine could not transfer its rights under the agreement to any third party, and those rights could not pass by operation of law, assignment, or any other mechanism to any successor entity.

• The license contained no automatic renewal provision. It did not include any "evergreen" clause, holdover provision, or language that would cause the license to renew or extend beyond December 31, 2018, in the absence of affirmative action by both parties.

• The license provided that it would terminate upon either (a) expiration of the three-year term on December 31, 2018, or (b) the dissolution or cessation of operations of Peregrine, whichever event occurred first.

Both termination triggers were activated. Peregrine ceased operations in November 2018, approximately six weeks before the license's December 31, 2018 expiration date. As a result, the Peregrine License terminated no later than November 2018 under the dissolution provision, and in any event expired on its own terms on December 31, 2018. The effect is the same under either termination event: as of the end of 2018, no license existed authorizing Crescendo to use any works that had been distributed through Peregrine.

It is critical to this analysis that no successor license was ever executed, renewed, assigned, replaced, or otherwise put into effect between Crescendo and any authorized representative of Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield Music Administration, or any other entity with authority to grant rights in Ms. Fonseca's works. The Peregrine License simply expired, and no replacement authorization of any kind was obtained.

D. The Infringement

Despite the unambiguous expiration of the Peregrine License on December 31, 2018, Crescendo continued to stream, reproduce, distribute, publicly perform, and digitally transmit forty-seven (47) of Ms. Fonseca's registered musical compositions and thirty-two (32) of her associated registered master sound recordings through both its Crescendo Stream direct-to-consumer platform and its sublicensed commercial content packages.

The infringement period spans approximately four years, from on or about January 1, 2019 through at least December 31, 2022 — a period of approximately forty-eight months. There is no indication in the record that the infringement ceased at the end of 2022; to the contrary, it appears to be ongoing as of the date of this memorandum. However, for the purposes of the damages analysis herein, we have used the conservative four-year window of January 1, 2019 through December 31, 2022.

During this period, Crescendo's internal content management system ("CMS") tagged Ms. Fonseca's works with a clearance status of "cleared — blanket license," referencing the expired and non-renewed Peregrine License as the basis for authorization. This tagging suggests one of two scenarios: either Crescendo suffered a systemic oversight in its content clearance and license renewal processes — a failure to update or audit its CMS records upon license expiration — or Crescendo made a deliberate decision not to verify or update the clearance status of works obtained through Peregrine, even after Peregrine ceased operations and the license expired. Either scenario has significant implications for the willfulness analysis discussed in Section III.C below.

The total number of individual streams of Ms. Fonseca's works during the infringement period, as reflected in platform data available from Crescendo Stream, is approximately 18,426,331. This figure encompasses both streams on the direct-to-consumer platform and streams generated through Crescendo's sublicensed commercial channels.

In addition to direct streaming, Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) commercial clients across the fitness, hospitality, and retail sectors. Over the four-year infringement period, Crescendo generated sublicense revenue attributable to Ms. Fonseca's catalog of approximately $2,740,000. None of this revenue was shared with Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield, or any other authorized representative.

To be clear, at no point during the infringement period did Crescendo obtain a mechanical license, synchronization license, master use license, direct license, blanket license, or any other form of authorization from Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield Music Administration, Inc., or any other entity or individual authorized to grant rights in Ms. Fonseca's copyrighted works.

E. Pre-Litigation Correspondence

On March 6, 2023, this Firm sent a detailed cease-and-desist letter to Priya Chandrasekaran in her capacity as General Counsel of Crescendo. The letter identified the 47 infringed compositions and 32 infringed sound recordings by title and registration number, described the factual basis for the infringement claims, and made the following demands: (1) immediate cessation of all unauthorized streaming, reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's works; (2) immediate takedown and removal of all of Ms. Fonseca's works from the Crescendo Stream platform and from all sublicensed content packages; (3) preservation of all records, data, communications, and documents relating to the streaming, sublicensing, and revenue generated from Ms. Fonseca's works; (4) a full and complete accounting of all streams, downloads, sublicense revenue, and other income attributable to Ms. Fonseca's works for the period January 1, 2019 through the present; and (5) payment of estimated back-royalties of not less than $1,087,200. The letter also expressly notified Crescendo of its potential exposure to statutory damages of up to $7,050,000 for willful infringement under 17 U.S.C. § 504(c)(2) and set a response deadline of fifteen business days, or March 27, 2023.

On March 17, 2023, Hargrove, Pennington & Cao LLP responded on Crescendo's behalf. The response was signed by Denise K. Whitford, Partner, IP Litigation, with Jason M. Trujillo, Senior Associate, listed as co-counsel. In its response, HPC: (a) disputed that any infringement had occurred; (b) asserted that Crescendo had acted in good faith reliance on the Peregrine blanket license; (c) did not commit to any takedown of Ms. Fonseca's works from the Crescendo Stream platform or from sublicensed content packages; (d) did not commit to providing any accounting of streaming data or revenue; and (e) did not provide any legal basis or authority for Crescendo's continued use of Ms. Fonseca's works beyond the expired Peregrine License. The response was notably devoid of substantive legal analysis and appeared designed primarily to preserve Crescendo's litigation posture rather than to engage in good-faith resolution of the dispute.

F. Discovery of the Infringement

Ms. Fonseca became aware of the infringement in late 2022 through a routine royalty audit conducted by Thornfield Music Administration, Inc. During the course of its standard audit and reconciliation procedures, Thornfield identified that Ms. Fonseca's works were being streamed on the Crescendo Stream platform and included in Crescendo's sublicensed commercial playlists without any corresponding royalty payments flowing to FDL Publishing or Mariposa Sound. Thornfield's investigation revealed that the Peregrine License — the only historical authorization for Crescendo's use of Ms. Fonseca's works — had expired at the end of 2018 and that no replacement or renewal license had been executed.

Following this discovery, Ms. Fonseca engaged this Firm on February 20, 2023. The matter was opened under Matter No. 1035-00003.

III. LEGAL ANALYSIS

A. Copyright Ownership and Registration (17 U.S.C. §§ 106, 408, 411)

As a threshold matter, Ms. Fonseca holds valid copyright registrations with the United States Copyright Office for all forty-seven (47) musical compositions and all thirty-two (32) sound recordings at issue in this dispute. The 47 compositions are registered under the PA-series (performing arts), and the 32 sound recordings are registered under the SR-series (sound recordings). These registrations are a matter of public record and can be verified through the Copyright Office's online catalog.

Under 17 U.S.C. § 411(a), registration of a copyright with the U.S. Copyright Office — or, alternatively, a refusal of registration by the Register of Copyrights — is a prerequisite to the institution of a civil action for infringement of a U.S. work. This requirement has been construed strictly by the Supreme Court. See Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 886–87 (2019) (holding that "registration" under § 411(a) requires that the Register of Copyrights has actually registered the copyright, not merely that the applicant has submitted an application). Ms. Fonseca's registrations have been granted by the Register, and the § 411(a) prerequisite is fully satisfied for all 79 works at issue.

The registration dates for the 47 infringed compositions range between 1998 and 2021, reflecting Ms. Fonseca's longstanding practice of registering her works with the Copyright Office. Critically, all registrations were timely filed — that is, each registration was obtained either (a) within three months of first publication of the work, or (b) prior to the commencement of the infringement at issue. The significance of timely registration cannot be overstated: under 17 U.S.C. § 412, a copyright holder may not recover statutory damages under § 504(c) or attorney's fees under § 505 for infringement of an unpublished work that commenced before the effective date of registration, or for infringement of a published work that commenced after first publication and before registration, unless registration was made within three months after first publication. Because all of Ms. Fonseca's registrations satisfy the timeliness requirements of § 412, she is fully qualified to elect statutory damages and to seek attorney's fees — remedies that substantially increase both the value of her claims and her negotiating leverage.

Copyright ownership is clear and undisputed. FDL Publishing owns the copyrights in the 47 musical compositions at issue. Mariposa Sound owns the copyrights in the 32 sound recordings at issue. Ms. Fonseca is the sole member of both entities and the original author of all works. There is no co-authorship dispute, no work-made-for-hire issue, and no competing ownership claim. The chain of title is clean.

B. Elements of Infringement (17 U.S.C. § 501)

A claim of copyright infringement under 17 U.S.C. § 501 requires proof of two elements: (1) ownership of a valid copyright, and (2) copying, or more broadly, unauthorized exploitation, of constituent elements of the work that are original. See Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361 (1991); Rentmeester v. Sterling Reach Partners LLC, 883 F.3d 1111, 1116–17 (9th Cir. 2018).

Element 1 — Ownership of a Valid Copyright. As established in Section III.A above, Ms. Fonseca, through FDL Publishing and Mariposa Sound, owns valid and registered copyrights in all 47 compositions and all 32 sound recordings at issue. This element is satisfied.

Element 2 — Unauthorized Exploitation. This element is the crux of the dispute, but it is overwhelmingly in Ms. Fonseca's favor. Crescendo does not dispute that it streamed and sublicensed the works at issue. HPC's March 17, 2023 response letter does not contest the fact of Crescendo's use; rather, Crescendo's defense rests entirely on authorization — specifically, its claim that it was entitled to use the works pursuant to the Peregrine blanket license. As discussed in Section II.C above, however, the Peregrine License expired on December 31, 2018, was not renewed, was non-assignable and non-transferable, and contained no automatic renewal provision. Peregrine itself ceased operations in November 2018, independently triggering the license's termination clause. No successor license or replacement authorization of any kind was ever obtained. Accordingly, Crescendo's continued use of Ms. Fonseca's works from January 1, 2019 onward is unauthorized as a matter of law.

Crescendo's exploitation of Ms. Fonseca's works during the infringement period implicates multiple exclusive rights of the copyright holder under 17 U.S.C. § 106, specifically:

Reproduction (§ 106(1)). Crescendo made server-side copies of Ms. Fonseca's musical compositions and sound recordings for the purpose of delivering streaming content through its Crescendo Stream platform. The making of such copies constitutes reproduction within the meaning of § 106(1), regardless of whether the copies are permanent or transitory. See Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 657–58 (2d Cir. 2018) (discussing the reproduction right in the digital context).

Distribution (§ 106(3)). Ms. Fonseca's works were made available to Crescendo's approximately 2.3 million direct-to-consumer subscribers through the Crescendo Stream platform and were further distributed to fourteen (14) sublicensed commercial clients in the fitness, hospitality, and retail sectors. Making copyrighted works available to the public through a streaming platform constitutes distribution under § 106(3).

Public Performance (§ 106(4)). On-demand streaming of musical compositions constitutes a "public performance" within the meaning of § 106(4). Under the Copyright Act, a work is performed "publicly" when it is transmitted or otherwise communicated to members of the public by any device or process. 17 U.S.C. § 101 (definition of "publicly"). Interactive, on-demand streaming — in which individual users select and listen to specific works — falls squarely within the statutory definition of public performance for musical compositions.

Digital Audio Transmission (§ 106(6)). With respect to the 32 sound recordings, Crescendo's streaming activities constitute "digital audio transmissions" within the meaning of § 106(6). This provision — added to the Copyright Act by the Digital Performance Right in Sound Recordings Act of 1995 and expanded by the Digital Millennium Copyright Act of 1998 — grants the copyright owner of a sound recording the exclusive right to perform the work publicly by means of a digital audio transmission. This is the specific exclusive right applicable to sound recordings in the digital streaming context, as distinguished from the general public performance right in § 106(4), which does not extend to sound recordings outside of digital transmissions.

The liability analysis is straightforward. Crescendo's sole defense — that its use was authorized by the Peregrine License — fails on the undisputed facts. The license expired; it was not renewed; no replacement authorization was obtained. The continued streaming, reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's works for four years after the license's expiration constitutes infringement of multiple exclusive rights under § 106. Summary judgment on liability should be achievable.

C. Willfulness (17 U.S.C. § 504(c)(2))

There is a strong argument that Crescendo's infringement was willful within the meaning of 17 U.S.C. § 504(c)(2). A finding of willfulness enhances the statutory damages cap from $30,000 per work infringed to $150,000 per work infringed — a five-fold increase that substantially affects both the damages calculus and Crescendo's settlement incentives.

Willful infringement exists where the infringer knew or should have known that its actions constituted copyright infringement. The standard does not require subjective intent to infringe; rather, reckless disregard of the copyright holder's rights, or willful blindness to facts that would have revealed the infringement, is sufficient. See Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1195 (9th Cir. 2001) (affirming willful infringement finding where defendant continued to broadcast copyrighted programming after license expiration).

The following factors support a finding of willfulness:

Sophistication of the Defendant. Crescendo is a sophisticated digital media company with $189 million in FY 2022 revenue, a $75 million Series C investment from institutional investors, and a business model that is entirely dependent on the lawful licensing of copyrighted content. Crescendo maintains licensing agreements with over 4,000 rights holders. This is not a small business or an individual infringer that might plausibly claim ignorance of copyright requirements.

In-House Legal Expertise. Crescendo has an in-house legal department headed by a General Counsel and SVP of Legal Affairs, Priya Chandrasekaran, who is specifically responsible for rights management and licensing compliance. The existence of dedicated in-house legal resources charged with ensuring that Crescendo's content is properly licensed undermines any claim that the company was unaware of its licensing obligations or unable to monitor license expirations.

Clarity of the License Terms. The Peregrine License was a time-limited agreement with a fixed, unambiguous expiration date of December 31, 2018. The license contained no automatic renewal provision and was expressly non-assignable and non-transferable. There was no ambiguity in the license terms that could reasonably have led Crescendo to believe that it retained authorization beyond the expiration date.

Content Management System Failure. Crescendo maintained a content management system specifically designed to track the clearance status of licensed works. Despite the purpose of this system, Ms. Fonseca's works were tagged as "cleared — blanket license" for over four years after the underlying license had expired. This tagging error — if it was an error rather than a deliberate decision — reflects a systemic failure in Crescendo's clearance processes that rises at minimum to the level of recklessness.

Dissolution of Peregrine. Peregrine ceased operations in November 2018. The dissolution of a licensor entity is an event that should independently trigger a review of the status of all licenses obtained through that entity. A sophisticated licensee with an in-house legal department and a content management system has both the means and the obligation to monitor the status of its licensors and to take action when a licensor goes out of business. Crescendo's apparent failure to take any action in response to Peregrine's cessation of operations further supports a finding of willfulness.

Duration of the Infringement. The infringement continued for approximately four years — from January 1, 2019 through at least December 31, 2022 — during which time Crescendo not only streamed Ms. Fonseca's works on its own platform but affirmatively sublicensed them to fourteen commercial clients. The length and commercial scope of the unauthorized use reinforce the conclusion that this was not a brief or inadvertent lapse.

discovery Strategy Note. Internal records regarding Crescendo's content clearance processes, communications about Peregrine's cessation of operations, and any internal audits or red-flag notices will be critical to proving willfulness at trial. I recommend that we draft targeted discovery requests for the following categories of materials: (a) content management system logs showing the clearance status of Ms. Fonseca's works, including any changes, updates, or alerts triggered in connection with the Peregrine License expiration; (b) internal emails, memoranda, and messaging records (including Meridian Solutions, Teams, or similar platforms) referencing Peregrine Music Group, the expiration of the Peregrine License, and/or Ms. Fonseca's works; (c) compliance audit reports, license renewal tracking records, and any internal reviews of Crescendo's licensing portfolio conducted between 2018 and 2023; and (d) any communications between Crescendo personnel regarding the cessation of Peregrine's operations. These materials will be essential both to establishing willfulness and to defeating Crescendo's anticipated good-faith defense.

D. Anticipated Defenses

1. Good Faith / Innocent Infringement (17 U.S.C. § 504(c)(2))

Crescendo's primary defense, as previewed in HPC's March 17, 2023 response letter, is that Crescendo acted in good faith reliance on the Peregrine blanket license. Crescendo may further argue that it did not know the Peregrine License had expired and that it reasonably believed its use of Ms. Fonseca's works was authorized.

This defense has several critical weaknesses:

Fixed Expiration Date. The Peregrine License contained a fixed expiration date — December 31, 2018 — that was clear and unambiguous on the face of the agreement. A party to a license agreement has an obligation to know and comply with the terms of that agreement, including its term and expiration date. Ignorance of a clear contractual provision does not constitute good faith. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545, 1555 (9th Cir. 1989) (holding that a licensee who continues to use copyrighted material after the expiration of a license does so at its peril).

Dissolution of the Licensor. Peregrine ceased operations in November 2018. A sophisticated licensee has a duty to verify the status of its licenses, particularly when the licensor entity goes out of business. The dissolution of a licensor is a significant event that should prompt an immediate review of all licensing arrangements mediated through that entity. Crescendo's failure to take any such action — or, at minimum, to verify the continuing validity of licenses obtained through Peregrine — is inconsistent with a claim of good faith reliance.

In-House Legal Resources and Content Management Systems. Crescendo has an in-house legal team and a content management system specifically designed to track content clearance status. The failure to update the clearance status of works licensed through Peregrine for a period of over four years is not "reasonable reliance" — it is negligence at best, and recklessness at worst. A company with the resources and sophistication of Crescendo cannot credibly claim that it had no means of monitoring its license portfolio.

Statutory Standard for Innocent Infringement. The "innocent infringer" provision under 17 U.S.C. § 504(c)(2) permits a court to reduce statutory damages to a floor of $200 per work where the infringer proves that it "was not aware and had no reason to believe that his or her acts constituted an infringement of copyright." This is a demanding standard that requires more than good intentions — it requires a lack of any reason to believe the acts were infringing. Given Crescendo's sophistication, the clarity of the license terms, the dissolution of Peregrine, and the availability of license monitoring tools, Crescendo will have great difficulty satisfying this standard.

Copyright Notice. The presence of proper copyright notices on Ms. Fonseca's works — including the © symbol, the year of first publication, and the name of the copyright owner — further undermines an innocent infringement claim. Under § 504(c)(2), the innocent infringer defense is unavailable where the infringed work bore a proper copyright notice in a form prescribed by §§ 401 and 402. Ms. Fonseca's works bear such notices.

For these reasons, the good faith / innocent infringement defense is unlikely to succeed.

2. Implied License

Crescendo may argue that an implied license arose from the prior course of dealing between Fonseca and Crescendo, mediated through Peregrine. Under this theory, Crescendo would contend that the parties' historical licensing relationship created an implied authorization for Crescendo to continue using Ms. Fonseca's works even after the express Peregrine License expired.

The legal standard for an implied license is well-established in the Ninth Circuit. An implied license requires evidence of intent by the copyright holder to grant a license. An implied license typically arises where: (a) the licensee requested the creation of a work; (b) the licensor created and delivered the work to the licensee; and (c) the licensor intended that the licensee copy and distribute the work. See Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990); Foad Consulting Group, Inc. v. Azzalino, 270 F.3d 821, 831 (9th Cir. 2001).

This defense is weak for several reasons:

No Action by Fonseca Authorizing Continued Use. Ms. Fonseca took no action whatsoever to authorize Crescendo's continued use of her works after the Peregrine License expired. She did not communicate with Crescendo, grant any new permissions, or take any step that could be construed as consent to ongoing use.

No Direct Relationship. Ms. Fonseca had no direct relationship with Crescendo at any time. All dealings between Ms. Fonseca and Crescendo were mediated through Peregrine, the now-dissolved intermediary. An implied license cannot be inferred from a relationship that was entirely indirect and mediated through a third party that no longer exists.

No Post-Expiration Communications. There are no post-expiration communications between Ms. Fonseca (or her authorized representatives, including FDL Publishing, Mariposa Sound, and Thornfield) and Crescendo that could be construed as an expression of consent or acquiescence. The complete absence of any post-expiration contact negates any inference of implied authorization.

Express License Terms Negate Implied Authorization. The express terms of the Peregrine License — non-assignable, non-transferable, non-renewable, fixed term — negate any implication of continuing rights beyond the expiration date. Where an express license addresses the scope and duration of the authorized use, courts are reluctant to find an implied license that would contradict or extend the express terms. See Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748, 755 (9th Cir. 2008).

3. Fair Use (17 U.S.C. § 107)

Although a fair use defense is unlikely to be raised given the facts of this case, it is addressed here for completeness. The fair use doctrine, codified at 17 U.S.C. § 107, provides an affirmative defense to copyright infringement based on a balancing of four statutory factors. Each factor weighs heavily against Crescendo.

Factor 1 — Purpose and Character of the Use. Crescendo's use is purely commercial. The works were streamed on a for-profit platform and sublicensed to commercial clients for revenue. There is no transformative element to the use; Ms. Fonseca's compositions and recordings were used for their original purpose — to be listened to as music. A commercial, non-transformative use strongly disfavors a finding of fair use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994); Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, 598 U.S. 508, 543 (2023) (emphasizing that when the use shares the same purpose as the original, a commercial use weighs against fair use).

Factor 2 — Nature of the Copyrighted Work. Musical compositions and sound recordings are creative works that lie at the core of copyright protection. The Ninth Circuit has consistently recognized that creative works receive the highest level of copyright protection under this factor. See Dr. Seuss Enterprises, L.P. v. Penguin Books USA, Inc., 109 F.3d 1394, 1402 (9th Cir. 1997). This factor favors Ms. Fonseca.

Factor 3 — Amount and Substantiality of the Portion Used. Crescendo reproduced and streamed Ms. Fonseca's compositions and recordings in their entirety. The use of a complete work, rather than a portion or excerpt, weighs strongly against fair use. See Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 565 (1985).

Factor 4 — Effect on the Potential Market for the Work. Crescendo's unauthorized use directly substitutes for the licensed market for Ms. Fonseca's works. Crescendo streamed the works to 2.3 million subscribers and sublicensed them to 14 commercial clients — the very markets in which Ms. Fonseca would license her works through authorized channels. The unauthorized use deprived Ms. Fonseca of royalty income she would otherwise have received and damaged the market value of her catalog. This factor weighs decisively against fair use.

Applying the four-factor analysis, fair use is not a viable defense. This conclusion is unsurprising; fair use is almost never available where the defendant engages in wholesale commercial exploitation of creative works in direct competition with the copyright holder's own licensing markets.

4. Statute of Limitations (17 U.S.C. § 507(b))

The Copyright Act provides a three-year statute of limitations for civil actions. 17 U.S.C. § 507(b). A claim must be commenced within three years of the date the claim accrued. The critical question is when the claim "accrued" — at the time of the infringement (the "injury rule") or at the time the plaintiff knew or should have known of the infringement (the "Discovery rule").

The Ninth Circuit applies the discovery rule, under which a copyright infringement claim accrues when the plaintiff discovers, or reasonably should have discovered, the infringement. See Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994); Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236, 1240 (9th Cir. 2022).

Ms. Fonseca became aware of the infringement in late 2022 through a routine audit conducted by Thornfield Music Administration, Inc. This Firm was engaged on February 20, 2023, and the cease-and-desist letter was sent on March 6, 2023. If the complaint is filed promptly — as recommended — it will be well within three years of Ms. Fonseca's discovery of the infringement. Accordingly, all claims for the entire 2019–2022 infringement period should be timely under the Ninth Circuit's discovery rule.

Even under the more restrictive "injury rule" — which some circuits apply and under which claims accrue at the time of the infringing act — claims arising from approximately March 2020 onward would be timely if suit is filed by early 2023. Claims for the period from January 2019 through approximately March 2020 might be at risk under a strict injury rule, but the Ninth Circuit's adoption of the discovery rule makes this concern largely academic for our purposes.

It should be noted that the Supreme Court has granted certiorari in Nealy v. Warner Chappell Music, Inc., which addresses the interaction between the discovery rule and the availability of damages for infringing acts occurring more than three years before the filing of suit. As of the date of this memorandum, that case has not yet been decided, and the Ninth Circuit's discovery rule remains favorable to Ms. Fonseca's claims. Any future Supreme Court guidance should be monitored and incorporated into our litigation strategy as appropriate.

5. Other Potential Defenses (Brief Assessment)

Estoppel. There is no basis for an estoppel defense. Ms. Fonseca made no representations to Crescendo — directly or indirectly — that could give rise to equitable estoppel. There were no direct dealings between Ms. Fonseca and Crescendo at any time, and Ms. Fonseca took no action that could reasonably be construed as a representation that Crescendo was authorized to use her works after the Peregrine License expired.

Laches. The equitable defense of laches requires a showing of unreasonable delay by the plaintiff and resulting prejudice to the defendant. Ms. Fonseca acted promptly upon discovering the infringement in late 2022. She engaged counsel in February 2023 and sent a cease-and-desist letter in March 2023. There has been no unreasonable delay. Moreover, even if laches were applicable, it would at most limit the recovery of retrospective damages and would not bar prospective injunctive relief. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001).

Failure to Mitigate. Copyright law does not impose a mitigation obligation on copyright holders. The duty to mitigate is a concept borrowed from contract law that has no established application in the copyright infringement context. Even if such a duty were recognized, Ms. Fonseca acted promptly upon discovering the infringement and demanded immediate cessation. There is no basis for a failure-to-mitigate defense.

IV. REMEDIES

A. Actual Damages and Defendant's Profits (17 U.S.C. § 504(b))

Under 17 U.S.C. § 504(b), a copyright owner is entitled to recover the actual damages suffered as a result of the infringement, as well as any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. This two-pronged approach — actual damages plus disgorged profits — ensures that the infringer does not retain the economic benefit of its wrongful conduct.

A preliminary calculation of Ms. Fonseca's back-royalties — pending a more rigorous forensic accounting analysis — yields the following estimates:

Unpaid Mechanical Royalties (Compositions). Mechanical royalties are owed for each reproduction of a musical composition. Based on the statutory mechanical rate of $0.0091 per stream, applied to the approximately 18,426,331 total streams during the infringement period, the unpaid mechanical royalties attributable to direct streaming are approximately $167,680. In addition, based on the estimated sublicense mechanical royalties for Fonseca's works distributed through Crescendo's 14 commercial sublicensing arrangements, an additional approximately $244,920 in sublicense mechanicals is owed. Total unpaid mechanical royalties: approximately $412,600.

Unpaid Master Use Royalties (Recordings). Master use royalties are owed for the use of sound recordings. Based on comparable master license rates in the digital streaming market of approximately $0.02975 per stream, applied to the approximately 18,426,331 total streams, the unpaid master use royalties are approximately $548,200 (calculated as $0.02975 × 18,426,331 = approximately $548,183, rounded).

Unpaid Performance Royalties. Performance royalties are owed for the public performance of musical compositions through digital streaming. Based on an estimated unremitted share of performance royalties that should have been collected and distributed to FDL Publishing through the applicable performing rights organization, the unpaid performance royalties are approximately $126,400.

Total Back-Royalties. $412,600 + $548,200 + $126,400 = approximately $1,087,200.

Additionally, Crescendo's profits attributable to the infringement may be recoverable under § 504(b). During the infringement period, Crescendo earned approximately $2,740,000 in sublicense revenue attributable to Ms. Fonseca's catalog from its 14 commercial clients. A portion of Crescendo's direct-to-consumer streaming revenue may also be attributable to the infringed works, although this amount is more difficult to isolate and will require forensic analysis.

Under § 504(b), the plaintiff is required only to present proof of the infringer's gross revenue attributable to the infringement. The burden then shifts to the defendant to prove its deductible expenses and any elements of profit attributable to factors other than the copyrighted work. See Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700, 710–11 (9th Cir. 2004). This burden-shifting framework is favorable to the plaintiff and creates an incentive for defendants to settle rather than risk full profit disgorgement at trial.

B. Statutory Damages (17 U.S.C. § 504(c))

Statutory damages are available because all of Ms. Fonseca's copyright registrations were timely filed, satisfying the requirements of 17 U.S.C. § 412. Under § 504(c), a copyright owner may elect to recover statutory damages in lieu of actual damages and profits at any time before final judgment is rendered. The election between actual damages and statutory damages is entirely within the plaintiff's discretion and may be exercised strategically based on the evidence developed during discovery.

The statutory damages ranges are as follows:

Non-Willful Infringement (§ 504(c)(1)). For non-willful infringement, the court may award statutory damages in the range of $750 to $30,000 per work infringed. Applied to the 47 infringed compositions, this yields a range of:

• Floor: 47 × $750 = $35,250

• Ceiling: 47 × $30,000 = $1,410,000

Willful Infringement (§ 504(c)(2)). Where the infringement is found to be willful, the court may increase the statutory damages award to a maximum of $150,000 per work infringed. Applied to the 47 infringed compositions, the willful ceiling is:

• Ceiling: 47 × $150,000 = $7,050,000

Note on Counting "Works" for Statutory Damages Purposes. The 47 compositions are clearly separate works for purposes of the statutory damages calculation. The 32 sound recordings are derivative of the underlying compositions and raise a more nuanced counting question. Courts in the Ninth Circuit have sometimes treated the composition and the sound recording embodying it as a single "work" for statutory damages calculation, particularly where the composition and recording are owned by the same plaintiff and were infringed in the same manner. However, there is also authority for counting them separately, particularly where — as here — the compositions and recordings are owned by separate entities (FDL Publishing and Mariposa Sound, respectively) and implicate distinct exclusive rights (public performance under § 106(4) for compositions; digital audio transmission under § 106(6) for recordings). If the compositions and recordings are counted separately, the total number of infringed works would be 79 (47 + 32), increasing the willful ceiling to 79 × $150,000 = $11,850,000. This counting question should be researched further and briefed at the appropriate stage of litigation.

Strategic Assessment. Statutory damages provide significant leverage, particularly the willfulness enhancement. Even if a court does not award damages at or near the statutory maximum, the mere availability of statutory damages up to $7,050,000 (or potentially $11,850,000) creates powerful settlement incentives for Crescendo. The election between actual damages and statutory damages should be deferred until after discovery provides a clearer picture of Crescendo's revenues and profits.

C. Attorney's Fees and Costs (17 U.S.C. § 505)

Under 17 U.S.C. § 505, a court may award reasonable attorney's fees and full costs to the prevailing party in a copyright infringement action. While the award of fees is discretionary, courts routinely award fees to prevailing plaintiffs where the copyright registrations were timely filed and the defendant's position is objectively unreasonable.

The Supreme Court's decision in Kirtsaeng v. Crowne Albany Industries, Inc., 579 U.S. 197 (2016), established that the objective unreasonableness of the losing party's litigation position is a "substantial factor" — though not the sole factor — in the fee-award analysis. Courts also consider the motivation of the parties, the need for compensation and deterrence, and other relevant circumstances. Crescendo's position — that it was authorized to use Ms. Fonseca's works based on a license that expired over four years ago, that was not renewed, and that Crescendo never verified — is objectively unreasonable and strongly supports a fee award.

The current and projected lodestar for this matter through litigation (if needed) is estimated at approximately $285,000. This estimate is based on the Firm's standard hourly rates, the anticipated scope of discovery and motion practice, and the likelihood of trial preparation activities. This figure will be refined as the matter progresses.

D. Injunctive Relief (17 U.S.C. § 502)

Under 17 U.S.C. § 502, a court may grant temporary and final injunctions to prevent or restrain infringement of a copyright. We should seek a permanent injunction prohibiting Crescendo, its officers, agents, employees, successors, assigns, and all persons acting in concert or participation with them from further unauthorized reproduction, distribution, public performance, and digital audio transmission of Ms. Fonseca's copyrighted works.

The standard for a permanent injunction was articulated by the Supreme Court in Northgate Group v. MercExchange, L.L.C., 547 U.S. 388 (2006), which requires the plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

Ms. Fonseca has a strong case for injunctive relief under each prong of the Cascade Holdings test:

Irreparable Injury. The ongoing infringement causes irreparable harm to Ms. Fonseca's exclusive rights under the Copyright Act and to the commercial value of her catalog. Each day that Crescendo continues to stream, reproduce, distribute, and transmit her works without authorization constitutes a continuing violation of her exclusive rights — harm that cannot be fully remedied by monetary damages alone.

Inadequacy of Legal Remedies. Monetary damages may be inadequate because Crescendo could theoretically continue to infringe, paying damages after the fact but never ceasing its unauthorized use. Furthermore, the ongoing unauthorized use degrades Ms. Fonseca's ability to control the exploitation of her catalog, to license her works on terms she finds acceptable, and to protect the integrity and market value of her body of work.

Balance of Hardships. The balance of hardships strongly favors Ms. Fonseca. An injunction would require Crescendo only to do what it is already legally obligated to do: stop using copyrighted works for which it has no license. Crescendo can either obtain a proper license from Ms. Fonseca on mutually agreed terms or remove her works from its platform and sublicensed content packages. Neither option imposes an undue burden on Crescendo.

Public Interest. The public interest is served by the enforcement of copyright protections. Copyright law exists to incentivize the creation of original works by protecting the rights of authors and creators. Permitting a well-resourced digital media company to continue exploiting a creator's works without authorization would undermine the Copyright Act's core objectives. The public interest strongly favors injunctive relief.

E. Pre-Settlement Demand Valuation

Based on the foregoing analysis, a preliminary pre-settlement demand valuation is as follows:

This figure represents a negotiating position designed to serve as a reasonable starting point for settlement discussions. It is a moderate demand that is well below the statutory damages ceiling of $7,050,000 (or $11,850,000 if compositions and recordings are counted separately). The statutory damages ceiling provides substantial upward leverage in negotiations and underscores the risk that Crescendo faces if the matter proceeds to trial and a court finds willful infringement.

V. VENUE AND JURISDICTION

I recommend filing the complaint in the United States District Court for the Central District of California. The following analysis confirms that this court has subject matter jurisdiction, that venue is proper, and that personal jurisdiction over Crescendo can be established.

Subject Matter Jurisdiction. The federal district courts have original jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. In addition, 28 U.S.C. § 1338(a) provides that the federal district courts have original and exclusive jurisdiction over any civil action arising under any Act of Congress relating to copyrights. Ms. Fonseca's claims arise under the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq., and therefore fall squarely within the subject matter jurisdiction of the federal courts.

Venue. Venue is proper in the Central District of California under both the general venue statute, 28 U.S.C. § 1391(b), and the specific copyright venue provision, 28 U.S.C. § 1400(a). Under § 1391(b), a civil action may be brought in a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or in which any defendant resides (with corporate residence defined as any district in which the defendant is subject to personal jurisdiction). Under § 1400(a), civil actions arising under copyright law may be instituted in the district in which the defendant or his agent resides or may be found. Venue is proper in the Central District of California because: (a) the infringement occurred in this district, insofar as Crescendo's streams are accessible to, and were accessed by, users located in this district; (b) the plaintiff, Ms. Fonseca, resides in Studio City, California, which is within this district; and (c) FDL Publishing and Mariposa Sound, the copyright-holding entities, have their registered offices in Los Angeles, California, which is within this district.

Personal Jurisdiction over Crescendo. The Central District of California may exercise specific personal jurisdiction over Crescendo. Crescendo transacts business in this district by operating a digital streaming platform accessible to users in this district. Crescendo has subscribers in this district. Crescendo streams copyrighted content to users located in this district. And Crescendo has committed acts of copyright infringement — specifically, the unauthorized streaming, reproduction, distribution, public performance, and digital audio transmission of Ms. Fonseca's works — directed at and occurring in this district. These contacts are sufficient to establish specific personal jurisdiction under the California long-arm statute (Cal. Code Civ. Proc. § 410.10) and the Due Process Clause of the Fourteenth Amendment. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (articulating the Ninth Circuit's three-part test for specific jurisdiction). Crescendo's purposeful direction of infringing activity into this district, combined with the fact that Ms. Fonseca's claims arise out of those forum-related contacts, satisfies the requirements for specific personal jurisdiction.

VI. RECOMMENDATIONS

A. File Suit

I recommend that we file a complaint for copyright infringement in the United States District Court for the Central District of California at the earliest practicable date. The complaint should assert two causes of action:

First Cause of Action: Copyright Infringement of Musical Compositions. This count should assert infringement of the 47 registered musical compositions owned by FDL Publishing, alleging violations of the exclusive rights of reproduction (§ 106(1)), distribution (§ 106(3)), and public performance (§ 106(4)).

Second Cause of Action: Copyright Infringement of Sound Recordings. This count should assert infringement of the 32 registered sound recordings owned by Mariposa Sound, alleging violations of the exclusive rights of reproduction (§ 106(1)), distribution (§ 106(3)), and digital audio transmission (§ 106(6)).

The claims are strong on both liability and damages. Crescendo does not dispute its use of the works, and its sole defense — reliance on the expired Peregrine License — is meritless. The damages exposure is substantial, with statutory damages alone reaching as high as $7,050,000 (or $11,850,000 if compositions and recordings are counted separately). Crescendo's defenses, as outlined in Section III.D above, are weak and unlikely to survive summary judgment.

Filing suit will serve several important objectives. It will formalize the dispute and subject Crescendo to the jurisdiction and processes of the federal court, including mandatory discovery obligations. It will create litigation pressure that may facilitate an early and favorable settlement. And it will demonstrate to Crescendo and its counsel that Ms. Fonseca is serious about enforcing her rights and is prepared to pursue the matter through trial if necessary.

Crescendo's sophistication and financial resources — $189 million in FY 2022 revenue and a $75 million Series C investment from Ridgeline Ventures Partners, LP — indicate that the company has both the capacity to settle and strong incentives to resolve the matter quickly. A protracted copyright infringement lawsuit would generate reputational harm, potential investor concern, and negative publicity for a company whose business model depends entirely on the trust of content licensors and rights holders. These considerations provide additional leverage.

B. Retain Forensic Accounting Expert

I recommend that we retain a forensic accounting expert to analyze Crescendo's streaming data and sublicensing revenue in order to quantify damages with precision. The expert should review Crescendo's internal streaming logs, content management system records, sublicense agreements with the 14 commercial clients, and revenue reports attributable to Ms. Fonseca's catalog.

The forensic accountant's analysis will serve three essential functions. First, it will support the actual damages claims under § 504(b) by providing a detailed and defensible calculation of unpaid royalties and attributable profits. Second, it will inform the strategic election between actual damages and statutory damages, which must be made before final judgment. Third, and perhaps most importantly, the expert's findings will anchor settlement negotiations with credible, data-driven figures.

I suggest exploring the retention of a firm with specific expertise in music industry royalty audits, such as Harborline Advisors's Media & Entertainment practice or a comparable specialist firm. The engagement should be structured to provide both a preliminary analysis suitable for early settlement discussions and a comprehensive report suitable for expert testimony if the matter proceeds to trial.

C. Discovery Strategy

Early and targeted discovery will be critical to establishing willfulness and quantifying damages. I recommend prioritizing the following categories of discovery:

1. Content management system logs showing the clearance status of Ms. Fonseca's works, including any changes, updates, alerts, or flags related to the expiration of the Peregrine License or the cessation of Peregrine's operations.

2. Internal communications — including emails, memoranda, Meridian Solutions or messaging records, and any other written or electronic communications — referencing Peregrine Music Group, the expiration or renewal of the Peregrine License, and/or Ms. Fonseca's works, for the period from October 2018 through the present.

3. Compliance audit reports and license renewal tracking records, including any internal reviews of Crescendo's licensing portfolio, reports prepared by or for Crescendo's legal department, and any communications or memoranda discussing the status of licenses obtained through Peregrine.

4. Sublicense agreements with the 14 commercial clients that received curated playlists containing Ms. Fonseca's works, including all amendments, schedules, and exhibits, as well as any internal documents reflecting the composition of the playlists provided to each client.

5. Complete streaming log

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP
MEMORANDUM
TO: Alan Ngo, Partner
FROM: Christy Bauer, Associate
DATE: March 20, 2023
RE: Fonseca v. Crescendo Digital Media, Inc. — Copyright Infringement Analysis
MATTER NO.: 1035-00003
Right-click to update Table of Contents
I. INTRODUCTION
This memorandum analyzes the merits of Marguerite D. Fonseca's copyright infringement claims against Crescendo Digital Media, Inc. ("Crescendo"). The purpose of this analysis is to identify the applicable causes of action under the Copyright Act of 1976, as amended (17 U.S.C. §§ 101 et seq.), evaluate the potential defenses that Crescendo is likely to assert, assess the range of available remedies, and recommend a litigation strategy going forward.
This memorandum follows two significant pieces of pre-litigation correspondence. On March 6, 2023, this Firm sent a cease-and-desist letter to Priya Chandrasekaran, General Counsel and SVP, Legal Affairs of Crescendo, demanding immediate cessation of the unauthorized use, removal of Fonseca's works from all platforms and sublicensed content packages, preservation of all relevant records and data, a full accounting of revenue and streaming data, and payment of estimated back-royalties of not less than $1,087,200. The letter also referenced Crescendo's potential statutory damages exposure of up to $7,050,000 for willful infringement and imposed a fifteen-business-day response deadline of March 27, 2023. On March 17, 2023 — ten days before the stated deadline — Hargrove, Pennington & Cao LLP ("HPC"), acting as counsel for Crescendo, responded by letter. HPC's response disputed that any infringement had occurred, asserted that Crescendo acted in good faith reliance on a blanket license previously held through Peregrine Music Group, LLC ("Peregrine"), and did not commit to any takedown, accounting, or other remedial action. Crucially, HPC's response letter did not provide any legal basis for Crescendo's continued use of Fonseca's works beyond the expired Peregrine license.
Based on the analysis set forth below, it is my conclusion that Ms. Fonseca's claims are strong on both liability and damages, that Crescendo's anticipated defenses are weak and unlikely to withstand summary judgment, and that we should recommend proceeding by filing suit in the United States District Court for the Central District of California. I further recommend that we retain a forensic accounting expert with music industry experience to analyze Crescendo's streaming data and sublicensing revenue in order to quantify damages with precision.
II. FACTUAL BACKGROUND
A. The Client and Her Catalog
Marguerite D. Fonseca is a Grammy-nominated singer-songwriter and recording artist, age 54, who resides at 4827 Laurelgrove Avenue, Studio City, California 91604. Ms. Fonseca's career spans approximately twenty-eight years, during which she has released nine studio albums traversing the genres of Latin pop, jazz, and contemporary R&B. Over the course of her career, she has received three Grammy Award nominations and has been honored with two Latin Grammy Awards, establishing her as a critically and commercially recognized artist with a substantial catalog of original works.
Ms. Fonseca's catalog consists of 214 registered musical compositions with the United States Copyright Office, bearing PA-series registration numbers ranging from PA 1-742-891 through PA 2-318-406, and 188 registered sound recordings, bearing SR-series registration numbers ranging from SR 0-891-220 through SR 1-104-773. The catalog represents the creative output of nearly three decades of professional songwriting and recording.
The publishing rights to Ms. Fonseca's musical compositions are controlled through Flor de Luna Publishing, LLC ("FDL Publishing"), a California single-member limited liability company of which Ms. Fonseca is the sole member. FDL Publishing maintains its registered office at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015 (EIN: 82-4193507). The master recording rights to Ms. Fonseca's sound recordings are controlled through a separate entity, Mariposa Sound Recordings, LLC ("Mariposa Sound"), also a California single-member limited liability company with Ms. Fonseca as the sole member, maintaining the same registered office address (EIN: 84-2671058). This dual-entity structure is a common and commercially prudent arrangement in the music industry, separating the economic interests in the underlying compositions from those in the recorded performances.
Administration of Ms. Fonseca's catalog is handled by Thornfield Music Administration, Inc. (President: Raymond O. Sato), a Los Angeles-based independent music administration company. Thornfield administers the catalog on a non-exclusive basis, collecting mechanical royalties, performance royalties, and other income streams on behalf of FDL Publishing. Thornfield does not hold any ownership interest in the compositions or recordings; its role is purely administrative and fiduciary.
The combined annual royalty income generated by Ms. Fonseca's catalog, encompassing mechanical royalties, performance royalties, synchronization fees, and related income, has averaged approximately $1,820,000 per year over the five-year period preceding this dispute (2018–2022). This figure reflects the ongoing commercial value of the catalog and will be relevant to the damages analysis discussed in Section IV below.
B. The Defendant
Crescendo Digital Media, Inc. ("Crescendo") is a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758 (EIN: 81-3729164). Crescendo operates a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation platform under the consumer-facing brand name "Crescendo Stream."
Crescendo was founded in 2016 by its current Chief Executive Officer, Nikolai R. Sorensen, age 41. Prior to founding Crescendo, Mr. Sorensen served as Vice President of Content Licensing at a prior digital media startup, giving him direct professional experience in the licensing and rights management practices that are central to this dispute. Crescendo is a privately held company. In 2021, Crescendo raised a $75 million Series C funding round led by Ridgeline Ventures Partners, LP (General Partner: Warren Hu; based in San Francisco, California). For its fiscal year ending December 31, 2022 ("FY 2022"), Crescendo reported revenue of approximately $189 million, placing it firmly in the category of a substantial and well-resourced digital media enterprise.
Crescendo's business model centers on the curation and distribution of licensed music content through two primary channels. First, Crescendo operates a B2B sublicensing business in which it assembles curated music packages and sublicenses those packages to commercial clients, including fitness chains, hospitality brands, and retail environments. Second, Crescendo operates a direct-to-consumer streaming tier through the Crescendo Stream platform, which maintains approximately 2.3 million individual subscribers. To support its operations, Crescendo maintains licensing agreements with over 4,000 rights holders, reflecting a large-scale content licensing operation that necessarily requires robust rights management and compliance systems.
Crescendo's General Counsel and Senior Vice President of Legal Affairs is Priya Chandrasekaran. Ms. Chandrasekaran is specifically responsible for rights management and licensing compliance — functions that are directly relevant to the clearance failures at the heart of this dispute.
C. The Peregrine License and Its Expiration
Peregrine Music Group, LLC ("Peregrine") was a California limited liability company that operated as a digital music distributor and sub-licensor for independent artists and smaller music rights holders, including Ms. Fonseca. Through its relationship with Peregrine, Crescendo obtained the right to stream and sublicense certain works from Peregrine's distributed catalog, including works by Ms. Fonseca.
Peregrine and Crescendo were parties to a blanket license agreement (the "Peregrine License") that was effective as of January 1, 2016 and that expired by its own terms on December 31, 2018. The Peregrine License was a three-year agreement with a fixed term. Based on a review of the Peregrine License agreement obtained from Ms. Fonseca's files, the key terms relevant to this analysis include the following:
• The license was expressly non-transferable and non-assignable, meaning that Peregrine could not transfer its rights under the agreement to any third party, and those rights could not pass by operation of law, assignment, or any other mechanism to any successor entity.
• The license contained no automatic renewal provision. It did not include any "evergreen" clause, holdover provision, or language that would cause the license to renew or extend beyond December 31, 2018, in the absence of affirmative action by both parties.
• The license provided that it would terminate upon either (a) expiration of the three-year term on December 31, 2018, or (b) the dissolution or cessation of operations of Peregrine, whichever event occurred first.
Both termination triggers were activated. Peregrine ceased operations in November 2018, approximately six weeks before the license's December 31, 2018 expiration date. As a result, the Peregrine License terminated no later than November 2018 under the dissolution provision, and in any event expired on its own terms on December 31, 2018. The effect is the same under either termination event: as of the end of 2018, no license existed authorizing Crescendo to use any works that had been distributed through Peregrine.
It is critical to this analysis that no successor license was ever executed, renewed, assigned, replaced, or otherwise put into effect between Crescendo and any authorized representative of Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield Music Administration, or any other entity with authority to grant rights in Ms. Fonseca's works. The Peregrine License simply expired, and no replacement authorization of any kind was obtained.
D. The Infringement
Despite the unambiguous expiration of the Peregrine License on December 31, 2018, Crescendo continued to stream, reproduce, distribute, publicly perform, and digitally transmit forty-seven (47) of Ms. Fonseca's registered musical compositions and thirty-two (32) of her associated registered master sound recordings through both its Crescendo Stream direct-to-consumer platform and its sublicensed commercial content packages.
The infringement period spans approximately four years, from on or about January 1, 2019 through at least December 31, 2022 — a period of approximately forty-eight months. There is no indication in the record that the infringement ceased at the end of 2022; to the contrary, it appears to be ongoing as of the date of this memorandum. However, for the purposes of the damages analysis herein, we have used the conservative four-year window of January 1, 2019 through December 31, 2022.
During this period, Crescendo's internal content management system ("CMS") tagged Ms. Fonseca's works with a clearance status of "cleared — blanket license," referencing the expired and non-renewed Peregrine License as the basis for authorization. This tagging suggests one of two scenarios: either Crescendo suffered a systemic oversight in its content clearance and license renewal processes — a failure to update or audit its CMS records upon license expiration — or Crescendo made a deliberate decision not to verify or update the clearance status of works obtained through Peregrine, even after Peregrine ceased operations and the license expired. Either scenario has significant implications for the willfulness analysis discussed in Section III.C below.
The total number of individual streams of Ms. Fonseca's works during the infringement period, as reflected in platform data available from Crescendo Stream, is approximately 18,426,331. This figure encompasses both streams on the direct-to-consumer platform and streams generated through Crescendo's sublicensed commercial channels.
In addition to direct streaming, Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) commercial clients across the fitness, hospitality, and retail sectors. Over the four-year infringement period, Crescendo generated sublicense revenue attributable to Ms. Fonseca's catalog of approximately $2,740,000. None of this revenue was shared with Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield, or any other authorized representative.
To be clear, at no point during the infringement period did Crescendo obtain a mechanical license, synchronization license, master use license, direct license, blanket license, or any other form of authorization from Ms. Fonseca, FDL Publishing, Mariposa Sound, Thornfield Music Administration, Inc., or any other entity or individual authorized to grant rights in Ms. Fonseca's copyrighted works.
E. Pre-Litigation Correspondence
On March 6, 2023, this Firm sent a detailed cease-and-desist letter to Priya Chandrasekaran in her capacity as General Counsel of Crescendo. The letter identified the 47 infringed compositions and 32 infringed sound recordings by title and registration number, described the factual basis for the infringement claims, and made the following demands: (1) immediate cessation of all unauthorized streaming, reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's works; (2) immediate takedown and removal of all of Ms. Fonseca's works from the Crescendo Stream platform and from all sublicensed content packages; (3) preservation of all records, data, communications, and documents relating to the streaming, sublicensing, and revenue generated from Ms. Fonseca's works; (4) a full and complete accounting of all streams, downloads, sublicense revenue, and other income attributable to Ms. Fonseca's works for the period January 1, 2019 through the present; and (5) payment of estimated back-royalties of not less than $1,087,200. The letter also expressly notified Crescendo of its potential exposure to statutory damages of up to $7,050,000 for willful infringement under 17 U.S.C. § 504(c)(2) and set a response deadline of fifteen business days, or March 27, 2023.
On March 17, 2023, Hargrove, Pennington & Cao LLP responded on Crescendo's behalf. The response was signed by Denise K. Whitford, Partner, IP Litigation, with Jason M. Trujillo, Senior Associate, listed as co-counsel. In its response, HPC: (a) disputed that any infringement had occurred; (b) asserted that Crescendo had acted in good faith reliance on the Peregrine blanket license; (c) did not commit to any takedown of Ms. Fonseca's works from the Crescendo Stream platform or from sublicensed content packages; (d) did not commit to providing any accounting of streaming data or revenue; and (e) did not provide any legal basis or authority for Crescendo's continued use of Ms. Fonseca's works beyond the expired Peregrine License. The response was notably devoid of substantive legal analysis and appeared designed primarily to preserve Crescendo's litigation posture rather than to engage in good-faith resolution of the dispute.
F. Discovery of the Infringement
Ms. Fonseca became aware of the infringement in late 2022 through a routine royalty audit conducted by Thornfield Music Administration, Inc. During the course of its standard audit and reconciliation procedures, Thornfield identified that Ms. Fonseca's works were being streamed on the Crescendo Stream platform and included in Crescendo's sublicensed commercial playlists without any corresponding royalty payments flowing to FDL Publishing or Mariposa Sound. Thornfield's investigation revealed that the Peregrine License — the only historical authorization for Crescendo's use of Ms. Fonseca's works — had expired at the end of 2018 and that no replacement or renewal license had been executed.
Following this discovery, Ms. Fonseca engaged this Firm on February 20, 2023. The matter was opened under Matter No. 1035-00003.
III. LEGAL ANALYSIS
A. Copyright Ownership and Registration (17 U.S.C. §§ 106, 408, 411)
As a threshold matter, Ms. Fonseca holds valid copyright registrations with the United States Copyright Office for all forty-seven (47) musical compositions and all thirty-two (32) sound recordings at issue in this dispute. The 47 compositions are registered under the PA-series (performing arts), and the 32 sound recordings are registered under the SR-series (sound recordings). These registrations are a matter of public record and can be verified through the Copyright Office's online catalog.
Under 17 U.S.C. § 411(a), registration of a copyright with the U.S. Copyright Office — or, alternatively, a refusal of registration by the Register of Copyrights — is a prerequisite to the institution of a civil action for infringement of a U.S. work. This requirement has been construed strictly by the Supreme Court. See Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 886–87 (2019) (holding that "registration" under § 411(a) requires that the Register of Copyrights has actually registered the copyright, not merely that the applicant has submitted an application). Ms. Fonseca's registrations have been granted by the Register, and the § 411(a) prerequisite is fully satisfied for all 79 works at issue.
The registration dates for the 47 infringed compositions range between 1998 and 2021, reflecting Ms. Fonseca's longstanding practice of registering her works with the Copyright Office. Critically, all registrations were timely filed — that is, each registration was obtained either (a) within three months of first publication of the work, or (b) prior to the commencement of the infringement at issue. The significance of timely registration cannot be overstated: under 17 U.S.C. § 412, a copyright holder may not recover statutory damages under § 504(c) or attorney's fees under § 505 for infringement of an unpublished work that commenced before the effective date of registration, or for infringement of a published work that commenced after first publication and before registration, unless registration was made within three months after first publication. Because all of Ms. Fonseca's registrations satisfy the timeliness requirements of § 412, she is fully qualified to elect statutory damages and to seek attorney's fees — remedies that substantially increase both the value of her claims and her negotiating leverage.
Copyright ownership is clear and undisputed. FDL Publishing owns the copyrights in the 47 musical compositions at issue. Mariposa Sound owns the copyrights in the 32 sound recordings at issue. Ms. Fonseca is the sole member of both entities and the original author of all works. There is no co-authorship dispute, no work-made-for-hire issue, and no competing ownership claim. The chain of title is clean.
B. Elements of Infringement (17 U.S.C. § 501)
A claim of copyright infringement under 17 U.S.C. § 501 requires proof of two elements: (1) ownership of a valid copyright, and (2) copying, or more broadly, unauthorized exploitation, of constituent elements of the work that are original. See Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361 (1991); Rentmeester v. Sterling Reach Partners LLC, 883 F.3d 1111, 1116–17 (9th Cir. 2018).
Element 1 — Ownership of a Valid Copyright. As established in Section III.A above, Ms. Fonseca, through FDL Publishing and Mariposa Sound, owns valid and registered copyrights in all 47 compositions and all 32 sound recordings at issue. This element is satisfied.
Element 2 — Unauthorized Exploitation. This element is the crux of the dispute, but it is overwhelmingly in Ms. Fonseca's favor. Crescendo does not dispute that it streamed and sublicensed the works at issue. HPC's March 17, 2023 response letter does not contest the fact of Crescendo's use; rather, Crescendo's defense rests entirely on authorization — specifically, its claim that it was entitled to use the works pursuant to the Peregrine blanket license. As discussed in Section II.C above, however, the Peregrine License expired on December 31, 2018, was not renewed, was non-assignable and non-transferable, and contained no automatic renewal provision. Peregrine itself ceased operations in November 2018, independently triggering the license's termination clause. No successor license or replacement authorization of any kind was ever obtained. Accordingly, Crescendo's continued use of Ms. Fonseca's works from January 1, 2019 onward is unauthorized as a matter of law.
Crescendo's exploitation of Ms. Fonseca's works during the infringement period implicates multiple exclusive rights of the copyright holder under 17 U.S.C. § 106, specifically:
Reproduction (§ 106(1)). Crescendo made server-side copies of Ms. Fonseca's musical compositions and sound recordings for the purpose of delivering streaming content through its Crescendo Stream platform. The making of such copies constitutes reproduction within the meaning of § 106(1), regardless of whether the copies are permanent or transitory. See Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 657–58 (2d Cir. 2018) (discussing the reproduction right in the digital context).
Distribution (§ 106(3)). Ms. Fonseca's works were made available to Crescendo's approximately 2.3 million direct-to-consumer subscribers through the Crescendo Stream platform and were further distributed to fourteen (14) sublicensed commercial clients in the fitness, hospitality, and retail sectors. Making copyrighted works available to the public through a streaming platform constitutes distribution under § 106(3).
Public Performance (§ 106(4)). On-demand streaming of musical compositions constitutes a "public performance" within the meaning of § 106(4). Under the Copyright Act, a work is performed "publicly" when it is transmitted or otherwise communicated to members of the public by any device or process. 17 U.S.C. § 101 (definition of "publicly"). Interactive, on-demand streaming — in which individual users select and listen to specific works — falls squarely within the statutory definition of public performance for musical compositions.
Digital Audio Transmission (§ 106(6)). With respect to the 32 sound recordings, Crescendo's streaming activities constitute "digital audio transmissions" within the meaning of § 106(6). This provision — added to the Copyright Act by the Digital Performance Right in Sound Recordings Act of 1995 and expanded by the Digital Millennium Copyright Act of 1998 — grants the copyright owner of a sound recording the exclusive right to perform the work publicly by means of a digital audio transmission. This is the specific exclusive right applicable to sound recordings in the digital streaming context, as distinguished from the general public performance right in § 106(4), which does not extend to sound recordings outside of digital transmissions.
The liability analysis is straightforward. Crescendo's sole defense — that its use was authorized by the Peregrine License — fails on the undisputed facts. The license expired; it was not renewed; no replacement authorization was obtained. The continued streaming, reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's works for four years after the license's expiration constitutes infringement of multiple exclusive rights under § 106. Summary judgment on liability should be achievable.
C. Willfulness (17 U.S.C. § 504(c)(2))
There is a strong argument that Crescendo's infringement was willful within the meaning of 17 U.S.C. § 504(c)(2). A finding of willfulness enhances the statutory damages cap from $30,000 per work infringed to $150,000 per work infringed — a five-fold increase that substantially affects both the damages calculus and Crescendo's settlement incentives.
Willful infringement exists where the infringer knew or should have known that its actions constituted copyright infringement. The standard does not require subjective intent to infringe; rather, reckless disregard of the copyright holder's rights, or willful blindness to facts that would have revealed the infringement, is sufficient. See Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1195 (9th Cir. 2001) (affirming willful infringement finding where defendant continued to broadcast copyrighted programming after license expiration).
The following factors support a finding of willfulness:
Sophistication of the Defendant. Crescendo is a sophisticated digital media company with $189 million in FY 2022 revenue, a $75 million Series C investment from institutional investors, and a business model that is entirely dependent on the lawful licensing of copyrighted content. Crescendo maintains licensing agreements with over 4,000 rights holders. This is not a small business or an individual infringer that might plausibly claim ignorance of copyright requirements.
In-House Legal Expertise. Crescendo has an in-house legal department headed by a General Counsel and SVP of Legal Affairs, Priya Chandrasekaran, who is specifically responsible for rights management and licensing compliance. The existence of dedicated in-house legal resources charged with ensuring that Crescendo's content is properly licensed undermines any claim that the company was unaware of its licensing obligations or unable to monitor license expirations.
Clarity of the License Terms. The Peregrine License was a time-limited agreement with a fixed, unambiguous expiration date of December 31, 2018. The license contained no automatic renewal provision and was expressly non-assignable and non-transferable. There was no ambiguity in the license terms that could reasonably have led Crescendo to believe that it retained authorization beyond the expiration date.
Content Management System Failure. Crescendo maintained a content management system specifically designed to track the clearance status of licensed works. Despite the purpose of this system, Ms. Fonseca's works were tagged as "cleared — blanket license" for over four years after the underlying license had expired. This tagging error — if it was an error rather than a deliberate decision — reflects a systemic failure in Crescendo's clearance processes that rises at minimum to the level of recklessness.
Dissolution of Peregrine. Peregrine ceased operations in November 2018. The dissolution of a licensor entity is an event that should independently trigger a review of the status of all licenses obtained through that entity. A sophisticated licensee with an in-house legal department and a content management system has both the means and the obligation to monitor the status of its licensors and to take action when a licensor goes out of business. Crescendo's apparent failure to take any action in response to Peregrine's cessation of operations further supports a finding of willfulness.
Duration of the Infringement. The infringement continued for approximately four years — from January 1, 2019 through at least December 31, 2022 — during which time Crescendo not only streamed Ms. Fonseca's works on its own platform but affirmatively sublicensed them to fourteen commercial clients. The length and commercial scope of the unauthorized use reinforce the conclusion that this was not a brief or inadvertent lapse.
discovery Strategy Note. Internal records regarding Crescendo's content clearance processes, communications about Peregrine's cessation of operations, and any internal audits or red-flag notices will be critical to proving willfulness at trial. I recommend that we draft targeted discovery requests for the following categories of materials: (a) content management system logs showing the clearance status of Ms. Fonseca's works, including any changes, updates, or alerts triggered in connection with the Peregrine License expiration; (b) internal emails, memoranda, and messaging records (including Meridian Solutions, Teams, or similar platforms) referencing Peregrine Music Group, the expiration of the Peregrine License, and/or Ms. Fonseca's works; (c) compliance audit reports, license renewal tracking records, and any internal reviews of Crescendo's licensing portfolio conducted between 2018 and 2023; and (d) any communications between Crescendo personnel regarding the cessation of Peregrine's operations. These materials will be essential both to establishing willfulness and to defeating Crescendo's anticipated good-faith defense.
D. Anticipated Defenses
1. Good Faith / Innocent Infringement (17 U.S.C. § 504(c)(2))
Crescendo's primary defense, as previewed in HPC's March 17, 2023 response letter, is that Crescendo acted in good faith reliance on the Peregrine blanket license. Crescendo may further argue that it did not know the Peregrine License had expired and that it reasonably believed its use of Ms. Fonseca's works was authorized.
This defense has several critical weaknesses:
Fixed Expiration Date. The Peregrine License contained a fixed expiration date — December 31, 2018 — that was clear and unambiguous on the face of the agreement. A party to a license agreement has an obligation to know and comply with the terms of that agreement, including its term and expiration date. Ignorance of a clear contractual provision does not constitute good faith. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545, 1555 (9th Cir. 1989) (holding that a licensee who continues to use copyrighted material after the expiration of a license does so at its peril).
Dissolution of the Licensor. Peregrine ceased operations in November 2018. A sophisticated licensee has a duty to verify the status of its licenses, particularly when the licensor entity goes out of business. The dissolution of a licensor is a significant event that should prompt an immediate review of all licensing arrangements mediated through that entity. Crescendo's failure to take any such action — or, at minimum, to verify the continuing validity of licenses obtained through Peregrine — is inconsistent with a claim of good faith reliance.
In-House Legal Resources and Content Management Systems. Crescendo has an in-house legal team and a content management system specifically designed to track content clearance status. The failure to update the clearance status of works licensed through Peregrine for a period of over four years is not "reasonable reliance" — it is negligence at best, and recklessness at worst. A company with the resources and sophistication of Crescendo cannot credibly claim that it had no means of monitoring its license portfolio.
Statutory Standard for Innocent Infringement. The "innocent infringer" provision under 17 U.S.C. § 504(c)(2) permits a court to reduce statutory damages to a floor of $200 per work where the infringer proves that it "was not aware and had no reason to believe that his or her acts constituted an infringement of copyright." This is a demanding standard that requires more than good intentions — it requires a lack of any reason to believe the acts were infringing. Given Crescendo's sophistication, the clarity of the license terms, the dissolution of Peregrine, and the availability of license monitoring tools, Crescendo will have great difficulty satisfying this standard.
Copyright Notice. The presence of proper copyright notices on Ms. Fonseca's works — including the © symbol, the year of first publication, and the name of the copyright owner — further undermines an innocent infringement claim. Under § 504(c)(2), the innocent infringer defense is unavailable where the infringed work bore a proper copyright notice in a form prescribed by §§ 401 and 402. Ms. Fonseca's works bear such notices.
For these reasons, the good faith / innocent infringement defense is unlikely to succeed.
2. Implied License
Crescendo may argue that an implied license arose from the prior course of dealing between Fonseca and Crescendo, mediated through Peregrine. Under this theory, Crescendo would contend that the parties' historical licensing relationship created an implied authorization for Crescendo to continue using Ms. Fonseca's works even after the express Peregrine License expired.
The legal standard for an implied license is well-established in the Ninth Circuit. An implied license requires evidence of intent by the copyright holder to grant a license. An implied license typically arises where: (a) the licensee requested the creation of a work; (b) the licensor created and delivered the work to the licensee; and (c) the licensor intended that the licensee copy and distribute the work. See Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990); Foad Consulting Group, Inc. v. Azzalino, 270 F.3d 821, 831 (9th Cir. 2001).
This defense is weak for several reasons:
No Action by Fonseca Authorizing Continued Use. Ms. Fonseca took no action whatsoever to authorize Crescendo's continued use of her works after the Peregrine License expired. She did not communicate with Crescendo, grant any new permissions, or take any step that could be construed as consent to ongoing use.
No Direct Relationship. Ms. Fonseca had no direct relationship with Crescendo at any time. All dealings between Ms. Fonseca and Crescendo were mediated through Peregrine, the now-dissolved intermediary. An implied license cannot be inferred from a relationship that was entirely indirect and mediated through a third party that no longer exists.
No Post-Expiration Communications. There are no post-expiration communications between Ms. Fonseca (or her authorized representatives, including FDL Publishing, Mariposa Sound, and Thornfield) and Crescendo that could be construed as an expression of consent or acquiescence. The complete absence of any post-expiration contact negates any inference of implied authorization.
Express License Terms Negate Implied Authorization. The express terms of the Peregrine License — non-assignable, non-transferable, non-renewable, fixed term — negate any implication of continuing rights beyond the expiration date. Where an express license addresses the scope and duration of the authorized use, courts are reluctant to find an implied license that would contradict or extend the express terms. See Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748, 755 (9th Cir. 2008).
3. Fair Use (17 U.S.C. § 107)
Although a fair use defense is unlikely to be raised given the facts of this case, it is addressed here for completeness. The fair use doctrine, codified at 17 U.S.C. § 107, provides an affirmative defense to copyright infringement based on a balancing of four statutory factors. Each factor weighs heavily against Crescendo.
Factor 1 — Purpose and Character of the Use. Crescendo's use is purely commercial. The works were streamed on a for-profit platform and sublicensed to commercial clients for revenue. There is no transformative element to the use; Ms. Fonseca's compositions and recordings were used for their original purpose — to be listened to as music. A commercial, non-transformative use strongly disfavors a finding of fair use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994); Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, 598 U.S. 508, 543 (2023) (emphasizing that when the use shares the same purpose as the original, a commercial use weighs against fair use).
Factor 2 — Nature of the Copyrighted Work. Musical compositions and sound recordings are creative works that lie at the core of copyright protection. The Ninth Circuit has consistently recognized that creative works receive the highest level of copyright protection under this factor. See Dr. Seuss Enterprises, L.P. v. Penguin Books USA, Inc., 109 F.3d 1394, 1402 (9th Cir. 1997). This factor favors Ms. Fonseca.
Factor 3 — Amount and Substantiality of the Portion Used. Crescendo reproduced and streamed Ms. Fonseca's compositions and recordings in their entirety. The use of a complete work, rather than a portion or excerpt, weighs strongly against fair use. See Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 565 (1985).
Factor 4 — Effect on the Potential Market for the Work. Crescendo's unauthorized use directly substitutes for the licensed market for Ms. Fonseca's works. Crescendo streamed the works to 2.3 million subscribers and sublicensed them to 14 commercial clients — the very markets in which Ms. Fonseca would license her works through authorized channels. The unauthorized use deprived Ms. Fonseca of royalty income she would otherwise have received and damaged the market value of her catalog. This factor weighs decisively against fair use.
Applying the four-factor analysis, fair use is not a viable defense. This conclusion is unsurprising; fair use is almost never available where the defendant engages in wholesale commercial exploitation of creative works in direct competition with the copyright holder's own licensing markets.
4. Statute of Limitations (17 U.S.C. § 507(b))
The Copyright Act provides a three-year statute of limitations for civil actions. 17 U.S.C. § 507(b). A claim must be commenced within three years of the date the claim accrued. The critical question is when the claim "accrued" — at the time of the infringement (the "injury rule") or at the time the plaintiff knew or should have known of the infringement (the "Discovery rule").
The Ninth Circuit applies the discovery rule, under which a copyright infringement claim accrues when the plaintiff discovers, or reasonably should have discovered, the infringement. See Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994); Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236, 1240 (9th Cir. 2022).
Ms. Fonseca became aware of the infringement in late 2022 through a routine audit conducted by Thornfield Music Administration, Inc. This Firm was engaged on February 20, 2023, and the cease-and-desist letter was sent on March 6, 2023. If the complaint is filed promptly — as recommended — it will be well within three years of Ms. Fonseca's discovery of the infringement. Accordingly, all claims for the entire 2019–2022 infringement period should be timely under the Ninth Circuit's discovery rule.
Even under the more restrictive "injury rule" — which some circuits apply and under which claims accrue at the time of the infringing act — claims arising from approximately March 2020 onward would be timely if suit is filed by early 2023. Claims for the period from January 2019 through approximately March 2020 might be at risk under a strict injury rule, but the Ninth Circuit's adoption of the discovery rule makes this concern largely academic for our purposes.
It should be noted that the Supreme Court has granted certiorari in Nealy v. Warner Chappell Music, Inc., which addresses the interaction between the discovery rule and the availability of damages for infringing acts occurring more than three years before the filing of suit. As of the date of this memorandum, that case has not yet been decided, and the Ninth Circuit's discovery rule remains favorable to Ms. Fonseca's claims. Any future Supreme Court guidance should be monitored and incorporated into our litigation strategy as appropriate.
5. Other Potential Defenses (Brief Assessment)
Estoppel. There is no basis for an estoppel defense. Ms. Fonseca made no representations to Crescendo — directly or indirectly — that could give rise to equitable estoppel. There were no direct dealings between Ms. Fonseca and Crescendo at any time, and Ms. Fonseca took no action that could reasonably be construed as a representation that Crescendo was authorized to use her works after the Peregrine License expired.
Laches. The equitable defense of laches requires a showing of unreasonable delay by the plaintiff and resulting prejudice to the defendant. Ms. Fonseca acted promptly upon discovering the infringement in late 2022. She engaged counsel in February 2023 and sent a cease-and-desist letter in March 2023. There has been no unreasonable delay. Moreover, even if laches were applicable, it would at most limit the recovery of retrospective damages and would not bar prospective injunctive relief. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001).
Failure to Mitigate. Copyright law does not impose a mitigation obligation on copyright holders. The duty to mitigate is a concept borrowed from contract law that has no established application in the copyright infringement context. Even if such a duty were recognized, Ms. Fonseca acted promptly upon discovering the infringement and demanded immediate cessation. There is no basis for a failure-to-mitigate defense.
IV. REMEDIES
A. Actual Damages and Defendant's Profits (17 U.S.C. § 504(b))
Under 17 U.S.C. § 504(b), a copyright owner is entitled to recover the actual damages suffered as a result of the infringement, as well as any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. This two-pronged approach — actual damages plus disgorged profits — ensures that the infringer does not retain the economic benefit of its wrongful conduct.
A preliminary calculation of Ms. Fonseca's back-royalties — pending a more rigorous forensic accounting analysis — yields the following estimates:
Unpaid Mechanical Royalties (Compositions). Mechanical royalties are owed for each reproduction of a musical composition. Based on the statutory mechanical rate of $0.0091 per stream, applied to the approximately 18,426,331 total streams during the infringement period, the unpaid mechanical royalties attributable to direct streaming are approximately $167,680. In addition, based on the estimated sublicense mechanical royalties for Fonseca's works distributed through Crescendo's 14 commercial sublicensing arrangements, an additional approximately $244,920 in sublicense mechanicals is owed. Total unpaid mechanical royalties: approximately $412,600.
Unpaid Master Use Royalties (Recordings). Master use royalties are owed for the use of sound recordings. Based on comparable master license rates in the digital streaming market of approximately $0.02975 per stream, applied to the approximately 18,426,331 total streams, the unpaid master use royalties are approximately $548,200 (calculated as $0.02975 × 18,426,331 = approximately $548,183, rounded).
Unpaid Performance Royalties. Performance royalties are owed for the public performance of musical compositions through digital streaming. Based on an estimated unremitted share of performance royalties that should have been collected and distributed to FDL Publishing through the applicable performing rights organization, the unpaid performance royalties are approximately $126,400.
Total Back-Royalties. $412,600 + $548,200 + $126,400 = approximately $1,087,200.
Additionally, Crescendo's profits attributable to the infringement may be recoverable under § 504(b). During the infringement period, Crescendo earned approximately $2,740,000 in sublicense revenue attributable to Ms. Fonseca's catalog from its 14 commercial clients. A portion of Crescendo's direct-to-consumer streaming revenue may also be attributable to the infringed works, although this amount is more difficult to isolate and will require forensic analysis.
Under § 504(b), the plaintiff is required only to present proof of the infringer's gross revenue attributable to the infringement. The burden then shifts to the defendant to prove its deductible expenses and any elements of profit attributable to factors other than the copyrighted work. See Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700, 710–11 (9th Cir. 2004). This burden-shifting framework is favorable to the plaintiff and creates an incentive for defendants to settle rather than risk full profit disgorgement at trial.
B. Statutory Damages (17 U.S.C. § 504(c))
Statutory damages are available because all of Ms. Fonseca's copyright registrations were timely filed, satisfying the requirements of 17 U.S.C. § 412. Under § 504(c), a copyright owner may elect to recover statutory damages in lieu of actual damages and profits at any time before final judgment is rendered. The election between actual damages and statutory damages is entirely within the plaintiff's discretion and may be exercised strategically based on the evidence developed during discovery.
The statutory damages ranges are as follows:
Non-Willful Infringement (§ 504(c)(1)). For non-willful infringement, the court may award statutory damages in the range of $750 to $30,000 per work infringed. Applied to the 47 infringed compositions, this yields a range of:
• Floor: 47 × $750 = $35,250
• Ceiling: 47 × $30,000 = $1,410,000
Willful Infringement (§ 504(c)(2)). Where the infringement is found to be willful, the court may increase the statutory damages award to a maximum of $150,000 per work infringed. Applied to the 47 infringed compositions, the willful ceiling is:
• Ceiling: 47 × $150,000 = $7,050,000
Note on Counting "Works" for Statutory Damages Purposes. The 47 compositions are clearly separate works for purposes of the statutory damages calculation. The 32 sound recordings are derivative of the underlying compositions and raise a more nuanced counting question. Courts in the Ninth Circuit have sometimes treated the composition and the sound recording embodying it as a single "work" for statutory damages calculation, particularly where the composition and recording are owned by the same plaintiff and were infringed in the same manner. However, there is also authority for counting them separately, particularly where — as here — the compositions and recordings are owned by separate entities (FDL Publishing and Mariposa Sound, respectively) and implicate distinct exclusive rights (public performance under § 106(4) for compositions; digital audio transmission under § 106(6) for recordings). If the compositions and recordings are counted separately, the total number of infringed works would be 79 (47 + 32), increasing the willful ceiling to 79 × $150,000 = $11,850,000. This counting question should be researched further and briefed at the appropriate stage of litigation.
Strategic Assessment. Statutory damages provide significant leverage, particularly the willfulness enhancement. Even if a court does not award damages at or near the statutory maximum, the mere availability of statutory damages up to $7,050,000 (or potentially $11,850,000) creates powerful settlement incentives for Crescendo. The election between actual damages and statutory damages should be deferred until after discovery provides a clearer picture of Crescendo's revenues and profits.
C. Attorney's Fees and Costs (17 U.S.C. § 505)
Under 17 U.S.C. § 505, a court may award reasonable attorney's fees and full costs to the prevailing party in a copyright infringement action. While the award of fees is discretionary, courts routinely award fees to prevailing plaintiffs where the copyright registrations were timely filed and the defendant's position is objectively unreasonable.
The Supreme Court's decision in Kirtsaeng v. Crowne Albany Industries, Inc., 579 U.S. 197 (2016), established that the objective unreasonableness of the losing party's litigation position is a "substantial factor" — though not the sole factor — in the fee-award analysis. Courts also consider the motivation of the parties, the need for compensation and deterrence, and other relevant circumstances. Crescendo's position — that it was authorized to use Ms. Fonseca's works based on a license that expired over four years ago, that was not renewed, and that Crescendo never verified — is objectively unreasonable and strongly supports a fee award.
The current and projected lodestar for this matter through litigation (if needed) is estimated at approximately $285,000. This estimate is based on the Firm's standard hourly rates, the anticipated scope of discovery and motion practice, and the likelihood of trial preparation activities. This figure will be refined as the matter progresses.
D. Injunctive Relief (17 U.S.C. § 502)
Under 17 U.S.C. § 502, a court may grant temporary and final injunctions to prevent or restrain infringement of a copyright. We should seek a permanent injunction prohibiting Crescendo, its officers, agents, employees, successors, assigns, and all persons acting in concert or participation with them from further unauthorized reproduction, distribution, public performance, and digital audio transmission of Ms. Fonseca's copyrighted works.
The standard for a permanent injunction was articulated by the Supreme Court in Northgate Group v. MercExchange, L.L.C., 547 U.S. 388 (2006), which requires the plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Ms. Fonseca has a strong case for injunctive relief under each prong of the Cascade Holdings test:
Irreparable Injury. The ongoing infringement causes irreparable harm to Ms. Fonseca's exclusive rights under the Copyright Act and to the commercial value of her catalog. Each day that Crescendo continues to stream, reproduce, distribute, and transmit her works without authorization constitutes a continuing violation of her exclusive rights — harm that cannot be fully remedied by monetary damages alone.
Inadequacy of Legal Remedies. Monetary damages may be inadequate because Crescendo could theoretically continue to infringe, paying damages after the fact but never ceasing its unauthorized use. Furthermore, the ongoing unauthorized use degrades Ms. Fonseca's ability to control the exploitation of her catalog, to license her works on terms she finds acceptable, and to protect the integrity and market value of her body of work.
Balance of Hardships. The balance of hardships strongly favors Ms. Fonseca. An injunction would require Crescendo only to do what it is already legally obligated to do: stop using copyrighted works for which it has no license. Crescendo can either obtain a proper license from Ms. Fonseca on mutually agreed terms or remove her works from its platform and sublicensed content packages. Neither option imposes an undue burden on Crescendo.
Public Interest. The public interest is served by the enforcement of copyright protections. Copyright law exists to incentivize the creation of original works by protecting the rights of authors and creators. Permitting a well-resourced digital media company to continue exploiting a creator's works without authorization would undermine the Copyright Act's core objectives. The public interest strongly favors injunctive relief.
E. Pre-Settlement Demand Valuation
Based on the foregoing analysis, a preliminary pre-settlement demand valuation is as follows:
This figure represents a negotiating position designed to serve as a reasonable starting point for settlement discussions. It is a moderate demand that is well below the statutory damages ceiling of $7,050,000 (or $11,850,000 if compositions and recordings are counted separately). The statutory damages ceiling provides substantial upward leverage in negotiations and underscores the risk that Crescendo faces if the matter proceeds to trial and a court finds willful infringement.
V. VENUE AND JURISDICTION
I recommend filing the complaint in the United States District Court for the Central District of California. The following analysis confirms that this court has subject matter jurisdiction, that venue is proper, and that personal jurisdiction over Crescendo can be established.
Subject Matter Jurisdiction. The federal district courts have original jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. In addition, 28 U.S.C. § 1338(a) provides that the federal district courts have original and exclusive jurisdiction over any civil action arising under any Act of Congress relating to copyrights. Ms. Fonseca's claims arise under the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq., and therefore fall squarely within the subject matter jurisdiction of the federal courts.
Venue. Venue is proper in the Central District of California under both the general venue statute, 28 U.S.C. § 1391(b), and the specific copyright venue provision, 28 U.S.C. § 1400(a). Under § 1391(b), a civil action may be brought in a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or in which any defendant resides (with corporate residence defined as any district in which the defendant is subject to personal jurisdiction). Under § 1400(a), civil actions arising under copyright law may be instituted in the district in which the defendant or his agent resides or may be found. Venue is proper in the Central District of California because: (a) the infringement occurred in this district, insofar as Crescendo's streams are accessible to, and were accessed by, users located in this district; (b) the plaintiff, Ms. Fonseca, resides in Studio City, California, which is within this district; and (c) FDL Publishing and Mariposa Sound, the copyright-holding entities, have their registered offices in Los Angeles, California, which is within this district.
Personal Jurisdiction over Crescendo. The Central District of California may exercise specific personal jurisdiction over Crescendo. Crescendo transacts business in this district by operating a digital streaming platform accessible to users in this district. Crescendo has subscribers in this district. Crescendo streams copyrighted content to users located in this district. And Crescendo has committed acts of copyright infringement — specifically, the unauthorized streaming, reproduction, distribution, public performance, and digital audio transmission of Ms. Fonseca's works — directed at and occurring in this district. These contacts are sufficient to establish specific personal jurisdiction under the California long-arm statute (Cal. Code Civ. Proc. § 410.10) and the Due Process Clause of the Fourteenth Amendment. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (articulating the Ninth Circuit's three-part test for specific jurisdiction). Crescendo's purposeful direction of infringing activity into this district, combined with the fact that Ms. Fonseca's claims arise out of those forum-related contacts, satisfies the requirements for specific personal jurisdiction.
VI. RECOMMENDATIONS
A. File Suit
I recommend that we file a complaint for copyright infringement in the United States District Court for the Central District of California at the earliest practicable date. The complaint should assert two causes of action:
First Cause of Action: Copyright Infringement of Musical Compositions. This count should assert infringement of the 47 registered musical compositions owned by FDL Publishing, alleging violations of the exclusive rights of reproduction (§ 106(1)), distribution (§ 106(3)), and public performance (§ 106(4)).
Second Cause of Action: Copyright Infringement of Sound Recordings. This count should assert infringement of the 32 registered sound recordings owned by Mariposa Sound, alleging violations of the exclusive rights of reproduction (§ 106(1)), distribution (§ 106(3)), and digital audio transmission (§ 106(6)).
The claims are strong on both liability and damages. Crescendo does not dispute its use of the works, and its sole defense — reliance on the expired Peregrine License — is meritless. The damages exposure is substantial, with statutory damages alone reaching as high as $7,050,000 (or $11,850,000 if compositions and recordings are counted separately). Crescendo's defenses, as outlined in Section III.D above, are weak and unlikely to survive summary judgment.
Filing suit will serve several important objectives. It will formalize the dispute and subject Crescendo to the jurisdiction and processes of the federal court, including mandatory discovery obligations. It will create litigation pressure that may facilitate an early and favorable settlement. And it will demonstrate to Crescendo and its counsel that Ms. Fonseca is serious about enforcing her rights and is prepared to pursue the matter through trial if necessary.
Crescendo's sophistication and financial resources — $189 million in FY 2022 revenue and a $75 million Series C investment from Ridgeline Ventures Partners, LP — indicate that the company has both the capacity to settle and strong incentives to resolve the matter quickly. A protracted copyright infringement lawsuit would generate reputational harm, potential investor concern, and negative publicity for a company whose business model depends entirely on the trust of content licensors and rights holders. These considerations provide additional leverage.
B. Retain Forensic Accounting Expert
I recommend that we retain a forensic accounting expert to analyze Crescendo's streaming data and sublicensing revenue in order to quantify damages with precision. The expert should review Crescendo's internal streaming logs, content management system records, sublicense agreements with the 14 commercial clients, and revenue reports attributable to Ms. Fonseca's catalog.
The forensic accountant's analysis will serve three essential functions. First, it will support the actual damages claims under § 504(b) by providing a detailed and defensible calculation of unpaid royalties and attributable profits. Second, it will inform the strategic election between actual damages and statutory damages, which must be made before final judgment. Third, and perhaps most importantly, the expert's findings will anchor settlement negotiations with credible, data-driven figures.
I suggest exploring the retention of a firm with specific expertise in music industry royalty audits, such as Harborline Advisors's Media & Entertainment practice or a comparable specialist firm. The engagement should be structured to provide both a preliminary analysis suitable for early settlement discussions and a comprehensive report suitable for expert testimony if the matter proceeds to trial.
C. Discovery Strategy
Early and targeted discovery will be critical to establishing willfulness and quantifying damages. I recommend prioritizing the following categories of discovery:
1. Content management system logs showing the clearance status of Ms. Fonseca's works, including any changes, updates, alerts, or flags related to the expiration of the Peregrine License or the cessation of Peregrine's operations.
2. Internal communications — including emails, memoranda, Meridian Solutions or messaging records, and any other written or electronic communications — referencing Peregrine Music Group, the expiration or renewal of the Peregrine License, and/or Ms. Fonseca's works, for the period from October 2018 through the present.
3. Compliance audit reports and license renewal tracking records, including any internal reviews of Crescendo's licensing portfolio, reports prepared by or for Crescendo's legal department, and any communications or memoranda discussing the status of licenses obtained through Peregrine.
4. Sublicense agreements with the 14 commercial clients that received curated playlists containing Ms. Fonseca's works, including all amendments, schedules, and exhibits, as well as any internal documents reflecting the composition of the playlists provided to each client.
5. Complete streaming log