1035-00003 · Flor de Luna Publishing, LLC · Mediation

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CALDERWOOD & HARKNESS LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-7400

CONFIDENTIAL MEDIATION BRIEF OF PLAINTIFFS

FOR MEDIATION PURPOSES ONLY Pursuant to Cal. Evid. Code § 1119 and Fed. R. Evid. 408

This document is confidential, privileged, and inadmissible in any court proceeding. It is prepared solely for submission to the mediator and is not to be disclosed to opposing counsel or any third party without the express written consent of Plaintiffs.

July 3, 2023

Hon. Gerald T. Nakashima (Ret.) Ashgrove Equity Partners Dispute Resolution Services, LLC 1901 Avenue of the Stars, Suite 1050 Los Angeles, CA 90067

Re: Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA (C.D. Cal.)

Mediation Scheduled: July 10, 2023

Dear Judge Nakashima:

This Confidential Mediation Brief is submitted on behalf of Plaintiffs Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC (collectively, "Plaintiffs") in advance of the mediation session scheduled for July 10, 2023 before Your Honor at Ashgrove Equity Partners Dispute Resolution Services. This brief is intended to provide the mediator with a comprehensive understanding of the facts, the legal framework, Plaintiffs' assessment of liability and damages, and the settlement framework that Plaintiffs believe represents a fair and achievable resolution of this dispute.

I. INTRODUCTION

At its core, this is a straightforward copyright infringement action. Defendant Crescendo Digital Media, Inc. ("Crescendo"), a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758, used forty-seven (47) copyrighted musical compositions and thirty-two (32) copyrighted sound recordings belonging to Plaintiff Marguerite D. Fonseca — without any license, authorization, or payment — for a period of approximately four years, from January 1, 2019 through December 31, 2022.

During that four-year period, Ms. Fonseca's works were streamed over 18.4 million times through Crescendo's proprietary digital platform — specifically, 18,426,331 streams, a figure derived from Crescendo's own platform data and internal streaming logs produced in discovery. Crescendo did not merely make these works available to its approximately 2.3 million direct-to-consumer subscribers. It went further: Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) separate commercial clients — fitness chains, hospitality brands, and retail environments — generating sublicense revenue attributable to Ms. Fonseca's catalog of approximately $2,740,000 over the infringement period. Not a single dollar of that revenue was shared with Ms. Fonseca or any entity acting on her behalf.

Crescendo's sole defense is that it relied in good faith on a blanket license that had expired more than four years before Plaintiffs filed this lawsuit. That license, which was obtained through a now-defunct digital music distributor called Peregrine Music Group, LLC, expired by its own terms on December 31, 2018. Peregrine itself ceased operations in November 2018 and was subsequently dissolved. No successor license was ever negotiated, executed, or even discussed. Crescendo simply continued exploiting Ms. Fonseca's works as though the license remained in effect — for four full years, across tens of millions of streams, and through over a dozen sublicensing arrangements — without ever bothering to verify whether it still had the right to do so.

This is not a case involving a small start-up struggling to navigate a complex licensing landscape. Crescendo is a sophisticated, well-capitalized digital media company with $189 million in fiscal year 2022 revenue, approximately 2.3 million subscribers, and an in-house legal department headed by General Counsel Priya Chandrasekaran. The company raised a $75 million Series C financing round in 2021, led by Ridgeline Ventures Partners, LP. Its CEO, Nikolai R. Sorensen, founded the company in 2016 with the express purpose of building a digital content aggregation and streaming platform. Crescendo maintains licensing relationships with over 4,000 rights holders. It is precisely the kind of company that should have robust systems in place to track license expirations — and precisely the kind of company that cannot credibly claim ignorance when a license lapses and it continues to use copyrighted works without authorization.

Plaintiffs come to this mediation in good faith, with a genuine desire to reach a fair resolution. Ms. Fonseca seeks compensation for the unauthorized exploitation of her life's work — compositions and recordings that represent nearly three decades of creative effort — and the establishment of a legitimate licensing framework going forward, so that Crescendo can continue to offer her works to its subscribers and commercial clients on proper terms. The proposed settlement framework set forth in this brief is designed to achieve both objectives while avoiding the considerable expense, delay, and uncertainty of continued litigation.

II. THE PARTIES

A. Plaintiffs. Marguerite D. Fonseca. Ms. Fonseca is fifty-four years old and resides at 4827 Laurelgrove Avenue, Studio City, California 91604. She is a singer-songwriter, composer, and recording artist whose career spans twenty-eight years and encompasses Latin pop, jazz, and contemporary R&B. Over the course of her career, Ms. Fonseca has released nine studio albums, earned three Grammy Award nominations, and received two Latin Grammy Awards. She is widely recognized within the music industry as one of the most accomplished independent Latin-crossover artists of her generation.

Ms. Fonseca's catalog is substantial. It comprises 214 registered compositions with the U.S. Copyright Office (Registration Nos. PA 1-742-891 through PA 2-318-406) and 188 registered master recordings (Registration Nos. SR 0-891-220 through SR 1-104-773). Her combined average annual royalty income over the five-year period from 2018 through 2022 was approximately $1,820,000. This income derives from a diversified portfolio of licensing arrangements across digital streaming, synchronization, broadcast, and live performance royalties.

Critically, Ms. Fonseca is an independent artist who owns and controls her own publishing and master recording rights. She has never signed an exclusive recording contract with a major label or an exclusive publishing agreement with a major publisher. Her decision to retain ownership of her rights was deliberate and reflects decades of effort to maintain both creative and economic independence. This case directly implicates the economic foundation upon which her independence rests.

Flor de Luna Publishing, LLC ("FDL Publishing"). FDL Publishing is a California single-member limited liability company whose sole member is Ms. Fonseca. Its registered office is located at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015, and its Employer Identification Number is 82-4193507. FDL Publishing owns the publishing rights — that is, the copyright in the underlying musical compositions — in Ms. Fonseca's catalog. It is the entity through which Ms. Fonseca administers and controls her compositional copyrights.

Mariposa Sound Recordings, LLC ("Mariposa Sound"). Mariposa Sound is a California single-member limited liability company whose sole member is also Ms. Fonseca. Its registered office is the same as FDL Publishing, at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015, and its Employer Identification Number is 84-2671058. Mariposa Sound owns the master recording rights — that is, the copyright in the sound recordings — in Ms. Fonseca's catalog. Together, FDL Publishing and Mariposa Sound hold all copyright interests in the works at issue in this litigation.

Ms. Fonseca's catalog is administered on a non-exclusive basis by Thornfield Music Administration, Inc. (Raymond O. Sato, President), located at 6363 Wilshire Boulevard, Suite 410, Los Angeles, California 90048. Thornfield handles day-to-day licensing administration, royalty collection, and audit functions on behalf of FDL Publishing and Mariposa Sound. It was a routine audit conducted by Thornfield in late 2022 that first alerted Ms. Fonseca to the unauthorized exploitation of her works by Crescendo.

B. Defendant. Crescendo Digital Media, Inc. Crescendo is a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758. It operates a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation platform branded as "Crescendo Stream." The platform offers curated and algorithmically generated playlists of licensed music to both individual subscribers and commercial clients across a range of industries, including fitness, hospitality, and retail.

Crescendo was founded in 2016 by its Chief Executive Officer, Nikolai R. Sorensen. By fiscal year 2022, the company reported annual revenue of $189 million and maintained licensing agreements with over 4,000 rights holders. The platform has approximately 2.3 million direct-to-consumer subscribers. Crescendo is privately held. In 2021, the company raised $75 million in a Series C financing round led by Ridgeline Ventures Partners, LP (General Partner: Warren Hu). The company's in-house legal department is headed by General Counsel Priya Chandrasekaran, whose responsibilities specifically include rights management and licensing compliance.

Crescendo is represented in this litigation by the law firm of Hargrove, Pennington & Cao LLP, out of its Austin, Texas office located at 401 Congress Avenue, Suite 2800, Austin, Texas 78701. Lead counsel is Denise K. Whitford, Partner in the firm's intellectual Property Litigation practice group, and co-counsel is Jason M. Trujillo, Senior Associate.

III. PROCEDURAL HISTORY

The following timeline sets forth the key procedural events in this matter:

February 20, 2023 — Engagement of Counsel. Calderwood & Harkness LLP was engaged by Ms. Fonseca to investigate and pursue claims arising from Crescendo's unauthorized use of her copyrighted works. The matter was opened under firm Matter No. 1035-00003.

March 6, 2023 — Cease-and-Desist Letter. Calderwood & Harkness sent a detailed cease-and-desist letter to Crescendo's General Counsel, Priya Chandrasekaran, demanding the immediate cessation of all unauthorized reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's copyrighted compositions and sound recordings. The letter further demanded the preservation of all records relating to the use of Ms. Fonseca's works, a full accounting of all streams, sublicense revenue, and related income, and payment of estimated back-royalties of at least $1,087,200.

March 17, 2023 — Crescendo's Response. Hargrove, Pennington & Cao LLP responded on Crescendo's behalf, disputing that any infringement had occurred. The response asserted that Crescendo had acted in good faith reliance on a blanket license previously obtained through Peregrine Music Group, LLC, and contended that Crescendo had no reason to believe the license had expired. The response did not offer any accounting or propose any payment.

April 3, 2023 — Filing of Complaint. Plaintiffs filed a Complaint for Copyright Infringement in the United States District Court for the Central District of California. The case was assigned Case No. 2:23-cv-02841-RGK-PLA and was assigned to the Honorable R. Gary Klausner, United States District Judge, with the Honorable Patricia L. Alvarez, United States Magistrate Judge, handling pretrial and discovery matters.

April 28, 2023 — Answer and Affirmative Defenses. Crescendo filed its Answer together with twelve affirmative defenses, including assertions of good faith and innocent infringement under 17 U.S.C. § 504(c)(2), implied license, estoppel, laches, failure to mitigate damages, and statute of limitations under 17 U.S.C. § 507(b). Notably, Crescendo did not assert a fair use defense.

May 15, 2023 — Early Neutral Evaluation Conference. The parties appeared before Magistrate Judge Alvarez for an Early Neutral Evaluation conference. During the conference, the Court expressed skepticism regarding Crescendo's "good faith reliance" defense. Specifically, Judge Alvarez noted that a sophisticated digital media company with in-house legal counsel and over 4,000 licensing relationships should have systems in place to track license expirations, and that reliance on an expired license obtained through a defunct intermediary was, in the Court's words, "a difficult argument to sustain." The Court encouraged the parties to explore mediation as a means of resolving the dispute efficiently.

June 8, 2023 — Retention of Forensic Accounting Expert. Plaintiffs retained the Lakeshore Forensic Accounting Group, LLC (Dr. Ellen Marchetti, CPA, CFF, Engagement Lead; 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606) to serve as forensic accounting and royalty audit expert. Dr. Marchetti commenced a forensic analysis of Crescendo's streaming data, sublicense agreements, and revenue reports, as well as historical royalty data from Thornfield Music Administration.

July 10, 2023 — Mediation. The parties have agreed to participate in a full-day mediation session before the Honorable Gerald T. Nakashima (Ret.) at Ashgrove Equity Partners Dispute Resolution Services, LLC. This brief is submitted in advance of that session.

IV. LIABILITY

Plaintiffs' case on liability is overwhelming. The core facts establishing infringement are undisputed, copyright ownership is not contested, and Crescendo's affirmative defenses are legally and factually deficient. The following sections address each element in turn.

A. Copyright Ownership and Registration

Ms. Fonseca holds valid, timely registered copyrights with the United States Copyright Office for all forty-seven (47) compositions at issue (PA-series registrations, Nos. PA 1-742-891 through PA 2-318-406) and all thirty-two (32) sound recordings at issue (SR-series registrations, Nos. SR 0-891-220 through SR 1-104-773). The registration dates for the infringed compositions span from 1998 to 2021, reflecting the breadth of Ms. Fonseca's career and the depth of the catalog that Crescendo exploited without authorization.

All registrations were timely filed — either within three months of first publication or prior to the commencement of infringement — thereby qualifying Plaintiffs for the full range of remedies available under the Copyright Act, including statutory damages under 17 U.S.C. § 504(c) and attorney's fees under 17 U.S.C. § 505. This is a critical point: Plaintiffs have the option to elect statutory damages, which can reach $150,000 per work in cases of willful infringement.

FDL Publishing owns the copyright in the underlying musical compositions. Mariposa Sound owns the copyright in the sound recordings. Together, these two entities — both wholly owned by Ms. Fonseca — hold all exclusive rights implicated by Crescendo's unauthorized conduct. Crescendo has not challenged Plaintiffs' ownership of any of the copyrights at issue. Ownership is undisputed.

B. Unauthorized Use — Undisputed Facts

The core factual predicate for liability is straightforward and, in its essential elements, undisputed.

Crescendo previously held a blanket license to certain of Ms. Fonseca's works. That license was obtained not directly from Ms. Fonseca or her entities, but through Peregrine Music Group, LLC, a California limited liability company that operated as a digital music distributor and sublicensing intermediary. The Peregrine license was effective from January 1, 2016 through December 31, 2018 — a fixed three-year term.

The terms of the Peregrine license were clear and unambiguous. Specifically, the license was: (a) non-transferable and non-assignable, meaning Crescendo could not claim that any rights survived beyond Peregrine's involvement; (b) contained no automatic renewal provision, meaning the license would not continue beyond its stated term absent an affirmative act of renewal by the parties; and (c) terminated upon either the expiration of the three-year term or the dissolution of Peregrine, whichever occurred first.

Peregrine ceased operations in November 2018 and was subsequently dissolved as a California LLC. The blanket license expired on its own terms on December 31, 2018. No successor license was ever executed between Crescendo and any party — not Ms. Fonseca, not FDL Publishing, not Mariposa Sound, not Thornfield Music Administration, and not any other intermediary or distributor. No rights under the Peregrine license were assigned or transferred to Crescendo or to any third party. The license simply ended.

Despite the expiration, Crescendo continued — without interruption — to reproduce, distribute, publicly perform, and digitally transmit the forty-seven compositions and thirty-two sound recordings through its Crescendo Stream platform and through sublicensed content packages provided to commercial clients. This unauthorized exploitation continued from January 1, 2019 through at least December 31, 2022, a period of approximately forty-eight (48) months.

The scale of the unauthorized use is reflected in Crescendo's own data. Its internal content management system ("CMS") logged a total of 18,426,331 streams of Ms. Fonseca's works during the four-year infringement period. Moreover, Crescendo's CMS tagged Ms. Fonseca's works as "cleared — blanket license" throughout the entirety of this period. This tag indicates either a systemic failure to update license status records when the Peregrine license expired, or a deliberate decision not to investigate or remediate the lapse — or both.

In addition to the direct-to-consumer streaming, Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) separate commercial clients. These clients operated in the fitness, hospitality, and retail sectors and used the playlists to provide background music or exercise-class accompaniment in their commercial establishments. The sublicense revenue attributable to Ms. Fonseca's catalog during the infringement period was approximately $2,740,000, based on Crescendo's own revenue reports and sublicense agreements produced in discovery. None of this revenue was remitted to Ms. Fonseca or her entities.

These undisputed facts establish the unauthorized exploitation of multiple exclusive rights belonging to Plaintiffs under 17 U.S.C. § 106:

• Reproduction (§ 106(1)) — Crescendo created server-side copies of Ms. Fonseca's compositions and sound recordings in order to facilitate on-demand streaming delivery to subscribers and sublicensees. Each stream initiated by a user required the reproduction of the relevant digital files on Crescendo's servers.

• Distribution (§ 106(3)) — Crescendo made Ms. Fonseca's works available to its approximately 2.3 million direct-to-consumer subscribers and to its fourteen commercial sublicensees, constituting a distribution of copyrighted works to the public.

• Public Performance (§ 106(4)) — On-demand streaming constitutes a public performance of the underlying musical compositions. Each time a subscriber or sublicensee streamed one of Ms. Fonseca's compositions, a public performance of that composition occurred.

• Digital Audio Transmission (§ 106(6)) — Applicable to the copyrighted sound recordings, Crescendo's streaming of Ms. Fonseca's master recordings constituted digital audio transmissions within the meaning of Section 106(6).

At no point during the four-year infringement period did Crescendo obtain any mechanical license, synchronization license, master use license, digital performance license, or any other form of authorization from Plaintiffs or their representatives for any use of the works at issue. The infringement is clear, comprehensive, and sustained.

C. Willfulness. The infringement was willful within the meaning of 17 U.S.C. § 504(c)(2). Under the Copyright Act, willful infringement does not require proof that the infringer acted with the specific intent to infringe; it is sufficient to show that the infringer acted with reckless disregard for the copyright holder's rights or with knowledge of the infringing nature of its conduct. See Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998); Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186 (9th Cir. 2001).

Here, the evidence of willfulness is compelling. Crescendo is a sophisticated digital media company with $189 million in annual revenue, a dedicated in-house legal department, and a General Counsel — Priya Chandrasekaran — whose responsibilities specifically include rights management and licensing compliance. Crescendo maintains licensing relationships with over 4,000 rights holders and operates a content management system that is designed, among other things, to track the clearance status of every piece of content on its platform.

The Peregrine license had a fixed, unambiguous expiration date: December 31, 2018. There was no ambiguity in the license terms, no automatic renewal clause, and no basis for any reasonable belief that the license continued beyond that date. The licensor — Peregrine Music Group, LLC — ceased operations in November 2018 and was dissolved. These were readily ascertainable facts. A company of Crescendo's size, sophistication, and resources — a company that employs in-house legal counsel specifically to manage licensing compliance — had an obligation to verify the status of its licenses and to ensure that it was not exploiting copyrighted content without authorization.

Crescendo failed to verify the license status for over four years. It continued to stream Ms. Fonseca's works, sublicense her catalog to commercial clients, and generate millions of dollars in revenue from content it had no right to use — all while its own content management system incorrectly tagged the works as "cleared." This conduct constitutes, at a minimum, willful blindness and recklessness with respect to the copyright interests of Ms. Fonseca and her entities.

Notably, at the May 15, 2023 Early Neutral Evaluation conference, Magistrate Judge Alvarez expressed skepticism about Crescendo's good faith defense, observing that a sophisticated digital media company should have systems in place to track license expirations. This judicial observation, while preliminary, is significant. It suggests that the Court is unlikely to credit Crescendo's defense at trial and may well find the infringement to be willful, thereby opening the door to enhanced statutory damages of up to $150,000 per work.

Plaintiffs anticipate that further discovery — including the production of internal communications among Crescendo's licensing, legal, and content management teams, as well as detailed CMS audit logs — will reveal additional evidence of knowledge or reckless disregard. The willfulness finding is supported by the facts already in the record, and the evidentiary picture will only strengthen as the case proceeds.

D. Crescendo's Defenses Are Meritless

Crescendo has asserted twelve affirmative defenses in its Answer. The defenses that are substantively relevant to the merits are addressed in turn below. None has merit.

1. Good Faith / Innocent Infringement (17 U.S.C. § 504(c)(2)). Crescendo's primary defense is that it reasonably and in good faith relied on the blanket license it had previously obtained through Peregrine Music Group, LLC. This defense fails for multiple reasons.

First, the Peregrine license expired by its own terms on December 31, 2018. The license contained no automatic renewal provision and was non-transferable. There was no ambiguity in the expiration date and no reasonable basis for believing the license continued after that date.

Second, the licensor — Peregrine Music Group — ceased operations in November 2018 and was dissolved. Even if Crescendo could have argued that it did not initially notice the license expiration, the disappearance of the licensor entity was an unmistakable signal that the licensing arrangement had come to an end. A reasonable licensee — particularly a sophisticated company with in-house legal counsel — would have investigated the status of any licenses obtained through a distributor that had gone out of business.

Third, as Magistrate Judge Alvarez noted during the ENE conference, a sophisticated digital media company with a dedicated legal department and over 4,000 licensing relationships has a duty to verify license status. The innocent infringer defense under Section 504(c)(2) is designed to protect genuinely unsophisticated parties who had no reason to know that their conduct was infringing. It is not a refuge for large, well-resourced companies that simply fail to do their due diligence. At best, a successful innocent infringement defense might reduce statutory damages from the willful range to the standard range — but even that outcome is unlikely given the weight of the evidence establishing willfulness.

2. Implied License. Crescendo's assertion of an implied license is equally meritless. An implied license arises only when the totality of the circumstances indicates that the copyright owner intended to grant permission for the use at issue. See Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990). There must be evidence of conduct by the copyright holder from which a license can reasonably be inferred.

Here, no such evidence exists. 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, did not negotiate a new license, did not accept any payment, and did not engage in any course of dealing that could give rise to an inference of implied permission. She was entirely unaware of the continued exploitation of her works until a routine audit conducted by Thornfield Music Administration in late 2022 uncovered the unauthorized use. The implied license defense has no factual basis.

3. Estoppel and Laches. Crescendo's estoppel and laches defenses are predicated on the assertion that Ms. Fonseca delayed unreasonably in asserting her rights. This assertion is factually baseless.

Ms. Fonseca had no knowledge of the infringement until late 2022, when the Thornfield audit revealed the unauthorized streaming and sublicensing activity. Upon discovering the infringement, she acted promptly: she engaged counsel in February 2023, a cease-and-desist letter was sent in March 2023, and a complaint was filed in April 2023. This timeline reflects diligent prosecution, not delay or acquiescence. There is no factual predicate for either estoppel or laches.

Moreover, equitable defenses such as laches are strongly disfavored in copyright cases within the statutory limitations period. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 954 (9th Cir. 2001). All of Plaintiffs' claims fall well within the three-year statute of limitations.

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). Under the discovery rule adopted in the Ninth Circuit, a claim accrues when the plaintiff knew or reasonably should have known of the infringement. Roley v. New World Pictures, 19 F.3d 479, 481 (9th Cir. 1994).

Ms. Fonseca discovered the infringement in late 2022 through the Thornfield audit. The complaint was filed on April 3, 2023 — well within three years of the date of discovery. Accordingly, all claims for unauthorized use occurring from 2019 through 2022 are timely. The statute of limitations defense provides no basis for excluding any portion of Plaintiffs' claims.

5. Fair Use (17 U.S.C. § 107). Crescendo has not asserted a fair use defense, and any such defense would be frivolous. The unauthorized use was entirely commercial in nature; Crescendo reproduced and streamed complete copyrighted works (not excerpts or transformative adaptations); the works are creative and highly original; and Crescendo's use served as a direct market substitute for properly licensed streams. All four statutory fair use factors weigh decisively against Crescendo. There is no colorable fair use argument on these facts.

6. Failure to Mitigate. Crescendo's failure-to-mitigate defense is without merit. Ms. Fonseca acted promptly upon discovering the infringement. She had no prior knowledge of the unauthorized use and no obligation to monitor Crescendo's platform for compliance with a license that had expired years earlier. A copyright holder has no duty to police the conduct of a former licensee, particularly when the licensee's continued use is unknown to the rights holder. This defense has no legal or factual support.

V. DAMAGES

A. Forensic Analysis

Plaintiffs' damages have been quantified through a rigorous forensic analysis conducted by Dr. Ellen Marchetti, CPA, CFF, of the Lakeshore Forensic Accounting Group, LLC. Dr. Marchetti is a certified public accountant and certified in financial forensics. She has extensive experience in royalty audits and damages quantification in intellectual property disputes, having served as a forensic accounting expert in over forty copyright and music licensing cases in federal courts nationwide.

Dr. Marchetti's analysis is based on three categories of data: (1) Crescendo's own discovery production (Bates-stamped documents CDM-000001 through CDM-004218), which includes streaming logs, sublicense agreements, and revenue reports from the Crescendo Stream platform; (2) historical royalty statements from Thornfield Music Administration, Inc. reflecting market-rate royalty earnings for Ms. Fonseca's catalog during the relevant period and comparable periods; and (3) market rate data for comparable digital music licensing transactions compiled from industry sources and publicly available rate schedules.

The results of Dr. Marchetti's analysis are summarized below.

B. Back-Royalties Owed

Dr. Marchetti's forensic analysis quantifies the back-royalties owed to Plaintiffs as follows:

The per-stream rates used in this analysis — $0.0091 for mechanical royalties and $0.02975 for master use royalties — are consistent with industry-standard rates for digital streaming platforms of Crescendo's size and market position. The 9% mechanical royalty rate applied to sublicense revenue reflects the statutory rate established by the Copyright Royalty Board for mechanical reproductions in the context of digital phonorecord deliveries. The performance royalty estimate of $126,400 is derived from a gap analysis comparing the royalties Ms. Fonseca would have received through performing rights organizations (such as ASCAP or BMI) if the streams had been properly reported and licensed, against the actual amounts received (which were zero, because the streams were never reported).

The rounded total of $548,200 for master use royalties reflects a precise calculation of $548,183.35, rounded to the nearest hundred for presentation purposes.

C. Statutory Damages

As an alternative to actual damages, Plaintiffs are entitled to elect statutory damages under 17 U.S.C. § 504(c). Because all of the compositions and sound recordings at issue were timely registered with the U.S. Copyright Office — either within three months of first publication or prior to the commencement of infringement — Plaintiffs satisfy the eligibility requirements for statutory damages under 17 U.S.C. § 412.

The statutory damages framework provides the following ranges:

Non-willful infringement: The Court may award statutory damages of not less than $750 and not more than $30,000 per work infringed. With forty-seven (47) compositions qualifying as separate works, this yields a non-willful range of $35,250 (47 × $750) to $1,410,000 (47 × $30,000).

Willful infringement: Where the infringement is found to be willful, the Court may award statutory damages of up to $150,000 per work infringed. With forty-seven compositions, this yields a willful ceiling of $7,050,000 (47 × $150,000).

It bears noting that if the Court counts the compositions and sound recordings as separate works — which is the correct approach under the statute, as compositions and sound recordings are distinct categories of copyrightable subject matter — then up to seventy-nine (79) works could qualify for statutory damages, yielding a willful ceiling of $11,850,000 (79 × $150,000).

As set forth in Section IV.C above, the evidence of willfulness is strong. Crescendo is a sophisticated company that failed to verify the status of an expired license for over four years while continuing to exploit Ms. Fonseca's works on a massive scale. Magistrate Judge Alvarez has already expressed skepticism about Crescendo's good faith defense. Plaintiffs are confident that a finding of willfulness is likely if this case proceeds to trial.

D. Attorney's Fees and Costs

Under 17 U.S.C. § 505, the Court has discretion to award full costs and reasonable attorney's fees to the prevailing party in a copyright action. Attorney's fees are routinely awarded to prevailing plaintiffs who hold timely registrations. See Kirtsaeng v. Crowne Albany Industries, Inc., 579 U.S. 197 (2016) (holding that the objective reasonableness of the losing party's litigation position is a significant factor in fee awards).

Calderwood & Harkness's current lodestar in this matter is approximately $155,000 as of the date of this brief, reflecting work performed from engagement through preparation for mediation. If this case proceeds through discovery, dispositive motions, and trial, the projected total lodestar is approximately $285,000. Plaintiffs will seek full recovery of attorney's fees if the case proceeds to judgment. Crescendo's litigation position — particularly its reliance on an expired license from a defunct entity — is objectively unreasonable and weighs heavily in favor of a fee award.

E. Summary of Plaintiffs' Damages Exposure to Crescendo

The following table summarizes the range of Crescendo's potential financial exposure in this litigation:

Plaintiffs' pre-litigation demand, communicated in the March 6, 2023 cease-and-desist letter, was $2,312,200, comprising back-royalties of $1,087,200, a statutory enhancement of $940,000 reflecting Crescendo's willful conduct, and projected attorney's fees of $285,000. This demand represented a substantial discount from the maximum statutory damages exposure and was intended to provide Crescendo with an opportunity to resolve the matter quickly and efficiently. Crescendo declined to engage on the demand.

VI. CONTEXT: THE IMPACT ON MS. FONSECA

While the legal analysis and damages calculations set forth above provide the framework for evaluating this case, it is important for the mediator to understand the real-world impact of Crescendo's conduct on Ms. Fonseca and her livelihood.

Ms. Fonseca is an independent artist who has spent twenty-eight years building a career and a catalog of music that she owns and controls. Her decision to retain ownership of her publishing and master recording rights — rather than signing with a major label or publisher — was a deliberate career choice reflecting decades of work, sacrifice, and financial discipline. That independence is the foundation of her economic security and her ability to continue creating music on her own terms. Her combined average annual royalty income of approximately $1,820,000 depends entirely on the proper licensing, reporting, and collection of royalties from parties that use her works.

The unauthorized exploitation of forty-seven compositions and thirty-two master recordings — representing a significant portion of her most commercially successful works — deprived Ms. Fonseca of over $1 million in royalties across a four-year period. This is not an abstract harm. It is money that Ms. Fonseca earned through her creative labor and that she was entitled to receive under the copyright laws of the United States.

Beyond the direct financial loss, Crescendo's conduct undermines the value of Ms. Fonseca's catalog. When a well-capitalized digital media company can exploit an independent artist's works for four years without paying a single dollar in royalties — and without consequence unless and until caught — it creates a perverse incentive structure that harms not just Ms. Fonseca but every independent rights holder in the music industry. The message it sends is that rights holders must constantly police major platforms at their own expense, or risk having their works used for free.

The manner in which the infringement was discovered underscores this point. Ms. Fonseca learned of Crescendo's unauthorized use only through a routine audit conducted by Thornfield Music Administration in late 2022. The audit revealed discrepancies between the streaming activity reflected in publicly available data and the royalty payments Ms. Fonseca was receiving. Had the Thornfield audit not flagged the issue, Crescendo would have continued its unauthorized exploitation indefinitely — generating revenue from Ms. Fonseca's works without ever paying for the privilege.

Ms. Fonseca comes to this mediation not seeking to punish Crescendo, but to be made whole for the unauthorized use of her life's work and to ensure that any continued use of her music by Crescendo occurs on legitimate, properly documented, and fairly compensated terms.

VII. SETTLEMENT POSITION

A. Plaintiffs' Objectives

Plaintiffs have identified the following core objectives for a mediated resolution of this dispute:

1. Full compensation for the unauthorized exploitation of Ms. Fonseca's compositions and sound recordings during the four-year infringement period (January 1, 2019 through December 31, 2022).

2. A prospective licensing arrangement that legitimizes the ongoing relationship between the parties and provides Ms. Fonseca with guaranteed revenue from any continued use of her works by Crescendo.

3. Avoidance of the expense, delay, and uncertainty of continued litigation for both sides.

4. Confidentiality regarding the terms of any settlement agreement.

5. Finality through the execution of a comprehensive mutual release and dismissal of the action with prejudice.

B. Proposed Settlement Framework

Plaintiffs entered this mediation in good faith and are prepared to resolve this dispute on reasonable terms. As noted above, Plaintiffs' pre-litigation demand was $2,312,200. The proposed settlement framework set forth below reflects a pragmatic assessment of the case, a genuine desire to reach resolution, and a willingness to accept a significant discount from the maximum exposure in exchange for certainty and an ongoing business relationship.

1. Lump-Sum Cash Payment. Plaintiffs propose a total cash payment in the range of $1,500,000 to $1,700,000, reflecting the following components:

• Back-royalties of $1,087,200, as calculated by Dr. Marchetti based on Crescendo's own streaming data, sublicense revenue, and industry-standard royalty rates. This figure represents the minimum amount owed to Plaintiffs for the unauthorized use of their copyrighted works over the four-year infringement period.

• A statutory enhancement and willfulness premium, reflecting Crescendo's culpable conduct — its failure to verify the status of an expired license for over four years, its continued exploitation of Ms. Fonseca's works on a massive commercial scale, and the strength of the evidence supporting a willfulness finding. The enhancement is modest in comparison to the statutory damages that would be available at trial.

• A contribution toward Plaintiffs' attorney's fees, in the approximate amount of $195,000. This figure falls between the current lodestar of $155,000 and the projected through-trial lodestar of $285,000, and reflects the fact that early resolution saves both sides significant legal costs going forward.

Allocation. The cash payment would be allocated between FDL Publishing (for the composition copyrights) and Mariposa Sound (for the sound recording copyrights), with a separate component payable directly to Calderwood & Harkness LLP for attorney's fees and costs.

Payment Schedule. Plaintiffs propose a two-installment payment schedule. The majority of the settlement amount — not less than seventy percent (70%) — would be due within thirty (30) days of execution of the settlement agreement. The balance would be due within ninety (90) days of execution. This schedule provides Crescendo with reasonable flexibility while ensuring that Plaintiffs receive substantially all of the compensation owed within a commercially reasonable timeframe.

2. Prospective Licensing Arrangement. In addition to the cash payment for past infringement, Plaintiffs propose the establishment of a forward-looking licensing arrangement that would permit Crescendo to continue streaming Ms. Fonseca's works on legitimate terms. The key terms of the proposed license are as follows:

• Scope: A non-exclusive license permitting Crescendo to continue streaming the forty-seven (47) compositions and thirty-two (32) master recordings currently on its platform.

• Term: Approximately three (3) years from the date of execution, with an option to negotiate renewal.

• Per-Stream Royalty: A market-rate per-stream royalty of $0.035 per stream, payable on all streams of the licensed works through the Crescendo Stream platform and any sublicensed channels.

• Minimum Annual Guarantee (MAG): A minimum annual guarantee of $175,000 per year, payable regardless of actual streaming volume, to provide Ms. Fonseca with revenue certainty. The MAG is recoupable against per-stream royalties — that is, if actual per-stream royalties exceed the MAG in a given year, Crescendo pays only the actual amount.

• Reporting and Payment: Quarterly reporting and payment obligations, with detailed statements reflecting stream counts by work, revenue generated, and royalties owed.

• Default and Termination: Automatic termination and mandatory takedown of all licensed works within forty-eight (48) hours if Crescendo defaults on any payment obligation, subject to a short cure period of ten (10) business days following written notice of the default. This provision is essential to protect Ms. Fonseca from a repeat of the circumstances that gave rise to this litigation.

• Sublicensing: Crescendo may continue sublicensing curated playlists containing Ms. Fonseca's works to commercial clients, provided that all sublicense revenue attributable to the licensed works is captured in the royalty calculations and reported in the quarterly statements.

The prospective license benefits both parties. Crescendo obtains legitimate access to desirable content without disrupting its platform, its subscriber experience, or its commercial client relationships. Ms. Fonseca obtains a guaranteed revenue stream from a major platform and the assurance that her works are being used under a properly documented license with enforceable terms.

3. Audit Rights. The settlement agreement would include annual audit rights permitting Plaintiffs — through Thornfield Music Administration or a designated independent auditor — to audit Crescendo's streaming records, sublicense agreements, and revenue data to verify the accuracy of royalty payments. If any audit reveals discrepancies in excess of five percent (5%) between reported and actual royalties owed, Crescendo would bear the full cost of the audit. This provision is standard in music licensing agreements and is critical to ensuring ongoing compliance.

4. Mutual Confidentiality. Plaintiffs propose a standard mutual confidentiality provision covering the terms of the settlement agreement and the mediation process. The existence of the settlement (but not its terms) may be disclosed as necessary. Customary carve-outs would apply for tax reporting obligations, disclosures required by law or court order, and disclosures to Plaintiffs' catalog administrators (i.e., Thornfield Music Administration) in the ordinary course of catalog administration.

5. Mutual Release and Dismissal. The settlement would include a mutual release of all claims arising from the identified works for the period from January 1, 2019 through the date of execution of the settlement agreement. The release would not extend to any future breach of the prospective license or to any works not identified in the settlement agreement.

Upon execution of the settlement agreement and receipt of the first installment payment, Plaintiffs would file a stipulation for dismissal with prejudice of all claims in Case No. 2:23-cv-02841-RGK-PLA. The parties would request that the Court retain jurisdiction to enforce the terms of the settlement agreement in the event of any dispute regarding compliance.

C. Why This Settlement Is Reasonable

Plaintiffs believe that the proposed settlement framework represents a fair, reasonable, and commercially sensible resolution of this dispute. Several considerations support this conclusion:

The proposed cash amount represents a significant discount from maximum exposure. The proposed range of $1,500,000 to $1,700,000 is a fraction of the maximum statutory damages exposure of $7,050,000 (based on compositions alone) or $11,850,000 (if compositions and sound recordings are counted separately). Even at the high end of the proposed range, Crescendo would pay less than twenty-five percent of the maximum statutory exposure. This discount reflects Plaintiffs' genuine interest in reaching a practical resolution rather than pursuing the maximum available recovery at trial.

The prospective license benefits Crescendo. The proposed licensing arrangement allows Crescendo to continue offering Ms. Fonseca's popular catalog to its subscribers and commercial clients without any disruption to its platform or its business relationships. The alternative — a judgment requiring immediate removal of all of Ms. Fonseca's works from the platform and all sublicensed content packages — would be commercially disruptive and potentially damaging to Crescendo's relationships with its fourteen commercial clients and its subscriber base.

The liability outcome at trial is strongly in Plaintiffs' favor. The core facts establishing infringement are undisputed. Crescendo's defenses are weak, and Magistrate Judge Alvarez's comments at the ENE conference signal that the Court is unlikely to credit those defenses. A trial would almost certainly result in a finding of liability, and the only real question would be the quantum of damages. Settling now allows Crescendo to control its exposure and avoid the risk of a significantly larger judgment.

A trial would be costly for both sides. Continued litigation through discovery, dispositive motions, and trial would impose significant costs on both parties. Plaintiffs' projected attorney's fees alone would reach approximately $285,000 through trial. Crescendo's legal costs would likely be comparable or greater. An early resolution conserves resources for both sides.

The MAG is reasonable in context. The proposed minimum annual guarantee of $175,000 per year — totaling $525,000 over the three-year license term — is modest in light of the $2,740,000 in sublicensing revenue that Crescendo generated from Ms. Fonseca's catalog during the four-year infringement period. The MAG provides Ms. Fonseca with baseline revenue certainty while allowing Crescendo to benefit from any increases in streaming volume.

Early resolution preserves the business relationship. A settlement allows the parties to move forward with a legitimate, mutually beneficial licensing arrangement. Continued litigation — and, in particular, a public trial — could damage Crescendo's reputation with its 4,000+ rights holder partners and with its investor, Ridgeline Ventures Partners, LP. A publicized finding of willful copyright infringement could have significant negative implications for a company whose entire business model depends on the trust and cooperation of content owners. Early resolution avoids these reputational risks.

VIII. CONCLUSION

Plaintiffs' case on liability is overwhelming. The key facts are undisputed: Crescendo used Ms. Fonseca's copyrighted works for four years without any license or authorization, generating millions of streams and hundreds of thousands of dollars in sublicensing revenue, none of which was shared with the rights holder. Crescendo's sole defense — reliance on an expired license from a defunct distributor — is factually and legally untenable, and has already received skeptical treatment from the Court.

Damages are substantial and well-documented by Dr. Marchetti's forensic analysis. Back-royalties alone total $1,087,200, and the statutory damages exposure — which could reach $7,050,000 or more if willfulness is found — provides powerful incentive for Crescendo to resolve this matter at mediation rather than at trial.

Plaintiffs are prepared to resolve this dispute on the reasonable terms outlined in this brief. The proposed settlement framework — a lump-sum cash payment in the range of $1,500,000 to $1,700,000, coupled with a prospective three-year licensing arrangement with a minimum annual guarantee of $175,000 — compensates Ms. Fonseca fairly for the unauthorized exploitation of her life's work while providing Crescendo with continued access to desirable content on legitimate terms.

Plaintiffs look forward to a productive mediation session on July 10, 2023 and sincerely hope to reach a resolution that compensates Ms. Fonseca fairly, addresses Crescendo's ongoing need for content, and avoids the considerable expense and uncertainty of continued litigation for all parties.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Alan Ngo, Partner Christy Bauer, Associate

777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-7400

Email: a.ngo@calderwoodharkness.com

Email: c.bauer@calderwoodharkness.com

Attorneys for Plaintiffs Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC

CONFIDENTIAL — FOR MEDIATION PURPOSES ONLY Pursuant to Cal. Evid. Code § 1119 and Fed. R. Evid. 408 This document is inadmissible in any court proceeding and is intended solely for submission to the mediator.

Category	Calculation	Amount
Mechanical royalties (streaming)	$0.0091 per stream × 18,426,331 streams	$167,680
Mechanical royalties (sublicensing)	Pro-rata share of $2,740,000 sublicense revenue at industry-standard 9% mechanical royalty rate	$244,920
Subtotal — Mechanical Royalties	$412,600
Master use royalties (streaming)	$0.02975 per stream × 18,426,331 streams	$548,200
Performance royalties (estimated unremitted)	Based on performing rights organization analogues and Thornfield gap analysis	$126,400
Total Back-Royalties	$412,600 + $548,200 + $126,400	$1,087,200
Component	Low End	High End
Back-royalties (actual damages)	$1,087,200	$1,087,200
Statutory damages (alternative to actual, compositions only)	$35,250	$7,050,000
Attorney's fees	$155,000 (current lodestar)	$285,000 (projected through trial)
Total Potential Exposure	$1,087,200 + $155,000 in fees	$7,050,000 + $285,000 in fees

CALDERWOOD & HARKNESS LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-7400
CONFIDENTIAL MEDIATION BRIEF OF PLAINTIFFS
FOR MEDIATION PURPOSES ONLY Pursuant to Cal. Evid. Code § 1119 and Fed. R. Evid. 408
This document is confidential, privileged, and inadmissible in any court proceeding. It is prepared solely for submission to the mediator and is not to be disclosed to opposing counsel or any third party without the express written consent of Plaintiffs.
July 3, 2023
Hon. Gerald T. Nakashima (Ret.) Ashgrove Equity Partners Dispute Resolution Services, LLC 1901 Avenue of the Stars, Suite 1050 Los Angeles, CA 90067
Re: Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA (C.D. Cal.)
Mediation Scheduled: July 10, 2023
Dear Judge Nakashima:
This Confidential Mediation Brief is submitted on behalf of Plaintiffs Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC (collectively, "Plaintiffs") in advance of the mediation session scheduled for July 10, 2023 before Your Honor at Ashgrove Equity Partners Dispute Resolution Services. This brief is intended to provide the mediator with a comprehensive understanding of the facts, the legal framework, Plaintiffs' assessment of liability and damages, and the settlement framework that Plaintiffs believe represents a fair and achievable resolution of this dispute.
I. INTRODUCTION
At its core, this is a straightforward copyright infringement action. Defendant Crescendo Digital Media, Inc. ("Crescendo"), a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758, used forty-seven (47) copyrighted musical compositions and thirty-two (32) copyrighted sound recordings belonging to Plaintiff Marguerite D. Fonseca — without any license, authorization, or payment — for a period of approximately four years, from January 1, 2019 through December 31, 2022.
During that four-year period, Ms. Fonseca's works were streamed over 18.4 million times through Crescendo's proprietary digital platform — specifically, 18,426,331 streams, a figure derived from Crescendo's own platform data and internal streaming logs produced in discovery. Crescendo did not merely make these works available to its approximately 2.3 million direct-to-consumer subscribers. It went further: Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) separate commercial clients — fitness chains, hospitality brands, and retail environments — generating sublicense revenue attributable to Ms. Fonseca's catalog of approximately $2,740,000 over the infringement period. Not a single dollar of that revenue was shared with Ms. Fonseca or any entity acting on her behalf.
Crescendo's sole defense is that it relied in good faith on a blanket license that had expired more than four years before Plaintiffs filed this lawsuit. That license, which was obtained through a now-defunct digital music distributor called Peregrine Music Group, LLC, expired by its own terms on December 31, 2018. Peregrine itself ceased operations in November 2018 and was subsequently dissolved. No successor license was ever negotiated, executed, or even discussed. Crescendo simply continued exploiting Ms. Fonseca's works as though the license remained in effect — for four full years, across tens of millions of streams, and through over a dozen sublicensing arrangements — without ever bothering to verify whether it still had the right to do so.
This is not a case involving a small start-up struggling to navigate a complex licensing landscape. Crescendo is a sophisticated, well-capitalized digital media company with $189 million in fiscal year 2022 revenue, approximately 2.3 million subscribers, and an in-house legal department headed by General Counsel Priya Chandrasekaran. The company raised a $75 million Series C financing round in 2021, led by Ridgeline Ventures Partners, LP. Its CEO, Nikolai R. Sorensen, founded the company in 2016 with the express purpose of building a digital content aggregation and streaming platform. Crescendo maintains licensing relationships with over 4,000 rights holders. It is precisely the kind of company that should have robust systems in place to track license expirations — and precisely the kind of company that cannot credibly claim ignorance when a license lapses and it continues to use copyrighted works without authorization.
Plaintiffs come to this mediation in good faith, with a genuine desire to reach a fair resolution. Ms. Fonseca seeks compensation for the unauthorized exploitation of her life's work — compositions and recordings that represent nearly three decades of creative effort — and the establishment of a legitimate licensing framework going forward, so that Crescendo can continue to offer her works to its subscribers and commercial clients on proper terms. The proposed settlement framework set forth in this brief is designed to achieve both objectives while avoiding the considerable expense, delay, and uncertainty of continued litigation.
II. THE PARTIES
A. Plaintiffs. Marguerite D. Fonseca. Ms. Fonseca is fifty-four years old and resides at 4827 Laurelgrove Avenue, Studio City, California 91604. She is a singer-songwriter, composer, and recording artist whose career spans twenty-eight years and encompasses Latin pop, jazz, and contemporary R&B. Over the course of her career, Ms. Fonseca has released nine studio albums, earned three Grammy Award nominations, and received two Latin Grammy Awards. She is widely recognized within the music industry as one of the most accomplished independent Latin-crossover artists of her generation.
Ms. Fonseca's catalog is substantial. It comprises 214 registered compositions with the U.S. Copyright Office (Registration Nos. PA 1-742-891 through PA 2-318-406) and 188 registered master recordings (Registration Nos. SR 0-891-220 through SR 1-104-773). Her combined average annual royalty income over the five-year period from 2018 through 2022 was approximately $1,820,000. This income derives from a diversified portfolio of licensing arrangements across digital streaming, synchronization, broadcast, and live performance royalties.
Critically, Ms. Fonseca is an independent artist who owns and controls her own publishing and master recording rights. She has never signed an exclusive recording contract with a major label or an exclusive publishing agreement with a major publisher. Her decision to retain ownership of her rights was deliberate and reflects decades of effort to maintain both creative and economic independence. This case directly implicates the economic foundation upon which her independence rests.
Flor de Luna Publishing, LLC ("FDL Publishing"). FDL Publishing is a California single-member limited liability company whose sole member is Ms. Fonseca. Its registered office is located at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015, and its Employer Identification Number is 82-4193507. FDL Publishing owns the publishing rights — that is, the copyright in the underlying musical compositions — in Ms. Fonseca's catalog. It is the entity through which Ms. Fonseca administers and controls her compositional copyrights.
Mariposa Sound Recordings, LLC ("Mariposa Sound"). Mariposa Sound is a California single-member limited liability company whose sole member is also Ms. Fonseca. Its registered office is the same as FDL Publishing, at 1200 South Grand Avenue, Suite 1450, Los Angeles, California 90015, and its Employer Identification Number is 84-2671058. Mariposa Sound owns the master recording rights — that is, the copyright in the sound recordings — in Ms. Fonseca's catalog. Together, FDL Publishing and Mariposa Sound hold all copyright interests in the works at issue in this litigation.
Ms. Fonseca's catalog is administered on a non-exclusive basis by Thornfield Music Administration, Inc. (Raymond O. Sato, President), located at 6363 Wilshire Boulevard, Suite 410, Los Angeles, California 90048. Thornfield handles day-to-day licensing administration, royalty collection, and audit functions on behalf of FDL Publishing and Mariposa Sound. It was a routine audit conducted by Thornfield in late 2022 that first alerted Ms. Fonseca to the unauthorized exploitation of her works by Crescendo.
B. Defendant. Crescendo Digital Media, Inc. Crescendo is a Delaware corporation headquartered at 3100 Esperanza Crossing, Suite 600, Austin, Texas 78758. It operates a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation platform branded as "Crescendo Stream." The platform offers curated and algorithmically generated playlists of licensed music to both individual subscribers and commercial clients across a range of industries, including fitness, hospitality, and retail.
Crescendo was founded in 2016 by its Chief Executive Officer, Nikolai R. Sorensen. By fiscal year 2022, the company reported annual revenue of $189 million and maintained licensing agreements with over 4,000 rights holders. The platform has approximately 2.3 million direct-to-consumer subscribers. Crescendo is privately held. In 2021, the company raised $75 million in a Series C financing round led by Ridgeline Ventures Partners, LP (General Partner: Warren Hu). The company's in-house legal department is headed by General Counsel Priya Chandrasekaran, whose responsibilities specifically include rights management and licensing compliance.
Crescendo is represented in this litigation by the law firm of Hargrove, Pennington & Cao LLP, out of its Austin, Texas office located at 401 Congress Avenue, Suite 2800, Austin, Texas 78701. Lead counsel is Denise K. Whitford, Partner in the firm's intellectual Property Litigation practice group, and co-counsel is Jason M. Trujillo, Senior Associate.
III. PROCEDURAL HISTORY
The following timeline sets forth the key procedural events in this matter:
February 20, 2023 — Engagement of Counsel. Calderwood & Harkness LLP was engaged by Ms. Fonseca to investigate and pursue claims arising from Crescendo's unauthorized use of her copyrighted works. The matter was opened under firm Matter No. 1035-00003.
March 6, 2023 — Cease-and-Desist Letter. Calderwood & Harkness sent a detailed cease-and-desist letter to Crescendo's General Counsel, Priya Chandrasekaran, demanding the immediate cessation of all unauthorized reproduction, distribution, public performance, and digital transmission of Ms. Fonseca's copyrighted compositions and sound recordings. The letter further demanded the preservation of all records relating to the use of Ms. Fonseca's works, a full accounting of all streams, sublicense revenue, and related income, and payment of estimated back-royalties of at least $1,087,200.
March 17, 2023 — Crescendo's Response. Hargrove, Pennington & Cao LLP responded on Crescendo's behalf, disputing that any infringement had occurred. The response asserted that Crescendo had acted in good faith reliance on a blanket license previously obtained through Peregrine Music Group, LLC, and contended that Crescendo had no reason to believe the license had expired. The response did not offer any accounting or propose any payment.
April 3, 2023 — Filing of Complaint. Plaintiffs filed a Complaint for Copyright Infringement in the United States District Court for the Central District of California. The case was assigned Case No. 2:23-cv-02841-RGK-PLA and was assigned to the Honorable R. Gary Klausner, United States District Judge, with the Honorable Patricia L. Alvarez, United States Magistrate Judge, handling pretrial and discovery matters.
April 28, 2023 — Answer and Affirmative Defenses. Crescendo filed its Answer together with twelve affirmative defenses, including assertions of good faith and innocent infringement under 17 U.S.C. § 504(c)(2), implied license, estoppel, laches, failure to mitigate damages, and statute of limitations under 17 U.S.C. § 507(b). Notably, Crescendo did not assert a fair use defense.
May 15, 2023 — Early Neutral Evaluation Conference. The parties appeared before Magistrate Judge Alvarez for an Early Neutral Evaluation conference. During the conference, the Court expressed skepticism regarding Crescendo's "good faith reliance" defense. Specifically, Judge Alvarez noted that a sophisticated digital media company with in-house legal counsel and over 4,000 licensing relationships should have systems in place to track license expirations, and that reliance on an expired license obtained through a defunct intermediary was, in the Court's words, "a difficult argument to sustain." The Court encouraged the parties to explore mediation as a means of resolving the dispute efficiently.
June 8, 2023 — Retention of Forensic Accounting Expert. Plaintiffs retained the Lakeshore Forensic Accounting Group, LLC (Dr. Ellen Marchetti, CPA, CFF, Engagement Lead; 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606) to serve as forensic accounting and royalty audit expert. Dr. Marchetti commenced a forensic analysis of Crescendo's streaming data, sublicense agreements, and revenue reports, as well as historical royalty data from Thornfield Music Administration.
July 10, 2023 — Mediation. The parties have agreed to participate in a full-day mediation session before the Honorable Gerald T. Nakashima (Ret.) at Ashgrove Equity Partners Dispute Resolution Services, LLC. This brief is submitted in advance of that session.
IV. LIABILITY
Plaintiffs' case on liability is overwhelming. The core facts establishing infringement are undisputed, copyright ownership is not contested, and Crescendo's affirmative defenses are legally and factually deficient. The following sections address each element in turn.
A. Copyright Ownership and Registration
Ms. Fonseca holds valid, timely registered copyrights with the United States Copyright Office for all forty-seven (47) compositions at issue (PA-series registrations, Nos. PA 1-742-891 through PA 2-318-406) and all thirty-two (32) sound recordings at issue (SR-series registrations, Nos. SR 0-891-220 through SR 1-104-773). The registration dates for the infringed compositions span from 1998 to 2021, reflecting the breadth of Ms. Fonseca's career and the depth of the catalog that Crescendo exploited without authorization.
All registrations were timely filed — either within three months of first publication or prior to the commencement of infringement — thereby qualifying Plaintiffs for the full range of remedies available under the Copyright Act, including statutory damages under 17 U.S.C. § 504(c) and attorney's fees under 17 U.S.C. § 505. This is a critical point: Plaintiffs have the option to elect statutory damages, which can reach $150,000 per work in cases of willful infringement.
FDL Publishing owns the copyright in the underlying musical compositions. Mariposa Sound owns the copyright in the sound recordings. Together, these two entities — both wholly owned by Ms. Fonseca — hold all exclusive rights implicated by Crescendo's unauthorized conduct. Crescendo has not challenged Plaintiffs' ownership of any of the copyrights at issue. Ownership is undisputed.
B. Unauthorized Use — Undisputed Facts
The core factual predicate for liability is straightforward and, in its essential elements, undisputed.
Crescendo previously held a blanket license to certain of Ms. Fonseca's works. That license was obtained not directly from Ms. Fonseca or her entities, but through Peregrine Music Group, LLC, a California limited liability company that operated as a digital music distributor and sublicensing intermediary. The Peregrine license was effective from January 1, 2016 through December 31, 2018 — a fixed three-year term.
The terms of the Peregrine license were clear and unambiguous. Specifically, the license was: (a) non-transferable and non-assignable, meaning Crescendo could not claim that any rights survived beyond Peregrine's involvement; (b) contained no automatic renewal provision, meaning the license would not continue beyond its stated term absent an affirmative act of renewal by the parties; and (c) terminated upon either the expiration of the three-year term or the dissolution of Peregrine, whichever occurred first.
Peregrine ceased operations in November 2018 and was subsequently dissolved as a California LLC. The blanket license expired on its own terms on December 31, 2018. No successor license was ever executed between Crescendo and any party — not Ms. Fonseca, not FDL Publishing, not Mariposa Sound, not Thornfield Music Administration, and not any other intermediary or distributor. No rights under the Peregrine license were assigned or transferred to Crescendo or to any third party. The license simply ended.
Despite the expiration, Crescendo continued — without interruption — to reproduce, distribute, publicly perform, and digitally transmit the forty-seven compositions and thirty-two sound recordings through its Crescendo Stream platform and through sublicensed content packages provided to commercial clients. This unauthorized exploitation continued from January 1, 2019 through at least December 31, 2022, a period of approximately forty-eight (48) months.
The scale of the unauthorized use is reflected in Crescendo's own data. Its internal content management system ("CMS") logged a total of 18,426,331 streams of Ms. Fonseca's works during the four-year infringement period. Moreover, Crescendo's CMS tagged Ms. Fonseca's works as "cleared — blanket license" throughout the entirety of this period. This tag indicates either a systemic failure to update license status records when the Peregrine license expired, or a deliberate decision not to investigate or remediate the lapse — or both.
In addition to the direct-to-consumer streaming, Crescendo sublicensed curated playlists containing Ms. Fonseca's works to fourteen (14) separate commercial clients. These clients operated in the fitness, hospitality, and retail sectors and used the playlists to provide background music or exercise-class accompaniment in their commercial establishments. The sublicense revenue attributable to Ms. Fonseca's catalog during the infringement period was approximately $2,740,000, based on Crescendo's own revenue reports and sublicense agreements produced in discovery. None of this revenue was remitted to Ms. Fonseca or her entities.
These undisputed facts establish the unauthorized exploitation of multiple exclusive rights belonging to Plaintiffs under 17 U.S.C. § 106:
• Reproduction (§ 106(1)) — Crescendo created server-side copies of Ms. Fonseca's compositions and sound recordings in order to facilitate on-demand streaming delivery to subscribers and sublicensees. Each stream initiated by a user required the reproduction of the relevant digital files on Crescendo's servers.
• Distribution (§ 106(3)) — Crescendo made Ms. Fonseca's works available to its approximately 2.3 million direct-to-consumer subscribers and to its fourteen commercial sublicensees, constituting a distribution of copyrighted works to the public.
• Public Performance (§ 106(4)) — On-demand streaming constitutes a public performance of the underlying musical compositions. Each time a subscriber or sublicensee streamed one of Ms. Fonseca's compositions, a public performance of that composition occurred.
• Digital Audio Transmission (§ 106(6)) — Applicable to the copyrighted sound recordings, Crescendo's streaming of Ms. Fonseca's master recordings constituted digital audio transmissions within the meaning of Section 106(6).
At no point during the four-year infringement period did Crescendo obtain any mechanical license, synchronization license, master use license, digital performance license, or any other form of authorization from Plaintiffs or their representatives for any use of the works at issue. The infringement is clear, comprehensive, and sustained.
C. Willfulness. The infringement was willful within the meaning of 17 U.S.C. § 504(c)(2). Under the Copyright Act, willful infringement does not require proof that the infringer acted with the specific intent to infringe; it is sufficient to show that the infringer acted with reckless disregard for the copyright holder's rights or with knowledge of the infringing nature of its conduct. See Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998); Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186 (9th Cir. 2001).
Here, the evidence of willfulness is compelling. Crescendo is a sophisticated digital media company with $189 million in annual revenue, a dedicated in-house legal department, and a General Counsel — Priya Chandrasekaran — whose responsibilities specifically include rights management and licensing compliance. Crescendo maintains licensing relationships with over 4,000 rights holders and operates a content management system that is designed, among other things, to track the clearance status of every piece of content on its platform.
The Peregrine license had a fixed, unambiguous expiration date: December 31, 2018. There was no ambiguity in the license terms, no automatic renewal clause, and no basis for any reasonable belief that the license continued beyond that date. The licensor — Peregrine Music Group, LLC — ceased operations in November 2018 and was dissolved. These were readily ascertainable facts. A company of Crescendo's size, sophistication, and resources — a company that employs in-house legal counsel specifically to manage licensing compliance — had an obligation to verify the status of its licenses and to ensure that it was not exploiting copyrighted content without authorization.
Crescendo failed to verify the license status for over four years. It continued to stream Ms. Fonseca's works, sublicense her catalog to commercial clients, and generate millions of dollars in revenue from content it had no right to use — all while its own content management system incorrectly tagged the works as "cleared." This conduct constitutes, at a minimum, willful blindness and recklessness with respect to the copyright interests of Ms. Fonseca and her entities.
Notably, at the May 15, 2023 Early Neutral Evaluation conference, Magistrate Judge Alvarez expressed skepticism about Crescendo's good faith defense, observing that a sophisticated digital media company should have systems in place to track license expirations. This judicial observation, while preliminary, is significant. It suggests that the Court is unlikely to credit Crescendo's defense at trial and may well find the infringement to be willful, thereby opening the door to enhanced statutory damages of up to $150,000 per work.
Plaintiffs anticipate that further discovery — including the production of internal communications among Crescendo's licensing, legal, and content management teams, as well as detailed CMS audit logs — will reveal additional evidence of knowledge or reckless disregard. The willfulness finding is supported by the facts already in the record, and the evidentiary picture will only strengthen as the case proceeds.
D. Crescendo's Defenses Are Meritless
Crescendo has asserted twelve affirmative defenses in its Answer. The defenses that are substantively relevant to the merits are addressed in turn below. None has merit.
1. Good Faith / Innocent Infringement (17 U.S.C. § 504(c)(2)). Crescendo's primary defense is that it reasonably and in good faith relied on the blanket license it had previously obtained through Peregrine Music Group, LLC. This defense fails for multiple reasons.
First, the Peregrine license expired by its own terms on December 31, 2018. The license contained no automatic renewal provision and was non-transferable. There was no ambiguity in the expiration date and no reasonable basis for believing the license continued after that date.
Second, the licensor — Peregrine Music Group — ceased operations in November 2018 and was dissolved. Even if Crescendo could have argued that it did not initially notice the license expiration, the disappearance of the licensor entity was an unmistakable signal that the licensing arrangement had come to an end. A reasonable licensee — particularly a sophisticated company with in-house legal counsel — would have investigated the status of any licenses obtained through a distributor that had gone out of business.
Third, as Magistrate Judge Alvarez noted during the ENE conference, a sophisticated digital media company with a dedicated legal department and over 4,000 licensing relationships has a duty to verify license status. The innocent infringer defense under Section 504(c)(2) is designed to protect genuinely unsophisticated parties who had no reason to know that their conduct was infringing. It is not a refuge for large, well-resourced companies that simply fail to do their due diligence. At best, a successful innocent infringement defense might reduce statutory damages from the willful range to the standard range — but even that outcome is unlikely given the weight of the evidence establishing willfulness.
2. Implied License. Crescendo's assertion of an implied license is equally meritless. An implied license arises only when the totality of the circumstances indicates that the copyright owner intended to grant permission for the use at issue. See Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990). There must be evidence of conduct by the copyright holder from which a license can reasonably be inferred.
Here, no such evidence exists. 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, did not negotiate a new license, did not accept any payment, and did not engage in any course of dealing that could give rise to an inference of implied permission. She was entirely unaware of the continued exploitation of her works until a routine audit conducted by Thornfield Music Administration in late 2022 uncovered the unauthorized use. The implied license defense has no factual basis.
3. Estoppel and Laches. Crescendo's estoppel and laches defenses are predicated on the assertion that Ms. Fonseca delayed unreasonably in asserting her rights. This assertion is factually baseless.
Ms. Fonseca had no knowledge of the infringement until late 2022, when the Thornfield audit revealed the unauthorized streaming and sublicensing activity. Upon discovering the infringement, she acted promptly: she engaged counsel in February 2023, a cease-and-desist letter was sent in March 2023, and a complaint was filed in April 2023. This timeline reflects diligent prosecution, not delay or acquiescence. There is no factual predicate for either estoppel or laches.
Moreover, equitable defenses such as laches are strongly disfavored in copyright cases within the statutory limitations period. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 954 (9th Cir. 2001). All of Plaintiffs' claims fall well within the three-year statute of limitations.
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). Under the discovery rule adopted in the Ninth Circuit, a claim accrues when the plaintiff knew or reasonably should have known of the infringement. Roley v. New World Pictures, 19 F.3d 479, 481 (9th Cir. 1994).
Ms. Fonseca discovered the infringement in late 2022 through the Thornfield audit. The complaint was filed on April 3, 2023 — well within three years of the date of discovery. Accordingly, all claims for unauthorized use occurring from 2019 through 2022 are timely. The statute of limitations defense provides no basis for excluding any portion of Plaintiffs' claims.
5. Fair Use (17 U.S.C. § 107). Crescendo has not asserted a fair use defense, and any such defense would be frivolous. The unauthorized use was entirely commercial in nature; Crescendo reproduced and streamed complete copyrighted works (not excerpts or transformative adaptations); the works are creative and highly original; and Crescendo's use served as a direct market substitute for properly licensed streams. All four statutory fair use factors weigh decisively against Crescendo. There is no colorable fair use argument on these facts.
6. Failure to Mitigate. Crescendo's failure-to-mitigate defense is without merit. Ms. Fonseca acted promptly upon discovering the infringement. She had no prior knowledge of the unauthorized use and no obligation to monitor Crescendo's platform for compliance with a license that had expired years earlier. A copyright holder has no duty to police the conduct of a former licensee, particularly when the licensee's continued use is unknown to the rights holder. This defense has no legal or factual support.
V. DAMAGES
A. Forensic Analysis
Plaintiffs' damages have been quantified through a rigorous forensic analysis conducted by Dr. Ellen Marchetti, CPA, CFF, of the Lakeshore Forensic Accounting Group, LLC. Dr. Marchetti is a certified public accountant and certified in financial forensics. She has extensive experience in royalty audits and damages quantification in intellectual property disputes, having served as a forensic accounting expert in over forty copyright and music licensing cases in federal courts nationwide.
Dr. Marchetti's analysis is based on three categories of data: (1) Crescendo's own discovery production (Bates-stamped documents CDM-000001 through CDM-004218), which includes streaming logs, sublicense agreements, and revenue reports from the Crescendo Stream platform; (2) historical royalty statements from Thornfield Music Administration, Inc. reflecting market-rate royalty earnings for Ms. Fonseca's catalog during the relevant period and comparable periods; and (3) market rate data for comparable digital music licensing transactions compiled from industry sources and publicly available rate schedules.
The results of Dr. Marchetti's analysis are summarized below.
B. Back-Royalties Owed
Dr. Marchetti's forensic analysis quantifies the back-royalties owed to Plaintiffs as follows:
The per-stream rates used in this analysis — $0.0091 for mechanical royalties and $0.02975 for master use royalties — are consistent with industry-standard rates for digital streaming platforms of Crescendo's size and market position. The 9% mechanical royalty rate applied to sublicense revenue reflects the statutory rate established by the Copyright Royalty Board for mechanical reproductions in the context of digital phonorecord deliveries. The performance royalty estimate of $126,400 is derived from a gap analysis comparing the royalties Ms. Fonseca would have received through performing rights organizations (such as ASCAP or BMI) if the streams had been properly reported and licensed, against the actual amounts received (which were zero, because the streams were never reported).
The rounded total of $548,200 for master use royalties reflects a precise calculation of $548,183.35, rounded to the nearest hundred for presentation purposes.
C. Statutory Damages
As an alternative to actual damages, Plaintiffs are entitled to elect statutory damages under 17 U.S.C. § 504(c). Because all of the compositions and sound recordings at issue were timely registered with the U.S. Copyright Office — either within three months of first publication or prior to the commencement of infringement — Plaintiffs satisfy the eligibility requirements for statutory damages under 17 U.S.C. § 412.
The statutory damages framework provides the following ranges:
Non-willful infringement: The Court may award statutory damages of not less than $750 and not more than $30,000 per work infringed. With forty-seven (47) compositions qualifying as separate works, this yields a non-willful range of $35,250 (47 × $750) to $1,410,000 (47 × $30,000).
Willful infringement: Where the infringement is found to be willful, the Court may award statutory damages of up to $150,000 per work infringed. With forty-seven compositions, this yields a willful ceiling of $7,050,000 (47 × $150,000).
It bears noting that if the Court counts the compositions and sound recordings as separate works — which is the correct approach under the statute, as compositions and sound recordings are distinct categories of copyrightable subject matter — then up to seventy-nine (79) works could qualify for statutory damages, yielding a willful ceiling of $11,850,000 (79 × $150,000).
As set forth in Section IV.C above, the evidence of willfulness is strong. Crescendo is a sophisticated company that failed to verify the status of an expired license for over four years while continuing to exploit Ms. Fonseca's works on a massive scale. Magistrate Judge Alvarez has already expressed skepticism about Crescendo's good faith defense. Plaintiffs are confident that a finding of willfulness is likely if this case proceeds to trial.
D. Attorney's Fees and Costs
Under 17 U.S.C. § 505, the Court has discretion to award full costs and reasonable attorney's fees to the prevailing party in a copyright action. Attorney's fees are routinely awarded to prevailing plaintiffs who hold timely registrations. See Kirtsaeng v. Crowne Albany Industries, Inc., 579 U.S. 197 (2016) (holding that the objective reasonableness of the losing party's litigation position is a significant factor in fee awards).
Calderwood & Harkness's current lodestar in this matter is approximately $155,000 as of the date of this brief, reflecting work performed from engagement through preparation for mediation. If this case proceeds through discovery, dispositive motions, and trial, the projected total lodestar is approximately $285,000. Plaintiffs will seek full recovery of attorney's fees if the case proceeds to judgment. Crescendo's litigation position — particularly its reliance on an expired license from a defunct entity — is objectively unreasonable and weighs heavily in favor of a fee award.
E. Summary of Plaintiffs' Damages Exposure to Crescendo
The following table summarizes the range of Crescendo's potential financial exposure in this litigation:
Plaintiffs' pre-litigation demand, communicated in the March 6, 2023 cease-and-desist letter, was $2,312,200, comprising back-royalties of $1,087,200, a statutory enhancement of $940,000 reflecting Crescendo's willful conduct, and projected attorney's fees of $285,000. This demand represented a substantial discount from the maximum statutory damages exposure and was intended to provide Crescendo with an opportunity to resolve the matter quickly and efficiently. Crescendo declined to engage on the demand.
VI. CONTEXT: THE IMPACT ON MS. FONSECA
While the legal analysis and damages calculations set forth above provide the framework for evaluating this case, it is important for the mediator to understand the real-world impact of Crescendo's conduct on Ms. Fonseca and her livelihood.
Ms. Fonseca is an independent artist who has spent twenty-eight years building a career and a catalog of music that she owns and controls. Her decision to retain ownership of her publishing and master recording rights — rather than signing with a major label or publisher — was a deliberate career choice reflecting decades of work, sacrifice, and financial discipline. That independence is the foundation of her economic security and her ability to continue creating music on her own terms. Her combined average annual royalty income of approximately $1,820,000 depends entirely on the proper licensing, reporting, and collection of royalties from parties that use her works.
The unauthorized exploitation of forty-seven compositions and thirty-two master recordings — representing a significant portion of her most commercially successful works — deprived Ms. Fonseca of over $1 million in royalties across a four-year period. This is not an abstract harm. It is money that Ms. Fonseca earned through her creative labor and that she was entitled to receive under the copyright laws of the United States.
Beyond the direct financial loss, Crescendo's conduct undermines the value of Ms. Fonseca's catalog. When a well-capitalized digital media company can exploit an independent artist's works for four years without paying a single dollar in royalties — and without consequence unless and until caught — it creates a perverse incentive structure that harms not just Ms. Fonseca but every independent rights holder in the music industry. The message it sends is that rights holders must constantly police major platforms at their own expense, or risk having their works used for free.
The manner in which the infringement was discovered underscores this point. Ms. Fonseca learned of Crescendo's unauthorized use only through a routine audit conducted by Thornfield Music Administration in late 2022. The audit revealed discrepancies between the streaming activity reflected in publicly available data and the royalty payments Ms. Fonseca was receiving. Had the Thornfield audit not flagged the issue, Crescendo would have continued its unauthorized exploitation indefinitely — generating revenue from Ms. Fonseca's works without ever paying for the privilege.
Ms. Fonseca comes to this mediation not seeking to punish Crescendo, but to be made whole for the unauthorized use of her life's work and to ensure that any continued use of her music by Crescendo occurs on legitimate, properly documented, and fairly compensated terms.
VII. SETTLEMENT POSITION
A. Plaintiffs' Objectives
Plaintiffs have identified the following core objectives for a mediated resolution of this dispute:
1. Full compensation for the unauthorized exploitation of Ms. Fonseca's compositions and sound recordings during the four-year infringement period (January 1, 2019 through December 31, 2022).
2. A prospective licensing arrangement that legitimizes the ongoing relationship between the parties and provides Ms. Fonseca with guaranteed revenue from any continued use of her works by Crescendo.
3. Avoidance of the expense, delay, and uncertainty of continued litigation for both sides.
4. Confidentiality regarding the terms of any settlement agreement.
5. Finality through the execution of a comprehensive mutual release and dismissal of the action with prejudice.
B. Proposed Settlement Framework
Plaintiffs entered this mediation in good faith and are prepared to resolve this dispute on reasonable terms. As noted above, Plaintiffs' pre-litigation demand was $2,312,200. The proposed settlement framework set forth below reflects a pragmatic assessment of the case, a genuine desire to reach resolution, and a willingness to accept a significant discount from the maximum exposure in exchange for certainty and an ongoing business relationship.
1. Lump-Sum Cash Payment. Plaintiffs propose a total cash payment in the range of $1,500,000 to $1,700,000, reflecting the following components:
• Back-royalties of $1,087,200, as calculated by Dr. Marchetti based on Crescendo's own streaming data, sublicense revenue, and industry-standard royalty rates. This figure represents the minimum amount owed to Plaintiffs for the unauthorized use of their copyrighted works over the four-year infringement period.
• A statutory enhancement and willfulness premium, reflecting Crescendo's culpable conduct — its failure to verify the status of an expired license for over four years, its continued exploitation of Ms. Fonseca's works on a massive commercial scale, and the strength of the evidence supporting a willfulness finding. The enhancement is modest in comparison to the statutory damages that would be available at trial.
• A contribution toward Plaintiffs' attorney's fees, in the approximate amount of $195,000. This figure falls between the current lodestar of $155,000 and the projected through-trial lodestar of $285,000, and reflects the fact that early resolution saves both sides significant legal costs going forward.
Allocation. The cash payment would be allocated between FDL Publishing (for the composition copyrights) and Mariposa Sound (for the sound recording copyrights), with a separate component payable directly to Calderwood & Harkness LLP for attorney's fees and costs.
Payment Schedule. Plaintiffs propose a two-installment payment schedule. The majority of the settlement amount — not less than seventy percent (70%) — would be due within thirty (30) days of execution of the settlement agreement. The balance would be due within ninety (90) days of execution. This schedule provides Crescendo with reasonable flexibility while ensuring that Plaintiffs receive substantially all of the compensation owed within a commercially reasonable timeframe.
2. Prospective Licensing Arrangement. In addition to the cash payment for past infringement, Plaintiffs propose the establishment of a forward-looking licensing arrangement that would permit Crescendo to continue streaming Ms. Fonseca's works on legitimate terms. The key terms of the proposed license are as follows:
• Scope: A non-exclusive license permitting Crescendo to continue streaming the forty-seven (47) compositions and thirty-two (32) master recordings currently on its platform.
• Term: Approximately three (3) years from the date of execution, with an option to negotiate renewal.
• Per-Stream Royalty: A market-rate per-stream royalty of $0.035 per stream, payable on all streams of the licensed works through the Crescendo Stream platform and any sublicensed channels.
• Minimum Annual Guarantee (MAG): A minimum annual guarantee of $175,000 per year, payable regardless of actual streaming volume, to provide Ms. Fonseca with revenue certainty. The MAG is recoupable against per-stream royalties — that is, if actual per-stream royalties exceed the MAG in a given year, Crescendo pays only the actual amount.
• Reporting and Payment: Quarterly reporting and payment obligations, with detailed statements reflecting stream counts by work, revenue generated, and royalties owed.
• Default and Termination: Automatic termination and mandatory takedown of all licensed works within forty-eight (48) hours if Crescendo defaults on any payment obligation, subject to a short cure period of ten (10) business days following written notice of the default. This provision is essential to protect Ms. Fonseca from a repeat of the circumstances that gave rise to this litigation.
• Sublicensing: Crescendo may continue sublicensing curated playlists containing Ms. Fonseca's works to commercial clients, provided that all sublicense revenue attributable to the licensed works is captured in the royalty calculations and reported in the quarterly statements.
The prospective license benefits both parties. Crescendo obtains legitimate access to desirable content without disrupting its platform, its subscriber experience, or its commercial client relationships. Ms. Fonseca obtains a guaranteed revenue stream from a major platform and the assurance that her works are being used under a properly documented license with enforceable terms.
3. Audit Rights. The settlement agreement would include annual audit rights permitting Plaintiffs — through Thornfield Music Administration or a designated independent auditor — to audit Crescendo's streaming records, sublicense agreements, and revenue data to verify the accuracy of royalty payments. If any audit reveals discrepancies in excess of five percent (5%) between reported and actual royalties owed, Crescendo would bear the full cost of the audit. This provision is standard in music licensing agreements and is critical to ensuring ongoing compliance.
4. Mutual Confidentiality. Plaintiffs propose a standard mutual confidentiality provision covering the terms of the settlement agreement and the mediation process. The existence of the settlement (but not its terms) may be disclosed as necessary. Customary carve-outs would apply for tax reporting obligations, disclosures required by law or court order, and disclosures to Plaintiffs' catalog administrators (i.e., Thornfield Music Administration) in the ordinary course of catalog administration.
5. Mutual Release and Dismissal. The settlement would include a mutual release of all claims arising from the identified works for the period from January 1, 2019 through the date of execution of the settlement agreement. The release would not extend to any future breach of the prospective license or to any works not identified in the settlement agreement.
Upon execution of the settlement agreement and receipt of the first installment payment, Plaintiffs would file a stipulation for dismissal with prejudice of all claims in Case No. 2:23-cv-02841-RGK-PLA. The parties would request that the Court retain jurisdiction to enforce the terms of the settlement agreement in the event of any dispute regarding compliance.
C. Why This Settlement Is Reasonable
Plaintiffs believe that the proposed settlement framework represents a fair, reasonable, and commercially sensible resolution of this dispute. Several considerations support this conclusion:
The proposed cash amount represents a significant discount from maximum exposure. The proposed range of $1,500,000 to $1,700,000 is a fraction of the maximum statutory damages exposure of $7,050,000 (based on compositions alone) or $11,850,000 (if compositions and sound recordings are counted separately). Even at the high end of the proposed range, Crescendo would pay less than twenty-five percent of the maximum statutory exposure. This discount reflects Plaintiffs' genuine interest in reaching a practical resolution rather than pursuing the maximum available recovery at trial.
The prospective license benefits Crescendo. The proposed licensing arrangement allows Crescendo to continue offering Ms. Fonseca's popular catalog to its subscribers and commercial clients without any disruption to its platform or its business relationships. The alternative — a judgment requiring immediate removal of all of Ms. Fonseca's works from the platform and all sublicensed content packages — would be commercially disruptive and potentially damaging to Crescendo's relationships with its fourteen commercial clients and its subscriber base.
The liability outcome at trial is strongly in Plaintiffs' favor. The core facts establishing infringement are undisputed. Crescendo's defenses are weak, and Magistrate Judge Alvarez's comments at the ENE conference signal that the Court is unlikely to credit those defenses. A trial would almost certainly result in a finding of liability, and the only real question would be the quantum of damages. Settling now allows Crescendo to control its exposure and avoid the risk of a significantly larger judgment.
A trial would be costly for both sides. Continued litigation through discovery, dispositive motions, and trial would impose significant costs on both parties. Plaintiffs' projected attorney's fees alone would reach approximately $285,000 through trial. Crescendo's legal costs would likely be comparable or greater. An early resolution conserves resources for both sides.
The MAG is reasonable in context. The proposed minimum annual guarantee of $175,000 per year — totaling $525,000 over the three-year license term — is modest in light of the $2,740,000 in sublicensing revenue that Crescendo generated from Ms. Fonseca's catalog during the four-year infringement period. The MAG provides Ms. Fonseca with baseline revenue certainty while allowing Crescendo to benefit from any increases in streaming volume.
Early resolution preserves the business relationship. A settlement allows the parties to move forward with a legitimate, mutually beneficial licensing arrangement. Continued litigation — and, in particular, a public trial — could damage Crescendo's reputation with its 4,000+ rights holder partners and with its investor, Ridgeline Ventures Partners, LP. A publicized finding of willful copyright infringement could have significant negative implications for a company whose entire business model depends on the trust and cooperation of content owners. Early resolution avoids these reputational risks.
VIII. CONCLUSION
Plaintiffs' case on liability is overwhelming. The key facts are undisputed: Crescendo used Ms. Fonseca's copyrighted works for four years without any license or authorization, generating millions of streams and hundreds of thousands of dollars in sublicensing revenue, none of which was shared with the rights holder. Crescendo's sole defense — reliance on an expired license from a defunct distributor — is factually and legally untenable, and has already received skeptical treatment from the Court.
Damages are substantial and well-documented by Dr. Marchetti's forensic analysis. Back-royalties alone total $1,087,200, and the statutory damages exposure — which could reach $7,050,000 or more if willfulness is found — provides powerful incentive for Crescendo to resolve this matter at mediation rather than at trial.
Plaintiffs are prepared to resolve this dispute on the reasonable terms outlined in this brief. The proposed settlement framework — a lump-sum cash payment in the range of $1,500,000 to $1,700,000, coupled with a prospective three-year licensing arrangement with a minimum annual guarantee of $175,000 — compensates Ms. Fonseca fairly for the unauthorized exploitation of her life's work while providing Crescendo with continued access to desirable content on legitimate terms.
Plaintiffs look forward to a productive mediation session on July 10, 2023 and sincerely hope to reach a resolution that compensates Ms. Fonseca fairly, addresses Crescendo's ongoing need for content, and avoids the considerable expense and uncertainty of continued litigation for all parties.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Alan Ngo, Partner Christy Bauer, Associate
777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-7400
Email: a.ngo@calderwoodharkness.com
Email: c.bauer@calderwoodharkness.com
Attorneys for Plaintiffs Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC
CONFIDENTIAL — FOR MEDIATION PURPOSES ONLY Pursuant to Cal. Evid. Code § 1119 and Fed. R. Evid. 408 This document is inadmissible in any court proceeding and is intended solely for submission to the mediator.
Category | Calculation | Amount
Mechanical royalties (streaming) | $0.0091 per stream × 18,426,331 streams | $167,680
Mechanical royalties (sublicensing) | Pro-rata share of $2,740,000 sublicense revenue at industry-standard 9% mechanical royalty rate | $244,920
Subtotal — Mechanical Royalties | $412,600
Master use royalties (streaming) | $0.02975 per stream × 18,426,331 streams | $548,200
Performance royalties (estimated unremitted) | Based on performing rights organization analogues and Thornfield gap analysis | $126,400
Total Back-Royalties | $412,600 + $548,200 + $126,400 | $1,087,200
Component | Low End | High End
Back-royalties (actual damages) | $1,087,200 | $1,087,200
Statutory damages (alternative to actual, compositions only) | $35,250 | $7,050,000
Attorney's fees | $155,000 (current lodestar) | $285,000 (projected through trial)
Total Potential Exposure | $1,087,200 + $155,000 in fees | $7,050,000 + $285,000 in fees