Judge Preska Vacates Copyright Infringement Victory for EMI on Standing Grounds

In an opinion filed Monday, Judge Preska vacated a $100,000 damages award for record company EMI when it turned out that the wrong corporate entity had brought the suit. After winning summary judgment on its copyright infringement claims, it came to light that the holders of the copyrights were in fact wholly-owned subsidiaries of EMI -- not EMI itself -- who were not named as plaintiffs in the case.

Plaintiff does not dispute that it does not have, and has never had, direct ownership of any of the copyrights at issue in this lawsuit but argues that the rights at issue are owned by “wholly-owned” subsidiaries of Plaintiff or entities on behalf of which Plaintiff was authorized to act. . . . There is support from decisions in this circuit for the holding that a parent company lacks standing to bring claims on behalf of its subsidiary. See, e.g., Feinberg v. Katz, No. 99 Civ. 45, 2002 WL 1751135, at *6 (S.D.N.Y. July 26, 2002); Diesel Sys., Ltd. v. Yip Shing Diesel Eng’g Co., Ltd., 861 F. Supp. 179, 181 (E.D.N.Y. 1994); Bross Utils. Serv. Corp. v. Aboubshait, 618 F. Supp. 1442, 1445 (S.D.N.Y. 1985). This conclusion follows from the principle that “a parent corporation cannot create a subsidiary and then ignore its separate corporate existence whenever it would be advantageous to the parent.” Feinberg, 2002 WL 1751135 at *6 (quoting Pa. Eng’g Corp. v. Islip Res. Recovery Agency, 710 F. Supp. 456, 465 (E.D.N.Y. 1989)). Plaintiffs do not provide in their papers a citation to a case holding otherwise. . . .

In light of the recently unearthed determination that Plaintiff lacks of standing, Rules 60(b)(1) and 60(b)(4) provide appropriate bases in this case to vacate the judgment. The “mistake” in this case was that all parties and the Court assumed jurisdiction over Plaintiff based on Plaintiff’s representations that it was the owner of the copyrights at issue. Although Defendant could have raised this issue at an earlier stage in the proceeding, and even admitted that Plaintiff controlled the copyrights at issue, (Pl. Opp. at 7–9, 12), standing cannot be waived by either party, and the Court has an obligation to raise the matter sua sponte.

Judge Preska went on to deny as untimely EMI's efforts to join the real parties in interest, vacated the judgment and dismissed the complaint.