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First: While I'm definitely not a Kanye fan, I think it's appropriate to withhold judgment on these allegations until more facts are available.

Second: Unauthorized use of a copyrighted tool (e.g., music-editing software) to create a copyrighted work of authorship --- a song and a sound recording of the song, let's say --- normally wouldn't result in loss of the copyright in either the song or the sound recording.

(This is a different situation than creating a derivative work without authorization.)

But such unauthorized use of the music-editing software could result in the author of the song and sound recording having to pay the owner of the copyright in the music-editing software for the former's "indirect profits" arising from the infringement. That can be a remedy with real teeth.

The case I usually teach to illustrate this point is Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc. [0], 886 F.2d 1545 (9th Cir. 1989) (Frank Music II). In that case:

+ The MGM Grand Hotel had a floor show called Hallelujah Hollywood!, which included 'tributes' to various MGM movies. The floor show incorporated significant portions of the Broadway musical Kismet, which years earlier had been made into an MGM movie.

+ The court found that MGM's use of the Kismet material in its floor show went beyond its 'movie rights' license and therefore infringed the copyright in the underlying Broadway musical.

+ As a result, MGM had to pay not just a portion of profits from the Hallelujah Hollywood! floor show itself (such as profits from sales of tickets to the show), but also 2% of the profits from the MGM Grand's overall hotel operations — including 2% of the casino profits — which, the court found, were indirectly attributable to the promotional value of the floor show. [1]

It didn't help MGM's case that its annual report had boasted about how great the floor show was as a draw for the casino, thus helping the copyright owner prove up its case for indirect profits.

[0] https://scholar.google.com/scholar_case?case=169034711262654...

[1] The above description is copied essentially verbatim from my piece, http://www.oncontracts.com/a-better-way-to-handle-a-breach-o...

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