11.24.2014

Pre-1972 Sound Recordings Could Kill the Radio Stars

On the heels of the Central District of California's related September 2014 decision, Judge Colleen McMahon of the Southern District of New York, has denied Sirius' motion for summary judgment on Flo & Eddie, Inc.'s class action complaint alleging that Sirius XM Radio (Sirius) committed common law copyright infringement and engaged in unfair competition by publicly performing pre-1972 sound recordings of The Turtles, and by reproducing those recordings in aid of its performances. Flo & Eddie, Inc. v. Sirius XM Radio, Inc. (S.D.N.Y. Nov. 14, 2014). Absent Sirius convincing the court by December 5, 2014, that there are remaining issues of material fact that would require a trial, Judge McMahon will enter summary judgment in favor of Flo & Eddie as to copyright infringement liability and proceed to an inquest on damages.
Ultimate victories for Flo & Eddie, Inc., which owns the copyrights to The Turtles' master recordings, could be disastrous to Sirius, a subscription-based satellite and Internet radio services provider, which operates 24/7, devotes entire channels to pre-1972 sound recordings, and, like other streaming music providers, has never paid separate royalties to perform sound recordings. Damages could reach millions of dollars, and this sea of change after decades of status quo non-enforcement will surely result in copycat lawsuits that will turn the broadcast and streaming music industry on its head.
Sirius and other providers pay music license royalties covering the underlying musical compositions, but music is the only type of creative work that has two independent copyrights: (i) a copyright in the composition (lyrics and music) that generally is held by the composers of works or their music publishers; and (ii) a copyright in the sound recording, which is the medium in or on which a particular performance of a musical composition is fixed for posterity and for playback. As Judge McMahon explained, "In essence, a copyright in a sound recording is a copyright in the performance -- not in the work being performed."
While federal law has protected copyrights in musical compositions since 1831, Congress only made sound recordings eligible for federal statutory copyright protection in 1971. This protection operates prospectively and, consequently, recordings that were "fixed" (i.e., recorded) prior to February 15, 1972, are not eligible for federal copyright protection. As Congress did not adopt a federal copyright scheme for pre-1972 sound recordings, holders of sound recording copyrights seeking to exercise their rights must look to state common law to determine the copyright protections and remedies to which they are entitled.
Enter Flo & Eddie, Inc., a California corporation that is wholly owned by Mark Volman and Howard Kaylan. Volman and Kaylan were two of the original members of the 1960s rock group The Turtles, whose memorable hits include "Happy Together" and "It Ain't Me Babe." Flo & Eddie, Inc. acquired all rights to The Turtles master recordings. Sirius acknowledges that it "performs" sound recordings, including pre-1972 Turtles recordings owned by Flo & Eddie,Inc., by broadcasting them over its satellite radio network and streaming them over the Internet. To facilitate this service, Sirius makes multiple copies -- temporary, permanent, whole, and/or partial -- of pre-1972 The Turtles sound recordings during its broadcast process, performs the copies it makes, and does so without obtaining sound recording reproduction and performance licenses from Flo & Eddie, Inc.
Flo & Eddie, Inc. filed three class actions against Sirius in California, New York, and Florida, asserting state common law copyright infringement claims (as well as claims for unfair competition, conversion, and misappropriation) under the laws of the three respective states. Florida has yet to issue its ruling.
In the California action, Flo & Eddie, Inc. argued that Sirius was liable for two unauthorized uses of its sound recordings: (i) publicly performing Flo & Eddie, Inc.'s recordings by broadcasting and streaming the content to end consumers and to secondary delivery and broadcast partners; and (ii) reproducing Flo & Eddie's recordings in the process of operating its satellite and Internet services. Sirius argued that the bundle of rights that attaches to copyright ownership of a pre-1972 sound recording does not include the exclusive right to publicly perform the recording. Flo & Eddie,Inc., however, contended that an exclusive public performance right existed under California law.
Relying on California's copyright statute, Civil Code §980(a)(2), the California court agreed with Flo & Eddie, Inc. and, on September 22, 2014, granted its motion for summary judgment on its public performance-based claim. After first noting that the California legislature intended ownership of a sound recording to include all rights that can attach to intellectual property, save the singular exception for a "cover" of a recording, the court concluded that copyright ownership of a sound recording under §980(a)(2) necessarily includes the exclusive right to publicly perform the recording. The court also found in favor of Flo & Eddie, Inc. on its unfair competition, conversion and misappropriation claims.
As New York, unlike California, does not have a specific statute that protects a public performance right in pre-1972 sound recordings, Judge McMahon considered the following four issues under New York common law: (i) whether the owners of pre-1972 sound recordings possess an exclusive right to the public performance of those works and whether Sirius infringed Flo & Eddie, Inc.'s copyright; (ii) whether Sirius' broadcast of The Turtles recordings is protected by the "fair use" doctrine; (iii) whether upholding Flo & Eddie, Inc.'s claims would violate the Dormant Commerce Clause; and (iv) whether Flo & Eddie, Inc.'s claims were barred by laches.
In the New York action, Flo & Eddie, Inc. first argued that New York's common law copyright protection prohibited both the reproduction and public performance of The Turtles' pre-1972 sound recordings. Echoing the argument that it made in California, Sirius contended that New York common law copyrights in pre-1972 sound recordings do not afford an exclusive right of public performance. After first acknowledging that this was a question of first impression, Judge McMahon ultimately concluded that "the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant to common law copyright in such a recording." Judge McMahon reached this conclusion based upon a detailed examination of the background principles and history of New York copyright common law, which revealed that the common law typically protects against unauthorized performances and has provided "expansive" protection for artistic works that do not enjoy federal statutory copyright protection for at least 50 years. Sirius' argument -- that New York case law contains no discussion of public performance rights in sound recordings -- was unavailing. As the court ultimately concluded, "New York has always protected public performance rights in works other than sound recordings that enjoy the protection of common law copyright. Sirius suggests no reason why New York -- a state traditionally protective of performers and performance rights -- would treat sound recordings differently."
The court next determined that Sirius reproduced Flo & Eddie, Inc.'s copyrighted recordings without authorization by (i) reproducing The Turtles' recordings for its three main databases, associated backups and smaller on-site databases; and (ii) producing several temporary but complete copies of The Turtles' recordings for its play-out servers, caches and buffers. In response to Sirius' argument that it was not liable for infringement because it did not "distribute" The Turtles' recordings, Judge McMahon pointed out that "[t]o the extent that distribution is an element of common law copyright infringement, publicly performing sound recordings is an act of distribution. Otherwise, Sirius cannot explain how New York courts could have recognized infringement claims alleging that defendants publicly performed copyrighted works without authorization."
Judge McMahon also rejected Sirius' contention that its creation of multiple complete copies of Flo & Eddie, Inc.'s sound recordings could be considered "fair use." After noting that New York courts have not articulated the scope of New York's fair use doctrine, the court undertook a fair use analysis based on the Copyright Act standard and concluded that "Sirius makes non-transformative use of Flo and Eddie's recordings and does so for commercial gain. It is, therefore, 'common sense' that Flo and Eddie would suffer market harm when Sirius takes its property and exploits it, unchanged and for a profit." The court also held that Sirius engaged in unfair competition, Flo & Eddie, Inc.'s assertion of its common law copyright is not barred by the Dormant Commerce Clause, and Sirius cannot invoke the defense of laches.
These explosive rulings may have dire consequences for the broadcast radio industry -- especially streaming music platforms. While the California and New York decisions will be appealed, they raise a host of issues that underscore the uncertain future of the sound recording copyright landscape. For instance, if the decisions are not stayed pending appeal, will pre-1972 music disappear from the airwaves? Will litigating the existence of a public performance right on a state-by-state basis upend the entire broadcasting industry? What happens if the myriad of state laws end up conflicting in the Internet age? Will Congress step in, as many have started urging, and bring pre-1972 sound recordings under the fold of the federal Copyright Act? In the words of The Beatles, legislators need to "Come Together" and sort this out.
By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP
The full SDNY decision can be accessed HERE.

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