Oldies and Broadcasters: No Longer Happy Together?

Thomas C. Carey

By Thomas Carey. Chair of the Business Practice Group

November 2014 IP Update

Copyright law is full of nooks and crannies, some of which aren’t explored for years or even decades.  Recent decisions from courts in California and New York cast a bright light on a seldom considered subject:  state law copyright protection.

The Turtles, a California rock group that performed from 1965 – 1970, had their first hit with a 1965 cover of Bob Dylan’s “It Ain’t Me Babe”.  Their most successful song, “Happy Together,” reached number one on the charts in 1967.  A handful of their other songs made the top ten.  Their music lives on, broadcast over the air by Sirius XM and others, and over the internet by Sirius XM, Pandora and others.

Two of the founding members incorporated and own Flo & Eddie Inc., which owns the rights to the master recordings of the Turtles’ music. Federal protection of copyright is based upon the copyright clause of the United States Constitution.

Federal copyright statutes, which generally preempt state law, have protected musical compositions since 1831.  But that protection benefited only composers (and their assignees) until February 15, 1972.  On that date, an amendment to the Copyright Act, designed to curtail piracy of phonograph records, became effective.  This amendment did not give copyright holders the right to prevent others from playing the records for public entertainment (over the air, for example), but prohibited only the unauthorized manufacture of copies of the records.

While this amendment preempted all state law protection for sound recordings to which it applied, it specifically preserved (until 2067) state law protection for sound recordings made before February 15, 1972 (we will call them “Oldies” here).  In 1995, the Copyright Act was further revised to provide copyright holders with a right to royalties for playing recorded performances over the air, but only for transmissions in digital form. This right does not apply to Oldies, which are not eligible for federal copyright protection.[1]  Traditional analog radio stations have thus been spared the obligation to pay performance royalties when they broadcast recorded music, but as always they must pay royalties that benefit the composers of that music.

As a result, no federal law benefits the Turtles when their performance of “It Ain’t Me Babe” is played on the radio.  They did not compose the song and their performance was recorded before February 15, 1972.  In fact, commercial radio stations and digital distributors of music such as Sirius XM and Pandora have never paid “performance royalties” for playing Oldies.

It had been accepted wisdom in the music industry that Oldies had no performance-based copyrights under any law, state or federal.  For example, the Chairman and CEO of the Recording Industry of America (RIAA) testified before Congress in 1995 that “Under existing law, record companies and performers … have no rights to authorize or be compensated for the broadcast or other public performance of their works.”

That may all be about to change.

In 2013, Flo & Eddie brought suit against Sirius XM in California, New York and Florida, alleging infringement of rights under the copyright law of those three states for the unauthorized broadcast of Oldies.  Not to be outdone, major record labels including Sony, UMG and Warner brought suit against Sirius XM in California state court on the same theory.

Sirius resisted the claims by arguing that the relevant state courts had never ruled that state copyright law protected performances of recordings and thus no such protection exists; that well-established customs in the recording and broadcast industries should be respected; and that the founders of the Turtles (and Flo & Eddie), themselves long-time subscribers to Sirus XM radio, had done nothing to assert their rights for decades and should not be permitted to do so after having been silent for so long.  Sirius XM also argued that state regulation of national broadcasts would violate the Commerce Clause of the Constitution.

As Sirius XM pointed out, the broadcast and recording industries had for decades operated on the assumption that no law required broadcasters to pay performance royalties for broadcasting Oldies.  Were they wrong?  Three courts – two in California and one in New York – have recently ruled that they were.

First, a California state court issued a tentative ruling in favor of Sirius XM, indicating that there was no common law right to performance royalties.  But while that ruling remained tentative, the federal court in California made a dramatic ruling in favor of Flo & Eddie.

The federal court reviewed a 1982 California statute pertaining to copyright in sound recordings.  That statute, section 980 of the California Civil Code, was modeled after the federal statute but addressed only recordings made before February 15, 1972.  It gave the “author” of a sound recording the exclusive rights to that recording.  The statute contains a single exception, following one found in the federal Copyright Act, permitting unauthorized “covers” of recordings provided that the performers actually perform the music themselves and do not merely electronically copy the sound from the first recording.

The presence of this express exception led the federal court to conclude that the California legislature had not intended any additional exceptions to be inferred.  The court noted that section 114(a) of the federal Copyright Act provides that the copyright in music recordings does not include a right to curtail the performance of those recordings; and that the California legislature did not include this exclusion in section 980.  The court reasoned that the California legislature, having copied one exclusion in the federal statute but not the other, intended the right to control performance of a sound recording to be included in section 980.

The court dispensed with the Commerce Clause argument by noting that the federal statute preserved state law rights in pre-1972 recordings. [2] The court thus granted Flo & Eddie’s motion for summary judgment in its favor.

The record labels asked the judge presiding over their state court proceeding to review the federal court opinion before issuing a final order.  The judge did so, was persuaded by its logic, and changed her mind.  She issued an order advising the jury that such performance rights for Oldies exist under California law.

The federal court in New York did not have a state statute to interpret.  Instead, it reviewed the history of common law copyright protection in New York State. New York’s common law had, the court found,  included the right to forbid the unauthorized performance of plays and film clips.  It also noted a 2005 opinion of the New York Court of Appeals (the state’s highest court) stating that New York common law of copyright applied to sound recordings.  From these disparate sources, the court concluded that New York common law would provide the owners of the copyright in sound recordings with a right to restrict their performance.

This ruling arose from a motion to dismiss brought by Sirius XM.  The court not only denied that motion, but said that, absent a showing by Sirius XM that any material facts were subject to dispute, it would enter judgment in favor of Flo & Eddie as to liability and proceed to a hearing on damages.

Flo & Eddy brought its lawsuits as class actions on behalf of itself and copyright owners of all sound recordings made before February 15, 1972.  Both cases are in the unusual posture of reaching a decision on the merits of the case before resolving the question whether the case can proceed as a class action.  Assuming that class certifications proceed, the potential liability of Sirius XM is large.

The complaints were brought against Sirius XM and certain unnamed defendants who allegedly assisted Sirius XM in its infringing distribution of oldies.  The New York complaint suggests that DISH and DirectTV will ultimately be among those named as defendants.   They too may face substantial liability.

Sirius XM has filed a motion for reconsideration of the California decision and has belatedly identified two cases that, it says, conclude that there is no state law protection for the performance of sound recordings.  Both cases are from federal courts, which are not an authoritative source of state law.

These lawsuits have a long way to go.  The class actions have not been certified as such and no proceedings have yet begun that will address the subject of how much money Flo and Eddie and the copyright owners of other Oldies may be able to recover as royalties. Undoubtedly, the decisions on liability will eventually be appealed.

These lawsuits have enormous implications and may affect radio stations, webcasters, retail stores, restaurants, nightclubs and any other venues where Oldies are heard.  Even more radically, liability could extend to internet service providers (ISPs), which are ordinarily sheltered from copyright liability by a safe harbor established in the Digital Millenium Copyright Act, but which, according to one New York decision, does not protect ISPs from state law copyright liability. For these reasons, the recent rulings in this litigation have been compared in scope to the San Francisco earthquake.

National broadcasters and internet service providers face a potentially chaotic situation if they are faced with a patchwork of royalty demands arising under numerous state laws. A uniform national licensing system would be a way out of this morass. Such a system is proposed in H.R. 4772 (the “RESPECT Act”), which would extend to Oldies the royalty system now applicable to newer music, and also preempt applicable state law. These recent court decisions may light a fire under Congress and prompt it to enact that bill.

Digital transmitters of music have been paying performance royalties on newer music since 1995, so paying royalties on Oldies may be nothing more than a nuisance to them. But terrestrial radio stations have never paid performance royalties, so don’t be surprised if you hear fewer Oldies while these lawsuits continue to wend their ways through the courts. And classical music fans should not be surprised if pre-1972 recordings of classical music start to disappear from the airwaves as well. The Turtles’ class actions do not discriminate by musical style.

 

[1]Section 301(c) of the Copyright Act provides: “[N]o sound recording fixed before February 15, 1972 shall be subject to copyright under this title . . .”
[2]This summary treatment of the Commerce Clause argument was perhaps too superficial, as the New York court later pointed out. It is likely to be one basis for an appeal of the California decision.