Copyhype

Even after two courts in California, one federal and one state, determined in September and October that California state protection of pre-1972 sound recordings includes an exclusive right of public performance, the conventional wisdom seemed to be that the decisions would not stand for too long. The public policy ramifications were too great for the holdings to survive on appeal or through further litigation. But then in November, a federal court in New York came to the same conclusion, and all bets seemed off.

The background of the litigation and issues involved are discussed more fully in the above two links, but very briefly: Flo & Eddie, a corporation made up of two founding members of the Turtles, sued satellite radio provider Sirius XM in federal court in California, New York, and Florida for infringement of their public performance rights under state and common law. The major record labels sued Sirius XM in state court in California alleging the same. Flo & Eddie have so far been granted summary judgment on the issue in California and New York; the record labels have won approval of a jury instruction stating California law grants public performance rights in sound recording owners.

Sirius XM changed legal teams days after the New York decision. ¹Note, though, that Sirius XM had already done the same for the California federal court litigation prior to the New York decision. The new team immediately moved for reconsideration in all three proceedings, calling attention to not-yet-cited precedent that it claimed stood for the proposition that pre-1972 sound recordings did not include an exclusive right of public performance.

The case it relied most fully on was RCA Mfg. Co. v. Whiteman, a Second Circuit decision from 1940. ²114 F.2d 86. Sirius also relies on Supreme Records, Inc. v. Decca Records, Inc., 90 F. Supp. 904 (S.D. Cal. 1950) in its California motions. Sirius also raises a Dormant Commerce Clause challenge in its motions, which I won’t discuss here. In Whiteman, a maker of records sought to restrain their broadcast by a radio station. ³Though Whiteman is captioned as the defendant here, he was actually the original plaintiff and performer on the records at issue; the court explains how, procedurally, he ended up being the defendant on appeal:

Before the action was brought Whiteman had filed a complaint against W. B. O. Broadcasting Corporation and Elin, Inc., to restrain the broadcasting of phonograph records of musical performances by Whiteman’s orchestra. By leave of court RCA Manufacturing Company, Inc., then filed the complaint at bar, as ancillary to Whiteman’s action, asking the same relief against W. B. O. Broadcasting Corporation and Elin, Inc., as Whiteman had asked in his action, and in addition asking that Whiteman be adjudged to have no interest in the records of his performances, because of contracts between him and itself. Whiteman thereupon discontinued his action, leaving only the ancillary action in which the judgment on appeal was entered.

The case is one of the earliest to address property interests in sound recordings, the technology itself still in its early stages—state law would not begin protecting sound recordings for two decades, federal law, three. ⁴US Copyright Office, Federal Copyright Protection for Pre-1972 Sound Recordings, 2011. Musical compositions—the underlying songs that are protected by copyright separately from sound recordings—have had public performance rights protected under federal law since 1897, but even then, it was only until the 1920s that courts recognized that public performance included broadcast by radio. ⁵Twentieth Century Music Corp. v. Aiken, 422 US 151, 158-59 (1975). The case was, in other words, decided when the law concerning sound recordings was quite primordial.

The Southern District Court of New York was the first to respond to the reconsideration motion from Sirius, and it did not sound happy. In a December 3rd order directing a response to the reconsideration motion from plaintiffs Flo & Eddie, the court said, “Whiteman plainly should have been addressed the first time around, and it must be dealt with now—it is, after all, a Second Circuit decision (albeit a pre-Naxos decision) discussing key issues in this case.” It concluded even more bluntly:

I will not accept reply papers; I will also not hold oral argument. I am well aware of the ramifications of my original ruling, which I did not reach lightly. But in the end, this court does not make policy; I deal in law. Sirius has had its say about the law; Flo & Eddie will weigh in in writing; and I will decide whether or not to reconsider my original ruling.

Two days later, the California state court, where the plaintiffs are the major record labels, considered the motion for reconsideration. The court did not change its original decision that California law recognizes a public performance right in sound recordings, though it did certify the question for interlocutory appeal. ⁶The California federal court denied to certify the same question for interlocutory appeal on November 20.

It made short work of the arguments from Sirius. It says “Whiteman was limited to New York common law” while the original decision here was based on the text and structure of California statutory law. In addition, it notes that Whiteman “was expressly disapproved in Capitol Records v. Mercury Records Corp.” which held that Whiteman‘s conclusion “is not the law of the State of New York.” The court was equally unpersuaded by Sirius’s reliance on Supreme Records v. Decca Records, a 1950 California decision that the court says “involved the imitation of particular arrangements of a song” rather than addressing “the issue of public performance rights in sound recordings.”

But the worst blow to Sirius’s morale was yet to come. On Friday, December 12, the New York court denied the motion for reconsideration in a remarkably devastating critique of the arguments advanced. It begins by noting, “Obviously Whiteman is a very old case, and does not represent any ‘intervening change of controlling law,’ so the argument must be that the Court’s failure to apply Whiteman constitutes ‘clear error.'” But, says the court, “The only clear error in this case is O’Melveny’s [Sirius’ counsel].” It continues:

Sirius’s former counsel had two perfectly good reasons not to argue the lack of any public performance right on the basis of Whiteman: (1) Whiteman does not hold that New York does not recognize a public performance right as part of the common law copyright in sound recordings; and (2) its actual holding – which is that the sale of sound recordings to the public constituted “publication,” which divested a creation of any common law copyright whatsoever – is no longer good law, and has not been for 60 years.

The court goes on to say that the crux of Whiteman was whether the sound recording was published, and therefore lost any rights it had. It notes that the court did not specify what exactly those rights were—whether they included a right to publicly perform or not. ⁷I would add that Whiteman appears to make a material error in its discussion. It says, “Copyright in any form, whether statutory or at common-law… consists only in the power to prevent others from reproducing the copy-righted work.” This is clearly not the case, since federal statute had provided a right of public performance to owners of dramatic compositions since 1856, nearly a century prior to Whiteman. In any event, the court adds, Whiteman has since been overruled by New York courts.

Sirius also asserted a Constitutional challenge to Flo & Eddie’s claims based on the Dormant Commerce Clause. The court’s clarity here concerning property and commerce is worth quoting:

Sirius does not dispute that the reach of the Dormant Commerce Clause is only to state actions properly characterized as “regulations.” Instead of explaining how liability for common law copyright infringement constitutes a regulation, Sirius dodges and misconstrues the issues.

…

The question is whether the law at issue – common law copyright – constitutes “regulation.” In the one case Sirius does cite applying the Commerce Clause to a judicial finding of liability the law involved [] a California statute requiring pre-approval for marketing cosmetic products. The cases holding that a law may violate the Dormant Commerce Clause because of its “practical effects” on interstate commerce each involved state liquor-pricing schemes. All of those state laws -pharmaceutical approval and liquor pricing laws – are classic instances of states exercising their regulatory power, and are very different from this case, where the issue is protection of property rights.

Protecting Flo and Eddie from the theft of its property is not “regulation”; a simple example illustrates the point. Suppose, instead of stealing Flo and Eddie’s property rights in the sound recordings, someone stole its company car, which was then used to operate an interstate taxi service. The Dormant Commerce Clause obviously would not bar Flo and Eddie from maintaining an action at common law for conversion of the car. And that would be true even though the action, and the return of the car and the end of the taxi service, would affect interstate commerce. State laws barring theft do not violate the Dormant Commerce Clause.

The court ultimately defers on certification of this issue for interlocutory appeal.

That leaves pending the motion for reconsideration in the California federal court (a proposed motion seeks hearing January 26, 2015) and the motion for summary judgment on the same issue in Florida.

Thus far, things have not gone well for Sirius. But it may be the case that the issues in the cases are resolved legislatively before they are resolved through litigation—the Copyright Office has already reported on federalization of pre-1972 sound recordings and taken up the issue in a recent round of public comments, and the House Judiciary Committee considered the issue during a two part hearing this past June. Proposed legislation that would bring these recordings within the compulsory license that Sirius relies on for digital performances of sound recordings (stopping short of full federalization) was introduced this past session.

Many sound recordings made before 1972 remain economically valuable, as this series of litigation demonstrates. At the same time, there are numerous issues remaining to be resolved if federalization is the goal. But in the interim, the recognition by several courts of the property rights of creators to the products of their intellectual labors is welcome.