Not So Happy Together The dispute over public performance rights for pre-1972 sound recording
US Copyright Law Splits Music Two Ways Musical compositions
Sound recordings
The underlying words
A fixation of sounds
©
and notes
Owned by its authors and assigned to a publisher
℗
(usually a recorded performance of a musical composition)
Owned by recording
artists and assigned to a record label
Federal Protections Musical compositions have been protected since 1831, nearly 50 years before the first experiments with radio waves
Sound recordings received federal copyright protection in 1971 Congress did not provide sound recording copyright owners with an exclusive right to publicly perform their work
Federal protection did not apply to sound recordings made before Feb. 15, 1972
In 1988, the Digital Millennium Copyright Act gave sound recording copyright
owners and exclusive right to publicly perform their works “by means of digital audio transmission”
Public Performance Rights for Pre-1972 Sound Recordings Sound recordings fixed prior to February 15, 1972 were subject to common law or statutes of individual states
For decades, the radio and recording industries have
operated with the assumption that pre-1972 sound recordings had no public performance right under state laws
Digital broadcasters including Sirius XM and Pandora followed suit
Flo & Eddie Inc. v. Sirius XM Flo & Eddie Inc., a corporation formed by two surviving
members of the 1960s musical group, The Turtles, sued Sirius XM in New York and California
Flo & Eddie own the rights to a number of sound recordings by The Turtles, including the 1967 hit, “Happy Together”
In their suits, Flo & Eddie argue that California statute and
New York common law provide a public performance right to pre-1972 sound recordings Sirius XM infringed upon this right by broadcasting The Turtles’ recordings without authorization
Flo & Eddie Inc. v. Sirius XM (Pictorial Summary)
Landmark Rulings In California, US District Judge Philip Gutierrez determined that California Statute protects pre-1972 sound recordings against unauthorized public performance
“The legislature did not intend to further limit ownership rights, otherwise it would have indicated that intent explicitly”
In New York, US District Judge Colleen McMahan held that state common law provided a performance right for pre-1972 sound recordings
“Years of judicial silence implies… not that common law copyright in sound
recordings carry no right of public performance, but rather that common law copyright in sound recordings comes with the entire bundle of rights that holders of copyright in other works enjoy”
Why It Matters The recent interpretations of state law would make the exclusive right of
public performance apply to any public performance of a pre-1972 sound recording whether on a digital service or otherwise
Any venue or service that plays recorded music Bars / Restaurants Retail Stores / Malls Stadiums / Theme Parks
Without the statutory framework that Congress provided for post-1972 sound recordings, the owners of sound recordings could charge any amount they wished, or deny permission altogether
Impact on Content Providers “Copyright owners do have an enforceable right that so far they have just ‘failed to act on’”
Flo & Eddie have already filed additional suits against Pandora
Pre-1972 sound recordings amount for 15% on Sirius XM 5% of plays on terrestrial radio 5% of plays on Pandora Including immensely popular 50s and 60s rock n roll Every original record by The Beatles
Increased Costs The costs of the combined lawsuits and assessed damages could be financially catastrophic for content providers
Flo & Eddie are seeking more than $100M from Sirius XM Equivalent to one quarter of Sirius XM’s net annual income
Devastating impact on their bottom line and investors’ faith
In addition to settling damages for previous unauthorized performances, the content providers would need to negotiate licenses and fees for future performances on a case by case basis with each set of rights owners, and navigate a patchwork of state statutes and common law
Looking Ahead With special thanks to Chris Harrison, VP of Business Affairs at Pandora
Judicial Realism For both Pandora and Sirius XM, the district court rulings in California and New York will be overturned by the 9th and 2nd circuit courts
“The appeals court will get the answer correct, which is that there is not a performance right” - Harrison
In part to avoid a tremendous amount of new lawsuits
against radio and TV services, as well as bars, restaurants and other venues
A Legislative Solution The R.E.S.P.E.C.T. (find out what it means to me) Act Requires “digital music services… that transmit sound recordings under the statutory license provided under federal copyright law to pay royalties for sound recordings fixed before February 15, 1972, in the same manner as they pay royalties for sound recordings protected by federal copyright”
Only address compensation Leaves pre-1972 sound recordings under state jurisdiction No safe harbor provisions
“If we’re going to move down a path where performance rights were to be granted to pre-72 works, all of the benefits and obligations of federal copyright ought to apply” - Harrison
Direct Deals Negotiated between rights holders and content providers “Some exchange of value, where both sides feel they're getting something that they otherwise wouldn’t have.” – Harrison
Pandora & Merlin Label Group (sound recordings) Pandora & BMG (publishing) iHeartMedia & Big Machine Label Group (sound recordings) Key to international expansion Spotify only uses direct deals, but this is because the Section 114 statutory license is unavailable to them as an on-demand service
What to Expect If you look back through history, whenever new distribution platforms emerge, there’s a tense struggle that ensues. It can last anywhere from 5 to 15 years, with lots of litigation, lots of money spent on lawyers, lobbying and all that, but at the end of that, the system finds its new equilibrium. I’m not sure whether it’s 5 years for us or 15 years for us, but we’ll get to a point where everybody just goes, ‘ok, that’s how much internet radio pays,’ and we’ll go about our business. The short term between now and when that gets resolved? There’s going to be a lot of litigation. There’s going to be a lot of money spent on lawyers. There’s going to be a lot of money spent on Capitol Hill, trying to influence the decision makers. - Harrison
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References
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-Nick Kuzma