Pandora’s Box:
Turtles Actions Threaten to Upend Music Streaming Models

Copyright law in the United States is almost exclusively governed by the federal Copyright Act, which preempts equivalent state laws.  As originally drafted, however, the Copyright Act of 1976 – the current iteration of the Act – made an exception for sound recordings fixed before February 15, 1972, leaving those works to be regulated by the states.   State law thus applies to determine the rights and remedies available to the copyright owner of pre-1972 sound recordings.

Flo & Eddie, Inc. owns all rights to the sound recordings created by the “The Turtles,” a 1960s-era band best known for its song “Happy Together.”  Flo & Eddie sued Sirius XM, which operates subscription services that deliver music to listeners via satellite radio and over the Internet, alleging that Sirius had reproduced and publicly performed several of its sound recordings without authorization.  It was undisputed that Sirius did not license the songs.  Because the songs were created before 1972, Flo & Eddie invoked California law to argue that “ownership of a pre-1972 sound recording includes the exclusive right to publicly perform the recording. . .”  Flo & Eddie, 2014 WL 4725382, at *3.

California Civil Code Section 980(a)(2) provides, “The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047 . . .”  The statute does not define what rights are included in “exclusive ownership” of the sound recording.  Accordingly, the court analyzed whether “exclusive ownership” of a sound recording under California law includes the right to publicly perform the sound recording.

The court first examined the plain language of the statute, concluding that “exclusive ownership” means “to possess and control it and not to share that right to possess and control with others.”  Id. at *4.  The statute carved out one narrow exception to the owner’s exclusive rights – such rights did not include the right to make a new recording of the song (a “cover”).  Since the statute listed one exception, the court reasoned, consistent with statutory interpretation, that “other exceptions are not to be implied or presumed.” Id. at *5 (citations omitted).  Thus, “the legislature intended ownership of a sound recording in California to include all rights that can attach to intellectual property, save the singular, expressly-stated exception for making ‘covers’ of a recording.”  Id.

The court then noted that there was no established body of common law in California – indeed, not even a single case – that applied a rule contrary to this interpretation of § 980(a)(2).  And the only two cases to discuss the public performance right under § 980(a)(2) after its enactment either implied or stated in dicta that the statute conferred such a right on sound recording owners.  Accordingly, the court granted summary judgment to Flo & Eddie on its claims that Sirius violated its public performance rights.  It denied Flo & Eddie’s motion with respect to its claims for violation of its reproduction rights due to disputed fact issues.  Sirius moved to certify the denial of summary judgment for interlocutory appeal, but the court denied the motion.  The case is scheduled to go to trial on August 25, 2015.

After the ruling issued, Flo & Eddie swiftly filed a follow-on lawsuit, styled as a class action, against Pandora, asserting similar claims under California law.  Pandora moved to strike the complaint under California’s anti-SLAPP statute, which provides for early dismissal of claims grounded in the defendant’s constitutional right of free speech unless the plaintiff can demonstrate a likelihood that it will prevail on the merits.  Pandora argued that streaming music constitutes protected speech, and the court agreed.  Because the court had previously ruled in Flo & Eddie’s favor in the Sirius XM action, however, it found that Flo & Eddie’s claims were sufficiently meritorious to survive Pandora’s anti-SLAPP motion.  Consequently, it denied the motion.  Pandora has appealed the denial to the Ninth Circuit.

Flo & Eddie has also sued Sirius in New York.  In that case, the district court found in favor of Flo & Eddie under New York common law and granted Sirius’ subsequent motion to certify the decision for interlocutory appeal.  The case is stayed pending the Second Circuit’s decision.

The rulings in favor of Flo & Eddie have generated substantial commentary in the copyright community as causing a major upheaval of previously settled expectations in the music industry.  Professor Tyler Ochoa of Santa Clara University School of Law reportedly characterized the Central District of California’s decision in the Sirius action as “huge, as in 1906-San-Francisco-earthquake huge.  It literally could result in undoing 75 years of copyright.” As two appeals are pending and one action is hurtling towards trial, however, we can be sure that the question is far from settled.  Moreover, as the laws of the 50 states vary in the form and degree of protection afforded to pre-1972 sound recordings, a victory for the recording industry in one or two states does not necessarily translate into a nationwide victory.  Nonetheless, the series of Flo & Eddie disputes creates substantial uncertainty about the future of royalty obligations for public performances of sound records fixed before 1972.

I will be speaking on this issue at the spring meeting of the American Intellectual Property Law Association in Los Angeles on May 2, 2015.  Please join me!

 

Eldred Conquers Golan’s Heights
Supreme Court Upholds Copyright Restoration

Last week, the Supreme Court issued its eagerly awaited ruling in Golan v. Holder, holding that Congress acted within its authority in passing legislation that restored copyright in certain foreign works that were previously in the public domain in the United States.  The Court found that its earlier opinion in Eldred v. Ashcroft largely disposed of the petitioners’ claims.  Though reactions to the case seemed muted in contrast to the raging debate over SOPA – which initially overshadowed news of the opinion – it is an important opinion with significant ramifications for those who use content in the public domain. Continue reading

Golan’s Heights
Supremes to Hear Constitutional Challenge to Copyright Restoration

On March 7, the Supreme Court granted cert. in Golan v. Holder, taking up the question whether Congress violated the First Amendment when it granted copyright protection to certain foreign works that were previously in the public domain in the United States. The case stems from Section 514 of the Uruguay Round Agreements Act (“URAA”), enacted in 1994 and codified as Sections 104A and 109 of the Copyright Act. Congress passed these provisions to bring the United States into compliance with preexisting international treaty obligations under the Berne Convention, which the United States joined in 1989.

Among other things, the Berne Convention requires its adherents to provide foreign authors with the same degree of copyright protection that they accord to their own nationals. Article 18 of the Berne Conventionrequires joining members to provide copyright protection to foreign works even if those works were previously in the public domain in the joining country. The United States, however, never passed legislation implementing this aspect of Berne.

In 1994, in connection with the Uruguay Round General Agreement on Tariffs and Trade, the United States signed the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs). TRIPs required its signatories to comply with Article 18 of the Berne Convention. Accordingly, the United States enacted Section 514 of the URAA, restoring copyrights in foreign works that had entered the public domain in the United States for any one of three reasons: a failure to comply with formalities (such as placing a copyright notice on published copies of a work); lack of subject matter protection; or lack of national eligibility. Section 514 did not restore copyrights in works whose copyright term had expired.

Clawing these works back from the public domain raised an obvious problem for members of the public who, relying on the fact that the subject works had entered the public domain, were making various uses of those works. One of the Golan plaintiffs, for example, created a derivative work sound recording based on several compositions by Shostakovich which had previously fallen into the public domain in the United States. To address this problem, Section 514 implemented certain protections for “reliance parties,” defined as parties who had exploited or created derivative works based on foreign public-domain works prior to restoration. Section 514 granted reliance parties who exploited foreign public-domain works a 12-month grace period, starting from receipt of notice of restoration from the copyright owner, to sell or otherwise dispose of copies of restored works. Furthermore, Section 514 authorized reliance parties who created derivative works based on restored works to continue exploiting those derivative works upon payment of “reasonable compensation” to the owner of the restored work (also upon receipt of notice of restoration).

The Golan plaintiffs – musicians, performers, educators and other creators – sued because they had exploited foreign works previously in the public domain and, after enactment of the URAA, were either prohibited from continuing to exploit those works or were required to pay cost-prohibitive licensing fees to the restored copyright holders. They argued that the removal of works from the public domain hampered their free speech rights and consequently violated the First Amendment of the Constitution. The District Court agreed and held the statute invalid.

On appeal, the Tenth Circuit reversed. As a threshold matter, the court addressed whether it should subject the statute to heightened scrutiny under the First Amendment. The court found no evidence that the government enacted the statute because of agreement or disagreement with a particular message. To the contrary, Congress passed the law to comply with international obligations and to protect the rights of American authors abroad. Thus, the court found the statute to be a content-neutral regulation subject to “intermediate scrutiny.” Under this test, courts uphold legislation if it (1) advances important governmental interests unrelated to the suppression of free speech and (2) does not burden substantially more speech than necessary to further those interests.

The Tenth Circuit found that the government had demonstrated a substantial interest in protecting American copyright holders’ interests abroad, because “[s]ecuring foreign copyrights for American works preserves the authors’ economic and expressive interests.” The United States’ failure to restore foreign copyrights following its adherence to Berne harmed those interests because other countries were following suit and refusing to restore copyright in American works. Though Section 514’s restoration of foreign copyrights does not guarantee that other countries will reciprocate, the Tenth Circuit reasoned that it owed Congress considerable deference in an area involving foreign relations, and concluded that substantial evidence supported Congress’s judgment.

The court also found that the “burdens imposed on the reliance parties are congruent with the benefits” of restoration. The “United States needed to impose the same burden on American reliance parties that it sought to impose on foreign reliance parties. . . . The burdens on speech are therefore directly focused to the harms that the government sought to alleviate.” As a result, Section 514 was narrowly tailored to achieve its goals. The court rejected the plaintiffs’ argument that Congress could have employed less restrictive means consistent with Berne’s requirements. Though a statute must be “narrowly tailored to serve the government’s legitimate, content-neutral interest,” it “need not be the least restrictive” means of doing so. Thus, the availability of other options to protect reliance parties’ interests did not alter the statute’s viability.

A look back at Eldred v. Ashcroft suggests that the Supreme Court may disagree with the Tenth Circuit’s application of intermediate scrutiny to Section 514. In Eldred, the plaintiffs sought to invalidate the Copyright Term Extension Act (“CTEA”), which increased the term of copyright from 50 years after the author’s death to 70 years after the author’s death. The Eldred plaintiffs argued that the CTEA was a content-neutral regulation of speech subject to heightened judicial review. In her majority opinion, however, Justice Ginsburg rejected the “imposition of uncommonly strict scrutiny on a copyright scheme that incorporates its own speech-protective purposes and safeguards,” finding that “copyright law contains built-in First Amendment accommodations” such as the idea-expression dichotomy and the fair use doctrine. The Court went on to hold that the “First Amendment securely protects the freedom to make–or decline to make–one’s own speech; it bears less heavily when speakers assert the right to make other people’s speeches. To the extent such assertions raise First Amendment concerns, copyright’s built-in free speech safeguards are generally adequate to address them.” Of course, three of the Justices who joined in that majority opinion – Chief Justice Rehnquist, Justice O’Connor and Justice Souter – have since retired.

The Surpreme Court is expected to hear Golan in its next term, which begins in October, 2011. I will post briefs as they are filed. In the meantime, the parties’ Tenth Circuit briefs are posted below.

Opening Brief for the Appellants/Cross-Appellees

Opening and Response Brief for the Appellees/Cross-Appellants

Combined Reply and Responsive Brief for the Appellants/Cross-Appellees

Reply Brief for the Appellees/Cross-Appellants