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!

 

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