THE TURTLES & SIRIUS XM: Not Happy Together

Flo & Eddie filed suit in Los Angeles Superior Court (a California state court) alleging that these performances violated the provisions of a California state statute.  The case was removed to Federal District Court in California based on Federal diversity of citizenship jurisdiction.  This is important to note because at issue is an interpretation of California state copyright law, not an issue of Federal copyright law.  The Federal District court had to interpret the meaning of the California copyright statute.

A little background on music copyrights is in order.  A recording of a song actually consists of two separately copyrighted works: (a) the “musical work” (i.e., the music and lyrics); and (b) the “sound recording”, (i.e., the actual performance of the song as captured on the record).  Musical work copyrights normally are owned by music publishers (or songwriters, if unpublished).  Sound recording copyrights normally are owned by record companies (or artists, if they self-release an album).  The protection afforded to these two types of works differs under the U.S. Copyright Act. Specifically, there is a “public performance right” for musical works, but NOT for sound recordings (unless the public performance is a digital performance, such as internet radio).  Even for digital performances, the Copyright Act provides NO protection for sound recordings first created prior to 1972. A 1971 amendment to the Copyright Act (which became effective on February 15, 1972) states specifically that recordings made prior to that date were not subject to Federal statutory copyright protection.

So, in the case of “Happy Together” (which was written in 1967), when the song is performed by a band live, or played on the radio, public performance royalties are payable to the music publishing owners.  Public performance royalties with respect to musical compositions are paid through ASCAP, BMI or SESAC. However, when the Turtles’ original recording of that song is played on the radio, no royalties are paid to Flo & Eddie because they do NOT own the copyrights to the musical composition, only the recording of it. (While changes to the Copyright Act which were enacted in 1998 as part of the Digital Millennium Copyright Act provided some protection for digital performances of sound recordings, those changes had no impact whatsoever on pre-1972 recordings which still do not enjoy a public performance right, analog or digital, under the Copyright Act.)

The 1971 amendment made clear that, unlike most of US copyright law that DOES pre-empt any equivalent state laws on point, the Federal Copyright Act will not pre-empt state protection for sound recordings until 2047.  So, state laws still matter in this one area.  At the present time, 49 states have enacted or extended state law protections to pre-2/15/72 sound recordings. (Only Vermont has no state law in this area.) Most of these laws, however, are anti-piracy statutes, designed to prevent unauthorized copying of recordings.  These state laws do not apply to the over-the-air broadcast performance of sound recordings. In fact, all but one of the 49 states offering protection to older sound recordings have explicit carve outs specifying that the laws do not create any public performance right in broadcasting. (Tennessee is the lone exception on this front.)

The primary issue in the Flo & Eddie cases is whether those state statutes protect any non-broadcast “public performances” of the recordings such as digital streaming services and other digital performances of the type provided by Sirius XM, Pandora, Spotify, etc.

Flo & Eddie (acting on their own and on behalf of a class they had certified) decided to file suit against Sirius XM alleging a violation of their rights under the California statute.  Their argument is that the California law that granted them “exclusive ownership” of their pre-1972 sounds recordings includes the exclusive right to control and be paid for digital performances of those recordings. While the case eventually was removed to Federal District Court, it still was decided on the basis of California state law, not Federal law.  Flo & Eddie also filed similar lawsuits in New York and Florida alleging violations of those states’ laws protecting pre-1972 sound recordings.  On their heels, major record labels (who own the lions’ share of these pre-1972 recordings) also have filed suits against Sirius XM and against Pandora.

Two weeks ago, the U.S. District Court for the Central District of California granted Flo & Eddie’s motion for summary judgment on their California sound recording claims insofar as the digital public performances are concerned. The basis for the Court’s decision was its interpretation of Section 980(a)(2) of the California Civil Code. That section expressly vests “exclusive ownership” of any pre-2/15/72 recording in the recording’s copyright owner.  Sirius XM had argued that since Section 980(a)(2) does not explicitly include a right of public performance they did not owe Flo & Eddie any money, even though they did not deny digitally broadcasting Flo & Eddie’s pre-1972 recordings.  The Court disagreed with this position and held that the concept of “exclusive ownership” in this context includes the exclusive right to digitally perform those recordings, even though the digital public performance right is not explicitly listed in the statue.  Consequently, the Court ruled that Sirius XM’s repeated playings misappropriated Flo & Eddie’s property interest in the sound recordings under California law and will entitle them to damages (which will be another phase of the case).

So what impact will this California case have?  All of the Flo & Eddie cases, including those filed in New York and Florida, are class actions.   It is likely that other similarly situated sound recording owners will jump into the fray to try to recover substantial damages for past royalties that should have been paid.  It is important to keep in mind, however, that the Flo & Eddie Court’s ruling was by a Federal judge interpreting a California statute.  So, for example, the Flo & Eddie Court’s opinion could be contradicted by a California state court hearing a similar case if it were to hold that the Federal court misinterpreted California law.  Also, there is no assurance that courts in other states, including Florida and New York, will agree that the “exclusive ownership” language under their respective state statutes should be viewed as broadly as the California law has been interpreted.  Further, Sirius XM has already prevailed in a separate but similar lawsuit, also in California, filed by record labels. So even this case could go away.

In the short run, however, the Flo & Eddie decision could have a major impact on digital broadcasters, such as Sirius XM, which have niche “oldies” channels that consist almost entirely of pre-1972 sound recordings.  (Flo & Eddie have just filed suit against Pandora in California based on the Sirius XM decision there.) The number of recordings that potentially are impacted by this Flo & Eddie decision is huge, including not only the Turtles, but also the Beatles, the Rolling Stones, Jimi Hendrix, Led Zeppelin, the Beach Boys, Elvis Presley, Roy Orbison, the classic Motown acts, and the classic “British Invasion” bands, to name just a few.  These artists, and their recordings, still are popular today, more than forty years after the initial release of their recordings.  So, unless the case is overturned, at the very least, Sirius XM will now have to pay royalties when it has not been doing so.  We’ll have to wait to see what impact this decision this will have on their willingness to continue to offer this programming, or on the costs that they try to pass along to their subscribers.

Finally, there is nothing stated in the Flo & Eddie decision that limits the scope of the California statue to violations of public performance by means of digital audio transmission (such as those made by Sirius XM and Pandora).  Therefore, the Flo & Eddie ruling might be viewed broadly to give sound recording copyright owners a general public performance right in pre-February 15, 1972 sound recordings (i.e., analog, as well as digital public performances), a broad right that expressly is not recognized under current Federal copyright law. That means that traditional “over-the-air” radio and television broadcasters, who currently are expressly exempted under Federal copyright law from paying public performance royalties with respect to post-February 15, 1972 sound recordings, may be the next group targeted.