David Oxenford: Court Ruling for pre-1972 Music: What Does It Mean?

david oxenford 02This guest column is by frequent broadcast attorney and frequent guest contributor David Oxenford. The article was originally published on his Broadcast Law Blog.

As the summer of copyright comes to an end, the music licensing issues which arose causing me to repeatedly write about this extremely contentious season in copyright law are by no means finished (see the most recent of our Summer of Copyright articles here). In fact, on the first full day of autumn, we received a very interesting decision out of a US District Court in California on the lawsuit brought by Flo and Eddie against Sirius XM, finding that the music service improperly failed to pay royalties for the public performance of pre-1972 sound recordings from the duo’s former band, the Turtles (a copy of the decision can be found in this Billboard article). As we have written before, Flo and Eddie brought suit against Sirius XM, arguing that the service needs to get permission to make public performances of these recordings and, by not doing so, it violated their California state law copyrights.

Pre-1972 sound recordings first registered in the US are not covered by Federal law, so the current mechanism for Sirius XM to pay for the digital public performance of sound recordings (paying a royalty, set by the Copyright Royalty Board, to SoundExchange) does not exist. To the surprise of many (including this author) the Court concluded that there is in fact a public performance right in pre-1972 sound recordings under California state law, and went on to conclude that Sirius XM violated its obligations under the law to pay for the use of music. This decision, on a summary decision motion, may quite well be appealed. The issue is also before many other courts, both in California and elsewhere. But this decision is certainly worth review, as it could have an impact not only on digital services, but also on any other company that publicly performs such recordings – including other digital music services, bars and restaurants, stadiums, and potentially even broadcasters.

In reaching this decision, the Court looked at the language of the California statute dealing with pre-1972 sound recordings. Finding that the statute vested “exclusive ownership” in the pre-1972 sound recordings in the “author” of the work, the Court looked at other California statutes on property ownership generally, to determine what “exclusive ownership” meant. Looking at the California civil code, the Court concluded that ownership was the right “to possess and use a thing to the exclusion of others.” From that language, the Court concluded that the public performance was a “use” of the “thing” (i.e. the sound recording), and that Flo and Eddie had the right to exclude Sirius XM from the public performance of their songs or to demand consideration from Sirius XM for such use.

This is a very surprising decision, in that the Court finds, from a generic definition of “ownership” applicable to tangible property in California, a public performance right in sound recordings. The public performance right is a creature of copyright law, and a right that never existed in the United States until the mid-1990s when it was adopted exclusively for digital transmissions of sound recordings. Copyrights are not “natural” rights like an ownership right to a piece of tangible property – they are rights that are created by the law, and subject to the limitations established by law. Owning a copyright is not like owning a car or a house, as it is not something where your use of the property excludes others from using it at the same time. It seems like a dangerous precedent to take the definitions applicable to tangible property and extend them to copyright concepts that are not really applicable at all to the kinds of property to which the definition of ownership originally applied. There is no right to “publicly perform” a house or a car, but from the definition of ownership applicable to that tangible property, the Court found an inherent right to publicly perform sound recordings – this sweeping right that has never before existed in the US.

If this decision were upheld, the potential ramifications for business in California could be great. There appears to be nothing in the decision that would limit it to just the digital world. So any business that plays pre-1972 sound recordings – bars and restaurants, stadiums, schools and churches, broadcasters, etc. could all face claims for royalties? And who would they pay? SoundExchange collects only for the statutory license under Federal law. There is no set rate for payments under California law, and no way to identify all of the pre-1972 sound recording copyright holders that may exist back to the start of recorded music or to determine how much they would want for the rights to play their music.

It is important to recognize that this is a trial court decision by a Federal Court interpreting California law. A California court, in another case addressing this issue, preliminarily reached a different conclusion just a few weeks ago (see this article about that preliminary ruling). So this decision likely will be appealed, and could be subject to collateral attack were the California courts, who have the right to determine what their own state law is, reach a different determination. As there are other similar suits pending in other states, each such case will depend on the interpretation of that state’s laws own laws on pre-1972 recordings. And in many if not most states, those laws deal only with criminal matters, principally adopted to prevent bootlegging of recorded music. These other states often do not have the broad rights of ownership as set out in the California laws.

So this is another of those issues that users of music will have to watch carefully as it develops, as there will no doubt be significant litigation and many disputes ahead. The Autumn of Copyright has begun!

David Oxenford