David Oxenford: Understanding the Murky State of the Performance Right in Pre-1972 Sound Recordings

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

It’s another summer with music copyright issues hitting the press almost every day. Over the next week or two, we will try to catch up on some of the legal issues raised by all the music news. First, let’s look at the significant actions in the last ten days in the battle over whether there is a public performance right in pre-1972 sound recordings. Just a few days after there was a court decision (available here) finding that there was no common law public performance right in pre-1972 sound recordings under Florida law, Sirius XM last week announced that it had settled the case brought against it by the major record labels by agreeing to pay $210 million for nationwide public performance rights to the catalog of recordings that these labels own, said by Sirius’ SEC 8-K filing to comprise about 80% of those sound recordings. Obviously, that settlement does not appear to resolve the issues with independent sound recording owners (like Flo & Eddie who brought the actions that have resulted in NY and California decisions finding a performance right in pre-1972 recordings in those two states). But what do the settlement and Florida decision mean for other users of these recordings?

First, a review of the issue with pre-1972 sound recordings. With all of the copyright issues that have been in the news in the last few weeks, that review is necessary so that readers really understand the issues involved in this case – beyond just the headlines. Pre-1972 sound recordings (sound recordings being a song or other audio material, as recorded by a particular artist) first released in the United States are different than other sound recordings, as they do not have protections under Federal copyright law. Prior to 1972, Federal copyright law did not protect sound recordings at all, only protecting what is referred to as the “musical work” or “musical composition” (the underlying words and music of a song). The actual recording of the song was protected only under state laws, and most state laws addressed only unauthorized reproductions of those recordings (e.g. bootlegged copies), not performance rights. When copyright protections over sound recordings were federalized in 1972, states were left with the right to determine how to deal with pre-1972 recordings.

Even since sound recordings were federalized in 1972, Federal law still deals mostly with issues of reproduction and distribution. Federal law did not grant copyright owners a performance right until 1995, and it was subsequently broadened by the Digital Millennium Copyright Act in 1998. Even then, the sound recording public performance right was only granted to digital performances. And that grant of a public performance right was largely based on fears of piracy – that “perfect digital copies” could be made of such performances, leading to the unauthorized reproduction and distribution of these sound recordings.

While performers and record labels (which own the copyrights to most sound recordings) have sought a broader Federal performance right for sound recordings since the 1940s, it has never been enacted. Given the lack of a general Federal sound recording performance right, most observers did not think that there was a performance right in these pre-1972 recordings, as there was simply no common law recognition that sound recordings were due any performance fees in the United States, and there was no industry practice of requests for payment for such rights. Even the Copyright Office at one time specifically stated that there was no performance right in pre-1972 recordings. But, as copyright holders began to assert their rights, the office retreated from that position and referred to it as ambiguous (and suggested federalization in a 2012 report, about which we wrote here).

So many were surprised when Flo & Eddie filed suit on this issue (see our article here), more were shocked when they were successful in NY and California, and last week’s decision by Sirius XM to settle, just as the company was finally beginning to have some success in the Courts (with a decision finding no performance right in Florida, and another allowing an appeal of the NY decision) came out of left field. What does this settlement mean? It may mean that Sirius was tired of the litigation, and wanted to buy peace, at least with the major labels. The litigation may also have been interfering with other business between the company and the labels, so peace may have brought some security. While Sirius may still have to litigate the Flo & Eddie case, which could potentially turn into a class action proceeding for other independents not covered by the settlement, that case could, of course, be settled too.

But unresolved is the question of whether the settlement, and these cases, have any broader applicability – to other digital services (Pandora, for instance, is also litigating some of these cases), for over-the-air broadcasters, and even for retailers, bars and restaurants and other locations that may play pre-1972 sound recordings to the public.

In fact, the Florida decision cites the uncertainty of the parameters of a common law performance right as one of its reasons for determining that, at least in Florida, there is no performance right in pre-1972 sound recordings. While the Florida court was careful to not disagree with the reasoning of the decisions in California and New York – instead simply finding that Florida law was different from the law of these other two states – the decision did point out the practical difficulty of deciding by judicial decree that a pre-1972 sound recording public performance right exists. Because of these practical difficulties, difficulties that apply equally in all other states, this decision may well be instructive as to how other courts look at this issue.

The practical issues addressed by the Florida judge include questions of who would be subject to such a performance right and who would be excluded. Would it apply to broadcasters, who do not pay for post-1972 sound recordings for their over-the-air signals? Would it apply to restaurants, retail stores and other businesses who play recorded music in their business establishments (these businesses are themselves exempt from such payments for the public performance of post-1972 sound recordings – though companies that provide music to these establishments using a digital distribution system are liable for paying for the ephemeral copies made in the transmission process – see our article here)? Who would collect the royalties? How would they be paid and what would the rates be? Who would receive the royalties (under Federal law, the royalties go half to the artists and half to the copyright holder, usually the record company – if there is no similar state law, then all the royalties would presumably be paid to the copyright holder and distributed according to the artist’s contract with the record company instead of being paid directly to the artist)? We wrote about other issues in our article on this topic, available here. None of these questions are easy to answer – leading the Judge to determine that the legislature, not the Courts, is the proper venue to make any decision granting a performance right to pre-1972 recordings.

The Court did distinguish the California and NY cases – suggesting that in these states where the entertainment industry is so large, it might make sense for the law to be different. In California, the Court there had looked at language granting pre-1972 copyright holders “full ownership” of their rights, which the court found would encompass a public performance right (see my thoughts on that decision here). In New York, the Court that found the performance right by analogy – looking to the fact that state courts had found a performance right in other media, such as the right to perform the script of a play (but also recognized the problems that arise from its ruling, thus allowing an appeal of its findings to the federal appellate court covering NY). Of course, the right to perform the script of a play would also exist under Federal law, recognition that this kind of right is part of the legal tradition in the US, while a general performance right in sound recordings does not similarly exist under Federal law (except for the recent recognition of such a right when sound recordings are transmitted digitally). While the Florida Court suggested that these bases for decisions in NY and California justified the different conclusions reached by those courts, the Florida Judge was very polite in not pointing out that the practical issues that he identified would equally apply in New York and California. These issues were recognized but given short-shrift by the judge in California, though they were obviously considered by the NY judge in her decision to allow the appeal of her initial conclusion that there was a performance right under NY law.

So even with Sirius’ apparent decision to pay rather than fight, we are still left with a murky state of the law regarding pre-1972 sound recordings. There are attempts to federalize those recordings (see for instance, the RESPECT Act legislation that we reported on in the last Congress, discussed in our article here), though nothing specific is pending except in the context of a much larger reform of music royalties, the Fair Play Fair Pay Act which we will write about next week. Federalization may be the only way that these issues are ultimately resolved once and for all. But, as we wrote here, as the copyright issues with pre-1972 recordings extend beyond just the performance issue (to issues like the DMCA safe harbor for user-generated content), federalization, to be accepted by most services that use copyrighted material, would need to cover all aspects of copyright, something that has thus far not been introduced in legislation. So we’ll watch with interest to see where this issue goes in the coming months.

David Oxenford