I’m honored to be named one of the top music lawyers in the country by Billboard magazine.
I’m honored to be named one of the top music lawyers in the country by Billboard magazine.
The 9th Circuit recently reversed and remanded a Central District of California’s dismissal of a case involving an attempt by the Ray Charles Foundation to invalidate terminations of copyright transfer effected by 7 of Charles’ 12 heirs. The 9th Circuit found that the Foundation had standing to sue the 7 heirs and challenge the validity of their terminations.
Terminating transfers of copyright rights is one of the most arcane areas of copyright law. When Congress amended the Copyright Act in 1976, it eliminated the 2-term structure of copyright, whereby an author received an initial term of copyright and the could file a renewal notice to further extend the term. In its place, Congress created a single term of copyright, but provided [nearly all] authors or their heirs the inalienable right to terminate any transfer of copyright ownership at some specified future date. The public policy rationale for both constructs is the belief that authors need to be protected “against unremunerative transfers … because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.” H.R. Rep. No. 94-1476, at 124 (1976).
As relevant here, the 1976 Act contains two separate provisions that govern how and when an author may terminate a transfer. Sec. 203(a) covers grants made on or after Jan. 1, 1978 (the effective date of the 1976 Act), which Sec. 304(c) covers grants made before Jan. 1, 1978. While both sections specify who may file a termination of transfer (the author or her heirs), neither section specifies who may challenge a termination. In this case, the 9th Circuit had to determine whether the Foundation had standing to challenge the terminations filed by the 7 heirs.
Noting that the Act does not specifically provide for a private right of action to challenge a termination, the Court of Appeals concluded that the Copyright Act created an implied private right of action to challenge terminations. Next, the 9th Circuit looked at “whether Congress intended to allow a party receiving royalties under a contractual assignment or will to challenge the validity of termination notices.” To answer that question, the 9th Circuit considered whether the Foundation fit within the “zone of interest” of this implied right. In concluding that it did, the Court noted that the Foundation had a material interest in the dispute (e.g., the future payment of royalties), had the proper incentive to forcefully litigate the dispute (more on that below), and resolution of the dispute in its favor would satisfy its grievance with the 7 heirs.
One may wonder why the owner of the copyright (in this case, Warner Chappell, one of the 3 major music publishers and sister company to Warner Music Group) wasn’t the one bringing this litigation. After all, if the terminations are valid, then Warner Chappell runs the risk of losing its share in those future royalties as well. The 9th Circuit reasoned that Warner Chappell’s interest was actually less direct than the Foundation’s. It is common practice for music publishers to renegotiate with songwriters after receiving a termination notice, so the 9th Circuit concluded that Warner Chappell (a) didn’t want to litigate and make the 7 heirs angry because (b) its most likely worst outcome was receiving less royalties in the future, not receiving no royalties in the future.
The Circuit’s decision is here:
I recently came across two interesting articles that discuss whether the Copyright Act preempts state or common law performance rights in sound recordings fixed prior to 1972.
Ostensibly, Prof. Pulsinelli’s article is focused on the Legacy Sound Recording Protection Act (the “LSRPA”), which was introduced in the last session of the Tennessee state legislature. The LSRPA would grant owners of Pre 72 Recordings essentially the same rights in Tennessee that owners of sound recordings made after 1972 enjoy under the federal Copyright Act.
Prof. Ross’ article takes as its jumping off point two recent federal district court decisions, one in California and another in New York, which found an exclusive right in Pre 72 Recordings. See Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. CV 13-5693, 2014 WL 4725382 (C.D. Cal. Sept. 22, 2014); Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13 Civ. 5784, 2014 WL 7172270 (S.D.N.Y. Nov. 14, 2014).
Both articles focus analysis on whether state laws, whether statutory or common, that attempt to create a performance right in Pre 72 Recordings are preempted by the Copyright Act. Both articles begin by noting that sound recordings did not enjoy any federal copyright protection until the enactment of the Sound Recording Act of 1971, which established a reproduction and distribution right—but not a performance right—for sound recording initially fixed after February 15, 1972. When Congress completed its major rewrite of the Copyright Act in 1976, it included a very broad preemption clause embodied in § 301(a), which effectively preempts all state laws purporting to grant any right “equivalent to” any right provided in § 106. Not wanting to displace the reproduction and distribution rights in Pre 72 Recordings that many states historically provided to discourage record piracy, a.k.a. “bootlegging”, § 301(c) then goes on to exempt Pre 72 Recordings from the general preemption of § 301(a).
The ‘general’ preemption language in § 301(a) provides:
On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.
The ‘exception’ to the general preemption language in § 301(c) provides:
With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.
In order to determine whether performance rights for Pre 72 Recordings are preempted by the Copyright Act, the authors describe preemption and its primary forms. Preemption exists because of the Supremacy Clause of the Constitution (Article IV, Clause 2). There are two broad categories of preemption: express preemption and implied preemption. Express preemption occurs when the applicable statutory scheme contains a provision that expressly states that the federal statute is meant to preempt state law in a particular area. If the federal law does not contain an express preemption provision, the state law may nevertheless violate the Supremacy Clause under the theory of implied preemption if the federal statutory scheme is so detailed and pervasive that it “occupies the field,” leaving no room for state law to operate (so-called “field preemption”) or the state statute “‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” (so-called “conflict preemption”). The fact that a statute contains an express preemption does not mean that the statute cannot still be found invalid as impliedly preempted.
The most important Supreme Court guidance on preemption in the context of conflict between state and federal law is Goldstein v. California (412 U.S. 546 (1973)). In Goldstein, the Court considered the validity of a California law criminalizing record piracy; i.e., the unauthorized reproduction and distribution of sound recordings. The timing of the case is quite complicated: it involves sound recording fixed prior to February 15, 1972, arrived at the Supreme Court after the passage of the SRA in 1971, but before the passage of the 1976 Copyright Act that added the express preemption provisions. In Goldstein, the Supreme Court upheld the California law as a valid exercise of the state’s power, finding that the Copyright Act left sound recordings “unattended,” and thus states could choose to protect them.
Prof. Pulsinelli quotes the Goldstein Court for the proposition that the Copyright Act itself is a reflection of Congress’ interest in setting broad, national policy around protecting copyrighted works, stating “[t]he objective of the Copyright Clause was clearly to facilitate the granting of rights national in scope.” Prof. Pulsinelli also quotes the House Report accompanying the 1976 Act, “One of the fundamental purposes behind the copyright clause of the Constitution … was to promote national uniformity and to avoid the practical difficulties of determining and enforcing an author’s rights under the differing laws and in the separate courts of the various States. Today, when the methods for dissemination of an author’s work are incomparably broader and faster than they were in 1789, national uniformity in copyright protection is even more essential than it was then to carry out the constitutional intent.” Performance rights in particular implicate the problems of varying state regulation, as noted by a variety of courts and commentators.
Prof. Pulsinelli argues that “At least theoretically, the Copyright Act is sufficiently comprehensive as to “occupy the field” and leave no room for the states to operate.238 However, given the strong express preemption provided in § 301(a), such an analysis is generally unnecessary—any law that escapes express preemption because it falls outside the scope of § 301(a) is likely also to fall outside the “field” occupied by the statutory scheme.” Instead, he argues that state law protections of performance rights in sound recordings is likely preempted under the “conflict preemption” doctrine.
Last year, 19 Records, the label that represents the recording artists from the TV series American Idol, sued Sony, 19 Records’ distributor, for underpayment of royalties. Specifically, 19 Records claimed that Sony paid royalties at the lower rate corresponding to the sale of physical records instead of the higher rate corresponding to a license for use. As background, attorney Richard Busch successfully represented Eminem’s former management team in a similar lawsuit against Universal and has filed numerous similar lawsuits against each of the major labels.
Yesterday, 19 Records amended its complain to include allegations that Sony’s agreements with Spotify amount to self-dealing; alleging “Sony … structured its agreement with the streaming service, Spotify, in a manner designed to rob 19, its artists, and other artists of royalties.” The amended complaint contains the specific allegation that Sony’s insisted on receiving free advertising to generate revenue that it would not have to share with artists: “For instance, Sony’s agreement with Spotify gives Sony up to [REDACTED] in advertising which Sony is free to resell or have resold for it. Thus, Sony is able to collect up to [REDACTED] under the terms of its agreement with Spotify and then claim that none of the income is attributable to the exploitation of a master recording, and thus not subject to the payment of royalties to Sony’s recording artists and 19.”
If history is a guide, Busch will file similar suits against the other majors on behalf of his other clients.
Jay Z won a motion to dismiss a copyright infringement case alleging that his alleged sampling and use of the word “oh” in an audio recording and music video entitled Run This Town. Jay Z allegedly sampled the recorded “oh” from the recording Hook &Sling Part I Eddie Bo and the Soul Finders. The “oh” in question appears once in Hook & Sling but allegedly appears 42 times in Run This Town. In a direct refutation of the Bridgeport Music case from the 6th Circuit, the SDNY court relied on 2nd Circuit precedent that distinguishes between “factual copying” and “actionable copying.” The former “requires only the fact that the infringing work copies something from the copyrighted work; the latter . . . requires that the copying is quantitatively and qualitatively sufficient to support the legal conclusion that infringement . . . has occurred.” Judge Kaplan concluded that “In arguing that the Court should find qualitative significance simply because defendants have actually copied its work, plaintiff improperly conflates factual copying and actionable copying.”
Judge McMahon has indicated she is considering reconsidering her prior ruling in which she found a performance right in sound recordings fixed before 1972. Her order is below.
The SDNY recently found that Toto’s recording contract with Sony did not obligate Sony to pay Toto 50% of royalties from digital sales through Internet retailers such as iTunes. This outcome is different from the FBT case out of the 9th Circuit, where similar language was interpreted differently. So, what is the difference?
The antitrust case brought by the Television Music License Committee against SESAC detailed here previously has been settled. SESAC agreed to pay the TMLC members $43mm as damages (i.e., excessive royalty fees) and $16mm in legal fees. The papers are below.
“A music rights group has become the first organization to successfully force a copyright-focused website blockade in freedom-friendly Iceland. Following a District Court ruling, ISPs including Vodafone must now block The Pirate Bay and Deildu, Iceland’s largest private torrent site.” Full story here.