No (un)Original Thoughts

As I’ve often said, reviewing litigation dockets is a great place to learn new things. Instead of focusing on a judge’s final decision, one can often learn more by reading the party’s pleadings, which provide the strongest advocacy for a particular legal position. [caveat–it is critical to read BOTH side’s pleadings]. It is also often the case that a recording artist or songwriter’s contract will be appended to the complaint, providing useful insight not only into the issues in a particular litigation, but towards how the music industry evolves over time. I was reading Rita Ora’s recording contract with Roc Nation–a copy of which can be found here–and I remembered some research I’d done a while ago but never bothered to post here. Specifically, a review of 3 recording contracts executed between 1983 and 1992 demonstrate how public performance for sound recording royalties made their way into major label recording contracts. [caveat–this is not intended to be scientific; it is merely an interesting fact based on the 3 contracts in question]

So, check this out.  In 1983, CBS did *not* have any language about public performance rights in sound recordings—check out the Toto contract below.  By 1989, the language does exist—see 10.04 of the Allman Bros. agreement with CBS reproduced below.  Identical language appears in the Interscope license with Dr. Dre is 1992—see 10.05 of the Dre agreement reproduced below—even though I’m not aware of any relationship between CBS (which was bought by Sony) and Interscope (which was bought by UMG)!

Pre 72 Comparison

The Toto recording contract is below.

Toto 1983 Recording Contract w CBS (Sony)


The Allman Bros. recording contract is below.

Allman Bros Record Contract w CBS 1989

Dr. Dre’s recording agreement is below:

Dre Death Row Records Agreement (1992)

Shiver me timbers! Cox Has No Safe Harbor by Failing to Terminate Pirates

Judge Liam O’Grady of the Eastern District of Virginia has issued his full opinion and order granting partial summary judgment to plaintiff music publisher BMG against cable / ISP-provider Cox Communications. Judge O’Grady found that Cox’s “repeat offender” policy against customers accused of committing copyright infringement by downloading content without authorization using Cox network was insufficient as a matter of law. Cox could not, therefore, take advantage of the “safe harbor” provisions of Sec. 512 to escape secondary liability to BMG.

When Congress passed the Digital Millennium Copyright Act in 1998, it created four safe harbors that protect ISPs such as Cox from direct and indirect liability for copyright infringement when their involvement is limited to certain activities—transitory digital networking communications, system caching, information residing on systems or networks at the direction of users, and information location tools. See 17 U.S.C. §§ 512(a)–(d). As an Internet Service Provider, Cox sought protection as a “mere conduit for transmission” to protect against claims of secondary copyright infringement liability for the unauthorized exploitation of BMG’s copyrights by Cox’ subscribers.

In order for Cox to qualify for this “safe harbor,” however, it must demonstrate that it has “adopted and reasonably implemented, and informed subscribers and account holders of the service provider’s system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.” 17 U.S.C. § 512(i)(1)(A). Court’s have interpreted this requirement to obligate an ISP such as Cox has to “adopt” a policy that is “reasonable.” As the Copyright Act makes clear, for a policy to be “reasonable,” it must provide “for the termination in appropriate circumstances of subscribers … who are repeat infringers.” See Capital Records, LLC v. Escape Media Grp., Inc., No. 12-cv-6646, 2015 WL 1402049, at *9 (S.D.N.Y. March 25, 2015).

Although Cox sought the Court to find that an “infringer” could only be someone adjudicated as such by a court of competent jurisdiction, Judge O’Grady held that an ISP only requires “knowledge” of infringement by a particular user. While this might seem problematic–since the ISP only gains “knowledge” by receiving take-down notices from copyright owners and, as demonstrated by the “Dancing Baby” case (Lenz v. UMG), the copyright owner might be wrong–in practice, as described below, an ISP only takes actions against a subscriber after receiving multiple take-down notices over short periods of time.

Judge O’Grady details Cox’ Abuse Tracking System (“CATS”), which includes graduated responses to complaints about its customers unauthorized access to copyrighted content. In summary, here is CATS

1st Complaint – Cox does nothing
2nd Complaint – Cox sends an email to the customer
3rd Complaint – Cox sends the same email again
4th Complaint – Cox sends the same email again
5th Complaint – Cox sends the same email again
6th Complaint – Cox sends the same email again
7th Complaint – Cox sends the same email again
8th Complaint – Cox suspends the customers account, placing the customer in a “soft-walled garden,” which means the customer’s landing page is a warning message and link to reactive the account
9th Complaint – Cox sends customer back into “soft-walled garden”
10th Complaint – Cox sends customer to a “hard-walled garden,” a landing page that directs the customer to call Cox, during which call the customer can request reactivation
11th Complaint – Cox sends customer back to “hard-walled garden”
12th Complaint – Cox sends customer back to “hard-walled garden,” but now a higher-level Cox customer service rep must be involved for reactivation
13th Complaint – same as #12
14th Complaint – the customer’s account is considered for termination

Mind you, these 14 complaints against a single account-holder had to occur with a 6 month time period! That’s more than one complaint against a single account-holder every 2 weeks!! But it was not the volume of complaints that Cox had to receive before considering termination that caused it to lose the Sec. 512(a) safe harbor. It was the fact even after receiving 14 complaints, Cox never actually ever terminated anyone.

Initially, Cox “pretended” to terminate subscribers, only to reactive them immediately. As described in an email from Cox’ Manager of Customer Abuse Operations,

if a customer is terminated for DMCA, you are able to reactivate them after you give them a stern warning about violating our AUP and the DMCA. We must still terminate in order for us to be in compliance  with safe harbor but once termination is complete, we have fulfilled our obligation. After you reactivate them the DMCA ‘counter’ restarts; The procedure restarts with the sending of warning letters, just like a first offense. This is to be an unwritten semi-policy..

There were numerous other emails imparting similar instructions.

Cox was more lenient with subscribers illegally downloading copyrighted material because it had little impact on the network; “It does not cause a big problem on the network. Not like spam, Dos attacks, hacking, etc. do.”

In late 2012, Cox abandoned even this illusory termination and simply stopped terminating anyone. BMG introduced evidence that from January 2010 until August 2012, Cox terminated an average of 15.5 account holders a month. Between September 2012 and November 2014, Cox terminated an average of 0.8 accounts per month, notwithstanding the fact that Cox issued 711,000 email warnings and suspensions in response to alleged infringements during this same period. “Cox also admits that of the 22 terminated accounts, 17 of those had also either failed to pay their bills on time or were excessive bandwidth users.”

Again, Judge O’Grady cites to numerous emails in which Cox’ customer service team dismiss knowledge that a subscriber is using the network to access copyrighted content, often because the subscriber is paying Cox a lot of money: “So, the BitTorrent client is running on one of their computers (their child’s, etc.) and they need to uninstall it. This customer pays us over $400/month and if we terminate their service, they will likely cancel the rest of their services. Every terminated Customer becomes lost revenue and a potential Detractor to our Net Promoter Score;” and “This customer will likely fail again, but let’s give him one more change [sic]. [H]e pays 317.63 a month.”

The decision is below:

BMG v Cox Comm. (12!2!15)

Judge Shakes Off Swift Lawsuit

District Judge Gail Standish (C.D. Cal.) has issued a whimsical opinion dismissing without prejudice a songwriter’s claim that Taylor Swift’s “Shake It Off” copied lyrics from his song “Haters Gone Hate.” In her conclusion, Judge Standish quotes several of Swift’s songs:

At present, the Court is not saying that Braham can never, ever, ever get his case back in court. But, for now, we have got problems, and the Court is not sure Braham can solve them. As currently drafted, the Complaint has a blank space— one that requires Braham to do more than write his name. And, upon consideration of the Court’s explanation in Part II, Braham may discover that mere pleading BandAids will not fix the bullet holes in his case. At least for the moment, Defendants have shaken off this lawsuit.

While a nice humorous twist on the often staid language of a federal district court opinion, I did not find this language the most interesting — from a copyright infringement standpoint. Instead, I was drawn to the discussion of what constitutes protectable expression; i.e., sufficiently original. After a brief discussion of internet searches for lyrics containing “haters gonna hate” and/or “players gonna play,” Judge Standish notes, somewhat ominously, that “Braham should consider whether filing a new complaint claiming that his lyrics “Players Gonna Play” and “Haters Gonna Hate” are original would conflict with his duty under Federal Rule of Civil Procedure 11 not to make factually or legally baseless claims.”

Judge Standish’s opinion is below.

 

Brahman v Satv (Taylor Swift Lyrics) (CD Cal. 11-11-15)

A Fool for Who? Can the Ray Charles Foundation Challenge Terminations?

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:

Ray Charles Foundation 9th Cir. Appeal

Happy or Unhappy?

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.

 

Pre 72 – Unhappy Together (Ross)

Pre 72 – Happy Together (Pulsinelli) by Christopher S. Harrison

Sony Sued for Self-Dealing with Spotify

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.

19 Records v Sony (Amended Complaint Re Spotify)

‘Oh’ No You Don’t!

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.”

Tufamerica v WB Music (Jay Z 'Oh' Copyright Infringement)

Toto v. Emenim

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?

 

Toto v Sony (9!29!14 Order)