UMG’s Motion for Summary Judgment
Global Eagle’s Response
Judge Wu’s Tentative Order
Judge Wu’s Supplemental Order
UMG’s Motion for Summary Judgment
Global Eagle’s Response
Judge Wu’s Tentative Order
Judge Wu’s Supplemental Order
The Second Circuit delivered its highly anticipated decision in the Capitol Records v. Vimeo case. Various record labels sued UGC site Vimeo for copyright infringement of sound recording fixed prior to February 14, 1972, so-called Pre-72 recordings. The labels argued that the safe harbor provisions of Sec. 512 of the Copyright Act, which provides immunity to copyright infringement liability to UGC host sites subject to certain conditions, do not apply to Pre 72 recordings, which are not covered by the Copyright Act but rather are the subject to various state statutory and common law protections. Relying heavily on a 2011 report concerning the legal state of Pre 72 recordings from the Copyright Office, the federal district court for the Souther District of New York granted the labels’ motion for summary judgment.1 Vimeo appealed.
In discussing the origins of Sec. 512, the Second Circuit describes the “compromise” that Congress sought to establish between content creators and content users. That compromise provided creators with a ‘notice and takedown’ provision, which allowed creators to avoid filing individual copyright infringement actions against each and every unauthorized use online. That compromise provided users immunity from infringement claims and monitoring responsibilities, provided the user expeditiously remove content in response to a takedown request. This compromise, the Second Circuit concludes, would be illusory if Pre 72 recordings weren’t subject to the 512 safe harbor.
The Second Circuit begins by noting that “the district court accepted without discussion the position taken by the United States Copyright Office in a report prepared in 2011 that the safe harbor does not protect against liability for infringement of pre-1972 sound recordings.” The Second Circuit then dissects the report and its shortcomings.
The Second Circuit points out that
The Report begins its analysis by asserting that § 512(c)’s term “infringement of copyright” is defined in § 501(a) as the violation of “any of the exclusive rights of the copyright owner as provided by sections 106 through 122.” Section 501(a), however, does not contain such a definition. The Copyright Act’s definitions are set forth in § 101, and do not include a definition for “infringement of copyright.
The Second Circuit rejects the Office’s conclusion, reasoning
The statement that one who violates rights identified in specified sections is an “infringer of copyright” does not purport to set forth an exclusive definition of “infringer of copyright.” … To state that conduct x violates a law is not the same thing as saying that conduct x is the only conduct that violates the law. (emphasis in original)
The Second Circuit concludes, therefore, that the safe harbor must include Pre 72 recordings or the entire “compromise” envisaged by Congress would be illusory.
what Congress intended in passing § 512(c) was to strike a compromise under which, in return for the obligation to take down infringing works promptly on receipt of notice of infringement from the owner, Internet service providers would be relieved of liability for user-posted infringements of which they were unaware, as well as of the obligation to scour matter posted on their services to ensure against copyright infringement. The purpose of the compromise was to make economically feasible the provision of valuable Internet services while expanding protections of the interests of copyright owners through the new notice-and-takedown provision. To construe § 512(c) as leaving service providers subject to liability under state copyright laws for postings by users of infringements of which the service providers were unaware would defeat the very purpose Congress sought to achieve in passing the statute.
Second Circuit Decision
Copyright Office Pre-72 Report
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)!
The Toto recording contract is below.
The Allman Bros. recording contract is below.
Dr. Dre’s recording agreement is below:
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.
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?
A magistrate judge has recommended that the lawsuit brought by VerStandig Broadcasting should be dismissed on jurisdictional grounds; i.e., for lack of Article III standing. In finding that the plaintiffs’ declaratory action failed to raise a justiciable controversy, the judge found that the issue of copyright liability is not “traceable” to SoundExchange because SoundExchange does not own or enforce copyrights Verstandig might infringe. As the judge stated: “Any dispute that may arise in that scenario is between the copyright owner and the broadcaster. Thus, the copyright owners themselves, who are ‘not party to this litigation, must act’ (or not act, as the case may be) in order for this particular injury to be cured.”
Looks like Pandora is about 6.25% of total US music revenue.