Sirius XM loses another ruling in California litigation about digital performance of pre-1972 recordings.

As I reported in September, Sirius XM (and, by extension, just about any other provider of streamed digital music) suffered a setback in a Federal District Court in California when the judge there ruled that performers have an exclusive public performance right to music they recorded prior to February 15, 1972. As it turns out, the news got worse for Sirius XM a couple of weeks later, when a California State Superior Court judge came down largely the same way.

As a result, Sirius XM, Pandora and other such services will likely be looking at a lot more liability for infringements as more pre-1972 artists join in the class action suit started by Flo and Eddie in California. While the outcome of the California end of that litigation doesn’t seem to be in much doubt – which is bad news for Sirius XM et al. – the chances of similar outcomes in other states is still up in the air, at least for the moment. Also up in the air: possible Congressional reaction.

For background on the issue of digital performance rights for pre-February, 1972 recordings, check out my earlier post about the Flo and Eddie case.

The more recent case doesn’t involve iconic individuals (like Flo and Eddie) as plaintiffs; it involves iconic record labels as plaintiffs.

Capitol Records, SONY, UMG, Warner and ABKCO joined forces to sue Sirius XM in LA Superior Court, claiming that, by streaming records from their pre-1972 catalogs, Sirius XM has infringed their public performance rights under California law. The record companies asked the presiding judge, Judge Mary H. Strobel, for a jury instruction that, under California law, ownership of a sound recording includes exclusive digital public performance rights. The specific language they were looking for was:

The owner of a sound recording “fixed” (i.e., recorded) prior to February 15, 1972, possesses a property interest and exclusive ownership rights in that sound recording. This property interest and the ownership rights under California law include the exclusive right to publicly perform, or authorize others to publicly perform, the sound recording by means of digital transmission–whether by satellite transmission, over the Internet, through mobile smartphone applications, or otherwise.

Judge Strobel initially reached a “tentative” conclusion not to agree to that instruction. But then came the Flo and Eddie decision in September. Within a month, after taking a look at that decision, Judge Strobel had re-thought the question and concluded that the requested instruction accurately reflects California law.

So while the case still has to get to the jury, once it gets there it’s hard to see how the labels could lose. Think about it for a second. The labels can presumably show without difficulty that Sirius XM played various songs recorded before February 15, 1972 in which the plaintiffs hold all copyrights. And while Sirius XM’s position has apparently been that it owes the labels nothing because Internet- or satellite-based performances don’t trigger any royalty obligation for that kind of thing, the now-endorsed jury instruction effectively scuttles that claim. So if the jury receives that instruction, it likely has to rule in the labels’ favor.

As Bob Dylan wrote (and originally recorded on January 15, 1965): “It’s All Over Now, Baby Blue”. I can’t see any way that Sirius XM wins this particular case.

Like her Federal District Court counterpart, Strobel recognized that Section 980 of the California Civil Code isn’t entirely clear as to whether ownership rights in a pre-1972 sound recording include the right to publicly perform that recording. She noted that that section had been amended after Congress created federal rights in post-1972 sound recordings for the first time. (The federal rights give copyright owners the right to control public performance of their sound recordings via almost any transmission method, including satellite and Internet but not including over-the-air broadcasting.) From that she initially concluded that (a) the California legislature must have known about public performance rights when it amended Section 980 and (b) the legislature’s failure then to expressly provide for such rights must mean that the legislature didn’t intend to create such rights.

But on reading the Flo and Eddie decision, she became convinced that California had indeed recognized all the rights that Congress had created. (The logic: Section 980 includes a specific carve-out that provides that “covers” are not infringements. Since Congress had included such “covers” in the federal law along with public performance rights, Judge Strobel reasoned that, had California wanted to exempt public performance rights, it would have carved them out as it did with “covers”. Since Section 980 has no such carve-out, the California legislature must have not have intended any exemption.)

What does this mean in the long term?

Unless either or both of these two cases get overturned, it means a great deal financially: we’re talking about California here, a state where so many copyrights are owned and exploited. Pandora, for one, is directly in the firing line since its main offices are in Oakland.

It’s less clear whether this portends victory in other states. The issue of state-created public performance rights for pre-1972 recordings is already being litigated elsewhere. The next case worth watching is the lawsuit filed in New York state court against Pandora; the plaintiffs there are the same record labels that sued Sirius XM in California. Victories in the other pending cases will likely lead to suits in other states targeting other services that make significant use of pre-1972 sound recordings without payment.

And I should also note that other potential infringement-related issues lurk in this area, as explored in this excellent piece by Joe McKnight of Comm Daily. Services like Pandora, Spotify, Soundcloud and others aren’t clearly protected by the Digital Millennium Copyright Act (DMCA) if individual users post songs to those services. That’s because the DMCA is a federal law and immunizes the sites against acts of copyright infringement under federal law arising from the acts of third party users. But, of course, what we’re talking about here are claims based on state law, meaning the DMCA doesn’t come into play. So Pandora and others may have to actively review and police uses of pre-1972 sound recordings in order to avoid exposure to liability.

The biggest impact may still be on the horizon. As Joe notes, the decision in the labels’ suit against Sirius XM could build momentum in favor of paying royalties to recording artists, certainly older artists. Congress is certainly taking note and, as we expect Congress to take up the RESPECT ACT (most likely in 2015) – either on its own or, more likely, as part of an omnibus music licensing bill – one must once again think that an overall performance right is clearly in play.