(Court also compares Internet Radio to Terrestrial Under State Law)

performance right royalty threat-1

A Georgia Supreme Court decision on a narrow issue relating to the use of pre-1972 sound recordings creates an interesting new topic for discussion in this area, even as the holding in this case is itself necessarily limited to Georgia.

The case is iHeartMedia v.Sheridan, et al.  It is the latest in a long line of cases in which owners of copyrights in sound recordings fixed before February 15, 1972 have asserted state-law rights in those recordings against broadcasters and internet streaming services. We’ve written about this issue in the context of several cases that have been brought in California, Florida, and New York over the past few years (for the most recent summary of where the biggest cases stand, check out this post from February 17, 2017 about a United States Court of Appeals for the Second Circuit ruling in favor of SiriusXM).

This is the first occasion in which we’ve had the opportunity to write about a case coming out of Georgia.  It’s also the first pre-1972 case we’ve addressed that does not attack the performance of pre-1972 recordings but instead focuses solely on the alleged illegal transfer of copies of recordings under a record piracy statute.  Arthur and Barbara Sheridan own the master sound recordings of several pre-1972 songs. According to this article from Coosa Valley News:

Arthur Sheridan owned several recording companies that recorded and sold doo-wop, jazz, and rhythm and blues music.  Today he owns several master sound recordings of the music that was made prior to 1972, including jazz, blues and doo-wop songs.  Barbara Sheridan owns the pre-1972 master sound recording of “Golden Teardrops” by The Flamingos.

In September 2015, the Sheridans – who are actually residents of Illinois –- filed a complaint in the United States District Court for the Middle District of Georgia against iHeartMedia, which operates hundreds of AM and FM radio stations around the country and offers a large Internet radio service called “iHeartRadio.”  iHeartRadio transmits online certain types of programming, among them: (a) radio station broadcast programming and (b) listener-specific channels of sound recordings that are customized based on listener preferences (but do not allow listeners to choose when specific sound recordings or artists are played).

As we said above – and unlike other pre-1972 cases that we’ve told you about – the Sheridans did not sue based on iHeartMedia’s performances of their recordings.  Instead, they claimed iHeartMedia’s unlicensed use of the Sheridan-owned recordings on iHeartRadio constituted criminal record piracy and racketeering under a Georgia RICO statute.  The provision that the Sheridans invoked appears in a section of the Georgia code entitled “Criminal Reproduction and Sale of Recorded Material” and states that:

It is unlawful for any person, firm, partnership, corporation, or association knowingly to: …Transfer or cause to be transferred any sounds or visual images recorded on a phonograph record, disc, wire, tape, videotape, film, or other article on which sounds or visual images are  recorded onto any other phonograph record, disc, wire, tape, videotape, film, or article without the consent of the person who owns the master phonograph record, master disc, master tape,  master videotape, master film, or other device or article from which the sounds or visual images are derived.

iHeartMedia summed up the remarkable – and unprecedented – nature of the Sheridans’ lawsuit against it as follows:

what is unique about this Complaint is that unlike all the others, it doesn’t allege that a state’s civil common law copyright regime grants sound recordings a public performance right; instead, it alleges that a state’s criminal record piracy statute condemns internet radio broadcasts, and thus gives rise to a civil RICO claim.  So far as iHeartMedia is aware, no one has ever before based a lawsuit on that contention, or anything like it.

(emphasis added).

The Sheridans further sought to increase the stakes of their lawsuit by filing it as a putative class action on behalf of other similarly situated potential plaintiffs.

So it may not surprise you to read that iHeartMedia filed a motion to dismiss the Sheridans’ complaint on multiple grounds. First, iHeartMedia argued that an exemption in the RICO statute protects iHeartMedia from liability.  That exemption states that the piracy provision “shall not apply to any person who transfers or causes to be transferred any such sounds or visual images … [i]ntended for or in connection with radio or television broadcast transmission or related uses.”  iHeartMedia also argued that:

(1)        streaming was not record piracy because no permanent copies of recordings were transferred to its listeners; and

(2)        even if the exemption did not apply and streaming were piracy, iHeartMedia did not have the required criminal intent to be found liable under the statute.

“But wait,” you may be asking, “doesn’t the exemption say ‘radio or television broadcast transmission and related uses.’”

Well, that’s pretty much what United States District Court Judge Leslie Abrams asked when she certified (a fancy way of saying “asked”) to the Georgia Supreme Court (which has the final judicial “say so” over issues of Georgia law) the following question:

Whether the exemption to OCGA §16-8-60, set forth in § 16-8-60 (c) (l), applies such that internet radio services are exempt from application of § 16-8-60?

The Georgia Supreme Court, in a unanimous opinion authored by Presiding Justice Harold Melton, answered “Yes.”  The court held that the plain language of subsection (c)(1) goes beyond just broadcast television and radio because it includes “related uses” as well.  It found that the services provided by iHeartRadio are “related uses” because (1) they are substantially similar to terrestrial AM/FM radio in the eyes (and ears) of listeners and (2) the nature of terrestrial AM/FM radio and the nature of iHeartRadio are essentially the same when it comes to the delivery of sound recordings to listeners.

With regard to the former, the justices noted that (1) one iHeartRadio service consists of pure simulcasts of terrestrial radio broadcast stations via the Internet and (2) another iHeartRadio service allows users to “build” stations but does not rise to the level of “on demand” and therefore closely resembles a terrestrial radio station.  With respect to these services, the court concluded that, “from the perspective of the listener, a shift from an AM/FM radio to an internet radio service would mean only minor changes to the user’s experience.”

As to the latter, the court found that internet radio services perform sound recordings to listeners in a similar manner to terrestrial radio.  In both instances, tracks are played to listeners, but no permanent copies of those tracks are created on listeners’ devices, whether those devices be radios, computers, tablets, phones, etc.  While the delivery media may be different, the lack of permanent user copies created from the transmissions is what mattered to the court.

The case now goes back to federal court, where Judge Abrams will incorporate this holding.  That should result in dismissal of this particular lawsuit.  But is it the end of the discussion? Probably not.  We haven’t looked at each and every one of the similar broadcast exemptions that exist in state record piracy laws around the country but, to the extent that others have similar extension to “related uses,” the issue may well arise again. This particular case will have no direct precedential value in future cases outside of Georgia but, given that it may be the only precedent out there on the issue, it could prove influential.  Then again, the next court to address the issue might find the comparisons between terrestrial radio and an internet stream to be a bit of a stretch and go out of its way to reach an opposite conclusion.  As always, stay tuned.