pandora – Techdirt (original) (raw)

PayPal Sues Pandora Over Yawn-Inducing Logos And Tweets About People Opening The Wrong App

from the zzzzzzzz dept

We’re going to jump right into this one without too much of a preamble, other than a quick refresher on what trademark law is designed to accomplish and what triggers a concern for infringement. The idea behind the law itself is to allow companies to utilize unique identifiers, be it name or branding, in order to distinguish itself from competitors by monopolizing those trademarkable items. The chief concern regarding infringement, therefore, is real or potential customer confusion in the marketplace as to the source of a particular product or service. With that out of the way, let’s have some fun discussing how a recent lawsuit filed by PayPal against Pandora gets just about everything wrong with respect to the above preamble.

In October 2016, Pandora announced it was redesigning its logo from a thin, serifed “P” into the chunky, sans serifed “P” that it is today. The color scheme was also changed from midnight blue to a softer shade of blue. By comparison, PayPal’s logo, active since 2014, also features a minimalist-looking “P” in a sans serif font and sporting a blue color palette. PayPal’s mark actually consists of two overlapping and slanted “Ps,” whereas Pandora keeps it to one. Both P’s lack a hole.

It’s over these two logos that PayPal has filed its lawsuit. Here they are, side by side.

Are they similar? I mean, maybe, but only as a function of how minimalist and non-unique each are. Each logo chiefly consists of a blue “P”, except one logo has a single “P” and the other has two “Ps” of varying blue-ness and then slants them. As far as ingenuity into a logo design goes, it’s not exactly Rembrandt. If you choose to make your identifying branding for your company as blasé as this, what exactly did you expect?

But the problems don’t end there. The lawsuit itself is rife with examples of what PayPal insists are customer confusion in the marketplace. Here’s an example.

Except that isn’t really the sort of confusion that trademark law is supposed to deal with. The interest is in keeping the public from mistaking the origin of a product. That isn’t happening in the examples in the filing. Once the music starts playing when a person intended to use PayPal to pay for something, it’s not as though that person begins thinking that Pandora suddenly is handling payment processing requests. What those social media posts are really pointing out is that the logos used in each products’ app aren’t sufficiently unique to be easily identifiable. Coupled with the fact that Pandora and PayPal don’t actually compete with one another, the angle of customer confusion as the basis for a trademark infringement is rather head-scratching.

But the larger point is that for trademark law to fulfill its original purpose, names and branding need to be unique. If companies choose not go the unique route, it shouldn’t be possible for them to then bludgeon non-competing companies over the head with their trademarks.

Filed Under: confusion, likelihood of confusion, p, trademar
Companies: pandora, paypal

So How Much Of The $90 Million Pandora Is Paying RIAA Labels To Settle Lawsuit Will Go To Artists?

from the we're-waiting... dept

This isn’t a huge surprise, but following Sirius XM settling the lawsuit filed against it by the RIAA labels over playing pre-1972 sound recordings, Pandora has now done the same, agreeing to pay $90 million to have the lawsuit go away. In both cases, the companies recognized that, while the law was unclear and some lawsuits had gone both ways, it was probably a lot easier in the long run to just pay up than face the uncertainty and the possibility of much larger fees. Of course, both companies do still face some individual lawsuits, such as the ones by Flo & Eddie (the company behind The Turtles) who kicked off this lawsuit craze.

But… there is still a big question. As with pretty much any of these lawsuits filed by the RIAA or MPAA and its members, when they come to a settlement, how much of that money actually gets passed along to the individual creators? In the past, the answer has been slim to none with vague answers about how the money would go into some general pool, and the answer may be similar here. Eriq Gardner at the Hollywood Reporter did the heavy lifting, and got the slightly vague answers from the labels:

For example, will the proceeds of the settlement be shared by the major labels with their recording artists? What share? Upon a request for comment, an RIAA spokesperson said it was a question best directed towards the labels themselves. We’ve reached out. According to a Sony insider, the label intends to share proceeds in the standard way, analogous to how money from SoundExchange is shared. The source acknowledges that the mechanism is still being worked out. Another source says that Universal intends to process money directly through SoundExchange, a digital royalty collection outfit. A Warner Music spokesperson says the “the artist share [is] being distributed through SoundExchange.”

So, they’re basically passing the buck to SoundExchange, which handles royalties for Pandora and other digital streaming services, and has an unfortunate history of not being able to find the artists it’s supposed to be paying (though, it’s been much better in the past few years). But, even so, it’s not clear how SoundExchange will divvy up the money, and how much will just be going directly back to the labels themselves.

Filed Under: pre-1972, pre-1972 sound recordings, settlement
Companies: pandora, riaa, soundexchange

Time To Say Goodbye To All Pre-1972 Music?

from the PAY-US-screams-the-recording-industry dept

As we’ve been covering over the past few years, there’s been a big battle going on over the copyright status of “pre-1972 sound recordings.” That may sound like a weird thing to be arguing over, but it’s due to a weird bit of history in US copyright law. You see, for a very long time, Congress believed that copyright law could not cover sound recordings. However, various states stepped in and either through explicit state law or through common law, created copyright-like regulations for sound recordings. When copyright was finally updated in the 1976 Copyright Act, pre-1972 works were left out of the federal copyright system, even as federal copyright law basically wiped out all state copyright law for everything else. This has created some weird issues, including that some songs that should be in the public domain under federal copyright law are locked up in perpetuity. A simple and reasonable solution to this would be to just move pre-1972 sound recordings under federal copyright law and level the playing field. But, the RIAA has resisted this. That might seems strange, until you realize that the RIAA and its friends saw this weird quirk of copyright law as a wedge issue with which to try to squeeze more money out of everyone.

It started a couple years ago when basically everyone started suing Sirius XM and Pandora for playing pre-1972 music without getting a separate license to do so. Once again, the reasoning here is a bit complex, but prior to the 1976 Act, there really wasn’t even any concept of a “public performance right” for sound recordings — only for compositions. The idea of one for sound recordings only came into existence with the updated copyright law. But what the RIAA and friends are trying to do is to rewrite history and pretend that these various state laws also retroactively meant to include a public performance right, and that these newer services were violating it.

In a series of rulings in the last year, Sirius XM has lost a few of these lawsuits, while winning another one. This has many copyright scholars quite concerned that decades of settled law are being tossed out.

More importantly, we pointed out that this could mean the end of hearing classic songs from the 50s and 60s on internet and satellite radio. But, it appears that the RIAA and friends are not stopping there. Last month they took things up a notch and started suing terrestrial radio stations over pre-1972 music as well.

And that brings up a whole different issue. As you probably know, terrestrial radio does not need to pay at all for the use of sound recordings (it does pay songwriters/publishers for the use of the composition), because Congress has (correctly) noted that songs on the radio are a form of advertising, and thus the musicians benefit from it, and there’s no reason to pay fees for the performance again. While the RIAA whines about this, the major labels own decades-long practices around payola make it clear that they, too, recognize that radio play is valuable for the musicians and worth paying for — rather than worth being paid for.

Every few years, the RIAA pushes to have Congress change the law, and to start making terrestrial radio pay a “performance rights fee” for sound recordings as well. But that never seems to get anywhere. So, instead, the RIAA appears to be attacking this via the pre-1972 loophole, and claiming that even though Congress explicitly has said that radio doesn’t need to pay, such a promise does not apply to pre-1972 songs. The new lawsuits, from ABS entertainment, aims to be a class action lawsuit for a bunch of pre-1972 music, and has targeted terrestrial broadcasters who also stream online, including CBS, iHeartRadio (previously known as Clear Channel) and Cumulus — the big three radio broadcasters.

In the meantime, one of the first original cases concerning this issue, against Pandora, has now moved to the 9th Circuit appeals court and a whole bunch of copyright experts have weighed in hoping that the appeals court will reverse the lower court and remind everyone that these state laws never included a public performance right in the first place. Unfortunately, this is the 9th Circuit, which is somewhat famous for its wacky copyright rulings, so pretty much anything goes here. However, should it come out in favor of the RIAA’s position, it could mean that pre-1972 music will start disappearing not just from streaming and satellite radio, but from traditional terrestrial radio as well.

Filed Under: copyright, copyright act, pre-1972 music, pre-1972 sound recordings, radio, streaming
Companies: cbs, cumulus, iheartradio, pandora, siriusxm

Funny How Recording Industry Only Likes A 'Free Market' When It's To Their Advantage

from the that-free-market-appears-slightly-tilted-in-one-direction dept

When it comes to the nexus between competition and regulation, competition is all too often cursed with fair-weather friends. For today’s example, we’ll take a trip down the copyright regulation rabbit hole.

It begins with a Copyright Royalty Board (CRB) proceeding for setting webcaster rates under a statutory license in Section 114 of the Copyright Act. The process, called “Web IV” because it is the fourth such proceeding under this section of the Copyright Act,[1]was announced late last year and should conclude by the end of 2015. By mid-December, non-interactive webcasters like Pandora and iHeartMedia will know how much they must pay to stream (or “publicly perform”) recorded music to listeners from 2016-2020.[2]

These statutory license rates, part of a complex multi-tiered system that, as we’ve noted in the past, legally requires discrimination against new technologies, are set for 5-year periods and are paid to an entity called SoundExchange. SoundExchange is designated to collect royalties under the statutory license for certain uses of sound recordings, including Internet radio play of music.

(Perhaps you’re thinking, “wait, I thought radio stations didn’t pay royalties to play records on the air?” You would be right: traditional terrestrial radio does not pay royalties for playing sound recordings ? which has historically been defended with the argument that radio play provides valuable promotion for sound recording owners. But in another example of copyright law discriminating against new entrants, while conventional terrestrial radio is not compelled to pay for the public performance of sound recordings, Internet radio must pay to do the same, under Section 106(6) of the Copyright Act.)

The rate Internet radio services pay is supposed to represent what a “willing buyer” would pay a “willing seller.” During the round of rate setting that governed 2006-2010, however, the CRB announced a fairly punitive “willing buyer/willing seller” rate, which was so high that it exceeded some webcasters’ total revenues. The risk that the Internet radio industry would collapse led Congress to enact the 2008 and 2009 Webcaster Settlement Acts, under which most non-interactive music licensees directly negotiated settlements with SoundExchange for that time period. An important wrinkle to this legislative action, however, was that Congress also directed that these settlements could not be used as benchmarks for future rates ? which includes the current rate setting proceeding.

So, why is this relevant? It matters because in the current Web IV rate setting proceeding, SoundExchange has argued that recent deals struck in the free market by non-interactive webcasters should not be used as the benchmarks for non-interactive rates.

Those deals include an arrangement between Pandora and the collection of indie labels known as Merlin. The terms of that deal were lower than the existing statutory rate, and encouraged Merlin music to be played more (and thereby the music of major labels to be played less). At the time, rights-holders openly criticized Merlin for entering in the deal, noting that it could become a benchmark, and might result in prices coming down. It was a peculiar moment: despite all the cheerleading of moving toward a free market in music licensing of willing buyers and willing sellers, Merlin came under fire for actually being a willing seller at the best price it thought it could get.

SoundExchange previous said it was seeking “rates that reflect a fair market value for recorded music? based heavily on evidence of other deals that exist in the marketplace”. Now, however, it argues that an analogous free-market deal with Merlin should be ignored, because it was in some way influenced and thereby tainted by settlements reached 6-7 years ago.[3]

This situation illustrates an issue larger than webcaster rate setting: there is cognitive dissonance about what it means to have free-market transactions in lieu of statutory licenses. In parts of the music industry, there is hostility to the statutory licenses. While statutory (or “compulsory”) licenses help overcome the enormous transaction costs of licensing millions of works from millions of rights-holders, they don’t allow rightsholders to say “no” to all uses.[4] These statutory licenses, it is sometimes argued, are unfaithful to the notion of copyrights being property rights. Such transactions would be better handled in the free market, the argument goes, and so statutory licenses should be repealed.

Nevertheless, the free market enthusiasm disappears when a free-market deal was actually reached outside the statutory license. To the dismay of other licensors, Merlin’s competitive price was *lower* than the statutory rate, and suddenly the free market doesn’t look so hot. Hence, Merlin was criticized and now efforts are being made to expunge Merlin’s deal from the record.

There are numerous transactions cost-related reasons why ? absent better copyright ownership records ? it is impossible to have a completely free market in music licensing at present. Still, insofar as anyone is going to champion competition as an alternative to statutory licenses, that means accepting prices that may be below statutory rates. If “free market” means rates can only be higher than statutory rates, then we don’t have a free market; we have a price floor. Or, stated otherwise: we’re not really talking about “willing buyers and willing sellers” if we’re only going to entertain market-based deals that come in above the statutory rate.

[1] Officially, “_In re Determination of Royalty Rates and Terms for Ephemeral Recording and Digital Performance of Sound Recordings._”

[2] The CRB only sets rates for “non-interactive digital music services”; interactive services like Spotify, which are “interactive” because users can determine themselves which music is delivered, fall outside the statutory license.

[3] The rationale for this is that Congress directed in Section 114(f)(5)(C) that Webcaster Settlement Act (WSA) agreements shall not “be admissible as evidence or otherwise taken into account” in a rate settlement proceeding. Because SoundExchange contends the Merlin agreement resembles the 2008-09 settlements, considering the Merlin rate would be “taking into account” a WSA agreement.Instead, SoundExchange contends that the benchmarks for non-interactive rates should be deals between interactive services like Spotify. When all the relevant apples are inadmissible, we’re left referring to oranges.

[4] In econ-speak, we would say that statutory or compulsory licenses resemble a liability rule more than a property rule.

Reposted from the Disruptive Competition Project

Filed Under: copyright, copyright royalty board, crb, free market, music industry, non-interactive, streaming rates, webcast rates, webcasters
Companies: iheartmedia, pandora, soundexchange

SiriusXM Finally Wins A Case Over Pre-1972 Music… And Promptly Settles Such Cases With RIAA

from the well-how-about-that... dept

We’ve written plenty about the mess around pre-1972 sound recordings and online streaming services. Technically, federal copyright law does not apply to sound recordings from before 1972. And while that might make you think they’re in the public domain, that’s not true at all. First, the compositions are still under copyright and much more importantly, a jumble of state laws did protect some aspects of those sound recordings — and that’s made a huge mess, including locking up some recordings for way, way longer than would be possible under today’s federal copyright. On the flip side, however, it meant that certain aspects of federal copyright law that were not covered by state copyright law were fair game — or so people thought.

This included in music streaming services. It had long been believed that you could publicly perform such pre-1972 songs without a license because, even under the various state and common law copyrights, there was really no concept of a “public performance” right anyway. Thus, services like SiriusXM and Pandora did not need to pay a performance fee to play those songs (for post-1972 recordings, both pay compulsory rates — which are for different reasons that have to do with lobbying power). This whole mess could be settled by just moving pre-1972 sound recordings under federal copyright law — which would make them subject to the same compulsory license fees as modern songs, but would also free up those old songs that state copyright law has locked up. It’s a tradeoff, but probably the best result. However, the RIAA has fought very hard to block this.

Instead, it wants to have things both ways. It wants to keep those songs locked up for as long as possible, but still wants to get the benefits of federal copyright rights, such as public performance exclusivity. The reason, of course, is that it wants a big weapon — to force SiriusXM, Pandora and others to pay much larger fees by not allowing them to rely on compulsory rates, but rather to have to come to a negotiated deal.

In order to make this happen there have been a series of lawsuits in different states. In both California and New York, courts ruled against SiriusXM, saying that the state law in California and the common law in NY could be seen to cover performance rights, and thus SiriusXM had to pay up.

However, just a few days ago, a court in Florida went the other way entirely, saying there was no such right in Florida. The state law had nothing and the common law was not established in that area, thus ruling against SiriusXM (and in favor of Flo & Eddie, the organization that brought the suit) would be creating a new right out of thin air (something some copyright experts noted that the other courts had done).

So…. that started to make things interesting. Except… just a few days later, the RIAA and SiriusXM have announced a massive settlement over pre-1972 recordings with SiriusXM agreeing to fork over $210 million. This is going to put enormous pressure on Pandora to come up with a similar settlement. But it’s not actually going to answer many of the questions here. First, the settlement only covers the cases brought by the big labels (so not the Flo & Eddie cases…). Second, it only covers through the end of 2017, at which point, it’s right back to the negotiating table.

Oh, and in case you’re wondering, this line in the Hollywood Reporter story is probably the most important one:

The agreement announced today also doesn’t deal with if and how the big record labels will share proceeds with its artists.

Because of course it doesn’t.

Filed Under: compulsory, copyright, pre-1972, pre-1972 sound recordings, public performance, streaming
Companies: pandora, riaa, sirius, siriusxm

Appeals Court Rejects Labels' Collusion Scheme To Try To Force Pandora To Pay Higher Rates

from the nice-try,-but-no dept

Last year, we wrote about a somewhat crazy lawsuit involving ASCAP, Pandora, and various record labels that was officially about trying to force Pandora into paying higher rates. There were a lot of moving parts in the case, but a key point was that various publishers (owned by the major record labels) pulled a neat little trick in which ASCAP allowed the publishers to “partially remove” their catalog, such that ASCAP could still license the catalog to traditional organizations, but not to “new media” companies (i.e., Pandora). Then, the publishers tried to “negotiate” independently with Pandora, and by “negotiate” I mean “refuse to tell Pandora what songs were no longer covered by ASCAP and then threaten a massive lawsuit if Pandora accidentally streamed any of those songs.” Under such pressure, Pandora caved and agreed to pay much higher rates to those publishers, and ASCAP then spun around and tried to argue that those new rates were much more representative of “market rates” leaving out how the whole thing was planned together as a group as a form of collusion. Thankfully, the district court recognized what was going on, and mostly sided with Pandora, raising the rates slightly, but nowhere near as much as ASCAP and the publishers sought.

ASCAP and the publishers appealed, but the appeals court has now easily sided with Pandora, seeing no problems with the lower court’s rulings. The ruling [pdf] doesn’t get into the whole collusion bit, but does note that allowing publishers to do this “partial removal” trick quite clearly violated the letter and spirit of the ongoing “consent decree” that ASCAP has with the Justice Department, to guarantee that it’s not violating antitrust law. The consent decree says that if someone wants to license music that ASCAP has the right to license, ASCAP has to provide that license. Since it makes no distinction among different kinds of services, ASCAP can’t just make up that part:

Appellants contend that publishers may withdraw from ASCAP its right to license their works to certain new media music users (including Pandora) while continuing to license the same works to ASCAP for licensing to other users. We agree with the district court?s determination that the plain language of the consent decree unambiguously precludes ASCAP from accepting such partial withdrawals. The decree?s definition of ?ASCAP repertory? and other provisions of the decree establish that ASCAP has essentially equivalent rights across all of the works licensed to it. The licensing of works through ASCAP is offered to publishers on a take?it?or?leave?it basis. As ASCAP is required to license its entire repertory to all eligible users, publishers may not license works to ASCAP for licensing to some eligible users but not others.

Basically, the consent decree is quite clear: if you have the right to license the music, you have to license it to all-comers, and you can’t make up artificial classifications that you won’t license it to. As the ruling notes, it seems what ASCAP and the publishers are really trying to do is to rewrite the consent decree on the fly and have the court system sign off on it. The court will not do that:

Appellants would have us rewrite the decree so that it speaks in terms of the right to license the particular subset of public performance rights being sought by a specific music user. This reading is foreclosed by the plain language of the decree, rendering Appellants? interpretation unreasonable as a matter of law

Of course, ASCAP, the publishers and the labels have been lobbying quite hard to get the DOJ and/or Congress to throw out the consent decree altogether, so that they can go back to colluding in this matter to try to jack up rates. Expect those efforts to expand even more given this ruling.

Finally, the court also says that the new rates set by the lower court are perfectly fine and it sees no reason to change those rates, no matter how much whining ASCAP might do about the new rates.

Having reviewed 1 the record and the district court?s detailed examination thereof, we conclude that the district court did not commit clear error in its evaluation of the evidence or in its ultimate determination that a 1.85% rate was reasonable for the duration of the Pandora?ASCAP license. We likewise conclude that the district court?s legal determinations underlying that ultimate conclusion? including its rejection of various alternative benchmarks proffered by ASCAP?were sound.

Basically: just because you say the rates are unfair doesn’t make them unfair. Either way, given the way ASCAP and the publishers have whined and complained about this entire process, expect that to reach a new level of ridiculousness in the near future, with a bunch of bogus talk about how absolutely unfair life is for them, even as they rake in tons of money.

Filed Under: compulsory rates, consent decree, licensing, music, partial withdrawal, publishers, rates
Companies: ascap, emi, pandora, sony music publishing, universal music

SiriusXM Loses For A Third Time On Public Performance Of Pre-1972 Works, This Time In New York

from the a-big-shakeup dept

A year ago, a bunch of folks in the recording industry hit on its latest strategy to squeeze more money out of services playing music: upset decades of settled copyright law, and pretend that pre-1972 works were subject to public performance rights. Suddenly lawsuits started flying like crazy, most directed at Sirius XM, with a few directed at Pandora. The key issue is the fact that pre-1972 sound recordings are not covered by federal copyright law, but a patchwork of (very messy) state laws and common law. Those state laws were never considered to have included public performance rights, but now people are going back to pretend they did. Of course, there would be a simple way to deal with this: just make those recordings subject to federal copyright laws, but the RIAA has fought hard against this.

In September, a judge ruled against Sirius XM and in favor of Flo & Eddie, the company that owns the rights to the music of the band The Turtles. In October, another California court agreed with the first (despite initially leaning in the other direction). Both of those were specific to California state law, however. But now, another month has gone by and Flo & Eddie has another big victory over Sirius XM, this time under New York’s law. You can read the ruling.

The judge, Colleen McMahon, acknowledges that this ruling completely upsets decades of accepted practice, but doesn’t seem too bothered by it all:

Of course, the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century. So does certain testimony cited by Sirius from record industry executives, artists and others, who argued vociferously before Congress that it was unfair for them to operate in an environment in which they were paid nothing when their sound recordings were publicly performed…. That they were paid no royalties was a matter of statutory exemption under federal law; that they demanded no royalties under the common law when their product as ineligible for federal copyright protection is, in many ways, inexplicable.

But acquiescence by participants in the recording industry in a status quo where recording artists and producers were not paid royalties while songwriters were does not show that they lacked an enforceable right under the common law – only that they failed to act on it.

Instead, she notes that the reason this is only coming up now is because Congress only created a performance right for digital music recently. That doesn’t really make much sense when you think about it. If the industry was really sitting on this potential goldmine of performance royalties for decades, wouldn’t it have made use of it before now?

Instead, the judge defaults to a purely maximalist approach, saying that absent any specific exemptions, we should assume that common law copyright in New York covers just about every damn thing.

Modern federal law supports the notion that an express carve-out is required in order to circumscribe the bundle of rights appurtenant to copyright

That should raise some serious First Amendment questions. In federal copyright law, the Supreme Court has argued that the First Amendment conflict is generally resolved through exceptions to copyright — including those established in common law, like fair use. Yet here, the court is basically saying, unless an exemption is clearly stated, everything is covered. That’s very troubling.

Of course, it’s likely that this, like the California cases, will be appealed, and it will all eventually end up before the Supreme Court. But, in the interim, don’t be surprised if “golden oldies,” including pretty much all music from pre-1972, start disappearing from a variety of services. Good job, recording industry, you may succeed in driving the classics into total obscurity.

Filed Under: copyright, new york, performance rights, pre-1972, pre-1972 sound recordings, the turtles
Companies: flo & eddie, pandora, sirius xm

Sirius XM Hit Again Over Pre-1972 Recordings

from the convinced-by-the-other-ruling dept

A few weeks ago, we wrote about how Sirius XM had lost its case concerning the public performance rights over pre-1972 sound recordings by the band The Turtles. As we noted, this ruling effectively upset decades of consensus about public performance rights for pre-1972 works. When that ruling came out, we noted that the judge, in a nearly identical case brought by the RIAA, appeared to be leaning in the opposite direction. It appears that the judge, Mary Strobel, read the other ruling and found it convincing enough to lean back in the other direction. While not a final determination in the case, Strobel has issued a ruling (pdf) that makes it pretty clear that Sirius XM is likely to lose, based on her agreement with that other ruling.

Having considered the additional authority, the papers submitted and arguments of counsel, the court is persuaded that it should change its tentative ruling.

The ruling itself is more of an essay of “on the one hand, on the other hand” arguments, rather than a typical judicial ruling (in many ways making it more readable), with the judge more or less suggesting that she’s not entirely comfortable with this outcome, but that based on the plain language of California’s state copyright law, this is the best way to read the law.

Of course, the real mess here is because of the different treatment of pre-1972 recordings. Congress should have fixed this years ago by just making pre-1972 recordings subject to federal copyright law. Except… the recording industry has actually fought hard against this. The hypocrisy here is huge. While the recording industry has fought so hard against making pre-1972 sound recordings subject to federal copyright laws, now they suddenly want aspects of federal copyright law (like public performance rights which did not exist under previous laws) to apply to those very same works. If Congress made it so those works were under federal copyright, there wouldn’t be an issue and all these works would be treated identically. But the truth is that the RIAA wants to keep these works out of federal copyright law to use them as a weapon against internet innovation. With rulings like these, it can hold companies like Pandora hostage, since those works wouldn’t be subject to compulsory rates. As always, it’s all about the RIAA seeking to hold back innovative services unless they’ll go bankrupt in paying the RIAA.

Filed Under: california, copyright, pre-1972, pre-1972 sound recordings
Companies: pandora, riaa, sirius xm

from the activist-judges... dept

We recently wrote about district court judge Philip Gutierrez ruling against Sirius XM on the issue of streaming pre-1972 recordings. As we noted at the time, the ruling appeared to upset what was considered more or less a settled issue. Pre-1972 sound recordings are not covered by federal copyright laws, but rather by a hodgepodge of state laws (and common law), but those have been entirely focused on reproduction/distribution and not on public performance. But this ruling changed all that. Sirius XM, of course, has already made it clear that it’s appealing the ruling, and on the other side, the victors in last week’s ruling, Flo & Eddie, have already moved to sue Pandora as well.

While I tried to express how much this ruling upsets what had been considered pretty much solid law, law professor Tyler Ochoa does an astounding job actually detailing the history and just what a big change this ruling is, calling it a “seismic” ruling on the scale of the 1906 San Francisco earthquake. Here’s just a snippet, though you really ought to read the whole thing, detailing historical case law that this ruling totally upends:

…in the early days of radio, sound recording copyright owners also tried to use state law to restrict unauthorized broadcasts of sound recordings (which, as explained above, were not eligible for federal copyright). In 1937, in Waring v. WDAS Broadcasting Station, 194 A. 631 (1937), the Pennsylvania Supreme Court held that state common law prevented the unauthorized broadcast of phonograph records (when the legend ?Not Licensed for Radio Broadcast? was printed on the records); but in 1940, in RCA Mfg. Co. v. Whiteman, 114 F.2d 86 (2d Cir. 1940), the U.S. Court of Appeals for the Second Circuit, in an opinion by Judge Learned Hand, held that common-law copyright prevented only the duplication of a sound recording, and that sale of phonograph records exhausted any common-law property right to prevent the unauthorized broadcast of the recording (notwithstanding the same restrictive legend). The Supreme Court denied certiorari, which effectively meant that broadcasters did not have to pay royalties to sound recording copyright owners to play their records on the radio. (Broadcasters still had to pay royalties to musical work copyright owners, under federal copyright law.)

… when sound recordings were added to the federal copyright act in 1972, Congress likewise limited the exclusive rights that were provided to sound recording copyright owners. Authors of most copyrightable works receive five exclusive rights: the right to reproduce the work, to adapt or prepare derivative works based on the work, to publicly distribute copies of the work, to publicly perform the work, and to publicly display the work. But broadcasters had enough lobbying power to block any action in Congress if it required them to pay more royalties. As a result, Congress gave sound recording copyright owners only the right to reproduce and distribute copies of the sound recording, and to prepare derivative works (by electronic manipulation of the sounds recorded, not by imitation or simulation). Congress did not give sound recording copyright owners any right to publicly perform their works. (The policy argument was that radio airplay served as free advertising for the sale of phonograph records.)

In other words, contrary to what you’ll hear today from the record labels and copyright maximalists, this ruling was not obvious or about Sirius XM, Pandora and others ripping off artists. This was actually about them upending what had been considered completely settled law. It was only in 1995 that Congress first established that copyright had any sort of “public performance” exclusivity — and then only for post-1972 recordings (remember, the recording industry itself has fought quite hard to exempt pre-1972 sound recordings from other aspects of federal copyright law) and only on digital streaming. So, to argue that pre-1972 state and common law somehow was intended to cover such a public performance right is almost impossible to fathom. Yet that’s what the court ruled.

And the impact could be immense. Beyond just Sirius and Pandora, it could hit a lot of others as well. In a big way, in part by undermining the very foundations of the DMCA safe harbors.

The ruling is a huge victory for sound recording copyright owners, which can use the ruling not only to negotiate higher negotiated rates for public performance of pre-February 15, 1972 sound recordings, but may also use such older recordings as leverage for negotiating higher rates for post-February 15, 1972 sound recordings. (Such negotiation tactics might be deemed to be copyright misuse, but it is unclear whether state law will recognize this federally-recognized defense.) Moreover, nothing in the decision limits the state-law violations to public performance by means of digital audio transmission, so the decision gives sound recording copyright owners the general public performance right in pre-February 15, 1972 sound recordings that they have always craved, but that was previously denied to them under federal law (and was assumed not to exist in state law under Whiteman). That means that traditional AM/FM broadcasters and television broadcasters, who are expressly exempt under federal law with respect to post-February 15, 1972 sound recordings, can expect to be sued next.

Sound recording copyright owners can also use the ruling to go after internet service providers. Section 512 of the federal Copyright Act provides that internet service providers are not liable for infringements committed by their users, so long as the service provider promptly complies with the ?notice-and-takedown? provisions of that section. But because Section 301(c) states that pre-February 15, 1972 sound recording copyrights are not preempted by the federal act, sound recording copyright owners have been suing internet service providers under state law, arguing that service providers are liable for reproduction and electronic distribution of pre-February 15, 1972 recordings under state law, and that the limitation of liability provided by federal law does not apply. Existing court decisions so far are split, with the New York Appellate Division holding that Section 512 does not apply to pre-February 15, 1972 sound recordings, because of the express terms of Section 301(c); while the U.S. District Court for the Southern District of New York has held that Section 512 does apply to pre-February 15, 1972 sound recordings, notwithstanding Section 301(c).

In the meantime, Ochoa notes, expect “oldies” to start disappearing from lots of different services as companies seek to limit their liability. Funny how yet another copyright ruling is likely to make music even more scarce.

Filed Under: california, copyright, history, pre-1972, pre-1972 sound recordings, public performance, radio, streaming
Companies: flo & eddie, pandora, sirius xm

Judge Rules Against Sirius XM On Pre-1972 Recordings

from the this-could-be-quite-a-mess dept

Last year, we wrote about the growing list of lawsuits against Sirius XM concerning the legal rights over pre-1972 recordings. As we’ve discussed, pre-1972 sound recordings are not under federal copyright law (for historical reasons too convoluted to go into now), but are covered under a hodgepodge of messy state copyright laws. Historically, those state laws have been focused on reproduction and distribution and not public performance. Furthermore, terrestrial radio stations have always been allowed to broadcast music without paying performance royalties (though they do pay songwriters/publishers). Post-1972 recordings can be streamed at statutory rates for non-interactive streaming (interactive streaming is a whole different game). It’s a bit of a mess, but based on all of this Sirius XM (and Pandora and others) felt fairly confident that they did not have to separately license public performance rights for pre-1972 recordings. There had been no issue about this at all, until the lawsuits started flooding in last year.

And, in a ruling this week, the judge has… ruled against Sirius XM in a manner that may force Sirius and Pandora to eventually have to pay out big. This lawsuit was the first one against Sirius, filed by Flo & Eddie, claiming that their California state copyrights were violated. The court basically found that, because California copyright law says that the copyright holder has “exclusive ownership” of the copyright, that includes public performance rights, despite no further explanation in the law designating that as an exclusive right under California’s copyright.

In short, the judge takes a very expansive “property rights” view of the situation, and assumes that California’s copyright law basically restricts everything.

Commonly, to have ?exclusive ownership? in something is to possess and control it and to not share that right to possess and control with others. See THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE 619, 1260 (Houghton Mifflin Harcourt, 5th ed. 2011) (defining ?exclusive? and ?ownership?). The California legislature defines ?ownership? generally in the Civil Code in a manner consistent with the word?s usual and ordinary meaning??the right of one or more persons to possess and use [a thing] to the exclusion of others.? Cal. Civ. Code § 654. Thus, at base, Flo & Eddie has the right to possess and use its sound recordings and prevent others from possessing and using them. The plain meaning of having ?exclusive ownership? in a sound recording is having the right to use and possess the recording to the exclusion of others. There is nothing in that phrase to suggest that the legislature intended to exclude any right or use of the sound recording from the concept of ?exclusive ownership.?

The legislature does include a limitation on the ownership right in the statute?s text, ?the most reliable indicator of legislative intent.? See Esberg, 28 Cal. 4th at 268. An author has exclusive ownership in his or her sound recording ?against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording.? Cal. Civ. Code § 980(a)(2) (emphasis added). In other words, ownership of a sound recording does not include the exclusive right to make ?covers? (i.e., recording the song with new instruments) ? any person can make a sound recording based on a copyrighted recording, without the permission of the owner, so long as they produce the sounds independently rather than recapture the actual sounds in the copyrighted recording.

Construing the meaning of ?exclusive ownership? in context with the rest of § 980(a)(2), which lists the above exception to the ownership right, the Court infers that the legislature did not intend to further limit ownership rights, otherwise it would have indicated that intent explicitly. Because the statute lists an exception, the Court should enlist the ?familiar rule of construction?[that] where exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed.? Geertz v. Ausonio, 4 Cal. App. 4th 1363, 1370 (1992) (citing In re Michael G., 44 Cal. 3d 283, 291 (1988). Courts should ?presume the Legislature included all the exceptions it intended to create.? Id. (citing Reynolds v. Reynolds, 54 Cal. 2d 669, 681 (1960)). If § 980(a)(2) had granted ?exclusive ownership? in sound recordings without a listed exception, the argument that some limitations on property rights were already inherent in the concept of sound recording ownership might have been more persuasive to the Court. See Opp. 6:21-7:4, 8:25-9:2. However, by finding it necessary to specify an excepted right to ownership in a sound recording, the legislature conveyed that limitations on ownership did not live within the concept itself, rather they required elucidation.

Accordingly, the Court?s textual reading of § 980(a)(2), giving the words ?their usual and ordinary meaning and construing them in context[,]? is that the legislature intended ownership of a sound recording in California to include all rights that can attach to intellectual property, save the singular, expressly-stated exception for making ?covers? of a recording.

Sirius XM pointed out the legal problems with this, in that California law did not have a public performance right, and thus the court is effectively making up a new right under to bolt onto California’s copyright law, but the judge isn’t buying it. Sirius further pointed out that California’s copyright law was designed to highlight what rights remained under its copyright law after the federalization of copyright for sound recordings, but again the judge isn’t buying it.

It’s inevitable that Sirius will appeal this ruling so it will be a while before we see where this actually ends up. Furthermore, in one of the other cases against Sirius, brought by the RIAA, it appears that the judge is leaning in the exact opposite direction. So, this situation is far from over.

Filed Under: california, copyright, flo & eddie, pre-1972, pre-1972 sound recordings, public performance, streaming
Companies: pandora, sirius xm