CMU Trends Digital Labels & Publishers Legal

Trends: 1972 and all that… Again!

By | Published on Monday 3 April 2017

1972

In late 2014 we published a CMU Trends article on why the year 1972 had become such a talking point among American music lawyers.

There have been plenty of developments around the 1972 issue since then, though legal uncertainties remain. Indeed, if anything, those legal uncertainties have increased in recent months.

So much so, it seems likely that the only way to really address this issue is to add a new line to federal copyright law in the US.

WHAT IS IT ABOUT 1972?
A quick recap. For reasons of history, US-wide federal copyright law only protects sound recordings released since 1972. Sound recordings that pre-date 1972, but which are still subject to copyright, get their protection from state-level laws.

In recent years this has led to much discussion over whether or not elements of federal copyright law added in the early days of the web should be applied to sound recordings that pre-date 1972. Two elements in particular: performing rights and safe harbours.

Performing Rights
Federal copyright law in the US is unusual in that it doesn’t provide a general performing right as part of the sound recording copyright. This means that third parties that ‘perform’ or ‘communicate’ a sound recording in the US do not need to secure a licence from or pay any royalties to the copyright owner.

The ‘performance’ or ‘communication’ controls – what we might refer to collectively as the ‘performing rights’ – are usually among the controls provided by copyright law. The song copyright enjoys a performance control in the US, and the sound recording copyright includes these controls as well in almost every other country.

However, federal copyright law Stateside does provide a digital performing right for sound recordings, which means that online and satellite radio services do need to secure a licence from and pay royalties to the copyright owners. Though, if they so wish, they can take advantage of a compulsory licence administered by SoundExchange.

Satellite broadcaster Sirius, and online personalised radio services like Pandora and iHeartRadio, all pay royalties to the record industry as a result of this digital performing right. Or they do when they play tracks that were released after 1972. But what about the golden oldies that aren’t protected by federal copyright law?

Keen to keep their royalty bills down, Sirius, Pandora and iHeart decided that their obligation to pay royalties to the record industry did not apply to pre-1972 catalogue. Artists and labels, however, did not concur.

Safe Harbours
Safe harbours are the part of copyright law that provide protection for internet companies whose customers use their servers and networks to infringe copyright, by copying and distributing content without licence. A net firm cannot be held liable for that infringement – even though it is technically hosting and/or distributing the unlicensed works – providing it provides copyright owners with a takedown system via which they can request infringing content be removed.

Although now nearly 20 years old, the safe harbours are more controversial than ever within the music community, which in particular objects to user-upload sites like YouTube benefiting from safe harbour protection. The music industry’s lobbyists have been busy trying to get safe harbour laws rewritten so to exclude the likes of YouTube from protection, though more progress has been made on this in Europe than America.

In the US, the safe harbours stem from the federal Digital Millennium Copyright Act. There have been various lawsuits that have tested the reach of the safe harbours – and the minimum requirements of a DMCA takedown system – and in the main those cases have tended to favour the tech firms over the media and entertainment industries.

With that in mind, some content owners, when suing safe harbour dwellers, decided to try to exploit the 1972 technicality; which is to say, to argue that the safe harbour didn’t apply when a net firm’s customers copied and distributed pre-1972 recordings without licence, because those recordings were protected by state rather than federal copyright law. That would mean that, by hosting such older content on its servers or network, the safe harbour dweller could be sued for copyright infringement.

Perhaps the highest profile of these lawsuits was that launched against one-time controversial streaming platform Grooveshark by Universal Music. Though the case that actually got to court and set a precedent was Capitol Records’ legal action against YouTube competitor Vimeo.

PERFORMING RIGHTS
In the main, legal attempts to force Pandora et al to pay royalties on the pre-1972 recordings they play haven’t put forward the simple argument that it’s silly and impractical to have one rule for pre-1972 recordings and another for post-1972 recordings. Possibly because the artists and labels suing didn’t think that argument would stand up in court. Or possibly because they were concurrently arguing that when it came to safe harbours, there should be a pre-1972 and post-1972 distinction.

Instead the lawsuits argued that Pandora et al were obliged to pay royalties on pre-1972 recordings under state law as well as federal law – either by claiming that there was actually a performing right for sound recordings in any one state’s copyright system, or by claiming online radio services were also exploiting other controls of the copyright.

The highest profile case – that pursued by two former members of the band The Turtles, Mark Volman and Howard Kaylan, aka Flo & Eddie – went with the former argument. The duo sued in California, New York and Florida arguing that – while the three state’s copyright laws didn’t mention a specific digital performing right – there was, in fact, a general performing right for sound recordings under the copyright systems of those states, and therefore the satellite and online radio stations were obliged to pay royalties.

Of course, if there was a general – rather than specifically digital – performing right for sound recordings under Californian, New York and Florida copyright law, then AM/FM radio stations would also be obliged to pay royalties when they play pre-1972 tracks and they never had. More to the point, no artist or label had ever even claimed royalties from any traditional broadcasters for 1950s and 1960s tracks.

Pandora et al reckoned that that was reason enough for courts in the three states where Flo & Eddie sued to rule that there was no obligation under state law for them to pay royalties on the pre-1972 catalogue. However, in 2014 a judge in California decided that there probably was a general performing right for sound recordings under the state’s copyright laws, a landmark ruling that – for a time – looked like it might settle the matter in the music community’s favour.

A judge in New York then made a similar ruling, and specifically dealt with the killer question: if a general performing right for sound recordings had been sitting in various state laws all this time, why hadn’t any artists or labels ever made a claim against the AM/FM radio stations that play 1950s and 1960s records? The fact that no claim had ever been made didn’t mean the right wasn’t there to be claimed, the judge concluded.

In the wake of those two rulings, in 2015 both Sirius and Pandora reached wide-ranging settlements with the major labels covering both past and future use of pre-1972 records. Meanwhile, last November, Sirius reached a settlement with Flo & Eddie as well, albeit one subject to the outcome of outstanding litigation.

Because the key rulings in California and New York were not the end of the matter, with appeals and lawsuits in other states still pending. And recent developments could mean that – while, thanks to Flo & Eddie’s actions, it felt for a while like this dispute was swinging in the music community’s favour – it could be the satellite and online radio services that ultimately win.

First of all, in New York, an appeals court decided that there wasn’t a general performing right under the state’s copyright laws after all. The appeals judges also considered the fact that no one had ever asked AM/FM stations for royalties. Disagreeing with the lower court, they thought it would be highly illogical to conclude an extra right had sat in the state’s copyright laws all these decades that no one had ever bothered to enforce.

To quote one of the judges: “It would be illogical to conclude that the right of public performance would have existed for decades without the courts recognising such a right as a matter of state common law, and in the absence of any artist or record company attempting to enforce that right in this state until now”.

Back in California, the ruling in favour of Flo & Eddie stands. For now. Though, while the duo settled with Sirius after their initial win, their legal battle with Pandora on the same issue is ongoing. And as that case continues to go through the motions, the Ninth Circuit Court Of Appeal recently asked the state’s Supreme Court to rule on the matter of performing rights for sound recordings once and for all.

Requesting such an opinion “is warranted if there is no controlling precedent and the California Supreme Court’s decision could determine the outcome of a matter pending in our court”, the Ninth Circuit judges wrote. “This appeal not only meets both criteria, but also presents an issue of significant public importance”.

They added that, “as an incubator of both musical talent and technological innovation, California has a significant interest in the appropriate resolution” of this issue, the conclusion of which “will likely affect the state and industries within the state in a variety of ways, and is therefore best left to the California Supreme Court”.

It remains to be seen if the Supreme Court accepts the Ninth Circuit’s request for clarification and, if it does, what it will rule. If the lower court ruling stands, and a general performing right is confirmed for sound recordings in California, that will pose an interesting question regarding the liabilities of AM/FM radio stations in the state, which could also be liable to pay royalties on pre-1972 tracks.

Though when CBS Radio was sued by ABS Entertainment based on that argument in the wake of the Flo & Eddie rulings, the broadcaster successfully argued that it only plays versions of golden oldie records that have been remastered since 1972. The remastering, CBS reckoned, created a new copyright that was under the protection of federal law.

Meanwhile, if the ultimate conclusion in California is that there is a performing right for sound recordings, while in New York there is not, well that’s a somewhat unsatisfactory conclusion, especially for satellite and online radio services that all operate nationally. It could also be a conclusion that results in some constitutional wrangling.

It might also result in test cases being pursued by heritage acts in every state, which would be good business for lawyers, but not ideal for the wider music community. Indeed, there are already other cases on the pre-1972 issue slowly working their way through other state-level courts.

Of those other cases, one to note is in Georgia, where plaintiffs Arthur and Barbara Sheridan sued iHeartRadio in a bid to get royalties for its use of their pre-1972 recordings. The case is interesting because, rather than arguing for a performing right under Georgia’s copyright law, the Sheridans argued that iHeart’s online radio services – including its Pandora rivaling personalised radio service – were ‘transferring’ sound recordings, which is definitely protected under the state’s copyright regime.

The lawsuit noted a state law that “prohibits the transfer of sound recordings without permission”. The Sheridans then said that “iHeartMedia needed their consent to transfer their master sound recordings to iHeartRadio listeners” and that – because no such consent had been sought let alone granted – the broadcaster was therefore “engaged in racketeering activity by making unauthorised transfers”.

However, when the matter recently went before the state’s Supreme Court, iHeart prevailed. This is because the law being cited by the Sheridans adds that permission is not needed for transferring a sound recording if a person “transfers or causes to be transferred any such sounds … intended for or in connection with radio or television broadcast transmission or related uses”.

Georgia’s Supreme Court was asked to rule on whether or not iHeart’s online radio services could be classified as a “radio transmission” or “related use”, so to qualify for the exemption. Judges there reckoned they could, because even the personalised radio element was not a truly on-demand streaming service, and therefore was more like radio than anything else.

SAFE HARBOURS
What about the safe harbours of federal copyright law though? Here, of course, the roles are reversed, in that it’s the net companies that want an element of federal law applied to pre-1972 recordings. And, as state-level laws definitely don’t provide any safe harbours for online service providers, the only way to get that protection is to argue that it’s impractical to limit this component of the Digital Millennium Copyright Act to just sound recordings released since 1972.

A key case in this domain was the litigation led by then EMI label Capitol Records against YouTube rival Vimeo. Because, at first instance, the judge hearing the case ruled that the safe harbour dwelling video-sharing site could be held liable for the pre-1972 recordings that had been uploaded without licence by its users to its servers.

However, that judgment remained controversial in some quarters and Vimeo appealed it. Then, last year, appeal judges in the Second Circuit overturned the lower court ruling, concurring with the tech sector that cutting the safe harbour off at 1972 would render the protection unworkable. Or, in the words of Second Circuit judges, such a limitation would “defeat the very purpose Congress sought to achieve” with its DMCA.

Now Universal-owned Capitol then appealed that ruling, taking the matter to the US Supreme Court late last year after the Second Circuit refused to reconsider the case. But earlier this month the Supreme Court declined to hear the case too, so that the appeals court ruling stands – ie the presence of pre-1972 sound recordings on a website like Vimeo doesn’t affect its safe harbour protection.

WHERE NOW?
You could argue that all these complexities around pre-1972 sound recordings are unnecessary, stemming as they do from a peculiar whim of American copyright law that could be fixed simply by applying federal-level protection to all sound recordings still in copyright.

After all, given that there are already plenty of challenges to be met navigating the differences between national copyright laws in a digital age where many key services are global, we can do without adding a whole load more differences between the copyright laws in 50 American states whenever golden oldies are thrown into mix.

Various parties have proposed amending US-wide copyright law so to extend some or all federal protection to all sound recordings, and given the music industry has pretty much lost the argument over limiting safe harbours, artists and labels have little to lose getting behind such proposals.

Last week the Fair Play Fair Pay Act was put back on the agenda in Washington. This is the latest attempt by the music community to get a general performing right for sound recordings inserted at a federal level, so that AM and FM broadcasters, as well as online and satellite radio services, would need to secure licences and pay royalties to artists and labels. Crucially, these proposals also include a provision that would mean the new performing right would apply to all sound recordings still in copyright, oblivious of release date, as would – presumably – the existing digital performing right.

Though, the record industry has long tried to secure a general performing right for its recordings and always faces tough opposition from the big American broadcasters, who are an influential lobby on Capitol Hill. Therefore, it’s not assured Fair Play Fair Pay will become law. So perhaps separate efforts are required to extend federal protection to all recordings, so at least that one anomaly of American copyright law is removed.



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