No New York Common Law Public Performance Right for Sound Recording Creators

We close 2016 with the latest on the Flo & Eddie v. Sirius XM saga. My previous posts on this topic include Unhappy Turtles Take a Bite Out of Sirius XM for Unauthorized Public Performance, Flo and Eddie Goes for the Two Coast Punch Against Sirius XM and Supreme Court of Florida to Weigh in on Common Law Sound Recording Rights.

Sirius XM Radio, a satellite digital radio service, broadcasts pre-1972 sound recordings without licenses and without paying the copyright owners of those sound recordings. Flo & Eddie, Inc., which owns the rights to The Turtles pre-1972 sound recordings, sued Sirius XM in multiple federal courts. Flo & Eddie claimed that Sirius XM’s actions infringe Flo & Eddie’s common law copyrights. Although U.S. copyright law has protected rights to musical compositions since 1831, federal copyright law did not protect rights to sound recordings until 1972, albeit offering limited protection. In 1995, federal copyright law began providing owners of post-1972 sound recordings a right to control public performance of sound recordings for digital audio transmission performances only. The right does not apply to AM/FM radio stations. Flo & Eddie argue that state common law copyrights protect their pre-1972 sound recordings from Sirius XM’s unauthorized satellite digital public performances.

After the federal district court for the Southern District of New York ruled in favor of Flo & Eddie on ownership of the public performance right, Sirius XM appealed. The Second Circuit Court of Appeals asked the New York State Court of Appeals, New York State’s highest court, to authoritatively answer this question:

Is there a right of public performance for creators of sound recordings under New York law and, if so, what is the nature and scope of that right?

The New York Court of Appeals ruled that New York common law copyright does not recognize a right of public performance for creators of sound recordings. I think the dissent presents the more persuasive argument. The majority passed the buck and declined to exercise its common law authority.

The New York Court of Appeals (the Court) described the status of federal sound recording rights:

Essentially, the right to control performance is now limited to digital radio services, and does not apply to AM/FM radio stations, nor to bars, restaurants or stores that play music in their establishments. This exemption was founded in Congress’s desire not to impose new and unreasonable burdens on radio and television broadcasters, which often promote, and appear to pose no threat to, the distribution of sound recordings.

Significantly, the Digital Performance Right in Sound Recordings Act (DPRA) created a highly complex scheme that: established a statutory licensing regime for noninteractive digital subscription services; required copyright owners to grant a license to such services for performance of their sound recordings (in order to prevent an artist from refusing to allow digital radio play); provided a means of determining reasonable rates and royalty payments (including a dispute resolution system); and required that portions of the royalties be distributed to the recording artists, as well as to the copyright owner. The enactment of the DPRA was prompted, in part, by concerns that, without appropriate protection, the creation of new sound recordings and musical works would be discouraged, and new subscription and interactive services might adversely affect sales of sound recordings and erode the ability of copyright owners to control and be paid for their work. After years of public comment and deliberation, Congress attempted to strike a balance between, on the one hand, protecting owners of copyright and encouraging creation of new music and, on the other hand, promoting the development of new media and distribution forms. Indeed, through the DPRA’s intricate scheme of rules and exceptions, Congress balanced the interests of numerous stakeholders, including digital radio services, recording companies, composers, terrestrial radio stations, businesses that play music on their premises, performing artists, and the public.

(Opinion pdf pages 8 – 9).

The Copyright Act preempts rights granted by states that are equivalent to the exclusive copyright rights. State law still controls copyright rights that are not equivalent to federal copyright rights. 17 USC §301(a), (b).

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.

§301(c).

Flo & Eddie asked the federal courts to enforce their New York common law rights in their sound recordings. But the federal courts did not know precisely what Flo & Eddie’s New York common law rights are, so asked New York State’s highest courts to answer the question.

After discussing in detail New York State common law copyright law, the Court summarized the applicable law.

Our common-law copyright protection prevents only the unauthorized reproduction of the copyrighted work, but permits a purchaser to use copies of sound recordings for their intended purpose, namely, to play them. It makes sense that, consistent with its name, copyright prevents copying of a work, but does not prevent someone from using a copy, once it has been lawfully procured, in any other way the purchaser sees fit.

(Opinion pdf page 23).

Although the expectations of the various stakeholders are not dispositive, the Court took societal expectations into consideration.

It would be illogical to conclude that the right of public performance would have existed for decades without the courts recognizing 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. The absence of a right of public performance in sound recordings was discussed at the federal level for years and became acutely highlighted in 1971, upon enactment of the Sound Recording Amendment, and again in 1995, upon enactment of the DPRA. At those times, all interested parties were placed on notice of the statute’s limited rights for post-1972 sound recordings. Although parties do not lose their rights merely by failing to enforce them, the fact that holders of rights to sound recordings took no action whatsoever to assert common-law protection for at least the past four decades — when the absence of a comprehensive federal right of public performance for sound recordings was clear — supports our conclusion that artists and copyright holders did not believe such a right existed in the common law.

Instead, common sense supports the explanation, articulated by the Third Circuit, that the record companies and artists had a symbiotic relationship with radio stations, and wanted them to play their records to encourage name recognition and corresponding album sales.

(Opinion pdf pages 26 – 27).

The Court refused to create a common law right that did not previously exist to accommodate changes in technology making it more difficult for record companies and performing artists to profit from the sale of recordings.

Simply stated, New York’s common-law copyright has never recognized a right of public performance for pre-1972 sound recordings. Because the consequences of doing so could be extensive and far-reaching, and there are many competing interests at stake, which we are not equipped to address, we decline to create such a right for the first time now. Even the District Court here, while finding the existence of a common-law copyright of public performance in sound recordings, acknowledged that such a right was ‘unprecedented,’ would upset settled expectations, and would ‘have significant economic consequences.” Under these circumstances, the recognition of such a right should be left to the legislature.

(Opinion pdf page 28).

What if courts had taken this approach to creating fair use? We might not even have fair use now, had it not been created by courts through the exercise of their common law authority. The lack of fair use might be fine for copyright holders, but it would be detrimental for the rest of the world.

This case is Flo & Eddie, Inc., v. Sirius XM Radio, Inc., No. 172, New York State Court of Appeals.

Judge Leslie Stein wrote the majority decision. Judge Eugene M. Fahey concurred. Judge Jenny Rivera dissented.

Concurring Opinion

Judge Fahey thought that the Court should have accepted the Second Circuit’s invitation to reform the Second Circuit’s question as appropriate.

The majority decision focused on broadcasters. Judge Fahey focused on interactive/ “on-demand” services in which the consumer choses what to play and pays a monthly subscription fee. To the majority’s answer, Judge Fahey would add

‘Public performance’ does not include the act of allowing members of the public to receive the ‘on-demand’ transmission of particular sound recordings specifically selected by those listeners.

(Opinion pdf page 38).

In Judge Fahey’s view, interactive services do not facilitate a public performance, but actually publish the work, infringing the copyright holder’s right to sell the work.

The evolution of technology should be accompanied by the evolution of the law. The ‘broad and flexible power of the common law’ needs ‘to keep pace’ with this new means of music consumption. We must recognize that the rental or lease of sound recordings fixed prior to February 15, 1972 by Internet broadcasters who provide the public ‘on-demand’ access to such recordings is a form of publication under copyright law.

Indeed, the ‘on-demand’ access to sound recordings offered to the public is unique in that it requires a paid subscription that connects the customer to a nearly limitless catalog of music and gives the customer the power to instantly listen to recordings specifically selected by that user without purchasing even a single one of those songs. In essence, unlike ‘terrestrial,’ Internet, and satellite radio operations, which select and play sound recordings for all of their listeners, ‘on-demand’ services permit recordings to be selected and played by each of their users.

(Opinion pdf pages 45 – 46).

Dissent

Judge Rivera rejected the majority’s approach of refusing to account for technological advances and of failing to exercise its common law authority.

Contrary to my colleagues, I conclude that decisional law, statutory mandates, legislative history, and the doctrinal foundations of private rights of ownership compel a determination that our common law recognizes a creator’s right of public performance in sound recordings. The beneficial contours of this right and the creator’s interests in receiving compensation for the labor that produced the sound recording align with society’s interest in avoiding exploitation of artists and their creative works. This right is balanced against the goal of increasing public access to creative works, the expectations of certain sectors of the music recording industry, and the reality that Congress has placed a time limit on common law protections for pre-1972 sound recordings while providing a limited right of public performance for all sound recordings made after February 15, 1972.

I reject a parochialism that justifies turning a blind eye to the exploitative practices of today’s music industry made possible by technological advances and that, as a consequence, excludes from our common-law copyright in sound recordings a quintessential property interest in the use of these works, and limits a creator’s opportunity to derive financial benefit from their performance. As this Court has previously stated, ‘the common law is not rigid and inflexible. It is a living organism which grows and moves in response to the larger and fuller development of the nation.’ Indeed, it is this Court’s duty to apply New York’s common-law copyright to the changing landscape of the music industry and protect the interests of creators of sound recordings against those who profit from the fruits of others’ labor, without compensating the copyright holder, and do so in a manner that jeopardizes the primary source of revenue for creative genius.

(Opinion pdf pages 53 – 54).

Judge Rivera found no reason to exclude a right of public performance from the bundle of rights in a sound recording. New York courts recognize a right of performance for plays and films.

There is no logical basis to distinguish between the copyright protections of those works and a sound recording. All involve creative inspiration and genius, application of artistic ability, and the development of a final product marketable to the public. The creator’s interest in the sound recording is no less real or significant than with other forms by which an artist communicates a creative idea, a concept that the majority ignores in reaching its conclusion. Indeed, addressing a slightly different matter, this Court in Naxos recognized performance is not the same as the mode of reproduction, and stated that the copyright holder in that case ‘has a protected property interest in the performances embodied on the shellac records.’

(Opinion pdf page 61).

Judge Rivera argued that an artist’s expression brought to life in a sound recording is property that is no less protectible than the property interest in the musical composition.

To be sure, copyright in a sound recording has a peculiar history because it was made possible by technological advances that distinguish it from copyright in the written word, and, as discussed, initially sound recordings were not protected by federal copyright law. When Congress amended the federal Copyright Act in 1972 to include post-1972 sound recordings, it explicitly withheld a right of performance from sound recording copyright holders. At the time, Congress understood that state common law included a right of performance, for otherwise this express reservation would be unnecessary.

My colleagues’ grounds for excluding the right of public performance from New York’s common law copyright in sound recordings are unpersuasive. The first reason is that no such right has previously been recognized in New York. However, as I have discussed, a generic right of public performance as part of a copyright holder’s ‘bundle of rights’ is well-established in decisional law and property doctrine. The fact that until now there has been no detailed explication on the right of public performance in sound recordings from this Court does not inexorably lead to the conclusion that no such right exists. Of course, since no New York state court has rejected the right of public performance, there is also no basis to exclude such right from the copyright holder’s protections. Regardless, the United States Supreme Court has warned against placing significance on the delayed assertions of copyright protections. ‘It is hardly incumbent on copyright owners to challenge each and every actionable infringement. And there is nothing untoward about waiting to see whether an infringer’s exploitation undercuts the value of the copyrighted work, has no effect on the original work, or even complements it.’

(Opinion pdf pages 69 – 70).

The sea change in the music industry from 1971 and 1995 to now prompted copyright holders to invoke their rights. The lack of lawsuits brought by copyright holders does not mean the right did not exist.

The last reason my colleagues assert for denying the right is perhaps the most unsupportable because it is grounded in the perception that it is too difficult to define the scope of such a right. Whether a right exists is a question separate from the expanse of the right, and the considerations regarding how best to protect the right as against competing interests and societal goals, serve as no excuse for removing this ‘stick’ from a copyright holder’s bundle of rights. Our common law does not bow to the challenges brought about by change. Rather, ‘our court said, long ago, that it had not only the right but the duty to re-examine a question where justice demands it.’ The law, and the equities as they stand today, support recognition of a creator’s right of public performance in a sound recording.

(Opinion pdf page 77).

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