SoundExchange Royalties Case Against Muzak Reinstated By Appellate Court

SoundExchange v. Muzak, No. 16-7041 (D.C. Cir. Apr. 25, 2017).

The D.C. Court of Appeals reversed the dismissal of SoundExchange's complaint against Muzak, which alleges that Muzak underpaid royalties.  SoundExchange is a nonprofit entity charged with the responsibility of collecting royalties for performing artists and copyright owners of music; Muzak is a company that supplies digital music channels to satellite television networks who, in turn, sell to subscribers.  Muzak argued that it was permitted to pay lower, "grandfathered," rates that had been set by a copyright royalties board even after certain corporate changes.  There had been a statutory change in the 1990s as part of the DMCA-compromise, and the case turned on the statutory definition of a "preexisting subscription service."  The Court concluded:

The grandfather provisions were intended to protect prior investments the three business entities had made during a more favorable pre-1998 rate-setting regulatory climate. “Muzak was [a] pioneer music service that incurred both the benefits and risks that came with its investment,” specifically its investment in DishCD. 71 Fed. Reg. at 64,646. But when Muzak expands its operations and provides additional transmissions to subscribers to a different “service,” (i.e., SonicTap), this is an entirely new investment. * * * We conclude, therefore, that the better interpretation of the statute is that the term “service” contemplates a double limitation; both the business and the program offering must qualify before the transmissions are eligible for the favorable rate.

Cars' Audio Technology May Require Royalty Payment

Alliance of Artists &Rec. Cos. v. Gen. Motors Co. et al., No. 14-1271 (D.D.C. Feb. 19, 2016).

Audio technology that has been installed in a number of car models since 2008 may require payment of royalties under the Audio Home Recording Act of 1992 (17 USC 1001 et seq.), holds the court in denying the defendant car manufacturer's motion to dismiss.  The Audio Home Recording Act of 1992 requires manufacturers, importers, and distributoers of "digital audio recording devices" to incorporate copying control technolgy into their devices and pay a set royalty amount for each device.  The statute has been referred to as a "compromise" and at the time of its adoption then-current technology was much different than it is today (DAT tapes were the issue then).  On defendants' Rule 12 motions to dismiss, the Court undertook an extensive and detailed analaysis of the statutory text and agreed with Defendants' asserting that a "digital audio recording device" must be capable of producing "digital audio copied recordings;" that these recordings are a type of "digital music recording;" and that the device's output must therefore comport with the definition of a digital music recording that is establisehd at 17 USC 1001(5).  However, the Court also concluded that the plaintiff's complaint sufficiently alleged facts that, if true, could plausible demonstrate that Defendants' devices are in violation of the statute.

California Law Protects Public Performance Right In Pre-1972 Sound Recordings; Turtles Granted Summary Judgment Against Sirius

Flo & Eddie Inc. v. Sirius XM Radio Inc., et al., No. 2:13-cv-05693-PSG-RZ (C.D. Cal. filed Sep. 22, 2014) (Doc. 117).

Plaintiff, owner of all rights to The Turtles’ master sound recordings (including the hit "Happy Together"), was granted summary judgment against Sirius XM on its causes of action for violation of California
copyright law (California Civil Code § 980(a)(2)), California’s Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.), and common law misappropriation and conversion, but only so far as the claims were premised on Sirius XM’s public performance of Plaintiff's recordings, not its alleged reproductions for which there were outstanding questions of fact.

Plaintiff argued that Sirius XM was liable for two distinct unauthorized uses of its sound recordings: (1) publicly performing its recordings by broadcasting and streaming the content to end consumers and to secondary delivery and broadcast partners, and (2) reproducing the recordings in the process of operating its satellite and Internet radio services.  Plaintiff contended that, in California, copyright ownership of a pre-1972 sound recording includes the exclusive right to publicly perform the recording; therefore, if anyone wishes to publicly perform such a recording, they must first seek authorization from the recording’s owner.  The Court agreed.

First, the Court found that California statutory and common law governs the rights that attach to pre-1972 sound recordings because the Federal Copyright Act does not apply to those earlier recordings and explicitly allows states to continue to regulate them.  Second, the Court examined the provision of California’s copyright statute that contains a provision directly addressing pre-1972 sound recordings. Cal. Civ. Code § 980(a)(2) ("The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as 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").

The crucial point of statutory interpretation for this case was whether “exclusive ownership” of a sound recording carries within it the exclusive right to publicly perform the recording.  The Court’s textual reading of § 980(a)(2) was 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.

The Court further found that the rule of statutory construction requiring express statements to alter the common law did not apply because, when the legislature passed § 980(a)(2), there was no common law rule in California rejecting public performance rights in sound recording ownership.  Also, the legislative history of § 980(a)(2) and its comparison to the Federal Copyright Act bolstered the Court’s plain textual reading of the statute that sound recording ownership is inclusive of all ownership rights that can attach to intellectual property, including the right of public performance, excepting only the limited right expressly stated in the law (that the owner does not have the exclusive right to record and duplicate “covers").  Lastly, the Court found further support for its textual reading of the statute as inclusive of the right of public performance from the only two courts that have ruled on or discussed this right under § 980(a)(2).  Accordingly, the Court granted summary judgment on copyright infringement in violation of § 980(a)(2) in favor of Plaintiff.

Borrowing the violation of § 980, the Court found that Sirius also violated California's Unfair Competition Law because Sirius publicly performs Plaintiff's sound recordings without authorization to do so.  Also, the Court found that Sirius XM’s unauthorized performances established conversion damages in the form of license fees that Sirius XM should have paid Plaintiff in order to publicly perform its recordings.  The foregone licensing or royalty payments that Sirius XM should have paid before publicly performing the recordings also constituted misappropriation.

Lastly, the Court found that Sirius could not rely on the doctrine of laches because this was an action at law seeking money damages, and laches is an equitable defense.  Accordingly, the Court granted Plaintiff's motion for summary judgment on all causes of action, but only so far as the claims are premised on Sirius XM’s public performance of the recordings, not its alleged reproductions.