Two years ago, a federal judge rocked the music industry in holding that pre-1972 recordings may be protected under state copyright laws and are protected by California copyright law.  This holding, in a case brought against SiriusXM, had vast potential ramifications, as it would mean that radio and internet radio stations playing such recordings would have to pay out millions of dollars in royalties that they had never anticipated paying. CBS Radio, however, just scored a legal victory that, if it stands up, would effectively eliminate any artist’s ability to recover royalties for pre-1972 recordings.

Seeking a way to shift the paradigm of the SiriusXM case and the string of similar suits that preceded and followed it, when ABS  Entertainment, which owns the pre-1972 recordings of Al Green and others, sued CBS, iHeartMedia, and Cumulus, CBS decided to throw something of a legal “Hair Mary.”  It argued that “CBS does not play vinyl sound recordings.”  Rather, it plays only re-issued or remastered versions of pre-1972 recordings.

United States District Judge Percy Anderson grabbed CBS’s Hail Mary in the end zone, finding that the sound engineering process in remastering an album constitutes “copyrightable originality.”  As such, CBS was permitted to treat the recordings as post-1972 recordings.

Judge Anderson’s ruling comes despite ABS’s warning that accepting CBS’s remastering argument would result in the owners of sound recordings trumping artists’ rights over their works in all cases.  The judge addressed this point in a footnote, distinguishing the “original expression added by a sound engineer during the remastering process” from the naked conversion between formats (i.e., vinyl to MP3).

The reason that this issue exists is that, on February 15, 1972, Congress brought sound recordings under federal copyright law, but not retroactively. Prior to 1972, musical recordings were protected only be state copyright laws, many of which are based in common law, court-made rules that are not codified in statutes and, at least in many instances, do not require registration in order to protect recorded material.  Works that are copyright protected by state common law are harder to track than those protected by a registered federal copyright.

[This post was written by Jason Horst.]

Debate over the most influential band from the 1960s will generally include names like the Beatles, the Rolling Stones, and Led Zeppelin, but a lesser-known act from one of music’s greatest eras, the Turtles, may have just changed all of that. Flo & Eddie Inc., a corporation owned by the two founding members of the Turtles, just prevailed in a lawsuit against SiriusXM sure to rock the music industry and, perhaps, take a lot of music out of circulation.

The Turtles, while not as big as the Beatles, did have some hits that many will recognize, including “Happy Together,” which have been played frequently on SiriusXM, broadcast radio, and other sources for music-listening. Because federal copyright laws apply only to recordings “fixed” starting in 1972, the Turtles are not protected or entitled to royalties under these laws. Last week, however, United States District Court Judge  Philip Gutierrez granted summary judgment in favor of Flo & Eddie, holding that pre-1972 recordings may be protected under state copyright laws and are protected by California copyright law.

The SiriusXM Suit, Pandora and SoundExchange

The suit against SiriusXM is similar to one recently filed against Pandora in New York state court. The SiriusXM and Pandora suits involve a challenge encountered in integrating the music industry’s royalty system: millions of people listening to music using media that did not exist even 15 to 20 years ago, let alone in 1972. Yet, when copyrighted songs are played on SiriusXM radio, Pandora, or streaming webcasts, the holders of the copyrights are still entitled to royalties.

Many companies that broadcast or provide access to digital recordings, including SiriusXM and Pandora, use a company called SoundExchange to track usage, collect digital royalties, and distribute them to copyright holders. Problem solved, right?  Unfortunately, there’s a catch. SoundExchange may not track usage of material recorded or “fixed” before 1972, meaning that it would not collect or distribute royalties on such recordings.

Assuming that the SiriusXM ruling stands and that other state courts follow its lead, those who want to provide access to pre-1972 recordings online or via satellite radio will have to find a way to efficiently track usage for the purposes of calculating royalty payments. And, of course, they will have to pay royalties to artists whom they were not previously paying. These expenses, in turn, will likely mean greater cost, more commercials, or even loss of access to certain works.

Federal Copyright Law Does Not Apply to Pre-1972 Recordings

The issue in both the SiriusXM and Pandora cases is a loophole of sorts in federal copyright law. On February 15, 1972, Congress brought sound recordings under federal copyright law. Prior to 1972, however, musical recordings were protected only be state copyright laws, many of which are based in common law, court-made rules that are not codified in statutes and, at least in many instances, do not require registration in order to protect recorded material. The suit against Pandora is based on New York common law. Works that are copyright protected by state common law are harder to track than those protected by a registered federal copyright.

The artists and record companies in both suits have contended that they have not been paid for usage of their pre-1972 recordings. Pandora, at least, appears to tacitly acknowledge as much. According to the complaint against the company, Pandora told the SEC that if it were required to obtain licenses for the reproduction and public performance of pre-1972 sound recordings, the expense of compliance may be so prohibitive that Pandora would simply remove all pre-1972 recordings from its service.

We have yet to hear the final word in either the SiriusXM or Pandora cases.  Barring an out-of-court settlement, SiriusXM will almost certainly appeal the trial court’s ruling to the Ninth Circuit Court of Appeals. Given the substantial financial interests at stake, even a trip to the Supreme Court is not out of the question. These cases could end up significantly diminishing both services and adding cost to consumers, or they could make it easier for new media companies such as Pandora and SiriusXM to climb the charts, while leaving artists like the Turtles continue to receive no royalties for use of their performances.

I’m listening to my Classic Rock station on Pandora, and Keith Richards’ timeless guitar licks begin to blast from my laptop speakers.  I instinctively pick up my air guitar and start to wail.  Mick comes in:  “I. Can’t. Get. No. . .”  Then . . .  nothing.  I snap out of my rock star fantasy and wildly click over to Pandora to figure out what happened.  Over the picture of the Stones’ Out of Our Heads album cover, there is a message from Pandora: “This track is no longer available on Pandora.  We apologize for the inconvenience.”

Ok, the Stones didn’t really disappear.  Not yet.  In actuality, Mick went right on singing, Keith went right on riffing, and I went right on wailing on the air guitar.  Nonetheless, the following two facts are absolutely true:  1) you don’t care about the rest of my jam session—which was complete with kicked-over “mic stands” (coat racks) and a T-shirt thrown into the “crowd” (my mortified wife and children)—and 2) fans of the Stones, Beatles, Elvis, Miles, Coltrane, and many other musicians with pre-1972 recordings could soon see these recordings removed from Pandora—and other commonly-used media—if record companies prevail in a recent suit filed against the Oakland-based company.

The Pandora Suit and SoundExchange

The suit against Pandora, which the record companies filed in New York state court, involves a challenge encountered in integrating the music industry’s royalty system:  millions of people listening to music using media that did not exist even 15 to 20 years ago, let alone in 1972.  Yet, when copyrighted songs are played on Pandora, satellite radio, or streaming webcasts, the holders of the copyrights are still entitled to royalties.  Many companies using digital recordings, including Pandora and SirusXM, use a company called SoundExchange to track usage, collect digital royalties, and distribute them to copyright holders.  Problem solved, right?  Unfortunately, there’s a catch.  SoundExchange may not track usage of material recorded or “fixed” before 1972, meaning that it would not collect or distribute royalties on such recordings.

The Problem With Pre-1972 Recordings

On February 15, 1972, Congress brought sound recordings under federal copyright law.  Prior to 1972, however, musical recordings were protected only be state copyright laws, many of which are based in common law, court-made rules that are not codified in statutes and, at least in many instances, do not require registration in order to protect recorded material.  The suit against Pandora is based on New York common law.  Works that are copyright protected by state common law are harder to track than those protected by a registered federal copyright.

The record companies in the Pandora suit, as well as in a California suit against SirusXM, contend that they have not been paid for usage of their pre-1972 recordings.  Pandora appears to tacitly acknowledge as much.  According to the complaint, Pandora told the SEC that if it were required to obtain licenses for the reproduction and public performance of pre-1972 sound recordings, the expense of compliance may be so prohibitive that Pandora would simply remove all pre-1972 recordings from its service.

We will watch the Pandora and SiriusXM cases with great interest, as the cases could end up significantly diminishing both services, as well as my living room concert series.