Discussion of FCC, copyright, advertising and other legal issues of importance to radio and television broadcasters and other media companies
Principal Editor: David O’Connor
Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.
…
The Copyright Royalty Board today published a Federal Register notice announcing that SoundExchange was auditing a number of broadcasters and other webcasters to assess their compliance with the statutory music licenses provided by Sections 112 and 114 of the Copyright Act for the public performance of sound recordings and ephemeral copies made in the digital transmission process by commercial webcasters. A separate notice to audit the company Music Choice, which also provides a digital music service usually delivered with cable or satellite television services, was also issued to audit their compliance both on webcasting and on their subscription music service which is subject to separate royalty rules set out in a different part of the same section of the Copyright Act and set through a different Copyright Royalty Board proceeding. A third audit notice has gone out to a company called Rockbot, a Business Establishment Service whose royalties are exclusively paid under Section 112 of the statute (see our article here about the CRB-set royalties for these services that provide music played in various food and retail establishments and other businesses).
SoundExchange may conduct an audit of any licensee operating under the statutory licenses for which it collects royalties. Such audits cover the prior three calendar years in order to verify that the correct royalty payments have been made. The decision to audit a company is not necessarily any indication that SoundExchange considers something amiss with that company’s royalty payments – instead they audit a cross-section of services each year (see our past articles about audits covering the spectrum of digital music companies audited by SoundExchange here, here, here and here). Audits are conducted by outside accounting firms who, after they review the books and records of the company being audited, issue a report to SoundExchange about their findings. The company being audited has the right to review the report before it is issued and suggest corrections or identify errors. The reports are then provided to SoundExchange and, if they show an underpayment, it can collect any unpaid royalties, with interest. While, by statute, the notice of the royalty must be published in the Federal Register, the results of the audit and any subsequent resolution usually are not made public.
Continue Reading Copyright Royalty Board Announces SoundExchange Audits of Royalty Payments for Webcasters (Including Broadcast Simulcasts) and Other Digital Music Services
Here are some of the regulatory and legal actions and developments of the last week of significance to broadcasters, with links to where you can go to find more information as to how these actions may affect your operations.
…
Recently, the Radio Music License Committee sent out a memo to broadcasters about a July 8, 2019 SoundExchange payment deadline for pre-1972 sound recordings. As with everything in copyright law, the issues surrounding pre-1972 sound recordings are complicated, and the RMLC notice, while seemingly straightforward, still resulted in our receiving lots of questions. These questions may have been compounded because of notices sent to broadcasters back in April about another filing deadline concerning these recordings which caused much consternation for what was, for most broadcasters, a matter of little concern. For most broadcasters, neither of these dates are of particular concern unless the broadcaster has been identifying pre-1972 sound recordings and not paying SoundExchange royalties when those songs are streamed, and we understand that most broadcasters have in fact been paying SoundExchange for these recordings. But let’s try to explain what is going on in a little more detail.
First, let’s look at the basics. Sound recordings (the recording of a particular band or singer performing a song) were originally not covered by federal copyright law. The law provided protections for “musical works” (i.e. the musical composition, the words and musical notes of the song), but the mere recording of that work was initially not seen as a creative work. It was thought of more as a mechanical rendering of the real creative work – the underlying song. So when recordings came to have real value in the first half of the last century, recording artists had to rely on state laws to prevent other people from making and distributing copies of their recordings. Laws against what we would refer to as bootlegging or pirating of recordings were passed in most states, and lawsuits against bootleggers would be brought under these state laws. It was not until 1972 that Congress, through an amendment to the Copyright Act, recognized that the recordings were themselves creative works entitled to copyright protection. But that amendment did not fully make all pre-existing recordings subject to the Copyright Act, instead leaving most sound recordings first recorded in the United States prior to the adoption of the amendment to the Act in February 1972 subject to state laws until 2067.
Continue Reading Pre-1972 Sound Recordings and the July 8 SoundExchange Filing Deadline
In a decision this week, the Florida Supreme Court rejected claims by Flo & Eddie (of the 1960s band the Turtles) that there was a common law public performance right in pre-1972 sound recordings in the state of Florida (the opinion is available here). The Florida court, after examining numerous avenues of argument, concluded that the establishment of such a right was a legislative task. A judicial declaration that the right existed would, in the Court’s words, “have an immediate impact on consumers beyond Florida’s borders and would affect numerous stakeholders who are not parties to this suit.” It would also upset settled expectations, as the determination that there was a right would effectively create a sound recording performance right greater than that which has ever been recognized in the US – far broader than the limited right granted under Federal law to cover digital performances of sound recordings. The Court went on to conclude that other claims raised by Flo & Eddie were similarly unavailing. The Court found that any reproductions made in the transmission process by Sirius XM (the defendant in the case) were not entitled to composition as they were transitory and made only for purposes of the transmission, not for public consumption (and as Florida law specifically permitted limited reproductions by radio broadcasters and the Court considered Sirius to fit that definition). And, as there was no violation of any rights of the plaintiffs, the use of the recordings could not constitute unfair competition or conversion.
This case reached the Florida Supreme Court when it was certified by the United State Court of Appeals which was reviewing a District Court decision reaching the same conclusion as did the Florida Supreme Court – that there was no performance right under state law for pre-1972 sound recordings (see our summary of the District Court decision here). The Supreme Court’s decision in Florida is similar to that reached by the Court of Appeals in New York (the state’s highest court), about which we wrote here, determining that there was no NY state law public performance right in pre-1972 sound recordings. As we’ve written many times, pre-1972 recordings are not governed by Federal law, which was only extended to cover reproduction rights in sound recordings in that year, leaving all pre-1972 rights in sound recordings with the states. Georgia and Illinois have reached similar decisions in slightly different cases (see our article here on the Georgia decision). In California, where a District Court found a public performance right in pre-1972 sound recordings, we are awaiting word from its Supreme Court as to whether such rights exist in that state (see our article here on the certification of this question to the California Supreme Court).
Continue Reading Florida Supreme Court Rejects Public Performance Right in Pre-1972 Sound Recordings – What’s Next?
The Copyright Office is now a part of the Library of Congress, with the Register of Copyrights (the head of the Copyright Office) appointed by the Librarian of Congress. As part of its plans to review the Copyright Act, the House Judiciary Committee asked for comments earlier this year about structural reform of the Copyright…
The question of whether state laws about pre-1972 sound recordings could give copyright holders a claim against broadcasters for the over-the-air public performance of these recordings was answered in a novel manner in a decision rendered by a US District Court in California. The evidence before the Court showed that CBS, the broadcaster being sued, had played digitally remastered versions of the pre-1972 songs, not the original analog pre-1972 recordings. The Court, based on evidence provided by the sound engineers who remastered the digital versions of the songs, found that there was enough originality in the remastering process for the digital versions to be copyrightable as “derivative works.” A derivative work is a separate work, based on the original, which can itself be copyrighted if there is some creativity in the new work. As the remastered derivative work was created after 1972, the Court decided that it was covered under Federal law. As Federal law provides no royalty for the public performance of a sound recording by an over-the-air broadcaster, the Court granted CBS summary judgement in the suit brought against it, dismissing the claims of the copyright holders (the text of the decision is embedded in this Hollywood Reporter article about the case).
The question of whether digitized versions of old recordings are sufficiently creative to merit their own copyrights (whether they are “original works of authorship”) has been debated in copyright circles for some time. Here, the Court looked at a summary of the law that had been prepared in a Circular distributed by the Copyright Office, which listed certain criteria that could be applied in determining whether a re-recorded work had sufficient creativity to merit a copyright. The Court also looked at specific evidence offered by recording engineers that showed how they used independent creative judgment in deciding to enhance certain elements of the recording in the digital version and to suppress others. The testimony showed that the digital version was the result of more than simply hooking the analog source material to a digital recorder and distributing the result. Human intervention in deciding how to materially change the original work to produce a new digital work was found by the Court – deciding that this was a classic version of a derivative work, authorized by the Copyright holders themselves when they commissioned the digital versions of the recordings. Thus, these works were entitled to their own copyright – a copyright that arose when the work was created after 1972.
We wrote about this issue in our article here, an article that primarily dealt with pending appeals of the question of whether there really is a state law public performance right in pre-1972 sound recordings. We wrote there about the fact that Sirius XM and some webcasters have not raised the CBS defense, as they have argued that no such royalties are due on pre-1972 sound recordings and have not been making such payments to SoundExchange (the Court in the CBS case said that CBS was apparently making such payments). Of course, the issue was not raised in those cases as to whether these companies were playing analog versions of the old recordings, or new digitally remastered works that may be entitled, if the current decision is upheld, to new copyrights (in fact, as we wrote here, the Copyright Royalty Board itself has approved of Sirius XM not making payments for pre-1972 recordings, without addressing what constituted such a recording). What implications does this decision have on other cases where this issue has been raised?
Continue Reading US District Court Finds Digitally Remastered Pre-1972 Sound Recordings Are “Derivative Works” Covered By Federal Law – Dismisses Suit against Broadcaster Seeking Over-the-Air Performance Royalties
It’s another summer with music copyright issues hitting the press almost every day. Over the next week or two, we will try to catch up on some of the legal issues raised by all the music news. First, let’s look at the significant actions in the last ten days in the battle over whether there is a public performance right in pre-1972 sound recordings. Just a few days after there was a court decision (available here) finding that there was no common law public performance right in pre-1972 sound recordings under Florida law, Sirius XM last week announced that it had settled the case brought against it by the major record labels by agreeing to pay $210 million for nationwide public performance rights to the catalog of recordings that these labels own, said by Sirius’ SEC 8-K filing to comprise about 80% of those sound recordings. Obviously, that settlement does not appear to resolve the issues with independent sound recording owners (like Flo & Eddie who brought the actions that have resulted in NY and California decisions finding a performance right in pre-1972 recordings in those two states). But what do the settlement and Florida decision mean for other users of these recordings?
First, a review of the issue with pre-1972 sound recordings. With all of the copyright issues that have been in the news in the last few weeks, that review is necessary so that readers really understand the issues involved in this case – beyond just the headlines. Pre-1972 sound recordings (sound recordings being a song or other audio material, as recorded by a particular artist) first released in the United States are different than other sound recordings, as they do not have protections under Federal copyright law. Prior to 1972, Federal copyright law did not protect sound recordings at all, only protecting what is referred to as the “musical work” or “musical composition” (the underlying words and music of a song). The actual recording of the song was protected only under state laws, and most state laws addressed only unauthorized reproductions of those recordings (e.g. bootlegged copies), not performance rights. When copyright protections over sound recordings were federalized in 1972, states were left with the right to determine how to deal with pre-1972 recordings.
Continue Reading Understanding the Murky State of the Performance Right in Pre-1972 Sound Recordings – Florida Court Rejects the Right yet Sirius XM Settles With the Record Labels
The Copyright Royalty Board has begun the hearing phase of its proceeding to set the royalties to be paid by webcasters (or noninteractive digital music services) for public performances of sound recordings for the years 2016-2020. These are the royalties paid by Internet radio companies to SoundExchange, allowing them to play any recorded music legally released in the United States since 1972 (see our article here about issues regarding pre-1972 sound recordings), as long as the digital service pays the royalties set by the Board and observes other rules set by the Copyright Act. This proceeding began in January 2014, when the CRB asked for petitions to participate in the proceeding. After those petitions, parties had time to engage in settlement discussions before filing “written direct cases” last October – written witness statements setting out the rates proposed by each party and the justifications for those rates (see our summary of the parties initial proposals here). Since that time, the parties have been engaged in discovery, producing mountains of documents relevant to the claims made, and conducting depositions of a number of witnesses. This week, the case moved into its trial phase.
On Monday, the parties still participating in the proceeding presented to the 3 CRB judges their opening statements where their attorneys summarized what they hope to prove over the next 5 weeks of trial. During the trial, the parties will formally introduce their written statements (available on the CRB website, here, with sensitive business information redacted), which have been amended based on facts uncovered during the discovery that was conducted, and their written rebuttal testimony – testimony that was provided to the CRB in February to rebut the initial written cases (available on the CRB website, here, with sensitive business information redacted). Such rebuttal testimony has itself been subject to the discovery process. There can be various objections to the written evidence presented – including questions of hearsay or relevance to the proceeding. For virtually all of the written statements, the individual who provided that testimony will be present at the hearing to introduce that testimony, and each witness will be subject to cross examination by the other parties. As is evident by the number of exhibits that have been submitted, there will be dozens of witnesses to be heard – from renowned economists and other experts, to record label and digital music company executives, to broadcasters large and small.
Continue Reading Copyright Royalty Board Begins Hearings on Webcasting Royalty Rates for 2016-2020 – When Will We See a Decision?
Today is Elvis Presley’s 80th birthday, so it seems appropriate to revisit the issue of pre-1972 sound recordings, and to take a deeper look at the recent decisions by courts in New York and California finding that there is a public performance right in these recordings. The NY decision in a case brought by Flo & Eddie of the band the Turtles, coming after the California cases, is in many ways the more interesting of the cases. In the California case, the Court interpreted a California statute on copyright ownership as signaling that the California legislature intended to provide the entire bundle of ownership rights that would be accorded to any other piece of property, which the California Courts found would include the right to publically perform the recording. While that may be debatable (as one does not usually think of a public performance right in connection with the ownership of tangible property – you don’t perform a house or a car), the decision at least is based on statute. But the NY court did not find any such specific statute to which it could point to find a public performance right, instead concluding that the performance right was somehow inherent in the common law and therefore existed unless there was a specific carve-out of that right by statute. This reasoning, to me, simply does not stand up to review.
The NY Court itself spends an entire footnote chronicling the history of the public performance right in the United States. It notes that there was initially no public performance right at all recognized by the Copyright Act, until Congress provided one for dramatic works (e.g. plays) in 1856. No such right was accorded to musical works (the musical composition – the words and music of a song) until 1897 when Congress specifically provided such a right by law. For sound recordings, the public performance right did not exist in the US until 1995, when it was first extended to a limited class of digital recordings. From these facts, the Court goes on to conclude “It was thus an accepted part of the background law that public performance rights would, absent a deliberate effort to exclude them, extend to sound recordings.” Presumably, the Court is talking about the background law in 1972, when Congress first accorded any protection at all to sound recordings by granting a Federal right to control reproduction and distribution of such works – but Congress specifically excluded any performance right for another 23 years.
Continue Reading On Elvis’ Birthday – Looking at the Issues with Pre-1972 Sound Recordings
