Controversy Over Pre-1972 Sound Recordings Certified to New York Appeals Court

The 2nd Circuit says it needs guidance on whether state law gives copyright holders performance rights.

On Wednesday, the 2nd Circuit Court of Appeals avoided handing down a definitive ruling on the closely watched issue of whether owners of pre-1972 sound recordings have performance rights and can stop SiriusXM from broadcasting them without agreed-upon compensation. The federal appeals court wants the New York Court of Appeals to address the issue first.

SiriusXM is fighting putative class-action lawsuits, led by Flo & Eddie of The Turtles, which contend that since federal copyright law protects sound recordings after 1972, it's up to state laws to protect works authored before then. The implications of the argument would theoretically mean that bars, restaurants, sports stadiums and other enterprises lose the right to perform the early works of Bob Dylan, The Rolling Stones and others.

In November 2014, New York federal judge Colleen McMahon followed a California judge in giving Flo & Eddie a significant victory and one that was unsettling for satellite and terrestrial radio operators. She sympathized with the defendant by writing that the "accepted fact of life in the broadcast industry for the last century" was that nobody was paying royalties for public performance. The judge added that common-law copyrights do in fact confer such benefits.

The case then went up to the 2nd Circuit, but technically, what's required is an interpretation of New York law. As such, the 2nd Circuit today certifies the following question for the state appeals court: 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 decision today takes no firm position, though it does express at least some skepticism.

"With no clear guidance from the New York Court of Appeals, we are in doubt as to whether New York common law affords Appellee a right to prohibit Appellant from broadcasting the sound recordings in question," writes 2nd Circuit judge Guido Calabresi.

Then again, Calabresi later adds, "Still, New York's interest in compensating copyright holders may perhaps outweigh the cost of making such a change. Whatever the merits of such a determination might be as a value judgment, however, it is a value judgment, which is for New York to make."

Over in California, the 9th Circuit is also set to take on the issue of performance rights for pre-1972 sound recordings. There is still a possibility that this winds up one day at the Supreme Court, even though the primary question at this point is interpretation of state laws (there are also cases on the controversy at hand pending in Florida, New Jersey and Hawaii). That's because SiriusXM is also arguing that any law granting a public performance right to pre-1972 sound recording owners would interfere with interstate commerce and be a violation of the U.S. Constitution.

"If this were so, then despite our usual preference not to reach difficult constitutional issues, the existence of such a right, vel non, would not be determinative of the case at hand until we decide the Commerce Clause question," notes Calabresi. "But, in fact, the question of whether such a right would violate the dormant Commerce Clause is not something we can adjudicate without knowing what, if any,  limitations New York places on such rights, if they do exist. It is not the case that all rights of this sort violate the dormant Commerce Clause; some might, some might not."

That issue now lies in wait as the big dispute gets kicked to a New York appeals court. But if SiriusXM loses, the case could end up back at the 2nd Circuit again.

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