August 28, 2014 10:52am PT by Austin Siegemund-Broka
SiriusXM Has Good Week in Important Legal Battle Over Pre-1972 Music
SiriusXM could be on the verge of fending off the first major challenge in an ongoing lawsuit brought by major record labels over its royalty-free broadcasting of pre-1972 music.
At a hearing on Wednesday, Los Angeles Superior Court Judge Mary Strobel indicated that she was leaning towards rejecting a motion by Warner, Universal, Sony, Capitol and ABKCO Records to accept the labels' interpretation of the law in jury instructions. The plaintiffs believe that state laws protect the misappropriation of older sound recordings that were authored before falling under federal copyright protection. But the judge isn't ready to go so far.
The lawsuits against the satellite broadcaster have piled up in the past year over the broadcasts of pre-1972 tunes. There's the $100-million class-action suit led by Flo & Eddie of the Turtles, in which the band behind "Happy Together" contends that state law protects pre-'72 music and the broadcaster can't rely on statutory royalty rates for the recordings. (The Turtles filed similar suits in Florida and New York, leading Sirius to accuse them of "lawsuit lottery.") Then there's the $100-million suit from SoundExchange, a non-profit performance rights organization, claiming SiriusXM underpaid federal royalties for pre-'72 tunes.
The lawsuit from the major record labels represents one of the biggest tests -- and because the plaintiffs are jumping to jury instructions, offered the prospect of some early guidance on an issue that potentially impacts not just SiriusXM, but Pandora, other website operators, television broadcasters and restaurants throughout the nation that perform pre-1972 music.
The record companies cite California common law and California Civil Code 980, which reads, "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." The labels aimed to confirm that the law and case precedent protects works from The Beatles, Bob Dylan, Pete Seeger and more older music.
But Judge Strobel was reticent at Wednesday's hearing. The judge has issued a tentative ruling holding that the cases that the record labels cite don't necessarily apply to SiriusXM's digital broadcasts, said SiriusXM lawyer R. Bruce Rich, because they concerned illicit analog recordings. He called the Civil Code and cases "a set of snapshots of current California law" that merit examination in trial. Judge Strobel appears to agree.
Russell Frackman of Mitchell Silberberg & Knupp, the record companies' longtime litigator, interprets the tentative as freezing common law.
An official ruling on the jury instruction motion should be forthcoming.
That isn't the only piece of legal good news for SiriusXM this week.
In a Tuesday ruling, a federal judge in the District of Columbia approved the satcaster's motion to stay the lawsuit from SoundExchange, responsible for collecting statutory license fees from broadcasters. That means the litigation contending SiriusXM is underpaying royalties will be paused.
SiriusXM's motion was premised on the doctrine of primary jurisdiction, which holds that when a case can be better addressed by an administrative body than by the court, it should be sent to the administrative body for first review. U.S. District Judge Richard J. Leon ruled that the SoundExchange case will await judgment from the federal Copyright Royalty Board.
The Copyright Royalty Board is a three-judge federal board that sets the statutory rates that SiriusXM must pay. The rates are a percentage of annual gross with allowed deductions. The issue in question is whether SiriusXM can deduct the revenue it earned from pre-'72 recordings from its yearly gross revenue. The CRB has determined that SiriusXM is allowed to deduct in 2013 through 2017; the SoundExchange lawsuit, however, targets deductions SiriusXM made without the CRB's direct permission from 2007 to 2012.
SoundExchange is arguing it "confirmed that the regulations in effect between 2007 and 2012 did not permit SiriusXM to exclude revenues purportedly attributable to performances of pre-1972 sound recordings." Unsurprisingly, SiriusXM argues that deductions allowed between 2013 and 2017 confirmed that it was right in making deductions in the earlier years.
The district court ruled on Tuesday that it can't decide what the CRB intended.