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1. Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540 Client/Matter: Flo & Eddie Narrowed by:

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Capitol Records, Inc. v. Naxos of Am., Inc. Court of Appeals of New York

February 8, 2005, Argued ; April 5, 2005, Decided

No. 30

Reporter 4 N.Y.3d 540; 830 N.E.2d 250; 797 N.Y.S.2d 352; 2005 N.Y. LEXIS 768; Copy. L. Rep. (CCH) P28,980; 74 U.S.P.Q.2D (BNA) 1331 Capitol Records, Inc., Appellant, v. Naxos of America, Inc., Respondent.

Subsequent History: Related proceeding at HNH Intl., Ltd. v. Pryor Cashman Sherman & Flynn LLP, 2008 N.Y. Misc. LEXIS 1542 (N.Y. Sup. Ct., Mar. 19, 2008)

Prior History: Proceeding, pursuant to NY Constitution, article VI, § 3 (b) (9) and Rules of the Court of Appeals (22 NYCRR) § 500.17, to review a question certified to the New York State Court of Appeals by the United States Court of Appeals for the Second Circuit. The following question was certified by the United States Court of Appeals and accepted by the New York State Court of Appeals, "In view of the District Court's assessment of the undisputed facts, but without regard to the issue of abandonment, is Naxos entitled to defeat Capitol's claim for infringement of common law copyrights in the original recordings? This overall question subsumes the following subquestions: (1) 'Does the expiration of the term of a copyright in the country of origin terminate a common law copyright in New York?' (2) 'Does a cause of action for common law copyright infringement include some or all of the elements of unfair competition?' (3) 'Is a claim of common law copyright infringement defeated by a defendant's showing that the plaintiff's work has slight if any current market and that the defendant's work, although using components of the plaintiff's work, is fairly to be regarded as a "new product"?' " Capitol Records, Inc. v. Naxos of Am., Inc., 3 N.Y.3d 666, 817 N.E.2d 820, 2004 N.Y. LEXIS 2130, 784 N.Y.S.2d 3 (2004)

Disposition: Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.17 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in the negative.

Case Summary

Procedural Posture

In a copyright infringement action by plaintiff, a licensee of the owner of rights to certain pre-1972 recordings, against defendant, a producer of remastered recordings that were sold in New York State, the United States Court of Appeals for the Second Circuit certified a general question, with subquestions, regarding whether the producer could defeat the licensee's claim of infringement made under New York common law.

Overview

The producer argued that since the copyrights to the classical recordings in question had long expired in the country where recording occurred, the licensee could not maintain a common law infringement action in New York. The court, after reviewing the history of copyright law and noting that only post-1972 recordings were protected under federal copyright statutes, and that federal case law had specifically left to the states (at least until the year 2067) issues relating to common law coverage of property not protected under federal statutes or treaties (as the recordings in question were not), found there was nothing to prevent New York common law from applying. Under that law, the original author had a perpetual right of ownership, and even the public sale of recordings did not dissipate that right. Such an action was entirely distinct from an action seeking to recover for unfair competition. The producer's argument that it was in essence creating a new product was unsuccessful as it would have been under the fair use doctrine.

Outcome

The court answered the certified question in the negative, holding that such an action could be maintained.

Counsel: Mayer, Brown, Rowe & Maw LLP, New York City (Philip Allen Lacovara and Todd Lundell of counsel), and

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Kaplan & Levenson LLP (Paul R. Levenson of counsel) for appellant. I. New York common law prohibits misappropriation of pre-1972 sound recordings until 2067, despite the expiration of a foreign statutory copyright. (Firma Melodiya v ZYX Music GmbH, 882 F. Supp. 1306; Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; 279 A.D. 632, 107 N.Y.S.2d 795; Apple Corps v Adirondack Group, 124 Misc. 2d 351, 476 N.Y.S.2d 716; Radio Corp. of Am. v Premier Albums, 19 A.D.2d 62, 240 N.Y.S.2d 995; A & M Records, Inc. v M.V.C. Distrib. Corp., 574 F.2d 312; G.M.L., Inc. v Mayhew, 188 F. Supp. 2d 891; CBS, Inc. v Garrod, 622 F. Supp. 532; 803 F.2d 1183; People v Winley, 105 Misc. 2d 474, 432 N.Y.S.2d 429; Goldstein v California, 412 U.S. 546, 93 S. Ct. 2303, 37 L. Ed. 2d 163.) II. New York common law requires showing only ownership of a valid right and unauthorized copying but does not require a separate showing of bad faith. (Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; Roy Export Co. Establishment of Vaduz, Liechtenstein v Columbia Broadcasting Sys., Inc., 672 F.2d 1095; Green v Lindsey, 885 F. Supp. 469; Capitol Records, Inc. v Wings Digital Corp., 218 F. Supp. 2d 280; G. Ricordi & Co. v Haendler, 194 F.2d 914; Mastro Plastics Corp. v Emenee Indus., 16 A.D.2d 420, 228 N.Y.S.2d 514; 12 N.Y.2d 826, 187 N.E.2d 360, 236 N.Y.S.2d 347; Saratoga Vichy Spring Co., Inc. v Lehman, 625 F.2d 1037; Eagle Comtronics v Pico Prods., 256 A.D.2d 1202, 682 N.Y.S.2d 505; Computer Assoc. Intl., Inc. v Computer Automation, Inc., 678 F. Supp. 424.) III. Naxos of America, Inc.'s conduct constitutes misappropriation and infringement of Capitol Records, Inc.'s common-law copyright, despite alleged enhancement of sound quality. (Durham Indus., Inc. v Tomy Corp., 630 F.2d 905; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; Firma Melodiya v ZYX Music GmbH, 882 F. Supp. 1306; Apple Corps v Adirondack Group, 124 Misc. 2d 351, 476 N.Y.S.2d 716; UMG Recordings, Inc. v MP3.Com, Inc., 92 F. Supp. 2d 349; Harvey Mach. Co. v Harvey Aluminum Corp., 9 Misc. 2d 1078, 175 N.Y.S.2d 288; Eldred v Ashcroft, 537 U.S. 186, 123 S. Ct. 769, 154 L. Ed. 2d 683; Agee v Paramount Communications, Inc., 853 F. Supp. 778; 59 F.3d 317.)

Schiff Hardin, LLP, New York City (Maxim H. Waldbaum, Lori D. Greendorfer and John Becker of counsel), for respondent. Naxos of America, Inc. is entitled to defeat Capitol Records, Inc.'s claim for infringement of common-law copyrights in the source recordings. (Capitol Records v Mercury Records Corp., 221 F.2d 657; Agee v

Paramount Communications, Inc., 853 F. Supp. 778; 59 F.3d 317; Hasbro Bradley, Inc. v Sparkle Toys, Inc., 780 F.2d 189; Procter & Gamble Co. v Colgate-Palmolive Co., 199 F.3d 74; Saratoga Vichy Spring Co., Inc. v Lehman, 625 F.2d 1037; Computer Assoc. Intl., Inc. v Computer Automation, Inc., 678 F. Supp. 424; Eagle Comtronics v Pico Prods., 256 A.D.2d 1202, 682 N.Y.S.2d 505; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; 279 A.D. 632, 107 N.Y.S.2d 795; Fame Publ. Co., Inc. v Alabama Custom Tape, Inc., 507 F.2d 667; Green v Lindsey, 885 F. Supp. 469; 9 F.3d 1537.)

Loeb & Loeb LLP, New York City (Barry I. Slotnick and Eleanor M. Lackman of counsel), and Stanley Pierre-Louis, Washington, D.C., for Recording Industry Association of America, amicus curiae. I. New York common-law copyright remains in effect despite expiration of foreign statutory copyright. (Fonotipia Ltd. v Bradley, 171 F. 951; Apple Corps v Adirondack Group, 124 Misc. 2d 351, 476 N.Y.S.2d 716; Radio Corp. of Am. v Premier Albums, 19 A.D.2d 62, 240 N.Y.S.2d 995; Metropolitan Opera Assn. v Wagner-Nichols Re-corder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; 279 A.D. 632, 107 N.Y.S.2d 795; Dowling v United States, 473 U.S. 207, 105 S. Ct. 3127, 87 L. Ed. 2d 152; Firma Melodiya v ZYX Music GmbH, 882 F. Supp. 1306; Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; Goldstein v California, 412 U.S. 546, 93 S. Ct. 2303, 37 L. Ed. 2d 163; Capitol Records v Mercury Records Corp., 221 F.2d 657; Ferris v Frohman, 223 U.S. 424, 32 S. Ct. 263, 56 L. Ed. 492.) II. A cause of action for infringement of a common-law copyright does not require a showing of bad faith. (International News Serv. v Associated Press, 248 U.S. 215, 39 S. Ct. 68, 63 L. Ed. 211; Apple Corps v Adirondack Group, 124 Misc. 2d 351, 476 N.Y.S.2d 716; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; 279 A.D. 632, 107 N.Y.S.2d 795; Fonotipia Ltd. v Bradley, 171 F. 951; Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; Radio Corp. of Am. v Premier Albums, 19 A.D.2d 62, 240 N.Y.S.2d 995; Roy Export Co. Establishment of Vaduz, Liechtenstein v Columbia Broadcasting Sys., Inc., 672 F.2d 1095; 459 U.S. 826. 103 S. Ct. 60, 74 L. Ed. 2d 63; Electrolux Corp. v Val-Worth, Inc., 6 N.Y.2d 556, 161 N.E.2d 197, 190 N.Y.S.2d 977; Saratoga Vichy Spring Co., Inc. v Lehman, 625 F.2d 1037; Feist Publs., Inc. v Rural Tel. Serv. Co., Inc., 499 U.S. 340, 111 S. Ct. 1282, 113 L. Ed. 2d 358.) III. A "new product" founded on a misappropriated work is an infringement of the common-law copyright in the original work. (Stewart v Abend, 495 U.S. 207, 110 S. Ct. 1750, 109 L. Ed. 2d 184; Grand Upright Music Ltd. v Warner Bros. Records, Inc., 780 F. Supp. 182; Jarvis v A &

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M Records, 827 F. Supp. 282; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483; Apple Corps v Adirondack Group, 124 Misc. 2d 351, 476 N.Y.S.2d 716; Harvey Mach. Co. v Harvey Aluminum Corp., 9 Misc. 2d 1078, 175 N.Y.S.2d 288; Capitol Records v Greatest Records, 43 Misc. 2d 878, 252 N.Y.S.2d 553; A&M Records, Inc. v Napster, Inc., 239 F.3d 1004; Micro Star v Formgen Inc., 154 F.3d 1107; Castle Rock Entertainment, Inc. v Carol Publ. Group, Inc., 150 F.3d 132.)

Judges: Opinion by Judge Graffeo. Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt, Read and R.S. Smith concur.

Opinion by: GRAFFEO

Opinion

[*544] [***354] [**252] Graffeo, J.

Sound recordings produced after February 15, 1972 can be protected from infringement under federal copyright law but Congress did not extend statutory protection to recordings created before that date. In a certified question, the United States Court of Appeals for the Second Circuit asks us whether there is common-law copyright protection in New York for sound recordings made prior to 1972.

This case involves a dispute between two music recording companies. Capitol Records, Inc. owns the rights to several classical recordings made in the 1930s. Naxos of America, Inc. copied those recordings from the original shellac record format and, using technological advances, remastered the recordings for sale to the public as compact discs. Naxos did not request permission from Capitol to use the recordings. The issue here is whether Capitol may maintain a copyright infringement action against Naxos premised on the common law of New York. Because the answer to this question will have significant ramifications for the music recording industry, as well as these litigants, we were offered and accepted certification.

I. Factual and Procedural Background

During the 1930s, the Gramophone Company Limited, currently known as EMI Records Limited--the parent company of Capitol--recorded classical musical performances of three world-renowned artists: Yehudi Menuhin's July 1932 performance of Edward Elgar's "Violin Concerto in B minor, Opus 61"; Pablo Casals' performances of J.S. Bach's cello suites, recorded between November

1936 and June 1939; and Edwin Fischer's performances of Bach's "The Well Tempered Clavier, Book I," recorded between April 1933 and August 1934, and of Bach's "The Well Tempered Clavier, Book II," recorded between February 1935 and June 1936. The artists' contracts specified that Gramophone would have absolute, worldwide rights to the performances, including the right to reproduce and sell copies of the performances to the public.

[***355] [**253] Gramophone recorded all of the performances in England. At that time, the United Kingdom provided statutory copyright protection to sound recordings for 50 years (see UK Copyright Act of 1911, 1 & 2 Geo 5, ch 46, § 19). Thus, all of the Gramophone recordings at issue had entered the public domain in the United Kingdom by 1990.

[*545] In 1996, subsidiaries of EMI entered into a series of agreements whereby Capitol was granted an exclusive license to exploit the Gramophone recordings in the United States. Using modern electronic methods, Capitol remastered the original recordings to improve their audio quality and transferred them to digital format for sale to the public.

Naxos also wished to preserve these important historical recordings. It located copies of the original 1930s shellac recordings and undertook its own multistep restoration process in the United Kingdom. The remastered compact disc versions produced by Naxos were distributed for sale in the United States beginning in 1999, competing with the compact disc products marketed by Capitol. Naxos never obtained a license from Capitol and rebuffed Capitol's demand to cease and desist the sale of the Naxos compact discs.

Capitol commenced an action against Naxos in the United States District Court for the Southern District of New York in 2002. The complaint set forth claims of common-law copyright infringement, unfair competition, misappropriation and unjust enrichment, all of which were premised on the law of the State of New York, the situs of the alleged infringement. Naxos moved to dismiss for failure to state a claim, arguing that the recordings had entered the public domain in the United Kingdom and, hence, the United States as well. Capitol moved for, among other relief, partial summary judgment on liability.

The District Court granted summary judgment to Naxos. The court characterized Capitol's cause of action as a "hybrid copyright, unfair competition" claim and concluded that Capitol did not have intellectual property rights in the original recordings because its copyrights had expired in the

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United Kingdom. (262 F. Supp. 2d 204, 210 [2003].) With respect to the unfair competition cause of action, the District Court opined that the Naxos recordings were not a "duplicate" or "imitation" of the original recordings but "an entirely new and commercially viable product" because the original shellac records were obsolete and Naxos had removed "numerous sound imperfections" from the records. (Id. at 213, 214.) Finding that public policy favored the preservation and redissemination of classical performances, the court held that Capitol failed to show that Naxos had engaged in the type of bad faith required to sustain an unfair competition [*546] cause of action. In a second written decision, the court adhered to its ruling. 1

On appeal, the Second Circuit determined that this case raises several unsettled issues of New York law. After noting that, under federal law, "it is entirely up to New York to determine the scope of its common law copyright with respect to pre-1972 sound recordings," the Second Circuit certified the following question to this Court: "In view of the District Court's assessment of the undisputed facts, but without regard to the issue of abandonment, is Naxos entitled to defeat Capitol's claim for infringement of common law [**254] [***356] copyrights in the original recordings?" (372 F.3d 471, 478, 484 [2004].) We are also asked to answer three questions:

"(1) 'Does the expiration of the term of a copyright in the country of origin terminate a common law copyright in New York?' (2) 'Does a cause of action for common law copyright infringement include some or all of the elements of unfair competition?' (3) 'Is a claim of common law copyright infringement defeated by a defendant's showing that the plaintiff's work has slight if any current market and that the defendant's work, although using components of the plaintiff's work, is fairly to be regarded as a "new product"?' " (Id. at 484-485.)

II. English Copyright Law

Because of the close connection between the evolution of copyright protection in England and the American adaptation of copyrights, it is helpful to examine the historical roots of property rights in tangible intellectual products (see generally Eldred v Ashcroft, 537 U.S. 186, 200, 154 L. Ed. 2d 683, 123 S. Ct. 769 [2003] [when examining copyright law, " 'a page of history is worth a volume of logic' "], quoting New York Trust Co. v Eisner, 256 U.S. 345, 349, 65 L. Ed. 963, 41 S. Ct. 506, T.D. 3267 [1921] [Holmes, J.]).

With the introduction of the printing press in England in the 15th century, a commercial interest in written works was born. It was, however, not authors but printers and publishers who initially sought to control the right to publish literary works (see Patterson, Copyright in Historical Perspective, at 6, 21). The concept of an exclusive right to reproduce works sprang [*547] from the commercial objectives of stationers or printers who wished to create a monopoly over the printing trade (see id. at 28-64). At the same time, the Crown had an interest in maintaining censorship authority over the press. Thus, the granting of an exclusive right to reproduce printed materials served the government's desire to control the flow and content of information, and supported the economic viability of the printers' trade guild (see id. at 223). This symbiotic relationship gave rise to early English copyright laws, such as those issued by the Star Chamber in its Decrees of 1586 and 1637, which reflected trade and guild regulations that assisted in preserving government censorship (see id. at 6, 9-11, 121, 125).

After the abolition of the Star Chamber in 1641 and the civil war between the Crown and Parliament, English law began to recognize an author's natural property right to control the dissemination of a literary creation (see id. at 160-162; see also 2 Blackstone, Commentaries on the Laws of England, at 405-406 [1769]; Millar v Taylor, 98 Eng Rep 201, 257, 4 Burr 2303, 2406-2407 [KB 1769] [Mansfield, L.C.J.] [discussing the "uniform( )" decisions of the Chancery Court]; 98 Eng Rep at 212, 4 Burr at 2323 [Willes, J.] [same]). Parliament's passage of the Statute of Anne in 1709 (8 Anne ch 19) signaled an attempt to end government censorship and trade guild monopoly. It broadened the concept of copyrights to include the ability of an author to decide whether a literary work would be published and disseminated to the public (referred to as the "right of first publication") and, if distributed, how the work would be reproduced in the future. The Statute of Anne vested an author or publisher of a literary work with statutory copyright protection for specified time periods--new works received 14 years of copyright protection (with the possibility of a 14-year renewal) and previously published works were entitled to 21 years of protection (see Patterson, Copyright in Historical Perspective, at 143-150).

[***357] [**255] In the latter half of the 18th century, a recognition emerged that the creation of a literary work should vest rights in its author similar to the ownership rights in perpetuity associated with other forms of tangible property. The common law embraced this concept of ownership for literary works (see 2 Blackstone,

1 The District Court also addressed issues of waiver and abandonment, which are not relevant to the certified question posed to us.

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Commentaries on the Law of England, at 405-406). This caused a "great question of literary property" to arise (Proceedings in the Lords on the Question of Literary Property, 17 Parliamentary History of England, at 953, 953-954 n [HL [*548] 1774]): did the Statute of Anne supplant the common law or did it provide additional rights and remedies that coexisted with the common law?

The first definitive ruling on this question appears in Millar v Taylor (98 Eng Rep 201, 4 Burr 2303 [KB 1769]). Millar, a bookseller, had purchased the rights to a certain book from its author. The dispute involved the unauthorized reproduction of the book by another publisher after copyright protection extended by the Statute of Anne had expired. The primary issues were whether common-law rights continued to exist in perpetuity after the first publication of a literary work and, if so, whether the Statute of Anne had abrogated the perpetual common-law copyright. In a 3-1 decision in favor of the bookseller, the court of King's Bench concluded that the common law furnished perpetual copyright protection that did not terminate upon the first publication of a literary work. More importantly, the Statute of Anne was viewed as not extinguishing common-law protections (see 98 Eng Rep at 252-253, 4 Burr at 2398-2399 [Mansfield, L.C.J.]; see also Patterson, Copyright in Historical Perspective, at 168-172).

Several years later, however, the House of Lords reached a different result in the seminal case of Donaldson v Beckett (4 Burr 2408; 17 Parliamentary History of England, at 953

[HL 1774]). Relying on the Millar precedent, the Chancery Court had granted an injunction against the sale of an unauthorized reproduction of a literary work even though the work was not entitled to protection under the Statute of Anne. Given the importance of the issues presented, the House of Lords sought advisory opinions from 12 judges on five questions. 2 The judges were asked to rule on whether the common law recognized the right of first publication; and if perpetual protection existed in common law for literary works, whether the Statute of Anne operated to curtail that protection. 3

[*549] [***358] [**256] The judges determined that the common law recognized a right of first publication (see Donaldson v Beckett, 4 Burr at 2417 [vote was 8-3]; cf. Patterson, Copyright in Historical Perspective, at 175 [vote was 10-1]) and that the common-law copyright protection extended beyond first publication into perpetuity (see Donaldson v Beckett, 4 Burr at 2417 [vote was 7-4]). By a 6-5 margin, the judges disagreed with the Millar court and concluded that the Statute of Anne was intended to abrogate the common law with respect to the duration of copyright protection (see id.). Applying the restrictions of the Statute of Anne, the House of Lords reversed and rescinded the injunction (see id.; Proceedings in the Lords on the Question of Literary Property, 17 Parliamentary History of England, at 958 n). 4 The [*550] supremacy of statutory time limitations for copyright protection was now firmly established in English law.

III. Development of American Copyright Law 2 One of the judges was Lord Chief Justice Mansfield, who, as a member of the House of Lords, declined to provide an opinion because of his participation in Millar v Taylor (4 Burr at 2417). 3 The texts of the inquiries by the House of Lords were as follows:

1. "Whether, at common law, an author of any book or literary composition, had the sole right of first printing and publishing the same for sale, and might bring an action against any person who printed, published, and sold the same without his consent?"

2. "If the author had such right originally, did the law take it away upon his printing and publishing such book or literary composition, and might any person afterward reprint and sell, for his own benefit, such book or literary composition, against the will of the author?"

3. "If such an action would have lain at common law, is it taken away by the statute of 8th Anne: and is an author, by the said statute, precluded from every remedy except on the foundation of the said statute, and on the terms and conditions prescribed thereby?"

4. "Whether the author of any literary composition, and his assigns, had the sole right of printing and publishing the same, in perpetuity, by the common law?"

5. "Whether this right is in any way impeached, restrained, or taken away, by the statute 8th Anne?" (Proceedings in the Lords on the Question of Literary Property, 17 Parliamentary History of England, at 970-971.) 4 The precise ruling by the House of Lords is the subject of scholarly debate. Professor Nimmer, among other commentators, takes the position that the House of Lords voted to overrule Millar only with regard to the abrogation question (see 1 Nimmer on Copyright § 4.02 [B], at 4-14, and n 12; see also Bowker, Copyright, Its History and Its Law, at 7 [1912]; Patterson, Copyright in Historical Perspective, at 174 ["The actual holding of the Donaldson case is that the author's common-law right to the sole printing, publishing, and vending of his works, a right which he could assign in perpetuity, is taken away and supplanted by the Statute of Anne"]; Burger, The Berne Convention: Its History and Its Key Role in the Future, 3 J.L. & TECH. 1, 6 n 25 [1988]; Cambridge Research Institute, Omnibus

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We enter the colonial era in America. In the midst of the Revolutionary War and transformation of the British colonies into independent states and commonwealths, it was generally presumed that colonial common law, derived from English law, should be applied as long as it was consistent with the acts of the colonial legislatures. Notably, preservation of existing common law was addressed in the first Constitution of the State of New York (see NY Const art XXXV [1777] [renumbered as article I, § 14 and amended by Constitutional Convention of 1938]). Our Founders were aware that there was common-law copyright protection in England, as evidenced in James Madison's writings, which observed that "[t]he copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law" (Madison, Federalist No. 43).

Similar to the British experience, the new states responded to the needs of authors and publishers by adopting statutory copyrights. Using the Statute of Anne as a model, Connecticut, followed by Massachusetts and Maryland, enacted statutes assuring copyright protection for between 14 and 28 years following first publication (see Library of Congress, Copyright Enactments, 1783-1900, at 9-14). Soon [***359] [**257] thereafter, the Colonial Congress (operating under the Articles of Confederation) recommended that each state pass legislation providing at least 14 years of copyright protection after first publication (id. at 9). Twelve of the 13 original states would eventually heed this call (see id. at 14-29; Nachbar, Constructing Copyright's Mythology, 6 Green Bag 2d 37, 38 [Autumn 2002]). When the New York Legislature acted, it contemplated the existence of common-law copyright protections separate from statutory rights: "nothing in this act, shall extend to effect prejudice, or confirm the rights, which any person may have, to the printing or publishing of any book or pamphlet, at common law, in cases not mentioned in this act" (L 1786, ch 54, § IV).

As the drafting of the national Constitution was underway, the Founders decided that federal copyright protection would be more effective and desirable than leaving the matter to the [*551] discretion of the states (see Madison, Federalist No. 43; Patterson, Copyright in Historical Perspective, at 192-193). In fact, the need for "national protection for intellectual property seems to have been

accepted at first and full impression by both the [Constitutional] Convention and the states adopting the Constitution" (Sutak, The Great Motion Picture Soundtrack Robbery, at xiii-xiv [1976]). This fundamental belief in the need for uniform copyright protection led to the constitutional provision vesting Congress with the "Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" (US Const, art I, § 8 [8]). When the first Congress convened under the authority of the new Constitution, it enacted America's first federal copyright statute--the Copyright Act of 1790. The Act provided the author "of any map, chart, book or books," or the author's assignee, the exclusive "right and liberty of printing, reprinting, publishing and vending such map, chart, book or books" for up to 28 years (Act of May 31, 1790 § 1 [1st Congress, 2d Sess, ch 15], 1 Stat 124, reprinted in Library of Congress, Copyright Enactments, 1783-1900, at 30-32).

The American counterpart to Millar and Donaldson reached the United States Supreme Court in the case of Wheaton v Peters (8 Pet [33 U.S.] 591, 8 L. Ed. 1055 [1834]). The plaintiff, who had been the third official reporter for the United States Supreme Court, invoked statutory and common-law copyright claims to prevent his successor from copying and republishing material contained in the volumes published by the first three official reporters (see Patterson, Copyright in Historical Perspective, at 203). The Supreme Court, with two Justices dissenting, remanded for factual determinations on the statutory copyright claim but held that Wheaton could not maintain a common-law copyright cause of action. The majority and dissenting opinions extensively debated the impact of Millar and Donaldson on colonial copyright law. The majority acknowledged that the common law insured copyright protection prior to publication but believed that in the absence of federal common law under our constitutional system, a party seeking common-law protection must look to the state where the controversy arose (see Wheaton v Peters, 8 Pet [33 U.S.] at 658).

The lasting effect of the Wheaton decision was that it "became accepted, and in most cases unquestioned, doctrine that . . . it was the act of publication which divested common law rights" [*552] (1 Nimmer on Copyright § 4.02 [C], at

Copyright Revision, Comparative Analysis of the Issues, at 6 [1973]). It has been argued, however, that the House of Lords actually held that the common law never provided any copyright protection and that the rights of authors and publishers were solely statutory in nature (see Abrams, The Historic Foundation of American Copyright Law: Exploding the Myth of Common Law Copyright, 29 Wayne L. Rev. 1119, 1164 [Spring 1983]; Deazley, Re-Reading Donaldson [1774] in the Twenty-First Century and Why It Matters, 25 [6] Eur Intell Prop Rev 270, 274 [2003]; Brown, Kaplan and Brown's Copyright, at 53, and n 32 [2d ed 1974]). The controversy stems from the lack of any contemporaneous report of the opinions of the Lords, because at that time it was "contempt punishable by imprisonment to publish any statements made by a member of Parliament in the course of parliamentary business" (Abrams, supra, at 1159).

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4-17). [***360] [**258] 5 New York courts also adhered to this view with regard to literary works, declaring the "settled" principle that "a statutory copyright operates to divest a party of the common-law right" (Jewelers' Mercantile Agency v Jewelers' Weekly Publ. Co., 155 N.Y. 241, 247, 49 N.E. 872 [1898]; see e.g. Palmer v De Witt, 47 N.Y. 532, 536 [1872]).

With the dawn of the 20th century, courts throughout the country were confronted with issues regarding the application of copyright statutes, which were created with sole reference to the written word, to new forms of communication. One of the first such challenges involved music. In White-Smith Music Publ. Co. v Apollo Co. (209 U.S. 1, 52 L. Ed. 655, 28 S. Ct. 319, 1908 Dec. Comm'r Pat. 562 [1908]), the United States Supreme Court was asked to determine whether the federal Copyright Act encompassed perforated rolls of music used in player pianos. 6 Although acknowledging that the federal statute had been amended as far back as 1831 to include "musical composition[s]," the Court believed that only written works that could be "see[n] and read" met the requirement for filing with the Library of Congress--a prerequisite to securing federal copyright protection (id. at 17). Because the music rolls were incapable of being read by a person, the Court concluded that federal statutory protection for "copies or publications of the copyrighted music" did not extend to music rolls (id. at 18).

Following the White-Smith decision, Congress passed the Copyright Act of 1909. Since the Supreme Court had declared that player piano rolls and, by implication, sound recordings could not be "published" (i.e., read by a person) under federal law, Congress did not include audio musical works within the scope of the statute (see Keller and Cunard, Copyright Law: A Practitioner's Guide § 1:3:1, at 1-18 [Aug. 2004]). Despite the fact that sound recordings could not be "published" under federal law, they were eligible for state common-law protection (see Wheaton v Peters, 8 Pet [33 U.S.] at 687 [Thompson, J., dissenting]). To insure that the 1909 Act would not be interpreted to deny any existing common-law protection, Congress explicitly stated that the Act "shall [not] be construed to annul or limit [*553] the right of the author or proprietor of an unpublished work, at common law or in equity, to prevent the copying, publication, or use of such unpublished work without his consent, and to obtain damages therefor" (17 USC § 2, added by 35 US Stat 1076 [1909]). Congress therefore

confirmed that, although sound recordings were not protected under federal law, there was nothing to prevent the states from guaranteeing copyright protection under common law.

State courts then had to deal with the operation of this dual system of copyright protection. In Waring v WDAS Broadcasting Sta. (327 Pa. 433, 194 A. 631 [1937]), the plaintiff, a conductor and owner of an orchestra, had contracted with a phonograph company to produce recordings of the orchestra's performances to be sold to phonograph dealers and the public. To avoid interfering with a different contract the orchestra had for weekly radio broadcasts [***361] [**259] of live performances, the record labels contained a printed warning that they were "[n]ot licensed for radio broadcast." (327 Pa. at 436, 194 A. at 633.) The plaintiff sued to prevent the owner of a radio station from broadcasting the recorded performances over the airwaves.

The Supreme Court of Pennsylvania found that the records were protected by state common law. Beginning with the premise that sound recordings were not copyrightable under federal law, the court explained:

"[a]t common law, rights in a literary or artistic work were recognized on substantially the same basis as title to other property. Such rights antedated the original copyright act of 8 Anne c. 19, and, while it has been uniformly held that the rights given by the act supersede those of the common law so far as the act applies . . . the common-law rights in regard to any field of literary or artistic production which does not fall within the purview of the copyright statute are not affected thereby" (327 Pa. at 439, 194 A. at 634).

The court declared that a performer who transforms a musical composition into a sound product creates "something of novel intellectual or artistic value [and] has undoubtedly participated in the creation of a product in which he is entitled to a right of property" (327 Pa. at 441, 194 A. at 635). Even if the common law offered protection to sound recordings only to the point of first publication, the court held that the sale of records was not a publication of the work that operated to divest the orchestra [*554] of its common-law property right because the phonograph records

5 The majority opinion in Wheaton has been criticized for its failure to rely on the rationale of Donaldson (that common-law rights cease upon publication because divestment is required by statute) and the majority's "unpersuasive analysis of Pennsylvania common law" (1 Nimmer on Copyright § 4.03, at 4-18). 6 At this time, Congress was in the process of revising the copyright statutes but decided to wait for the Supreme Court's decision.

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had been marked "[n]ot . . . for radio broadcast," which indicated that the manufacturer did not intend, by the sale alone, to make the records the " 'common property' " of the public (327 Pa. at 443, 194 A. at 636, quoting American Tobacco Co. v Werckmeister, 207 U.S. 284, 300, 52 L. Ed. 208, 28 S. Ct. 72, 1908 Dec. Comm'r Pat. 571 [1907]).

A similar dispute arose in New York in Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp. (199 Misc. 786, 101 N.Y.S.2d 483 [Sup Ct, NY County 1950], affd 279 A.D. 632, 107 N.Y.S.2d 795 [1st Dept 1951]). The plaintiff's operatic performances had been broadcast on radio and records of the performances were sold to the public. The defendant copied those performances and created its own records for sale. In granting an injunction preventing the sale of the defendant's records, the trial court observed that "[a]t common law the public performance of a play, exhibition of a picture or sale of a copy of the film for public presentation did not constitute an abandonment of nor deprive the owner of his common-law rights" (199 Misc. at 798). Far from expressing an intent to commit intellectual property to the public domain, the court determined that an owner who grants exclusive rights to record a performance to a particular company "shows clearly no intent to abandon but, on the contrary, an attempt to retain effective control over the . . . recording of its performances" (id. at 799). Thus, the court characterized the public sale of a sound recording as a "limited publication" that did not divest a composer or artist of common-law copyright protection (id.).

A contrary view was initially expressed by the Second Circuit in RCA Manuf. Co. v Whiteman (114 F.2d 86 [2d Cir 1940], cert denied 311 U.S. 712, 85 L. Ed. 463, 61 S. Ct. 393 [1940]). The court concluded that the sale of a record to the public is a general publication that ends common-law copyright protection. But the Second Circuit reconsidered this rule after Metropolitan Opera and subsequently stated that RCA Mfg. was "not the law of the State of [***362] [**260] New York" (Capitol Records v Mercury Records Corp., 221 F.2d 657, 663 [2d Cir 1955]). Instead, the court announced that the appropriate governing principle was that "where the originator, or the assignee of the originator, of records of performances by musical artists puts those records on public sale, his act does not constitute a dedication of the right to copy and sell the records" (id.). 7 Capitol Records v Mercury Records was consistent with the [*555] long-standing practice of the federal Copyright Office and became the accepted view within the music recording industry (see 1 Nimmer on Copyright § 4.05 [B]

[4], at 4-35; Bailey, Phonorecords and Forfeiture of Common-Law Copyright in Music, 71 Wash. L. Rev. 151, 157 [Jan 1996]; Kaplan, Publication in Copyright Law: The Question of Phonograph Records, 103 U. Pa. L. Rev. 469, 472 [Jan. 1955]).

The Waring, Metropolitan Opera and Capitol Records decisions may appear to conflict with the accepted principle that a public sale of a literary work is a "general publication" terminating a common-law copyright, and any copyright protection thereafter must be derived from statute. But the historical distinction in the treatment of literary and musical works by Congress accounts for the lack of federal statutory copyright protection for sound recordings. In the absence of protective legislation, Congress intended that the owner of rights to a sound recording should rely on the "broad and flexible" power of the common law to protect those property rights after public dissemination of the work. As Metropolitan Opera so aptly observed more than five decades ago, the common law "has allowed the courts to keep pace with constantly changing technological and economic aspects so as to reach just and realistic results" (199 Misc. at 799).

In recent times, state legislatures have found common-law remedies inadequate to deter the widespread prevalence of "music piracy." By the 1970s, the technological ease of reproducing existing recordings for resale without securing authorization had motivated about one half of the state legislatures, including New York (see Penal Law former § 441-c [L 1966, ch 988]), to adopt criminal statutes prohibiting such piracy (see HR Rep No. 94-1476, 94th Cong, 2d Sess, at 133, reprinted in 1976 US Code Cong & Admin News, at 5659, 5749). Spurred by the action of the states, Congress finally responded in 1971 and amended the Copyright Act of 1909 to expressly include "[s]ound recordings" within the classes of artistic and intellectual works entitled to federal copyright protection (17 USC § 5 [n] added by Pub L 92-140, 85 US Stat 391 [Act of Oct. 15, 1971]). But the 1971 amendments were prospective only, so recordings created before February 15, 1972--the effective date of the amendment--were not protected by federal law (see Pub L 92-140 § 3 [1971]). During the drafting of the amendment, debate arose concerning the scope of protection to be afforded to pre-1972 sound recordings. Both the Senate and the House of [*556] Representatives recognized that decisional law had allowed sound recordings to be "protected by State statute or common law" (see HR Rep No. 94-1476, 94th Cong, 2d Sess, at 133, reprinted in 1976 US Code Cong & Admin News, at 5659, 5749). The Senate

7 This rule was reaffirmed in Rosette v Rainbo Record Mfg. Corp. (546 F.2d 461 [2d Cir 1976], affg 354 F. Supp. 1183 [SD NY 1973]).

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was content to permit the states to provide perpetual protection to pre-1972 sound recordings, but the House objected (see id.). The two houses eventually reached a compromise, [**261] [***363] deciding that existing state common-law copyright protection for pre-1972 recordings would not be preempted by the new federal statute until February 15, 2047--75 years after the effective date of the 1971 amendment (see 17 USC § 301 [c] [1976]). 8

The 1971 amendments raised new problems for the music recording industry. Because the status of pre-1972 sound recordings was a matter left to the states, there was uncertainty as to how claims of copyright infringement would be treated in different jurisdictions. The amendments also did not include a technical definition of the term "publication," which clouded the meaning of that term of art in the recording industry. Finally, there was concern that the amendments could be read as abrogating existing state statutes proscribing music piracy (see HR Rep No 94-1476, 94th Cong, 2d Sess, at 133, reprinted in 1976 US Code Cong & Admin News, at 5659, 5749).

Initial guidance came from the United States Supreme Court in Goldstein v California (412 U.S. 546, 37 L. Ed. 2d 163, 93 S. Ct. 2303 [1973]). The defendant, convicted of criminal music piracy, challenged the constitutionality of a California penal statute on the grounds that it conflicted with the Copyright Clause, the Supremacy Clause and the federal copyright act by "establish[ing] a state copyright of unlimited duration" (id. at 551). Rejecting the defendant's claim, the Court noted that "[a]lthough the Copyright Clause . . . recognizes the potential benefits of a national system, it does not indicate that all writings are of national interest or that state legislation is, in all cases, unnecessary or precluded" (id. at 556-557). The Court further observed that, because the Constitution does not require Congress to "take affirmative action either to authorize protection of all categories of writings or to free them of all restraint," it was sensible that the states [*557] did not relinquish all power to provide copyright protection (id. at 560).

The Supreme Court also acknowledged that the states were free to act with regard to sound recordings precisely because Congress had not, and in the absence of conflict between federal and state law, the Supremacy Clause was not a barrier to a state's provision of copyright protection to a work not covered under federal copyright law (see id. at 569-570). Nor did the Court find fault with the perpetual nature of California's copyright (see id. at 560-561).

Rejecting the defendant's "publication" argument, the Court clarified that

"[f]or purposes of federal law, 'publication' serves only as a term of the art which defines the legal relationships which Congress has adopted under the federal copyright statutes. As to categories of writings which Congress has not brought within the scope of the federal statute, the term has no application" (id. at 570 n 28).

The effect of Goldstein was more than an affirmation of the states' right to enact criminal laws prohibiting music piracy. Its rationale clearly deviated from the Wheaton view--that publication divests common-law rights even in the absence of statutory protection. Instead, the Court relied on the rule that state common-law copyright protection can continue beyond the technical definition of publication in the absence of contrary statutory authority [***364] [**262] (see 1 Nimmer on Copyright § 4.02 [C], at 4-17 n 23).

In the aftermath of Goldstein, Congress rectified some of the problems that erupted with the 1971 amendment of the Copyright Act. A major revision and restructuring of the Act occurred in 1976 and took effect in 1978. Included among the amendments was a statutory definition of "publication," now defined to include "the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership" (17 USC § 101). This definition applied prospectively only, thereby continuing to exclude pre-1972 recordings from the scope of the statute. Congress again left to the states the decision how to handle the meaning and effect of "publication" for pre-1972 sound recordings.

The music industry's belief that state common law could provide copyright protection for pre-1972 recordings (until the date of federal preemption), without regard to the "publication" [*558] or sale of recordings, was undermined by the Ninth Circuit in La Cienega Music Co. v ZZ Top (53 F.3d 950 [9th Cir 1995], cert denied 516 U.S. 927, 133 L. Ed. 2d 231, 116 S. Ct. 331 [1995]). This controversy pitted the owner of certain John Lee Hooker recordings against the band ZZ Top, which allegedly performed a top-selling song that was similar to earlier performances by Hooker. ZZ Top defended on the ground that any common-law protection was extinguished when the Hooker recordings were "published," i.e., released for sale to the public. This contention challenged the Second Circuit holdings in Capitol

8 The preemption date was later extended by 20 years, to February 15, 2067 (see Pub L 105-298, 112 US Stat 2827 [105th Congress, 2d Sess, Oct. 27, 1998] [termed the "Sonny Bono Copyright Term Extension Act"], amending 17 USC § 301 [c]).

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Records (221 F.2d 657 [1955]) and Rosette (546 F.2d 461 [1976])--the only other United States Court of Appeals to have addressed the issue. The defendants in La Cienega were successful in convincing the Ninth Circuit not to adopt the rationale of the Second Circuit, and the court therefore held that public sale of a pre-1972 sound recording is a publication that divests the owner of common-law copyright protection.

La Cienega was criticized in Congress as exposing pre-1972 sound recordings to unauthorized uses and as "overturn[ing] nearly 90 years of [precedential] decisions" (143 Cong Rec H9882-01 [statement of Rep. Coble]). It was estimated that the ruling, if allowed to stand, would cause musicians, composers and publishers to lose over a billion dollars in annual revenue (see id. [statement of Rep. Delahunt]). Congress reacted to La Cienega by amending section 303 of the federal Copyright Act to clarify that "[t]he distribution before January 1, 1978, of a phonorecord shall not for any purpose constitute a publication of the musical work embodied therein" (17 USC § 303 [b]). After the passage of this amendment, the Ninth Circuit acknowledged that the intent of Congress was to " 'restore national uniformity on this important issue by confirming the wisdom of the custom and usage of the affected industries and of the Copyright Office for nearly 100 years' " (ABKCO Music, Inc. v LaVere, 217 F.3d 684, 690 [2000] [quoting 143 Cong Rec S11301 (statement of Sen. Hatch)], cert denied 531 U.S. 1051, 148 L. Ed. 2d 559, 121 S. Ct. 655 [2000]). Congress had confirmed that sound recordings created before 1972 could be eligible for common-law copyright protection until federal preemption of state law in 2067.

IV. The Scope of Common-Law Copyright Protection in New York

The first New York State Constitution in 1777 permitted the continuation of colonial common law, derived from English common law. One such principle was that the creator of a literary [*559] work was entitled [***365] [**263] to perpetual common-law copyright protection in the absence of abrogation by statute (see Madison, Federalist No. 43; see also Whicher, The Ghost of Donaldson v. Beckett: An Inquiry Into the Constitutional Distribution of Powers Over the Law of Literary Property in the United States, 9 Bull Copyright Socy 102, 131-143 [1962]; Taubman, Copyright and Antitrust, at 9, 14 [1960]). The State Legislature acted to supplant common-law copyright protection when it passed a statute in 1786 "to promote literature" (L 1786, ch 54). The statute restricted the copyright protection an author of a literary work could receive after first publication for up to 28 years (see id.). This statute was superseded by

Congress in 1790 when the first national copyright act was enacted (see Act of May 31, 1790, reprinted in Library of Congress, Copyright Enactments, 1783-1900, at 30-32). Consistent with the statutory abrogation rule, this Court established that New York common law would provide copyright protection to a literary work up to the point that federal law governed (see e.g. Jewelers' Mercantile Agency v Jewelers' Weekly Publ. Co., 155 N.Y. at 247; see also Palmer v De Witt, 47 N.Y. at 536; Estate of Hemingway v Random House, 23 N.Y.2d 341, 346, 244 N.E.2d 250, 296 N.Y.S.2d 771 [1968]).

As earlier discussed, federal copyright statutes in the early 20th century encompassed only written musical compositions, not sound recordings (see White-Smith Music Publ. Co. v Apollo Co., 209 U.S. at 18). Because the federal Copyright Act did not protect musical recordings, state common law could supply perpetual copyright protection to recordings without regard to the limitations of "publication" under the federal act (see Goldstein v California, 412 U.S. at 560-561, 570). It is clear that both the judiciary and the State Legislature intended to fill this void by protecting the owners of sound recordings in the absence of congressional action (see Rosette v Rainbo Music Manuf. Corp., 546 F.2d 461 [1976]; Capitol Records v Mercury Records Corp., 221 F.2d 657 [1955]; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. 786, 101 N.Y.S.2d 483 [1950]; Firma Melodiya v ZYX Music GmbH, 882 F. Supp. 1306, 1316 n 14 [SD NY 1995]; see also Penal Law art 275; Arts & Cultural Affairs Law § 31.01; General Business Law former § 561 [L 1967, ch 680, § 59]; Penal Law former § 441-c [L 1966, ch 988]).

[1] With the 1971, 1976 and subsequent congressional amendments to the federal Copyright Act, New York common-law protection of sound recordings has been abrogated, but only in two respects. First, the common law does not apply to any sound [*560] recording fixed, within the meaning of the federal act, after February 15, 1972, because recordings made after that date are eligible for federal statutory copyright protection. Second, state common-law copyright protection is no longer perpetual for sound recordings not covered by the federal act (those fixed before February 15, 1972), because the federal act mandates that any state common-law rights will cease on February 15, 2067. The musical recordings at issue in this case, created before February 15, 1972, are therefore entitled to copyright protection under New York common law until the effective date of federal preemption--February 15, 2067.

Even assuming, however, that common-law copyright protection ceases upon "first publication" without regard to

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the existence of an applicable statute covering the type of literary or artistic work at issue, our common law would continue to [***366] [**264] protect sound recordings made before 1972.

The evolution of copyright law reveals that the term "publication" is a term of art that has distinct meanings in different contexts. With regard to literary works, it has long been the rule that common-law protection ends when a writing is distributed to the public (see e.g. Palmer v De Witt 47 N.Y. at 536; Chamberlain v Feldman, 300 N.Y. 135, 139, 89 N.E.2d 863 [1949]; Estate of Hemingway v Random House, 23 N.Y.2d at 345-346) because it is at that point that federal statutory copyright protection controls (see Jewelers' Mercantile Agency v Jewelers' Weekly Publ. Co., 155 N.Y. at 247). In contrast, in the realm of sound recordings, it has been the law in this state for over 50 years that, in the absence of federal statutory protection, the public sale of a sound recording otherwise unprotected by statutory copyright does not constitute a publication sufficient to divest the owner of common-law copyright protection (see Rosette v Rainbo Record Mfg. Corp., 546 F.2d 461 [2d Cir 1976], affg 354 F. Supp. 1183 [SD NY 1973]; Capitol Records v Mercury Records Corp., 221 F.2d at 663; Radio Corp. of Am. v Premier Albums, Inc., 19 A.D.2d 62, 63-64, 240 N.Y.S.2d 995 [1st Dept 1963]; Gieseking v Urania Records, 17 Misc. 2d 1034, 1035, 155 N.Y.S.2d 171 [Sup Ct, NY County 1956]; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. at 799; see also Note, Copyrights--Unfair Competition--Property Right [*561] of Performer in Recorded Performance, 7 Air L Rev 122, 125 [1936]). 9

V. The Certified Questions

Having concluded that the musical recordings here are presumptively entitled to common-law copyright protection in New York, we proceed to address the three subquestions posed by the Second Circuit.

First: "Does the expiration of the term of a copyright in the country of origin terminate a common law copyright in New York?"

When the recordings here were created in England, they received statutory copyright protection in the United Kingdom (UK) for 50 years after the date of creation (see Copyright Act of 1911, 1 & 2 Geo 5, ch 46, § 19). As a result, the UK copyrights for all of the recordings expired by the 1990s--years before Naxos's allegedly infringing actions. Naxos argues, and the District Court apparently agreed, that the expiration of the foreign copyrights prevents the enforcement of copyright protections in other jurisdictions, including the United States and New York. We disagree and concur with the [***367] [**265] Second Circuit's observation that "nothing in federal law denies Capitol enforceable rights in the original recordings simply because the U.K. copyrights have expired" (372 F.3d 471, 480 [2d Cir 2004]).

Under the Federal Constitution, treaties that the United States enters with other countries have the force of federal law and must be respected by the states (see US Const art VI [2]). Although the Berne Convention and the Universal Copyright Convention both recognize the "Rule of the Shorter Term," [*562] which generally provides that the term of copyright in the nation where a work is first published should be applied by other nations that would grant a longer period of protection, neither treaty applies this rule to sound recordings (see Universal Copyright Convention art IV [4] [a], 25 UST 1341, TIAS No. 7868 [1974]; Berne Convention for the Protection of Literary and Artistic Works art 7 [8], July 24, 1971 [Paris Text], S Treaty Doc No. 99-27 [amended 1979]; 4 Nimmer on Copyright, § 17.06 [A], at 17-48.2). Instead, sound recordings fall within the ambit of the Phonograms Convention but this treaty applies only to recordings fixed after the date it became law (March 10, 1974 in the United States). Furthermore, the Phonograms Convention does not contain a rule of the shorter term (see Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms, arts 4, 7 [3], 25 UST 309, TIAS No. 7808 [1974]). Nor does the statutory implementation of the Uruguay Round Agreements Act (Pub L 103-465, 108 US Stat 4809 [1994]), which appears in 17 USC § 104A, alter

9 This appears to be the position of the United States Copyright Office and the sound recording industry with respect to recordings not covered by the national Copyright Act (see ABKCO Music v LaVere, 217 F.3d at 690; see also 1 Nimmer on Copyright § 4.05 [B] [4], at 4-35; Bailey, Phonorecords and Forfeiture of Common-Law Copyright in Music, 71 Wash. L. Rev. at 157; Kaplan, Publication in Copyright Law: The Question of Phonograph Records, 103 U. Pa. L. Rev. at 472). The international community also does not deem the sale of such a sound recording to be a "publication" (see Universal Copyright Convention art IV, 25 UST 1341, TIAS No. 7868 [1974]), a definition crafted on the "understanding by the delegates [to the Convention] that the issuance of phonograph records does not amount to publication under United States law" and a belief " 'that a contrary provision in the Convention would require an amendment of the United States Copyright Law unlikely to be accepted by Congress' " (Landau, "Publication," Musical Compositions, and the Copyright Act of 1909: Still Crazy After All These Years, 2 Vand. J. Ent. L. & Prac. 29, 40 [Winter 2000] [citing Universal Copyright Convention art IV]).

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the common law with respect to the recordings at issue. That provision restores United States copyright protection to certain public domain works but does not apply to recordings, like those here, that were in the public domain in the country of origin prior to 1996 (see 17 USC § 104A [h] [6] [B]).

[2] Thus, neither federal statutory nor constitutional law prohibits the states from providing common-law protection to artistic works that are in the public domain in the country of origin (see generally Hasbro Bradley, Inc. v Sparkle Toys, Inc., 780 F.2d 189, 192-193 [2d Cir 1985]). Nothing in the statutes of this state or in our jurisprudence suggests such a prohibition is warranted. Indeed, there are indications that the opposite is true (see 1 Nimmer on Copyright § 5.11, at 5-90; see also Rostropovich v Koch Intl. Corp., 34 U.S.P.Q.2d 1609, 1995 U.S. Dist. LEXIS 2785, 1995 WL 104123, *5 [SD NY 1995]), given that the copyright protection extended by state common law to sound recordings not covered by the federal Copyright Act is similar to the scope of common-law ownership rights in other forms of property, which can exist indefinitely (see generally People ex rel. International Nav. Co. v Barker, 153 N.Y. 98, 101, 47 N.E. 46 [1897]). Until 2067, no federal or state statutory impediment constricts this common-law durational component for pre-1972 sound recordings. Applying the copyright law of the situs where the infringement occurs (see e.g. Itar-Tass Russian News Agency v Russian Kurier, Inc., 153 F.3d 82, 89 [2d Cir 1998]), there is no justification under New York [*563] law for substituting the British copyright term in place of New York's common-law protection for these recordings, which continues until federal preemption occurs. We therefore answer the first subquestion in the negative because we conclude that New York provides common-law copyright protection to sound recordings not covered by the federal Copyright Act, regardless of the public domain status in the country of origin, if the alleged act of infringement occurred in New York.

[***368] [**266] Second: "Does a cause of action for common law copyright infringement include some or all of the elements of unfair competition?"

[3] We understand this question to ask whether the District Court was correct to assume that some type of malicious intent or bad faith is a necessary element of a state common-law copyright infringement claim. A copyright

infringement cause of action in New York consists of two elements: (1) the existence of a valid copyright; and (2) unauthorized reproduction of the work protected by the copyright (see e.g. L 1786, ch 54, § 1). To the extent that any inference of deceptive or fraudulent intent may have been referred to in early copyright case law, it appears to have been the view that bad faith was inherent in the act of copying and selling a work without permission from a competitor because this would deprive the true owner of the work's value (see Millar v Taylor, 98 Eng Rep at 203, 4 Burr at 2305; see also Capitol Records, Inc. v Wings Digital Corp., 218 F. Supp. 2d 280, 286 [ED NY 2002]). But fraud or bad faith is not an element of an infringement action in modern New York law (see Chamberlain v Feldman, 300 N.Y. 135, 89 N.E.2d 863 [1949] [enjoining publication of Mark Twain manuscript on behalf of his estate's trustees in the absence of any indication of fraud or bad faith]). 10 Copyright infringement is distinguishable from unfair competition, which in addition to unauthorized copying and distribution requires competition in the marketplace or similar actions designed for commercial benefit (see Roy Export Co. Establishment of Vaduz, Liechtenein v Columbia Broadcasting Sys., 672 F.2d 1095, 1105 [2d Cir 1982], cert denied 459 U.S. 826, 74 L. Ed. 2d 63, 103 S. Ct. 60 [1982]; G. Ricordi & Co. v Haendler, 194 F.2d 914, 916 [2d Cir [*564] 1952]; Capitol Records, Inc. v Wings Digital Corp., 218 F. Supp. 2d at 286; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc. at 793), or deception of the public (see e.g. Shaw v Time-Life Records, 38 N.Y.2d 201, 206, 341 N.E.2d 817, 379 N.Y.S.2d 390 [1975]). In response to the second subquestion, we hold that the causes of action for copyright infringement and unfair competition are not synonymous under New York law.

Third: "Is a claim of common law copyright infringement defeated by a defendant's showing that the plaintiff's work has slight if any current market and that the defendant's work, although using components of the plaintiff's work, is fairly to be regarded as a 'new product'?"

[4] We begin by noting that Naxos does not contend that "market size" or "new product" issues are relevant to the existence of a common-law copyright regarding sound recordings. Its discussion of those terms is limited to the context of an unfair competition cause of action. In any event, the ability to enforce copyright protections provided

10

As the United States Supreme Court has explained, a federal statutory copyright infringement cause of action consists of two elements: "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original" (Feist Publs. v Rural Tel. Serv. Co., 499 U.S. 340, 361, 113 L. Ed. 2d 358, 111 S. Ct. 1282 [1991]). Commentators are in accord (see 3 Goldstein, Copyright § 15.5.2, at 15:45 [2d ed 1996; 2005 Supp]; 4 Nimmer on Copyright § 13.01, at 13-5).

Page 13 of 13 4 N.Y.3d 540, *564; 830 N.E.2d 250, **266; 797 N.Y.S.2d 352, ***368

by New York common law is not diminished due to the size of the market and, therefore, the popularity of a product does not affect a state common-law copyright infringement claim (see generally Nimmer, Copyright in the Dead Sea Scrolls: Authorship and Originality, 38 Hous. L. Rev. 1, 177-179 [Spring 2001]).

[***369] [**267] Nor do we believe that a state common-law copyright claim can be defeated under the so-called "new product" analysis. We note that the Second Circuit has declared that the "[i]ndependent creation" of a new product "[can]not consist of actual copying" of an entire work (Durham Indus., Inc. v Tomy Corp., 630 F.2d 905, 910 [2d Cir 1980]). In the related area of the federal "fair use" doctrine, it is a general rule that the reproduction of an entire copyrighted work constitutes infringement (see Infinity Broadcast Corp. v Kirkwood, 150 F.3d 104, 109 [2d Cir 1998], quoting 4 Nimmer on Copyright § 13.05 [A] [3], at 13-181). We see no justification for adopting a different rule of state law. Thus, even assuming that Naxos has created a "new product" due to its remastering efforts that enhance sound quality, 11 that product can be deemed to infringe on Capitol's copyright to the extent that it utilizes the original elements of [*565] the protected performances.

We conclude that the third subquestion should be answered in the negative.

VI. Conclusion

[1] In light of our responses to these inquiries and our conclusion that state common law protects ownership interests in sound recordings made before 1972 that are not covered by the federal Copyright Act, the answer to the main certified question is that, without regard to the issue of abandonment, Naxos is not entitled to defeat Capitol's claim for infringement of common-law copyright in the original recordings. Accordingly, the certified question should be answered in the negative.

Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt, Read and R.S. Smith concur.

Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.17 of the Rules of Practice of the Court of Appeals (22 NYCRR 500.17), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in the negative.

11 Although we express no view on whether Naxos has, in fact, created a "new product," we simply note that Capitol has a protected property interest in the performances embodied on the shellac records (cf. Capitol Records v Greatest Records, 43 Misc. 2d 878, 880, 252 N.Y.S.2d 553 [Sup Ct, NY County 1964]) and that Naxos is selling remastered copies of the identical performances.

UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

Present: The Honorable Philip S. Gutierrez, United States District Judge

Wendy Hernandez Not ReportedDeputy Clerk Court Reporter

Attorneys Present for Plaintiff(s): Attorneys Present for Defendant(s):

Not Present Not Present

Proceedings (In Chambers): Order GRANTING Plaintiff’s Motion for Summary Judgment

Before the Court is Plaintiff Flo & Eddie Inc.’s (“Flo & Eddie”) motion for summaryjudgment as to liability on all claims. Dkt. # 69 (originally filed as Dkt. # 65). After consideringthe arguments in the moving, opposing, and reply papers, and the parties’ oral arguments onSeptember 15, 2013, the Court GRANTS the motion on all causes of action, but only on thebasis of public performance conduct.

I. Background

Flo & Eddie is a corporation created in 1971 that is owned and exclusively controlled byHoward Kaylan (“Kaylan”) and Mark Volman (“Volman”), two of the founding members of themusic group “The Turtles.” Plaintiff’s Statement of Uncontroverted Facts (“PSUF”) ¶¶ 2, 7. The Turtles recorded a number of hit songs in the 1960s, including the iconic song “HappyTogether.” Id. ¶ 4. Today, Flo & Eddie owns all rights to The Turtles’ master sound recordings. Id. ¶ 7. Over the last four decades, Flo & Eddie has been exploiting The Turtles’ masterrecordings by licensing the rights to make and sell records and licensing the rights for use of therecordings in movies, TV shows, and commercials. Id. ¶ 8. However, Flo & Eddie has neverlicensed a radio station, digital or otherwise, to publicly perform its recordings. Defendant’sStatement of Genuine Issues of Material Fact (“DSGF”) ¶ 8.

Sirius XM Radio Inc. (“Sirius XM”) is a company that operates both a subscription basednationwide satellite radio service as well as a subscription based internet radio service. Id. ¶ 11. The company claims that it is the largest radio broadcaster in the United States, measured byrevenue, and has over 25.8 million paying subscribers. Id. ¶ 10. In exchange for monthly fees,subscribers can access, among other things, Sirius XM’s broadcasts of commercial-free music. Id. ¶ 12. Through its network of satellites, ground based terrestrial repeaters, and command andcontrol earth stations, Sirius XM’s satellite radio service broadcasts over 135 full-time channels. Id. ¶ 13. Sirius XM also streams music over the Internet to its subscribers. Id. ¶ 14. Its music

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CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

offerings include a number of channels devoted solely to playing “oldies” music recorded priorto 1972, such as “40s on 4,” “50s on 5,” and “60s on 6.” Id. ¶ 13.

Through its satellite and Internet radio services, Sirius XM has publicly performed 15separate pre-1972 sound recordings that are exclusively owned by Flo & Eddie. Id. ¶ 23. Flo &Eddie has not licensed Sirius XM to use these recordings in its radio services and Sirius XMperforms these sound recordings without paying royalties to Flo & Eddie. Id. ¶ 24. Flo & Eddiehas been aware that Sirius XM plays songs by The Turtles for over seven years. Id. ¶ 77. Priorto commencing this lawsuit, Flo & Eddie had never asked Sirius XM to stop performing itsrecordings or to acquire a license from Flo & Eddie for its performances. Id. ¶ 78.

Ever since the songs owned by Flo & Eddie were recorded in the 1960s and 1970s,terrestrial (AM/FM) radio stations have played the recordings and Flo & Eddie has been awareof this practice. Id. ¶ 86. Radio stations have never obtained licenses to perform theserecordings from Flo & Eddie or otherwise. Id. ¶ 87. However, Flo & Eddie has also nevercontacted a radio station to request compensation for public performances of its tracks or suedany radio station these performances. Id. ¶ 90.

In addition to broadcasting and streaming Flo & Eddie’s sound recordings to itssubscribers, Sirius XM has allegedly engaged in some copying of Flo & Eddie’s soundrecordings in the operation of its business. Id. ¶¶ 16, 19, 20-22, 24. This reproduction conductinvolves copying recordings to databases and libraries, using small segments of songs in thecreation of voice transitions, copying to “play out servers,” “buffering” songs, and authorizingthird party copying of broadcasts. Id.

Flo & Eddie filed its Complaint in Los Angeles Superior Court on August 1, 2013,alleging violations of California Civil Code § 980(a)(2) and California’s Unfair CompetitionLaw, Cal. Bus. & Prof. Code §§ 17200, et seq. (“UCL”), conversion, and misappropriation. Dkt.# 1. Sirius XM filed a timely Notice of Removal and the case was removed on August 6, 2013. Id. Flo & Eddie now seek summary judgment on liability as to all of its causes of action. SeeDkt. # 69.

II. Legal Standard

Federal Rule of Civil Procedure 56(a) provides that a “court shall grant summaryjudgment if the movant shows that there is no genuine dispute as to any material fact and themovant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). An issue of fact isgenuinely disputed and material if it cannot be reasonably resolved in favor of either party and

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

may affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 238 (1986);In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008).

The party moving for summary judgment bears the initial burden of showing that there isno genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[M]ere allegation and speculation do not create a factual dispute for purposes of summaryjudgment.” Nelson v. Pima Cmty. Coll., 83 F.3d 1075, 1081-82 (9th Cir. 1996) (citationomitted). A party asserting that a fact cannot be genuinely disputed must support that assertionby citing to “materials in the record, including depositions, documents, electronically storedinformation, affidavits or declarations, stipulations (including those made for purposes of themotion only), admissions, interrogatory answers, or other materials.” Fed. R. Civ. P.56(c)(1)(A).

If the non-movant will bear the burden of proof on an issue at trial, the moving party cansatisfy its summary judgment burden by “‘showing’—that is, pointing out to the districtcourt—that there is an absence of evidence to support the nonmoving party’s case.” CelotexCorp. v. Catrett, 477 U.S. 317, 325 (1986). The non-moving party must then “come forth withevidence from which a jury could reasonably render a verdict in the non-moving party’s favor.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010). The non-moving party mustset forth specific evidence showing that there is a genuine issue for trial, and “may not rest uponthe mere allegations or denials of his pleading.” Anderson, 477 U.S. at 256.

On summary judgment, the Court may not weigh conflicting evidence or make credibilitydeterminations. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). It mustdraw all reasonable inferences in the light most favorable to the non-moving party. Anderson,477 U.S. at 255; Soremekun, 509 F.3d at 984.

III. Discussion

Flo & Eddie argues that Sirius XM is liable for two distinct unauthorized uses of its soundrecords: (1) publicly performing Flo & Eddie’s recordings by broadcasting and streaming thecontent to end consumers and to secondary delivery and broadcast partners, and (2) reproducingFlo & Eddie’s recordings in the process of operating its satellite and Internet radio services. Mot. 9:7-15, 7:8-10. Flo & Eddie claims that each of these unlicensed uses violates Californiacopyright law and constitutes misappropriation, conversion, and an unlawful and unfair businesspractice under the UCL. Mot. 20:3-4, 9-11. The Court will examine each use in turn.

A. Public Performance

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

On the public performance use, the parties do not dispute any of the materials factsregarding whether Sirius XM publicly performed Flo & Eddie’s sound recordings. See DSGF ¶23. Sirius XM does not deny that it routinely publicly performs Flo & Eddie’s sound recordingsin the course of its business; rather, it argues that the bundle of rights that attaches to copyrightownership of a pre-1972 sound recording does not include the exclusive right to publiclyperform the recording. See Opp. 6:15-19. Accordingly, once Sirius XM has lawfully purchaseda copy of a Flo & Eddie recording, it broadcasts and streams that recording to paying audienceswithout first obtaining permission from Flo & Eddie to do so. Mot. 20:19-21. Flo & Eddiecontends that, in California, copyright ownership of a pre-1972 sound recording includes theexclusive right to publicly perform the recording; therefore, if anyone wishes to publicly performsuch a recording, they must first seek authorization from the recording’s owner. Id. 10:20-23. To discern whether ownership of a pre-1972 sound recording includes the exclusive right topublicly perform the recording, the Court will look to copyright law.

i. The Relationship Between Federal and State Copyright Law with Respect toSound Recordings

The Federal Copyright Act exclusively governs rights attendant to works of authorship inmany areas; however, it explicitly leaves certain segments of copyright law open to stateregulation. See generally, 17 U.S.C. § 301 (the Federal Copyright Act’s preemption section). When Congress passed the Federal Copyright Act in 1976, it carved out pre-1972 soundrecordings as a limited area of copyright law unaffected by the new federal law and within thedomain of the states: “With respect to sound recordings fixed before February 15, 1972, anyrights or remedies under the common law or statutes of any state shall not be annulled or limitedby this title until February 15, 2067…no sound recording fixed before February 15, 1972, shallbe subject to copyright under this title[.] ” Id. § 301(c). Accordingly, California statutory andcommon law presently governs the rights that attach to pre-1972 sound recordings because theFederal Copyright Act does not apply to those earlier recordings and explicitly allows states tocontinue to regulate them. Id. Flo & Eddie’s sound recordings were fixed prior to February 15,1972 (DSGF ¶¶ 4,7); therefore, its rights to those recordings depend solely on whatever rightsare afforded to sound recording owners under California law.

ii. Copyright Protection of Sound Recordings Under California Law

California’s copyright statute contains a provision that directly addresses pre-1972 soundrecordings. See Cal. Civ. Code § 980(a)(2). Section 980(a)(2) provides:

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

The author of an original work of authorship consisting of a sound recording initiallyfixed 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 anothersound recording that does not directly or indirectly recapture the actual sounds fixed insuch 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 soundrecording.

Id. Sirius XM does not claim that it falls into the statutory exception as an independent maker ofanother sound recording, thus the crucial point of statutory interpretation for this case is whether“exclusive ownership” of a sound recording carries within it the exclusive right to publiclyperform the recording. See Opp. 6:20-7:4. If so, Sirius XM is infringing on Flo & Eddie’ssound recording ownership rights by public performing the recordings without Flo & Eddie’sauthorization.

a. The Text of § 980(a)(2)

The role of the courts in construing statutes is “to ascertain the intent of the drafters so asto effectuate the purpose of the law.” Esberg v. Union Oil Co., 28 Cal. 4th 262, 268 (2002)(citing Preston v. State Bd. Of Equalization, 25 Cal. 4th 197, 213 (2001)). “Because thestatutory language is generally the most reliable indicator of legislative intent, [courts] firstexamine the words themselves, giving them their usual and ordinary meaning and construingthem in context.” Id. (citing People v. Lawrence, 24 Cal. 4th 219, 230 (2000)). And “[w]henstatutory language is clear and unambiguous, ‘“there is no need for construction and courtsshould not indulge in it.”’” Id. (citing People v. Benson, 18 Cal. 4th 24, 30 (1998), quotingPeople v. Overstreet, 42 Cal. 3d 891, 895 (1986)).

Accordingly, the Court begins its interpretation with the text of § 980(a)(2), giving thewords their usual and ordinary meanings. What does it mean to have “exclusive ownership” in asound recording “as against all persons”? Cal. Civ. Code § 980(a)(2). Commonly, to have“exclusive ownership” in something is to possess and control it and to not share that right topossess and control with others. See THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISHLANGUAGE 619, 1260 (Houghton Mifflin Harcourt, 5th ed. 2011) (defining “exclusive” and“ownership”). The California legislature defines “ownership” generally in the Civil Code in amanner consistent with the word’s usual and ordinary meaning—“the right of one or morepersons to possess and use [a thing] to the exclusion of others.” Cal. Civ. Code § 654. Thus, atbase, Flo & Eddie has the right to possess and use its sound recordings and prevent others frompossessing and using them. The plain meaning of having “exclusive ownership” in a soundrecording is having the right to use and possess the recording to the exclusion of others. There is

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CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

nothing in that phrase to suggest that the legislature intended to exclude any right or use of thesound recording from the concept of “exclusive ownership.”

The legislature does include a limitation on the ownership right in the statute’s text, “themost reliable indicator of legislative intent.” See Esberg, 28 Cal. 4th at 268. An author hasexclusive ownership in his or her sound recording “against all persons except one whoindependently makes or duplicates another sound recording that does not directly or indirectlyrecapture the actual sounds fixed in such prior recording, but consists entirely of an independentfixation of other sounds, even though such sounds imitate or simulate the sounds contained inthe prior sound recording.” Cal. Civ. Code § 980(a)(2) (emphasis added). In other words,ownership of a sound recording does not include the exclusive right to make “covers” (i.e.,recording the song with new instruments) – any person can make a sound recording based on acopyrighted recording, without the permission of the owner, so long as they produce the soundsindependently rather than recapture the actual sounds in the copyrighted recording.

Construing the meaning of “exclusive ownership” in context with the rest of § 980(a)(2),which lists the above exception to the ownership right, the Court infers that the legislature didnot intend to further limit ownership rights, otherwise it would have indicated that intentexplicitly. Because the statute lists an exception, the Court should enlist the “familiar rule ofconstruction…[that] where exceptions to a general rule are specified by statute, other exceptionsare not to be implied or presumed.” Geertz v. Ausonio, 4 Cal. App. 4th 1363, 1370 (1992)(citing In re Michael G., 44 Cal. 3d 283, 291 (1988). Courts should “presume the Legislatureincluded all the exceptions it intended to create.” Id. (citing Reynolds v. Reynolds, 54 Cal. 2d669, 681 (1960)). If § 980(a)(2) had granted “exclusive ownership” in sound recordings withouta listed exception, the argument that some limitations on property rights were already inherent inthe concept of sound recording ownership might have been more persuasive to the Court. SeeOpp. 6:21-7:4, 8:25-9:2. However, by finding it necessary to specify an excepted right toownership in a sound recording, the legislature conveyed that limitations on ownership did notlive within the concept itself, rather they required elucidation.

Accordingly, the Court’s textual reading of § 980(a)(2), giving the words “their usual andordinary meaning and construing them in context[,]” is that the legislature intended ownership ofa sound recording in California to include all rights that can attach to intellectual property, savethe singular, expressly-stated exception for making “covers” of a recording.

b. Departure from the Common Law

In California, a different and “well-established” rule of statutory construction applieswhen a statute conflicts with existing common law. See Borg-Warner Protective Servs. Corp. v.

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CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

Super. Ct., 75 Cal. App. 4th 1203, 1207-08 (1999). “[S]tatutes are not presumed to alter thecommon law unless expressly stated.” Id. (citing Saala v. McFarland, 63 Cal. 2d 124, 130(1965)) (emphasis added). Sirius XM appeals to this rule to argue that the Court can onlyconstrue § 980(a)(2) as inclusive of a right to public performance if the text of the statuteexpressly specifies that right, which it does not. See Opp. 8:19-24. Sirius XM reasons that thisheightened rule of statutory construction applies because California common law in 1982 (whenthe legislature passed § 980(a)(2)) did not afford owners of sound recordings the exclusive rightto publicly perform their recordings. Id. 7:20-23. As a statute including that right wouldnecessarily conflict with common law jurisprudence denying it, the Court can only interpret §980(a)(2) as inclusive of a public performance right if the legislature expressly stated theexistence of the right.

While Sirius XM’s statement of the rule of statutory construction is accurate, it isinapplicable here because there is no pre-1982 (or post-1982) body of California common lawdenying sound recording owners the exclusive right to publicly perform their recordings. SiriusXM cannot point to a single case in which a judge considered facts implicating this right or eventheorized on the right then decided that the right of public performance does not attach toownership of sound recordings in California. The Court cannot extrapolate a common law ruleregarding public performance rights in sound recordings if the facts that would prompt a court torule on the issue have simply never been presented in a California court. In this judicial void,the rule of statutory construction requiring express statements to alter the common law does notapply because, when the legislature passed § 980(a)(2), there was no common law rule inCalifornia rejecting public performance rights in sound recording ownership.

c. Beyond the Text of § 980(a)(2)

“When statutory language is clear and unambiguous, there is no need for construction andcourts should not indulge in it.” Esberg, 28 Cal. 4th at 268 (internal citations omitted); see alsoIn re Steele, 32 Cal. 4th 682, 694 (2004) (“[a]lthough legislative history often can help interpretan ambiguous statute, it cannot change the plain meaning of clear language”). As indicatedabove, in light of (1) the clarity of the plain and ordinary meaning of § 980(a)(2)’s “exclusiveownership…as against all persons” and (2) the legislature’s choice to specify one use ofrecordings to exclude from the grant of ownership, the Court finds that the statute is clear andunambiguous as to the rights that attach to ownership in a sound recording. Under § 980(a)(2),the owner of a sound recording has the exclusive right to possess and use the recording for allpurposes, necessarily including the exclusive right to publicly perform the recording, except thatthe owner does not have the exclusive right to record and duplicate “covers.”

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CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

Sirius XM’s attempts to insert ambiguity into the textual language fail because Sirius XMrelies on information outside the statutory language to find that ambiguity in the first place. SeeOpp. ¶ 7:5-19, 16:20-17:4; see People v. Hagedorn, 127 Cal. App. 4th 734, 743 (2005) (“Courtsgenerally resort to legislative history to resolve ambiguities, not to create them”). Regardless,the legislative history of § 980(a)(2) is consistent with the Court’s textual reading of the statute.

Sirius XM explains that the legislative history of § 980(a)(2) “makes abundantly clearthat the 1982 revision was motivated by the preemption provisions of Section 301(c) of theCopyright Act, which, as of 1978, had made much of Section 980 ‘obsolete’; consequently, thelaw needed amendment to clarify what state-level protections remained[.]” Opp. 7:5-10. Theversion of § 980(a) of the California copyright law that existed prior to the 1982 amendment wasbroad and did not distinguish between different types of copyrightable property: “The author orproprietor of any composition in letters or art has an exclusive ownership in the representation orexpression thereof as against all persons except one who originally and independently creates thesame or a similar composition.” Stats. 1947, c. 1107, p.2546, § 1. In response to Congress’preemption of the majority of state copyright law in the 1970s, the California legislature rewroteits sweeping provision to narrow it to the areas of the law that it still had the authority toregulate. Therefore, it replaced the above subsection with § 980(a)(1), pertaining to works “notfixed in any tangible medium of expression,” and § 980(a)(2), pertaining to pre-1972 soundrecordings. See Cal. Civ. Code §§ 980(a)(1-2). This narrowing of state-regulated subject mattertracked the Federal Copyright Act’s preemption provisions. See 17 U.S.C. § 301(a) (“On andafter January 1, 1978, all legal and equitable rights that are equivalent to any of the exclusiverights within the general scope of copyright…in works of authorship that are fixed in a tangiblemedium of expression…are governed exclusively by this title”) (emphasis added); see also id. §301(c) (leaving pre-1972 sound recording protection to the states). Accordingly, the legislaturedid not expand or limit ownership rights in sound recordings by its 1982 amendment, rather, itexcluded works of authorship in other mediums of expression from the law because it no longerhad authority to regulate copyrights of those works.

As the California legislature clearly considered the Federal Copyright Act when draftingits 1982 amendment, § 980(a)(2)’s similarities to and differences from the federal law canfurther reveal the legislature’s intent regarding sound recording rights. As discussed above, §980(a)(2) contains one explicit limitation on sound recording ownership rights. That samelimitation is found in the Federal Copyright Act’s “Scope of exclusive rights in soundrecordings,” nearly word-for-word. See 17 U.S.C. § 114(b) (“The exclusive rights of the ownerof copyright in a sound recording…do not extend to the making or duplication of another soundrecording that consists entirely of an independent fixation of other sounds, even though suchsounds imitate or simulate those in the copyrighted recording). Section 114 contains otherexpressly stated limitations, including “[t]he exclusive rights of the owner of copyright in a

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Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

sound recording…do not include any right of performance[.]” See 17 U.S.C. § 114(a). TheCalifornia legislature was thus likely aware of this manner of excluding performance rights fromsound recording ownership, as well as other limitations listed in the Federal Copyright Act, yetchose to incorporate only one exception into its revised § 980(a)(2). The legislative history of §980(a)(2) and its comparison to the Federal Copyright Act actually bolsters the Court’s plaintextual reading of the statute that sound recording ownership is inclusive of all ownership rightsthat can attach to intellectual property, including the right of public performance, excepting onlythe limited right expressly stated in the law.

d. Case Law After § 980(a)(2)

The Court finds further support for its textual reading of the statute as inclusive of theright of public performance from the only two courts that have ruled on or discussed this rightunder § 980(a)(2). See Capital Records, LLC et al. v. BlueBeat, Inc. et al., 765 F. Supp. 2d 1198(C.D. Cal 2010); see also Bagdasarian Prods., LLC v. Capitol Records, Inc., No. B217960, 2010WL 3245795 (Cal. Ct. App. August 18, 2010). These courts agreed that the right exists, albeiteither implicitly or in dicta.

In BlueBeat, the court was squarely presented with facts implicating a public performanceright attendant to sound recording ownership. Capital Records v. BlueBeat, 765 F. Supp. 2d at1200-01. Defendant operated a commercial website that enabled users to download songs(reproduction and distribution of a sound recording) as well as “stream” songs without adownload (isolated public performance of a sound recording). Id. at 1200-03, 1206 (noting“BlueBeat does not dispute that…it reproduced, sold, and publicly performed the pre-1972Recordings” without approval from the Recordings’ copyright owners). Plaintiffs had alleged“misappropriation in violation of California Civil Code 980(a)(2)” and the court held that forBlueBeat’s actions (offering songs for download and for live streaming), it was liable formisappropriation. Id. at 1206. Although applying § 980(a)(2), the court does not analyze the“streaming conduct” or public performance allegation any differently than the reproduction anddistribution charges related to the downloading function. Thus, the court’s treatment of thestatute when confronted with public performance facts suggests that the court interpreted“exclusive ownership” under the statute’s text to include the right of public performance sounambiguously that the issue did not even warrant analysis beyond repeating the statutorylanguage. See id. at 1205.

While the California appellate court in Bagdasarian Prods., did not rule on facts thatisolated the public performance right in sound recordings, the court assumed the existence ofsuch a right in its dicta. Bagdasarian Prods., 2010 WL 3245795, at *11. The parties in the casehad executed a sales contract regarding certain sound recording rights in pre-1972 Alvin and the

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CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

Chipmunks songs. Id. at *1. Their dispute concerned which rights had been sold in thatcontract. Id. at *2. The court’s analysis consisted largely of contract interpretation, not statutoryinterpretation, but the court acknowledged that it was operating in a copyright landscapegoverned by § 980(a)(2) by citing to the statute when explaining property rights in soundrecordings under California law. Id. at *7. Examining the parties’ contract, the court askedwhether the agreement granting Defendant “all rights of every kind” in the physical masterrecordings “together with such rights to use and control…the performances embodied thereonfor the purposes of manufacture and distribution” included conveyance of the right to license therecordings for purposes other than manufacture and distribution, specifically, for use asbackground music in film and television. Id. at *1, 15. While licensing for film and televisiondoes not implicate the isolated public performance right like use for radio broadcast does, thecourt’s reasoning suggested that the exclusive right to publicly perform a sound recording wasone of the intangible property rights that attaches to a recording. Id. at *11. The courtsummarized that the contract granted Defendant “the right to exploit the intellectual propertyembodied in the master recordings only for the purpose of ‘manufacture and distribution’ ofreproductions and records” and explained that other rights remained that Plaintiff had nevergranted to Defendant. Id. “Uses not involving the manufacture or distribution of reproductionsor records—for example, publicly performing the records, as would occur if a recording of oneof the songs was played during a live stage play—are not within [the contract’s] grant of rights.” Id. By mentioning public performance as an example of a property right that Plaintiff had nottransferred to Defendant, the court conveyed that a sound recording owner’s bundle ofintellectual property rights included the exclusive right to publicly perform the recording. Id.

Although the breadth and specificity of cases acknowledging that exclusive ownership ofa sound recording includes the right to publicly perform the recording are slight, Defendant hasnot directed the Court to a single case cutting against the right to public performance, evenimplicitly or in dicta. Therefore, the limited but unopposed case law referencing § 980(a)(2) in apublic performance context supports the Court’s interpretation of legislative intent based on thetext of the statute – that the legislature intended ownership of a sound recording to include theexclusive right to any use of a recording (other than the singular listed exception), including theright to publicly perform it.

The Court finds that copyright ownership of a sound recording under § 980(a)(2) includesthe exclusive right to publicly perform that recording. See Cal. Civ. Code § 980(a)(2). Accordingly, the Court GRANTS summary judgment on copyright infringement in violation of §980(a)(2) in favor of Flo & Eddie.1

1 Sirius XM’s argument that state regulation of sound recording performances would violate theCommerce Clause is without merit. See Opp. 21:12-14. “Where state or local governmentaction is specifically authorized by Congress, it is not subject to the Commerce Clause even if itCV-90 (10/08) CIVIL MINUTES - GENERAL Page 10 of 15

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

B. Reproduction

Much of the facts surrounding Sirius XM’s alleged copying are still disputed at this pointin the case. As the moving party, Flo & Eddie bears the burden of showing that there are nogenuine disputes as to any facts material to the outcome of the case. Fed. R. Civ. P. 56(a);Anderson, 477 U.S. at 238. Flo & Eddie argues that the following conduct by Sirius XMconstitutes unlawful reproduction of its sound recordings:

(1) copying Flo & Eddie’s recordings in creating and backing up libraries anddatabases (Mot. 7:10-18; DSGF ¶¶ 16, 18);

(2) copying “tips and tails” of sound recordings to programmers’ workstations to addvoice transitions then transferring copies of those sequences—tips, tails, and voicetransitions—back to Sirius XM’s music libraries (Mot. 8:7-15; DSGF ¶ 19);

(3) copying sound recordings to “play out” servers each time it broadcasts a song(Mot. 8:17-20; DSGF ¶ 20);

(4) copying sound recordings as “buffer copies” after being transmitted from the “playout” server but before the recording is heard by Sirius XM subscribers (Mot. 8:21-24; DSGF ¶ 21);

(5) authorizing a third party company, Quickplay Media, to copy all of Sirius XM’sbroadcasts to maintain a 5-hour cache to enable later on-demand listening (Mot.9:1-3; DSGF ¶ 22).

The evidence offered in support of all of this conduct is the deposition transcript of TerrenceSmith, a high-ranking Sirius XM officer.

Sirius XM disputes aspects of each of these factual representations, supporting itscontestations with evidence of its own. In response to assertions regarding libraries anddatabases, “play out” servers, buffering, and Quickplay “caching,” Sirius XM presents evidence

interferes with interstate commerce.” White v. Mass. Council of Constr. Emp’rs, Inc., 460 U.S.204, 213 (1983); see also S. Pac. Co. v. State of Ariz. ex rel. Sullivan, 325 U.S. 761, 769 (1945)(“Congress has undoubted power to redefine the distribution of power over interstate commerce. It may…permit the states to regulate the commerce in a manner which would otherwise not bepermissible”). Because Congress specifically authorized protection of pre-1972 sound recordingrights by the states in 17 U.S.C. § 301(c), the California statute protecting those rights is notsubject to the Commerce Clause. CV-90 (10/08) CIVIL MINUTES - GENERAL Page 11 of 15

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

that none of this activity as it relates to Flo & Eddie’s sound recordings has occurred inCalifornia. Opp. 6:7-10; DSGF ¶¶ 16, 51-54, 58-61, 20-22. Flo & Eddie only counters thisshowing with evidence that the Quickplay operations are located in San Diego, California, whichis not conclusive as to where the alleged acts of copying took place. Reply 12:2-3. The locationof copying is disputed by the parties and is material to the case because pre-1972 soundrecordings are protected by California law alone and “a copyright granted by a particular Statehas effect only within its boundaries. If one State grants such protection, the interests of Stateswhich do not are not prejudiced since their citizens remain free to copy within their bordersthose works which may be protected elsewhere.” See Goldstein v. Cal., 412 U.S. 546, 558(1973). Thus, for these four types of copying conduct where there is disagreement as to thelocation of the copying, the Courts find a genuine dispute as to material facts and will denysummary judgment on claims arising from this conduct.

Regarding “tips and tails” copying, the parties characterize the conduct differently. “Tipsand tails” are the beginnings and endings (just a few seconds) of recordings that are used bySirius XM’s programmers to bracket the voice transitions that it broadcasts between songs. Mot.8:9-11; DSGF ¶ 19. Flo & Eddie allege that these recording segments are copied onto SiriusXM workstations then the copy is transferred to and stored in Sirus XM’s libraries and databasesfor later use. Mot. 8:11-15; DSGF ¶ 19. Sirius XM disputes which portion of the “tip and tailsequence” is copied and retained. See DSGF ¶19. Sirius XM describes the conduct as“caching” the recording segments on a workstation on a very temporary basis, just to make thevoice transitions, then only the voice tracks are copied and retained in its libraries and databases. Id. The parties genuinely dispute the mechanics of the characterization of the “tips and tails”recordation and storage process. The details as to what is reproduced and retained by Sirius XMis material to the case as it is precisely the conduct that Flo & Eddie argues constitutes unlawfulreproduction. Accordingly, the Court will deny summary judgment on Flo & Eddie’s claimsrelated to “tips and tails” copying.

At this point in the case, Flo & Eddie has not met its burden to show that material facts asto Sirius XM’s reproductions of Flo & Eddie’s sound recordings are not genuinely disputed bythe parties; therefore, the Court DENIES summary judgment as to any claim premised on SiriusXM’s alleged reproduction conduct.

C. The UCL

The UCL prohibits unfair competition, including unlawful, unfair, or fraudulent businessacts. See Bus. & Prof. Code §§ 17200 et seq.; Korea Supply Co. v. Lockheed Martin Corp., 29Cal. 4th 1134, 1143 (2003). “Section 17200 ‘borrows’ violations from other laws by makingthem independently actionable as unfair competitive practices.” Korea Supply, 29 Cal. 4th at

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

1134 (citing Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999)). Flo & Eddie argue that Sirius XM’s unauthorized public performance of Flo & Eddie’s soundrecordings in the course of its business violates the UCL. Mot. 20:3-8.

A threshold issue, disputed by Sirius XM, is whether Flo & Eddie has standing to bringthis claim. See Opp. 15:4-5. Actions under the UCL may be maintained by a corporation that“has suffered injury in fact and has lost money or property as a result of the unfair competition.” See Bus. & Prof. Code §§ 17201, 17204; see also Kwikset Corp. v. Super. Ct., 41 Cal. 4th 310,323 (2011) (“lost money or property-economic injury-is itself a classic form of injury in fact”). “There are innumerable ways in which economic injury from unfair competition may be shown.” Id. For example, standing is established if a plaintiff was “deprived of money or property towhich he or she has a cognizable claim.” Id.; see also Clayworth v. Pfizer, 49 Cal. 4th 758, 789(2010) (warning parties not to “conflate the issue of standing with the issue of the remedies towhich a party may be entitled. That a party may ultimately be unable to prove a right todamages…does not demonstrate that it lacks standing to argue for its entitlement to them”). Flo& Eddie has standing under the UCL because it has an exclusive right to publicly perform itssound recordings and every time Sirius XM played those recordings, it used them withoutpaying Flo & Eddie for that use. DSGF ¶¶ 23-24. Thus, at minimum, Flo & Eddie sufferedeconomic harm in the form of foregone licensing or royalty payments for the unauthorizedperformances of its sound recordings.

Having established standing, Flo & Eddie has also proven that Sirius XM’s conductviolates the UCL. On undisputed facts, Sirius XM publicly performs Flo & Eddie’s soundrecordings without authorization to do so. Id. The Court found that such public performanceconstitutes a violation of Cal. Civ. Code § 980(a)(2). Borrowing the violation of § 980(a)(2), theCourt finds that this unlawful conduct also constitutes a violation of the UCL and grants Flo &Eddie’s motion for summary judgment on UCL liability.

D. Conversion

“In California, conversion has three elements: ownership or right to possession ofproperty, wrongful disposition of the property right and damages.” G.S. Rasmussen & Assocs.,Inc. v. Kalitta Flying Serv., Inc., 958 F.2d 896, 906 (1992) (citing Tyrone Pac. Int’l, Inc. v. MVEurychili, 658 F.2d 664, 666 (9th Cir. 1981)). Flo & Eddie has an ownership interest in the rightto publicly perform its sound recordings under § 980(a)(2). PSUF ¶ 7. There was wrongfuldisposition of that property right every time Sirius XM publicly performed the recordingswithout Flo & Eddie’s permission, in violation of California copyright law. DSGF ¶¶ 23-24; seeCal. Civ. Code § 980(a)(2); Capital Records v. BlueBeat, 765 F.Supp.2d at 1206; see also JoeHand Promotions, Inc. v. Albright, No. CV 11-2260 WBS (CMKx), 2013 WL 2449500 (E.D.

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Case 2:13-cv-05693-PSG-RZ Document 117 Filed 09/22/14 Page 13 of 15 Page ID #:3357

UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

Cal. June 5, 2013), at *8 (finding conversion where the owner of a bar intercepted a satellitebroadcast of a sporting event and showed it at his bar without Plaintiff’s authorization, thusmisappropriating plaintiff’s exclusive right to distribute the broadcast). On the element ofdamages, Sirius XM contends that there are none because Flo & Eddie cannot identify a singlesale or lost or diminished license fee that it has suffered as a result of Sirius XM’s performanceof its sound recordings. See Opp. 14:2-4. But Sirius XM’s unauthorized performances aloneestablish conversion damages in the form of license fees that Sirius XM should have paid Flo &Eddie in order to publicly perform its recordings. DSGF ¶¶ 23-24. Thus, the Court grants Flo &Eddie’s motion for summary judgment on conversion liability.

E. Misappropriation

“Common law misappropriation presents a final legal theory under the broad unfaircompetition umbrella.” Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327, 1342(1990). The cause of action has three elements: (1) the plaintiff has invested substantial timeand money in development of its…property; (2) the defendant has appropriated the [property] atlittle or no cost; and (3) the plaintiff has been injured by the defendant's conduct. Id. (internalcitation omitted). Much of California misappropriation law regarding intellectual property hasbeen preempted by the Federal Copyright Act, but preemption is not at issue here because theFederal Copyright Act leaves copyright protection of pre-1972 sound recordings entirely up tothe states until 2067. See Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434,1439-40 (9th Cir. 1993) (explaining preemption of common law misappropriation); 17 U.S.C. §301(c). Regarding Flo & Eddie’s investment in the development of the sound recordings, thetwo individuals who own and control Flo & Eddie, Kaylan and Volman, are former bandmembers who performed on recordings. DSGF ¶¶ 2-4. In a 1970 litigation settlement, Kaylan,Volman, and other band members obtained ownership rights in The Turtles’ master recordingsfrom the band’s record company in exchange for foregoing a large amount of underpaid royaltypayments. Id. ¶¶ 3, 5. Subsequently, Kaylan and Volman purchased exclusive ownership rightsin the sound recordings from the other band members and transferred the rights to theircorporation, Flo & Eddie. Id. ¶¶ 6-7. By performing on the recordings, foregoing royalties, andmaking pay-outs to acquire exclusive rights to the sound recordings, Flo & Eddie hasdemonstrated that it invested substantial time and money in the development of the recordings. Moreover, Sirius XM appropriated the sound recordings at little cost - it simply purchased a firstcopy of each Flo & Eddie sound recording that it uses in its radio business and performs it asoften as it wishes without paying any additional licensing or royalty fees. Id. ¶ 24; see A&MRecords, Inc. v. Heilman, 75 Cal. App. 3d 554, 564 (1977) (finding that duplicatingperformances owned by plaintiff in order to resell them for profit “presents a classic example ofthe unfair business practice of misappropriation of the valuable efforts of another”). Flo &Eddie has proven injury to itself by this conduct in that same manner that it demonstrated

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UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERALCase No. CV 13-5693 PSG (RZx) Date September 22, 2014

Title Flo & Eddie Inc. v. Sirius XM Radio Inc., et al.

damages under conversion and the UCL. At minimum, Flo & Eddie was injured by Sirius XM’sconduct in the form of foregone licensing or royalty payments that Sirius XM should have paidbefore publicly performing Flo & Eddie’s recordings. Thus, the Court grants Flo & Eddie’smotion for summary judgment on misappropriation liability.

F. Laches

Sirius XM briefly argues that the equitable defense of laches bars this action in itsentirety due to Flo & Eddie’s delay in making demands for compensation or bringing suit toenforce its rights. See Opp. 4:12-14, 9:12-13. “Laches is an unreasonable delay in asserting anequitable right, causing prejudice to an adverse party so as to render the granting of relief to theother party inequitable.” Wells Fargo Bank v. Bank of America, 32 Cal. App. 4th 424, 439(1995) (citing Conti v. Bd. of Civil Serv.Comm’rs, 1 Cal. 3d 351, 359 (1969). Sirius XM reasonsthat Flo & Eddie and Sirius XM have been “happy together” for years without any licensing orroyalty arrangements, and Flo & Eddie cannot disrupt this practice that Sirius XM has built its“oldies” business around after Flo & Eddie had allowed it for so long. See Opp. 9:12-13. It isundisputed that Flo & Eddie has been aware of Sirius XM’s public performance of its soundrecordings for over seven years and has never demanded payment or sued Sirius XM regardingthe performances prior to this lawsuit. DSGF ¶¶ 77-78. However, “the laches defense isunavailable in an action at law for damages ‘even [if] combined with the cumulative remedy ofdeclaratory relief.’” Id. (quoting Abbott v. City of L.A., 50 Cal. 2d 438, 462 (1958)); see alsoUnilogic v. Burroughs Corp., 10 Cal. App. 4th 612, 619 (1992) (“The equitable doctrine oflaches has a legal equivalent in the statutes of limitations. To allow a laches defense in a legalaction would be to override a time limit mandated by the Legislature”). This case is, in part, anaction at law for damages (Compl. 11:23-24); therefore, before reaching the issue of prejudice,the laches defense fails because it is unavailable to Sirius XM in this action.

IV. Conclusion

For the reasons above, Flo & Eddie’s motion for summary judgment is GRANTED on allcauses of action, but only so far as the claims are premised on Sirius XM’s public performanceof Flo & Eddie’s recordings, not its alleged reproductions.

IT IS SO ORDERED.

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

FLO & EDDIE, INC.,

Plaintiff,

-against-

SIRIUS XM RADIO, INC., and DOES 1-10,

Defendants.

JJSDCSDNY DOCUMENT ELECTRONICALLY FILED

DOC#: ~ I

DATE FILED: l/J tJtl I

No. 13 Civ. 5784 (CM)

MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

McMahon, J.:

Plaintiff Flo & Eddie, Inc. ("Flo and Eddie") brings this putative class action suit against

Defendant Sirius XM Radio, Inc. ("Sirius"). The complaint alleges that Sirius committed common

law copyright infringement and engaged in unfair competition by publicly performing sound

recordings owned by Flo and Eddie, and by reproducing those recordings in aid of its

performances. Before the Court is Docket #46, Sirius's motion for summary judgment. For the

reasons stated below, the motion is DENIED.

Furthermore, it appears to the Court that there are no disputed issues of material fact as to

liability. Sirius is therefore ORDERED to show cause by December 5, 2014, why summary

judgment should not be entered in favor of Flo and Eddie as to liability only. See FED. R. C1v. P.

56(f)(l).

1

Case 1:13-cv-05784-CM Document 88-1 Filed 11/14/14 Page 1 of 40

BACKGROUND

I. Factual Background

A. The Parties

Flo and Eddie is a California corporation, wholly owned by its principals, Mark Volman

("Volman") and Howard Kaylan ("Kaylan"). (Sirius 56.1 Statement ifif 1-2; Volman Deel. if 1.)

Volman and Kaylan are two of the original members of The Turtles ("the Turtles"), a 1960s rock

group whose hits included "Happy Together" and a cover of Bob Dylan's "It Ain't Me Babe."

(Sirius 56.l Statement if 16; Flo and Eddie 56.l Statement irir 2-3.)

Master recordings of the Turtles' performances- all of which were made prior to February

15, 1972 - were originally held by White Whale Records. (Sirius 56.1 Statement irir 1, 17; Flo and

Eddie 56.1 Statement irir 3, 5; Volman Deel. ir 2.) White Whale transferred those recordings to the

Turtles' members as part of a legal settlement. (Sirius 56.1 Statement if 18; Flo and Eddie 56.1

Statement ir 5.) Volman and Kaylan purchased the remaining Turtles' members' interests in the

recordings, and ultimately transferred all ownership interests in the recordings to Flo and Eddie.

(Sirius 56.1 Statement irir 19-20; Flo and Eddie 56.1 Statement irir 6-7 .)

Sirius is a Delaware corporation engaged in the satellite radio business. (Sirius 56.1

Statement if 3.) Sirius provides digital audio content to its subscribers, who pay a periodic fee.

(Geller Deel., Ex. 6.) Subscribers can receive audio content in several ways. Many subscribers- a

majority according to Sirius - use special digital radios installed in their vehicles. (Sirius 56.1

Statement if 5; Smith Deel. if 4.) Other subscribers stream the same programming over the internet

to a computer or mobile device. (Sirius 56.1 Statement if 6; Flo and Eddie 56.1 Statement ir 14;

Smith Deel. if 6; see Smith 2/11/14 Dep. Tr. at 194:22-25.) Some users receive Sirius's music

programming through Dish Network set-top boxes. (Sirius 56.1 Statement if 6; Flo and Eddie 56.1

Statement if 3; Smith Deel. if 6; Smith 2/11/14 Dep. Tr. at 224:22-226:5.) Businesses can also

2

Case 1:13-cv-05784-CM Document 88-1 Filed 11/14/14 Page 2 of 40

receive music broadcasts to play in their retail establishments through Sirius's "Business

Establishment Service." (Sirius 56.1 Statement~ 6; Smith Deel.~ 6.)

Sirius offers a diverse set of programming including talk radio, live sports coverage, and

music. (Sirius 56.1 Statement~ 4.) Music programming is featured on dozens of Sirius channels.

(Geller Deel., Ex. 7.) Many of those channels - for example "60s on 6" or "70s on 7" - broadcast

pre-1972 sound recordings. (Flo and Eddie 56.1 Statement~ 13.) Some of those channels have

broadcast Turtles sound recordings. (See, e.g., Sirius 56.1 Statement ~~ 21-22; Smith Deel. ~~

12-13.) Both Sirius subscribers and users those who receive Sirius content through Dish Network

set-top boxes can listen to programming that features pre-1972 sound recordings. (Smith 2/11 /14

Dep. Tr. at 226:6-18.)

Sirius acknowledges that it "perform[s]" sound recordings, including pre-1972 sound

recordings, by broadcasting them over its satellite radio network and streaming them over the

internet. (Smith 3/12/14 Dep. Tr. at 96:21-97:15.) The pre-1972 sound recordings Sirius has

performed include Turtles recordings. (Smith 3/12/14 Dep. Tr. at 104:8-105:9.) Sirius does not

currently know how many pre-1972 recordings it has performed, or how many times it has

performed Turtles recordings. (Smith 3/12/14 Dep. Tr. at 97:16-25, 105:11-22.)

B. Sirius's Operations

To understand Flo and Eddie's claims, one has to understand a bit about the technical

aspects of Sirius's operations. Sirius stores its permanent digital music library on three databases,

named "Prophet," "Dalet 5.1," and "Dalet Plus." (Sirius 56.1 Statement~, 24-26; Smith Deel.,

17; Smith 2/11/14 Dep. Tr. at 154:2-8.) The Prophet database is located in New York City, and

the two Dalet databases are located in Washington, D.C. (Sirius 56.1 Statement~~ 25-26; Smith

Deel. ~~ 18-19.) Sirius maintains onsite backup copies of each database, as well as off site disaster

recovery copies of the Prophet database in New Jersey, and of the Dalet databases in Georgia.

3

Case 1:13-cv-05784-CM Document 88-1 Filed 11/14/14 Page 3 of 40

(Sirius 56.1 Statement~~ 25-26; Flo and Eddie 56.1 Statement~ 18; Smith Deel. ~~ 18-19; Smith

2/11/14 Dep. Tr. at 154:11-155:23, 156:15-157:7.)

The content of the three databases overlaps imperfectly. (Smith 2/11/14 Dep. Tr. at

156:7-14.) Some recordings may be stored on all three databases. Other recordings might be stored

only on Prophet, while others may be stored only on the Dalet databases. (Smith 2/11/14 Dep. Tr.

at 75:12-76:13.) Each database stores copies of pre-1972 recordings. (Smith 2/11/14 Dep. Tr. at

159:24-160:9; Smith 3/12/14 Dep. Tr. at 38:6-40:6.) At least 18,000 such copies are stored on the

Prophet database, and at least 24,000 are stored on each of the Dalet databases. (Flo and Eddie

56.l Statement~ 17; Smith 3/12/14 Dep. Tr. at 40:8-42:15, 43:15-44:19; see Smith 3/12/14 Dep.

Tr. at 61:19-62:11.) The Prophet database in New York contains 14 Turtles recordings, while the

Dalet databases in Washington, D.C., contain 71 such recordings. (Sirius 56.1 Statement~~ 29-

30; see Flo and Eddie 56.l Statement ~ 16; Smith Deel. ~~ 23-24.) The backup and disaster

recovery databases, like the Dalet and Prophet databases also contain pre-1972 recordings. (Smith

2111114 Dep. Tr. at 73:9-24.)

In addition to its three main databases, Sirius stores subsets of its music library on smaller

databases at off-site locations. (Sirius 56.1 Statement~ 33; Flo and Eddie 56.1 Statement~ 18;

Smith Deel.~ 27.) Specifically, Sirius maintains recordings from the Prophet database on smaller

databases in Nashville, Orlando, and Boston. (Smith 2/11/14 Dep. Tr. at 158:17-21, 159:6-9.)

Recordings from the Dalet databases reside on databases in Cleveland, Austin, and Los Angeles.

(Sirius 56.1 Statement~ 33; Smith 2/11/14 Dep. Tr. at 158:22-159:5.) These smaller databases are

used to produce on-location shows tailored to a particular musical style or on-air talent. (Smith

2111/14 Dep. Tr. at 158: 17-159:9, 163:4-21.) Some of these databases contain pre-1972 recordings,

and the Cleveland database contains at least one Turtles recording. (Sirius 56.1 Statement ~ 33;

4

Case 1:13-cv-05784-CM Document 88-1 Filed 11/14/14 Page 4 of 40

Smith 2/11/14 Dep. Tr. at 160:9-161:25, 162:25-163:3, 164:12-23; Smith 3/12/14 Dep. Tr. at

51:11-54:4.)

Sirius has also copied some recordings to a database that it transferred to Omnifone, a

UK-based firm that operates the My SXM service, described below. (Sirius 56.1 Statement~ 35;

Flo and Eddie 56.1 Statement~ 29; Smith 2/11/14 Dep. Tr. at 33:25-34:16, 165:4-11; Smith

3/12/14 Dep. Tr. at 107:15-21.) Although the parties agree that Omnifone continues to possess

those copies, Sirius claims that Omnifone can use them only for a very limited purpose: to provide

the customized My SXM service. (Sirius 56.1 Statement~ 35; Smith 2/11/14 Dep. Tr. at 35:9-25.)

The database transferred to Omnifone contains pre-1972 recordings, including Turtles recordings.

(Sirius 56.1 Statement~ 35; Smith Deel.~~ 27, 29; Smith 2/11114 Dep. Tr. at 165:7-15; Smith

3/12/14 Dep. Tr. at 54:22-55:14.)

Several hours before Sirius plays a sound recording on one of its programs, it creates an

additional copy of the recording on its "play-out server." (Sirius 56.l Statement~ 37; Flo and

Eddie 56.l Statement~ 20; Smith Deel. ~ 31; Smith 2/11/14 Dep. Tr. at 19:5-16.) Content is

broadcast directly from the play-out server; the copy ensures a smooth broadcast even if there is a

network disruption. (Sirius 56.l Statement~ 37; Smith Deel.~ 31; see Smith 2/11/14 Dep. Tr. at

114:15-116:16.) The copy on the play-out server is deleted once a recording is broadcast. (Sirius

56.1 Statement if 3 7; Smith Deel. if 31.) Each time a recording is performed, a new copy is created

on the play-out server. (Smith 2/11/14 Dep. Tr. at 117:9-11; Smith 3/12/14 Dep. Tr. at 89:2-7.)

Because Sirius has performed pre-1972 recordings, including Turtles recordings, it has necessarily

copied those recordings to its play-out server - many times, in fact. (Smith 3/12/14 Dep. Tr. at

88:2-20, 91 :5-16.) But Sirius does not knowhow many copies of those recordings have been made

on its play out server (Smith 3/12/14 Dep. Tr. at 89:8-91 :4.)

5

Case 1:13-cv-05784-CM Document 88-1 Filed 11/14/14 Page 5 of 40

To deliver content through its streaming service, Sirius employs a third party, Akami.

(Smith 2/11114 Dep. Tr. at 176:5-11; Smith 3/12/14 Dep. Tr. at 108:3-21.) Sirius sends a signal of

its programming to Akami; Akami in turn makes several temporary copies of the recordings that

Sirius sends it in order to facilitate its content distribution operation. (Smith 2/11/14 Dep. Tr. at

177:21-178:11.) Pre-1972 recordings are included in the programming that Sirius broadcasts and

Akami copies. (Smith 3/12/14 Dep. Tr. at 46:17-20.)

Sirius makes additional complete of recordings it has broadcast for its "Start Now"

service.1 (See Sirius 56.1 Statement~ 39; Flo and Eddie 56.1 Statement~~ 15, 22, 29; Geller Deel.,

Ex. 5; Smith Deel. ~ 33.) Start Now is a time-shifting feature. It allows users to start from the

beginning (up to five hours earlier) a program that Sirius is currently broadcasting. (Sirius 56.1

Statement~ 39; Smith Deel.~ 33; Smith Deel.~ 33.) To provide this service, Sirius keeps a running

cache of its broadcasts. (Sirius 56.1 Statement~ 39; Smith Deel.~ 33.) The cache is continually

updating to store the most recent five hours- earlier data is overwritten on a first-in-first-out basis.

(Sirius 56.1 Statement~ 39; Smith Deel. ~ 33.) Sirius acknowledges that copies of pre-1972

recordings have been cached for the Start Now feature. (Smith 2/11/14 Dep. Tr. at 214:9-12.)

Separately from the Start Now feature, Sirius also authorizes Quick Play, a third party, to

maintain a five hour cache of Sirius programming. (Smith 2111/14 Dep. Tr. at 179:5-17,

193:16-19.) Quick Play's role, performed in conjunction with Akami, is to deliver Sirius content

to mobile devices. (Smith 2111114 Dep. Tr. at 179:23-180:4.) As with the Start Now cache, Quick

Play has included pre-1972 recordings in its five-hour cache. (Smith 2/11/14 Dep. Tr. at 214:9-

19.)

1 Flo and Eddie describes the five-hour time-shifting as Sirius's "On Demand" feature. Although the parties are not entirely clear, it appears that "On Demand" and "Start Now" are separate features. The allegedly unauthorized copy made for time-shifting purposes is properly referred to as "Start Now." (See Geller Deel., Ex. 8; Smith Deel.~ 33.)

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In aid of broadcasting, Sirius also makes partial copies of some recordings, known as

"tips-and-tails" copies. (Sirius 56. l Statement~ 36; Flo and Edie 56. l Statement~ 19; Smith Deel.

~ 30; Smith 2/11/14 Dep. Tr. at 18:4-25.) These copies contain the final few seconds of one

recording and the first few seconds of the recording set to play after it. (Sirius 56.1 Statement~

36; Smith Deel.~ 30; Smith 2/11114 Dep. Tr. at 52:20-53:25.) Hosts of Sirius programs use the

tips-and-tails copies to properly time voice-overs in which they will, for example, announce the

titles of the recording that just played and the one about to play. (Sirius 56.1 Statement~ 36; Smith

Deel.~ 30; Smith 2/11/14 Dep. Tr. at 18:4-25.) A host will pre-record voice-overs against the

background of the tips-and-tails recording to ensure that a voice-over does not bleed over too far

into the body of a recording. After the voice-over is recorded, the tips-and-tails copy is deleted.

(Sirius 56. l Statement ~ 36; Smith Deel. ~ 30; Smith 2111114 Dep. Tr. at 55:5-56:10.) (There

appears to be one exception. The smaller regional "Margaritaville" database retains permanent

copies of tips-and-tails recordings. (Smith 2111114 Dep. Tr. at 83:2-84:6.)) Partial copies of pre-

1972 recordings, including Turtles recordings, have been made for tips-and-tails purposes. (Smith

2/11/14 Dep. Tr. at 56:11-18; Smith 3/12/14 Dep. Tr. at 80: 11-81 :4, 82: 14-20, 84:8-21.) But Sirius

does not know exactly how many such copies have been made. (Smith 3/12/14 Dep. Tr. at 81:6-

82:13.)

The most contentious factual dispute between the parties concerns buffering, which Flo

and Eddie describes as "progressive downloading." (Flo and Eddie 56.1 Statement~~ 30-31; Smith

2/11114 Dep. Tr. at 203:18-204:10.) Buffering, in general, refers to storing a small segment of

audio or video content in computer memory to ensure smooth playback. Sirius's content is buffered

at several points. Sirius buffers for four seconds at the "earth station," where content is uplinked

to a satellite. (Sirius 56.1 Statement, 38; Smith Deel. , 32; Smith 2111/14 Dep. Tr. at 119: 12-

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120:2.) The four second buffer allows Sirius to send two separate signals to its satellites. A user's

radio can then substitute one transmission for another if a connection is momentarily blocked, so

that playback will not be interrupted. (Sirius 56.1 Statement~ 38; Smith Deel.~ 32.) The satellites

then send back the two signals, where they are received by a "terrestrial repeater." (Sirius 56.1

Statement~ 38; Smith Deel.~ 32; Smith 2111/14 Dep. Tr. at 93:12-15.) The terrestrial repeaters

buffer the first signal received until they receive the second signal, generally on the order of a few

milliseconds later. (Smith 2/11/14 Dep. Tr. at 93:16-94:3, 135:18-136:25.) Finally, Sirius digital

radios store signals they receive in memory, creating a four-second buffer at the point where

subscribers listen to content. (Smith 2/11/14 Dep. Tr. at 96:3-97:7, 111:15-112:10; see Smith

2/11/14 Dep. Tr. at 137:14-18 (noting that there are two distinct four-second buffers).)

Some individual radio receivers create a buffer of up to 30 minutes on a channel to which

a subscriber is listening. (Sirius 56.1 Statement~ 44; Smith Deel. ~ 35.) That buffer allows users

to "replay" a few minutes of a show they miss. (Sirius 56.1 Statement~ 44; Smith Deel.~ 35.) The

replay buffer is overwritten on a rolling first-in, first-out basis and is erased if a user changes the

channel or turns off the radio. (Sirius 56. l Statement~ 44; Smith Deel. ~ 35.) Finally, mobile

phones or other internet-connected devices also create a buffer when they stream Sirius's content.

(Sirius 56.1 Statement ~ 43; Smith Deel. ~ 34.) Because buffers are created any time Sirius

broadcasts a recording, Sirius has of course created buffers ofpre-1972 recordings. (Smith 2/11/14

Dep. Tr. at 138:7-13.)

Flo and Eddie emphasizes that every second of a buffered recording will, at some point, be

cached in the buffer, even if no complete copy is ever created. Sirius stresses that buffers are

constantly adding new data and removing old data. At any one time, a buffer contains at most a

few seconds of content, which may include portions of more than one recording.

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The long and short of this is - Sirius makes multiple copies, temporary, permanent, whole

or partial, during its broadcast process; and it performs the copies it makes. Furthermore, as to pre-

1972 sound recordings, it does so without obtaining licenses or paying royalties. Sirius has not

obtained a license to copy most of the pre-1972 recordings stored in its various databases. (Frear

3/12/14 Dep. Tr. at 77:20-79:25.) Nor has Sirius obtained licenses to perform most of those

recordings over the internet, (Frear 3/12/14 Dep. Tr. at 80:2-21), or to authorize third parties

Omnifone or Akami to stream its programming. (Frear 3/12114 Dep. Tr. at 90:11-91:5.) Sirius has

not paid royalties to copy or perform most of its pre-1972 recordings. (Frear 3/12/14 Dep. Tr. at

69:10-16.)

For all the copying it does do, it's worth noting what Sirius does not do. Sirius does not

currently allow users to download and store complete copies of any recordings. (Sirius 56.1

Statement~~ 24, 40, 41, 43; Smith Deel.~ 14.) In this way, Sirius differs from file-sharing services

such as Napster and Limewire. (Sirius 56.l Statement~ 41; Smith Deel.~ 14.)

Nor does Sirius allow users to listen to a particular recording whenever they choose to do

so. In this way, Sirius differs from some internet radio services like Spotify. (Sirius 56.1 Statement

~ 41; Smith Deel. ~ 14.) Users can customize the programming they receive to a limited extent

using the "My SXM" feature. (Sirius 56.l Statement~ 35; Flo and Eddie 56.1 Statement~ 15;

Geller Deel., Ex. 8; Smith Deel.~ 28.) For example, a user could choose to emphasize folk music

and deemphasize rock music on a 70s channel. But that user could not choose to listen only to Bob

Dylan, much less a particular Bob Dylan recording, while excluding anything by Led Zeppelin.

(See Sirius 56.1 Statement~ 41; Smith Deel.~~ 14, 28.)

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II. Procedural Background

Flo and Eddie filed its initial complaint on August 16, 2013. (Docket # 1.) In response to a

motion to dismiss filed by Sirius, Flo and Eddie filed an amended complaint on November 13,

2013. (Docket #32.)

Flo and Eddie has filed companion suits in California and Florida. (See Flo & Eddie, Inc.

v. Sirius XM Radio, Inc., No. 13-cv-23182 (S.D. Fla.); Flo & Eddie, Inc. v. Sirius XM Radio, Inc.,

No. 13-cv-05693 (C.D. Cal.)). In each case, Flo and Eddie has asserted state-law claims under the

law of the state in which the suit was filed. The district court in the California suit granted Flo and

Eddie's motion for summary judgment as to liability. The district court in the Florida suit has not

yet issued a decision on a pending motion by Flo and Eddie for summary judgment as to liability.

To understand why Flo and Eddie seeks relief under state law, one has to know a bit about

federal copyright law. Since 1831, federal law has protected copyrights in musical compositions.

See 17 U.S.C. § 102(a)(2); Act of Feb. 3, 1831, ch. 16, § 1, 4 Stat. 436. "The creator of a musical

composition has long had a right of exclusive public performance of that musical piece."

Bonneville Int'/ Corp. v. Peters, 347 F.3d 485, 487 (3d Cir. 2003). Thus, when radio stations

publicly perform - that is, broadcast - copyrighted musical compositions, they pay royalties to the

holder of the copyright in the song - generally the composer or his heirs - for the privilege of

doing so. Woods v. Bourne Co., 60 F.3d 978, 983-84 (2d Cir. 1995). Those royalties are typically

collected and distributed by professional clearinghouses, such as the American Society of

Composers, Authors and Publishers ("ASCAP"). Id.; see Broad. Music, Inc. v. Columbia Broad.

Sys., Inc., 441U.S.1, 4-5 (1979) (describing ASCAP).

A copyright in a musical composition is not same as a copyright in a sound recording of a

performance of that composition. And this lawsuit not about musical compositions. (Pl. Opp.

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Mem. at 10 n.6.) As far as the Court is aware, Sirius pays royalties to the holder of the copyright

for the right to perform the Turtles' musical compositions.

This suit is about copyright in sound recordings, which is a different animal. A sound

recording is a medium in or on which a particular performance of a musical composition (song) is

fixed for posterity and for playback. See 17 U.S.C. § 101. In essence, a copyright in a sound

recording is a copyright in the performance - not in the work being performed.

Congress only made sound recordings eligible for federal statutory copyright protection in

1971. See Sound Recordings Act, Pub. L. No. 92-140, 85 Stat. 391 (1971). Furthermore, that

protection was limited in two important ways.

First, Congress did not originally provide sound recording copyright holders with an

exclusive right to publicly perform their works. Bonneville Int'/ Corp., 347 F.3d at 487. Thus, the

owners of copyrights in sound recordings, unlike copyright holders in musical compositions were

not entitled to compensation under federal law when radio stations broadcast their recordings

between 1972 and 1995. Id. In 1995, Congress added a limited public performance right for sound

recordings, giving holders of sound recording copyrights the "exclusive right[] ... to perform the

copyrighted work publicly by means of a digital audio transmission." 17 U.S.C. § 106. Federal

copyright law still provides no exclusive right to public performance of sound recordings by any

other means. See Arista Records, LLC v. Launch Media, Inc., 578 F .3d 148, 153-54 (2d Cir. 2009).

The second important limitation of the 1971 Act was that it operated prospectively.

Recordings "fixed" (recorded) prior to February 15, 1972 were not, and still are not, eligible for

federal copyright protection. See 17 U.S.C. § 301(c). The Turtles recordings were all fixed before

February 15, 1972. Therefore, none is eligible for federal copyright protection.

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Instead of adopting a federal copyright scheme for pre-1972 sound recordings, Congress

left the issue to the states. For works protected by federal law, Congress broadly preempted any

"equivalent right in any such work under the common law or statutes of any State." Id. § 301(a).

For sound recordings fixed before February 15, 1972, however, Congress expressly did "not ...

annul[] or limit[]" "any rights or remedies under the common law or statutes of any State." Id.

§ 30l(c).

Flo and Eddie argues that New York provides pre-1972 sound recording owners with rights

and remedies under its common law. Flo and Eddie further argues that New York's common law

copyright protection, which extends to pre-1972 sound recordings, prohibits both reproducing and

publicly performing those recordings. It also argues the law of unfair competition provides similar

protection.

Sirius has moved for summary judgment. (Docket #46.) It argues that: (1) New York

common law copyrights in pre-1972 sound recordings do not afford an exclusive right of public

performance; (2) the copies Sirius made of Turtles recordings are protected by fair use; (3)

sustaining Flo and Eddie's claims would violate the Dormant Commerce Clause; and (4) Flo and

Eddie's entire action is barred by the doctrine of laches.

DISCUSSION

I. Standard

A party is entitled to summary judgment when there is "no genuine issue as to any material

fact" and the undisputed facts warrant judgment for the moving party as a matter oflaw. Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); see FED. R. Civ. P. 56(a), (c). On a motion

for summary judgment, the court must view the record in the light most favorable to the nonmoving

party and draw all reasonable inferences in its favor. Matsushita Elec. Indus. Co. Ltd. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986).

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The moving party has the initial burden of demonstrating the absence of a disputed issue

of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once such a showing has been

made, the nonmoving party must present "specific facts showing that there is a genuine issue for

trial." Beard v. Banks, 548 U.S. 521, 529 (2006). The party opposing summary judgment "may

not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d

105, 114 (2d Cir. 1998). Moreover, not every disputed factual issue is material in light of the

substantive law that governs the case. "Only disputes over facts that might affect the outcome of

the suit under the governing law will properly preclude summary judgment." Anderson, 477 U.S.

at 248.

To withstand a motion for summary judgment, the nonmoving party "must do more than

simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S.

at 586. Instead, sufficient evidence must exist upon which a reasonable jury could return a verdict

for the nonmoving party. "Summary judgment is designed ... to flush out those cases that are

predestined to result in directed verdict." Lightfoot v. Union Carbide Corp., 110 F .3d 898, 907 (2d

Cir. 1997).

II. Sirius Cannot Invoke the Defense of Laches

Sirius argues that Flo and Eddie's entire suit is barred by the defense of }aches. But it is

not.

"The defense of laches is unavailable in [an] action at law commenced within the period

of limitations." Cadlerock, L.L.C. v. Renner, 898 N.Y.S.2d 127, 128 (App. Div. 2010); see

Onanuga v. Pfizer, Inc., 369 F. Supp. 2d 491, 499 (S.D.N.Y. 2005); Coit v. Campbell, 82 N.Y.

509, 512-13 (1880). Flo and Eddie has brought an action at law for damages. Flo and Eddie's

unfair competition claim - grounded in misappropriation - is subject to a three-year statute of

limitations. Sporn v. MCA Records, Inc., 451N.Y.S.2d750, 751 (App. Div. 1982) aff'd, 58 N.Y.2d

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482 (1983). The claim for common law copyright infringement is also an action at law, Arnstein

v. Porter, 154 F.2d 464, 468 (2d Cir. 1946); Bercovici v. Chaplin, 7 F.R.D. 61, 62 (S.D.N.Y. 1946),

subject to a six year statute of limitations. Capitol Records, LLC v. Harrison Greenwich, LLC, 986

N.Y.S.2d 837, 838 (Sup. Ct. 2014). Flo and Eddie seeks damages on both claims, and Sirius does

not argue that they are brought outside the applicable statutes of limitations. Thus, those claims

are not barred by laches.

Nor does laches bar Flo and Eddie's prayer for an injunction. That request "for an equitable

remedy" is made "in aid of or to enforce a legal right." Bohemian Brethren Presbyterian Church

v. Greek Archdiocesan Cathedral of Holy Trinity, 405 N.Y.S.2d 926, 929 (Sup. Ct. 1978) aff'd,

416 N.Y.S.2d 751 (App. Div. 1979) (citing Galway v. Metro. Elevated Ry. Co., 128 N.Y. 132

(1891)). In that situation, the defense of laches is similarly unavailable. The statute of limitation

controls both the legal action for damages and the equitable remedy. Id.; see Trust for Certificate

Holders of Merrill Lynch Mortg. Passthrough Certificates Series 1999-CJ v. Love Funding Corp.,

No. 04 Civ. 9890, 2005 WL 2582177, at *8 & n.87 (S.D.N.Y. Oct. 11, 2005).

III. Flo and Eddie Holds the Valid Common Law Copyright in the Turtles' Sound Recordings

As explained above, federal law provides copyright protection for sound recordings fixed

on or after February 15, 1972. See 17 U.S.C. §§ 102(a)(7), 301(c). As to those sound recordings,

Congress broadly preempted equivalent state-law protections. Id. § 30l(a). Federal law does not,

however, provide copyright protection for sound recordings fixed before February 15, 1972.

Furthermore, Congress expressly declined to preempt whatever common law copyright protection

was provided to those recordings by state law until February 15, 2067. Id. § 301(c).

New York has elected to "fill th[ e] void" Congress left, by continuing to enforce its

preexisting body of copyright common law for pre-1972 sound recordings. Capitol Records, Inc.

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v. Naxos of Am., Inc. (Naxos), 4 N.Y.3d 540, 559-60, 565 (2005); see Capitol Records v. Mercury

Records Corp., 221 F.2d 657, 662-63 (2d Cir. 1955); Firma Melodiya v. ZYX Music GmbH, 882

F. Supp. 1306, 1316 (S.D.N.Y. 1995). Under that law, artists can acquire a common law copyright

in "any original material product of intellectual labor" A.J. Sandy, Inc. v. Junior City, Inc., 234

N.Y.S.2d 508, 510 (App. Div. 1962) - including sound recordings - by expending "time, effort,

money, and great skill" in its creation. 104 N.Y. JUR. 2o TRADE REGULATION§ 262; see RCA Mfg.

Co. v. Whiteman, 114 F.2d 86, 88 (2d Cir. 1940). The term "any original material product of

intellectual labor" includes sound recordings. See, e.g., Capitol Records, Inc. v. Greatest Records,

Inc., 252 N.Y.S.2d 553, 554-55 (Sup. Ct. 1964); Metro. Opera Ass 'n, Inc. v. Wagner-Nichols

Recorder Corp., 101N.Y.S.2d483, 492-93 (Sup. Ct. 1950) aff'd, 107 N.Y.S.2d 795 (App. Div.

1951 ).

The Turtles originally acquired a common law copyright in their sound recordings by

expending time, effort, money and skill to create them. That copyright was then transferred to

White Whale, and eventually to Flo and Eddie, which now owns the sound recordings. Sirius does

not contest Flo and Eddie's claim to possess a common law copyright in the Turtles recordings

(though it insinuates that some of the underlying ownership transfers are undocumented). Rather,

Sirius contends that Flo and Eddie's rights as holder of the copyright in the sound recordings does

not give them the exclusive right to publicly perform those works.

IV. Flo and Eddie's Common Law Copyright Provides Exclusive Rights to Reproduce and Publicly Perform Turtles Recordings

Flo and Eddie alleges that Sirius has infringed its common law copyright by ( 1)

reproducing (making copies of) the master recordings, and (2) performing those recordings (or

the illicit copies of them) publicly.

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New York unquestionably provides holders of common law copyrights in sound recordings

with an exclusive right to reproduce those recordings. See Capitol Records, 221 F.2d at 663;

Naxos, 4 N.Y.3d at 559-60, 563-64. Sirius does not challenge that proposition, although it argues

that its reproductions of Turtles sound recordings constitute fair use. That issue will be discussed

below.

Whether New York provides holders of common law copyrights in sound recordings with

an exclusive right to publicly perform those recordings presents a much thornier question - one of

first impression, and one that has profound economic consequences for the recording industry and

both the analog and digital broadcast industries. My first task is to predict how I believe the New

York Court of Appeals would rule on this question, which no appellate court in New York has yet

confronted. City of Johnstown, NY v. Bankers Standard Ins. Co., 877 F. 2d 1146, 1153 (2d Cir.

1989).2

I conclude that the New York Court of Appeals would recognize the exclusive right to

public performance of a sound recording as one of the rights appurtenant to common law copyright

in such a recording.

"In general, the rights under common law copyright ... are at least co-extensive with the

rights commanded under the Copyright Act." 2 MELVILLE B. NIMMER AND DAVID NIMMER,

NIMMER ON COPYRIGHT § 8(C](2] (Matthew Bender, Rev. Ed.). But when New York first

recognized common law copyrights in sound recordings - over 50 years ago - Congress had not

yet authorized any federal copyright protection for sound recordings. Naxos, 4 N.Y.3d at 560.

2 One very recent decision of the New York State Supreme Court appears to recognize just the sort of public performance right that Sirius says does not exist. See Capitol Records, LLC v. Harrison Greenwich, LLC, 984 N.Y.S.2d 274, 275-76 (Sup. Ct. 2014); Decision and Order, Capitol Records, LLC v. Harrison Greenwich, LLC, No. 652249/2012 (N.Y. Sup. Ct. May 13, 2014). But that Decision and Order does not explain its ruling and cites no prior case Jaw recognizing any public performance right in sound recordings, so I can take no guidance from it.

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Thus, the protections New York common law offers to holders of copyrights in sound

recordings cannot be determined by reference to comparable federal protection. Instead, I must

look to the background principles and history of New York copyright common law. See id at 546

("[W]hen examining copyright law, a page of history is worth a volume of logic." (internal

citations and quotation marks omitted)).

The common law typically "protects against unauthorized reproduction of copies or

phonorecords, unauthorized distribution by publishing or vending, and unauthorized

performances." 2 NIMMER ON COPYRIGHT§ 8[C][2] (internal citations omitted) (emphasis added);

see Letter Edged in Black Press, Inc. v. Pub. Bldg. Comm 'n of Chicago, 320 F. Supp. 1303, 1308

(N.D. Ill. 1970); cf Swatch Grp. Mgmt. Servs. Ltd. v. Bloomberg L.P., 756 F. 3d 73, 81 (2d Cir.

2014) (describing the bundle). New York courts have long afforded public performance rights to

holders of common law copyrights in works such as plays, Palmer v. De Witt, 47 N.Y. 532, 535-

36, 540-41 (1872); Roberts v. Petrova, 213 N.Y.S. 434, 434-37 (Sup. Ct. 1925); French v.

Maguire, 55 How. Pr. 471, 472-73, 479-80, 1878 WL 11310 (N.Y. Sup. Ct. 1878) and films,

Brandon Films, Inc. v. Arjay Enter., Inc., 230 N.Y.S.2d 56, 57-58 (Sup. Ct. 1962). The Second

Circuit concluded over three decades ago that New York would recognize a public performance

right in compilations of film clips. Roy Exp. Co. v. Columbia Broad. Sys., Inc., 672 F.2d 1095,

1097-99, 1101-04 (2d Cir. 1982) (applying New York law).

Nonetheless, Sirius advances a number of arguments for why New York common law

copyright in sound recordings does not include any public performance right.

Sirius principally argues that no such right exists because New York case law contains no

discussion of public performance rights in sound recordings. But the exact same argument could

have been made (and undoubtedly was made, and rejected) in Naxos- a case decided only in 2005,

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more than a century after sound recordings were invented. The very fact that Naxos was decided

in favor of the common law copyright holder, after more than a century of judicial silence, means

that this court can infer nothing - certainly not that the common law copyright in sound recordings

does not encompass all of the rights traditionally accorded to copyright holders in other works,

including the right of public performance - from the fact that this is the first case to raise the issue.

Of course, the conspicuous lack of any jurisprudential history confirms that not paying

royalties for public performances of sound recordings was an accepted fact of life in the

broadcasting industry for the last century. So does certain testimony cited by Sirius from record

industry executives, artists and others, who argued vociferously before Congress that it was unfair

for them to operate in an environment in which they were paid nothing when their sound recordings

were publicly performed. See, e.g., Digital Performance Rights: Hearing Before the House

Judiciary Committee Subcommittee on Courts and Intellectual Property on HR. 15 06, 104th

Cong. (1995) (statement of Edward 0. Fritts, President & CEO, Nat'l Ass'n of Broadcasters), 1995

WL 371107; H. Comm. On Patents, 74th Cong., Hearings on Revision of Copyright Laws 622

(Comm. Print. 1936) (statement of H.A. Huebner, representing Brunswick Record Corp. and

Columbia Phonograph Co.); see also Sirius Summary Judgment Mem. at 9-12. That they were

paid no royalties was a matter of statutory exemption under federal law; that they demanded no

royalties under the common law when their product as ineligible for federal copyright protection

is, in many ways, inexplicable.

But acquiescence by participants in the recording industry in a status quo where recording

artists and producers were not paid royalties while songwriters were does not show that they lacked

an enforceable right under the common law - only that they failed to act on it. The United States

Copyright Office, in its most recent commentary on this subject, concluded, "While, as a factual

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matter, a state may not have affirmatively acknowledged a public performance right in pre-1972

recordings as of the Office's 2011 report, the language in the report should not be read to suggest

that a state could not properly interpret its law to recognize such a right." Music Licensing Study:

Second Request for Comments, 79 Fed. Reg. 42,833-01, 42,834 n.3 (July 23, 2014).

The United States Supreme Court admonished recently against reading too much into a

lack of precedent for a point:, stating (in another context), "It should be unsurprising that such a

significant matter has been for so long judicially unresolved." D.C. v. Heller, 554 U.S. 570, 625

(2008). The Supreme Court, for example, failed to grapple with many fundamental constitutional

questions for the first 150 years of the Constitution's existence. Id. at 625-26. I thus do not read

too much into the fact that New York courts have never squarely addressed a particular feature of

state copyright law in the context of sound recordings.

In fact, there is precedent for this kind of judicial silence in the copyright arena. Prior to

1976, choreography was deemed ineligible for any sort of copyright protection, under federal or

common law. Courts declined to offer copyright protection to dance on the theory that

choreographic works did not "tell" a story, and thus could not be considered copyright-eligible

"dramas." See, e.g., Seltzer v. Sunbrock, 22 F. Supp. 621, 628-29 (S.D. Cal. 1938); Fuller v. Bemis,

50 F. 926, 929 (S.D.N.Y. 1892). That changed with the 1976 amendments to the Copyright Act,

which explicitly recognized "choreographic works" as copyright-eligible. See Copyright Act of

1976, Pub. L. No. 94-553, 90 Stat. 2541, 2544-45. Since then, an entire body of law has evolved

concerning dance copyright - not all at once, or all as soon as the 1976 Act became effective, but

over the ensuing decades.

So it is not surprising that sound recordings, like choreographic works, received little

attention from courts before they became eligible for statutory copyright. It is likely that the issue

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was just not on anyone's radar screen until Congress granted a public performance right in more

recent sound recordings.

An arguably stronger argument can be made that years of judicial silence implies exactly

the opposite of what Sirius contends - not that common law copyright in sound recordings carries

no right of public performance, but rather that common law copyright in sound recordings comes

with the entire bundle of rights that holders of copyright in other works enjoy. No New York case

recognizing a common law copyright in sound recordings has so much as suggested that right was

in some way circumscribed, or that the bundle of rights appurtenant to that copyright was less than

the bundle of rights accorded to plays and musical compositions. The expansive nature of New

York's common law protection for artistic works that do not enjoy federal statutory copyright

protection was announced over fifty years ago, in Metropolitan Opera Association v. Wagner­

Nichols Recorder Corp., supra - a case protecting property rights in sound recordings. There, the

court said, "The law has ... protected the creative element in intellectual productions-that is, the

form or sequence of expression, the new combination of colors, sounds or words presented by the

production ... against appropriation by others." Metro. Opera, 101 N.Y.S.2d at 493.

Modem federal law supports the notion that an express carve-out is required in order to

circumscribe the bundle of rights appurtenant to copyright. When Congress amended the

Copyright Act in 1971 to protect copyrights in sound recordings, it announced quite explicitly that

sound recordings would not carry any right to public performance. The relevant section of Title 17

limits copyright in sound recordings to the rights, "To reproduce and distribute to the public by

sale or other transfer of ownership, or by rental, lease, or lending, reproductions of the copyrighted

work if it be a sound recording." Sound Recordings Act, Pub. L. No. 92-140, 85 Stat. 391, 391

( 1971 ). The 1971 Act further provided that "the exclusive right of the owner of a copyright in a

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sound recording to reproduce it is limited to the right to duplicate the sound recording in a tangible

form," and that ''this right does not extend to ... reproductions mad~ by transmitting organizations

exclusively for their own use." Id.

This express carve-out for public performance strongly suggest that, absent such an explicit

limitations, holder of sound recording copyrights would have enjoyed the entire bundle of rights

traditionally granted to copyright holders - including the right to public performance, which has

been part of the bundle of rights enjoyed by holders of federal copyrights in performable works

since 1897 or earlier. Put otherwise, if public performance rights were not part of the normal bundle

of rights in a copyright, Congress would not have needed to carve out an exception specifically for

sound recordings. See Cent. Virginia Cmty. Coll. v. Katz, 546 U.S. 356, 375 n.12 (2006) (same

principle in the context of bankruptcy law).3

3 The history of Congressional grants of public performance rights is convoluted. The 1831 Act, which first granted copyright protection to authors of musical compositions, did not provide a public performance right. See Act of Feb. 3, 1831, ch. 16, § 1, 4 Stat. 436. When Congress added copyright protection for "dramatic composition[ s ]" in 1856, it expressly included a "sole right to ... perform, or represent" the composition, without providing any comparable right for copyrights in other works. Act of Aug. 18, 1856, ch. 169, 11Stat.138, 139. That state of affairs continued through the general copyright law revisions of 1870 in which Congress expressly provided a "public[] perform[ance]" right for dramatic compositions but not for musical compositions. Act ofJuly 8, 1870, ch. 230, § 86, 16 Stat. 198, 212. Finally, in 1897, Congress added a public performance right specifically for musical compositions. Act of Jan. 6, 1897, ch. 4, 29 Stat. 481, 481-82. When Congress revised the copyright law in 1909, it continued to provide the holders of copyrights in dramatic compositions and musical compositions with the exclusive right to "perform [their works] publicly." Act of Mar. 3, 1909, ch. 320, § 1, 35 Stat. 1075, 1075. Other types of works, however, did not enjoy that same privilege.

By the time Congress enacted copyright protection for sound recordings, public performance rights were firmly entrenched for musical compositions and dramatic compositions: the two kinds of works to which public performance rights could sensibly be provided. 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. That principle applies with even more force to common law copyright, which generally includes fewer limitations on exclusive rights than does federal statutory law. See Shyamkrishna Balganesh, The Pragmatic Incrementalism of Common Law Intellectual Property, 63 V AND. L. REV. 1543, 1563 (2010).

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Sirius also raises several policy arguments against public performance rights in pre-1972

sound recordings. 4

Sirius claims that affording public performance rights would not serve the underlying

purposes of copyright law because pre-1972 recordings already exist and further rights cannot

create incentives for the creation of new pre-1972 recordings.

But the same criticism could be leveled against the New York Courts of Appeals' decision

in Naxos. There, in answer to a certified question from the Second Circuit, the New York Court of

Appeals held that, "New York provides common-law copyright protection to sound recordings not

covered by the federal Copyright Act, regardless of the public domain status in the country of

origin." Naxos, 4 N.Y.3d at 563. The plaintiffs in Naxos owned several sound recordings made in

the 1930s, which had fallen into the public domain in the United Kingdom where they were

originally copyrighted. Allowing the Naxos plaintiffs to assert their common law right of

reproduction could not possibly have created any incentive to produce new sound recordings -

especially since all newly created sound recordings enjoy exclusive copyright protection under

federal law. Yet the New York Court of Appeals held that those plaintiffs could proceed on their

common law copyright infringement claims. From that holding, I conclude that New York does

not protect common law copyrights only when that protection creates incentives for new similar

works.

4 Sirius frames these arguments with the general principle that federal courts should apply state common law as it currently stands- not as they think it should be. That is a correct statement of the role of federal courts. But I am not applying the law as I think it "should" be, but as I "predict how the New York Court of Appeals would resolve the ... question." DiBella v. Hopkins, 403 F.3d 102, 111 (2d Cir. 2005). Unlike the Second Circuit, I do not have the option to certify even profoundly uncertain issues of state law to the Court of Appeals.

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New York is hardly unique in this regard. Each time that Congress is asked to extend the

term of copyright protections (a request not infrequently made), someone observes that allowing

the children and grandchildren of creative people long dead to collect royalties does nothing to

encourage creativity, and so cuts against both the traditional argument in favor of copyright and

undermines the historic belief that, at some point, a Government-created monopoly on intellectual

property should yield to an expanded public use. Congress has rejected that perfectly sensible

argument time and time again. I see no reason to conclude that either statutory or common law

copyright any longer focuses on fostering future creativity, as opposed to rewarding past creativity.

Sirius also claims that recognizing public performance rights in pre-1972 sound recordings

would unjustly punish good faith investors who provided capital for Sirius.

Investors always assume the risk that whatever economic model they are working off will

turn out not to be correct, so investor expectations are rarely "settled" enough to provide a

justification for declining to apply the correct legal rule.

However, I question whether the investors would be truly surprised if Sirius were to have

to pay royalties in order to perform pre-1972 sound recordings. Sirius, which broadcasts

exclusively in non-analog form, must pay royalties under federal law in order to broadcast post-

1972 sound recordings. All Flo and Eddie seeks here is the right to receive royalties under state

law for the digital broadcasting of its pre-1972 recordings - hardly a shocking development in the

world of digital broadcasting.

Indeed, as a matter of public policy there would seem to be good reason to harmonize New

York's common law of copyright with its federal statutory counterpart, see 2 NIMMER ON

COPYRIGHT§ 8[C][2], and recognizing public performance rights in pre-1972 sound recordings

would conform the two.

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In 1995, Congress added a limited right for sound recording copyright holders to publicly

perform their works "by means of a digital audio transmission." 17 U.S.C. § 106. In creating that

limited right, Congress carefully balanced the interests of all affected parties. As Senator Hatch

explained, the bill establishing a public performance right was "forward looking. It largely leaves

in place mature businesses that have grown up under the old copyright regime [i.e., analog

broadcasting]. It seeks to ensure that creators of sound recordings will have the rights they have

been denied until now as the digital age dawns." 141 Cong. Rec. 22,775, 22,779 (1995). By

establishing a "new digital performance right [that] applies to digital audio transmission ... [but]

not [] to traditional broadcasts and most other free transmissions" Congress "attempted to balance

the competing interests of the various copyright owners as well as users." Id; see H.R. Rep. No.

104-274, at 13-15 (1995); S. Rep. No. 104-128, at 13-17 (1995); see generally Kimberly L. Craft,

The Webcasting Music Revolution Is Ready to Begin, As Soon As We Figure Out the Copyright

Law: The Story of the Music Industry at War with Itself, 24 HASTINGS COMM. & ENT. L.J. 1, 9-13

(2001) (discussing the legislative history of the 1995 Act).

Sirius would of course respond that any public performance right that the New York Court

of Appeals might recognize would be broader than the right legislated by Congress, encompassing

analog broadcasting, the "mature" (some would say dying) industry that Congress exempted from

the payment of royalties for public performance. And Sirius quite rightly notes that the right

Congress has created for post-1972 works is part of a carefully crafted scheme that operates

nationwide, whereas common law copyrights are the province of the several states - raising the

specter of administrative difficulties in the imposition and collection of royalties, which would

ultimately increase the costs consumers pay to hear broadcasts, and possibly make broadcasts of

pre-1972 recordings altogether unavailable.

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Sirius may well be correct that a legislative solution would be best. But the common law,

while a creature of the courts, exists to protect the property rights of the citizenry. And courts are

hardly powerless to craft the sort of exceptions and limitations Congress has created, or to create

a mechanism for administering royalties. Sirius forgets that it was this court, not Congress, that,

back in 1950 fashioned a consent decree that set up what became the most successful mandatory

licensing and royalty scheme in the world - a system still administered by a judge of this court,

which functions as a rate court for the major licensing houses like ASCAP and BMI. See United

States v. Am. Soc'y a/Composers, Authors and Publishers, No. CIV.A. 42-245, 1950 WL 42273

(S.D.N.Y. Mar. 14, 1950), amended (July 17, 1950); see also United States v. Broad Music, Inc.,

No. 64 CIV. 3787, 1994 WL 901652, (S.D.N.Y. Nov. 18, 1994) (modifying 1966 BMI consent

decree). New York courts are capable of fashioning appropriate relief- and even of recognizing

only such public performance rights in pre-1972 sound recordings as conform to rights statutorily

conferred on holders of statutory copyright in post-1972 recordings.

In short, general principles of common law copyright dictate that public performance rights

in pre-1972 sound recordings do exist. New York has always protected public performance rights

in works other than sound recordings that enjoy the protection of common law copyright. Sirius

suggests no reason why New York - a state traditionally protective of performers and performance

rights - would treat sound recordings differently.

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V. Sirius Infringed Flo and Eddie's Common Law Copyright and Engaged in Unfair Competition

A. Common-Law Copyright Infringement

1. Sirius Reproduced Flo and Eddie's Copyrighted Recordings Without Authorization

"A copyright infringement cause of action in New York consists of two elements: (1) the

existence of a valid copyright; and (2) unauthorized reproduction of the work protected by the

copyright." Naxos, 4 N.Y.3d at 563.

As explained above, Flo and Eddie holds a valid copyright in the Turtles recordings. The

record clearly shows that Sirius reproduced those recordings without authorization. In particular,

Sirius reproduced Turtles recordings for its three main databases and associated backups, as well

as for the smaller on-site databases, including the database it transferred to Omnifone. Sirius also

made several temporary but complete copies of Turtles recordings: on its play-out server each time

a Turtles song was performed, in each of the five-hour caches, and in the half-hour buffer available

on some in-vehicle satellite radios.

To be sure, some of the alleged copies may not qualify as infringing reproductions.

Buffering, for example, does not constitute infringement under federal law. See Cartoon Network

LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 127-30 (2d Cir. 2008). The tips-and-tails partial

copies may be too fragmentary or ephemeral to constitute infringement. But Sirius does not

seriously dispute that many of the copies it made of Turtles recordings - in particular the permanent

copies - amount to reproductions as a matter of law.

In reproducing Turtles recordings, Sirius acted without authorization. As noted above,

Sirius has not obtained licenses for using pre-1972 recordings, either to store those recordings in

its databases or to broadcast them. Nor has Sirius obtained licenses or paid royalties for transferring

those recordings to third parties.

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Sirius argues instead that it is not liable for infringement because it did not distribute the

Turtles recordings. Sirius supports that argument with language from Naxos, "Copyright

infringement is distinguishable from unfair competition, which in addition to unauthorized

copying and distribution requires competition in the marketplace or similar actions designed for

commercial benefit." 4 N. Y.3d at 563. This language, according to Sirius, establishes that

"distribution" of a copyrighted work is an element of common law copyright infringement. A

distribution requirement would be consistent with Sirius's assertion that New York does not

provide any exclusive right to publicly perform sound recordings.

But as I explained above, New York law does provide copyright holders with just that

exclusive performance right for sound recordings. To the extent that distribution is an element of

common law copyright infringement, publicly performing sound recordings is an act of

distribution. Otherwise, Sirius cannot explain how New York courts could have recognized

infringement claims alleging that defendants publicly performed copyrighted works without

authorization. See, e.g., Brandon Films, 230 N.Y.S.2d at 57-58; French, 55 How. Pr. at 472-73,

479-80, 1878 WL 11310.

In addition to Naxos, Sirius cites Hemingway's Estate v. Random House, Inc., 279

N.Y.S.2d 51 (Sup. Ct.) affd sub nom. 285 N.Y.S.2d 568 (App. Div. 1967) aff'd sub nom. 23

N.Y.2d 341 (1968), in which the New York Supreme Court held that a publisher did not infringe

the plaintiffs copyright by including gallery proofs in a few copies of a book before the book was

finally published. Id. at 54-56. But public performance rights were not at issue in Hemingway's

Estate, and the Supreme Court never suggested in its opinion that public performance could not

be a form of distribution. Rather, on the facts of the case, that court found that, "No use of any

kind was made of the original galley proofs." Id. at 55.

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One might argue that Flo and Eddie divested itself of its copyright in the Turtles sound

recordings by "publishing" those recordings. See Jewelers' Mercantile Agency v. Jewelers' Weekly

Pub. Co., 155 N. Y. 241, 24 7 (1898). Publication is a term of art in the common law of copyright

and it does not encompass every dissemination of a copyrighted work, even if the work reaches

thousands of people. Jewelers' Mercantile Agency, 155 N.Y. at 247-48; Hemingway's Estate, 279

N.Y.S.2d at 55.

But there is a good reason why Sirius did not make this argument. In the context of sound

recordings, "it has been the law in [New York] for over 50 years that, in the absence of federal

statutory protection, the public sale of a sound recording otherwise unprotected by statutory

copyright does not constitute a publication sufficient to divest the owner of common-law copyright

protection." Naxos, 4 N.Y.3d at 560; see also Metro. Opera Ass'n, Inc. v. Wagner-Nichols

Recorder Corp., 101N.Y.S.2d483, 493-95 (Sup. Ct. 1950) aff'd, 107 N.Y.S.2d 795 (App. Div.

1951 ). Public sale is exactly what Flo and Eddie have done with the Turtles sound recordings.

Under Naxos, that does not constitute publication. Flo and Eddie therefore retains its common law

copyright in those recordings.

2. Sirius's Creation of Multiple Complete Copies of Flo and Eddie's Sound Recordings Cannot Be Considered Not Fair Use

Although the case law is sparse, it appears that New York recognizes fair use as a defense

to copyright infringement. See Fendler v. Morosco, 253 N.Y. 281, 291 (1930); EM/ Records Ltd.

v. Premise Media Corp., L.P., 2008 N.Y. Misc. LEXIS 7485, at *9-11 (N.Y. Sup. Ct. Aug. 8,

2008); Hemingway's Estate, 279 N.Y.S.2d at 57. New York courts have not, however, articulated

the scope of New York's fair use doctrine. I will assume, as do the parties, that New York's fair

use defense operates similarly to the federal defense, which is codified in 17 U.S.C. § 107. See

EM/ Records, 2008 N.Y. Misc. LEXIS 7485, at *16-18.

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Under federal law, courts "determin[ e] whether the use made of a work in any particular

case is a fair use" by considering, among other factors:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. § I 07.

On all four factors, Sirius's creation of the unauthorized copies fails to qualify as "fair use."

In considering the first factor - the "purpose and character of the use," courts must ask

"whether the new work merely supersedes the objects of the original creation or instead adds

something new, with a further purpose or different character ... , in other words, whether and to

what extent the new work is transformative. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569,

579 (1994) (internal citations, quotation marks, and alterations omitted); see also Authors Guild,

Inc. v. HathiTrust, 755 F.3d 87, 96 (2d Cir. 2014).

Sirius is a for-profit entity using Flo and Eddie's recordings for commercial purposes.

Moreover, Sirius's use is not transformative. Sirius does not add anything new or change the

Turtles recordings by copying and performing them. Publicly performing a recording adds no "new

expression, meaning, or message," to the recording. Campbell, 510 U.S. at 579. Sirius lets

subscribers hear Turtles recordings through a different medium, but that does not make its use

"transformative." insofar as the recording is concerned - however "transformative" satellite radio

may be in the context of broadcasting.

The cases cited by Sirius do establish that a use may be transformative even when it

requires completely copying a copyrighted work. But the uses in those cases are far different than

what Sirius does. Courts, for example, have upheld as fair use copying images that then appear as

"thumbnail" results in response to an internet search. See, e.g., Kelly v. Arriba Soft Corp., 336 F .3d

811, 818-19 (9th Cir. 2003). But a thumbnail is a lower-quality image that does not serve the

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purpose of the original - to view and appreciate. Id Courts have also upheld search engines'

copying original books so that users can search the books and find out where certain phrases

appear. Authors Guild, Inc. v. Google Inc., 954 F. Supp. 2d 282, 291 (S.D .N. Y. 2013 ). That too is

a different use from the original book, which is meant to be read, not searched by keyword. Id.

What one wants to do with a sound recording is to hear it, and that can be done just by listening to

Sirius.

The second fair use factor "calls for recognition that some works are closer to the core of

intended copyright protection than others." Campbell, 510 U.S. at 586. In particular, "creative

expression for public dissemination falls within the core of the copyright's protective purposes."

Campbell, 510 U.S. at 586; see Authors Guild, Inc., 755 F.3d at 96. Even Sirius recognizes that

the Turtles works are "creative." Sirius claims that the second factor does not favor Flo and Eddie

because the Turtles' sound recordings have been widely disseminated for decades. This is a non­

sequitur; widespread distribution does nothing to alter the creative character of a copyrighted work.

The cases Sirius cites does not hold to the contrary.

The third fair use factor requires courts to consider "amount and substantiality of the

portion used in relation to the copyrighted work as a whole." 17 U.S.C. § 107. "The third factor

asks whether the secondary use employs more of the copyrighted work than is necessary, and

whether the copying was excessive in relation to any valid purposes asserted under the first factor."

Authors Guild, Inc., 755 F.3d at 96. Further, "the extent of permissible copying varies with the

purpose and character of the use." Campbell, 510 U.S. at 586-87. Sirius has copied and performed

several Turtles recordings in their entirety. As explained above, Sirius's use is non-transformative

and commercial. It has, in the words of the Second Circuit, no "valid purpose[] asserted under the

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first factor." Authors Guild, Inc., 755 F.3d at 96. Thus, the third factor does not favor even minimal

copying by Sirius.

Sirius leans heavily on the fourth fair use factor, "the effect of the use upon the potential

market for or value of the copyrighted work." 17 U.S.C. § 107. This factor "requires courts to

consider not only the extent of market hann caused by the particular actions of the alleged

infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the

defendant would result in a substantially adverse impact on the potential market for the original."

Campbell, 510 U.S. at 590. The Second Circuit has explained that "the relevant market effect with

which we are concerned is the market for plaintiffs' expression, and thus it is the effect of

defendants' use of that expression on plaintiffs' market that matters." NXIVM Corp. v. Ross Inst.,

364 F.3d 471, 482 (2d Cir. 2004) (internal quotation marks and citation omitted). As a matter of

"common sense[] when a commercial use amounts to mere duplication of the entirety of an

original, it clearly supersedes the objects of the original and serves as a market replacement for it,

making it likely that cognizable market harm to the original will occur." Campbell, 510 U.S. at

591. (internal citations, quotation marks, and alterations omitted).

Sirius makes non-transformative use of Flo and Eddie's recordings and does so for

commercial gain. It is, therefore, "common sense[]," id, that Flo and Eddie would suffer market

hann when Sirius takes its property and exploits it, unchanged and for a profit. That exploitation

"supersedes the objects of the original." Id

Sirius responds to this common-sense conclusion with two points: (1) Flo and Eddie points

to no actual evidence or lost sales or licensing fees caused by Sirius's operations; and (2) there is

no existing market for licensing pre-1972 sound recordings for public performance. Those

responses are unpersuasive.

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First, discovery on damages has not yet been conducted. The evidence might ultimately

show that Flo and Eddie has lost fewer sales than one might expect as a result of Sirius'

unauthorized copying and public performances of their recordings. But it is beyond cavil that Flo

and Eddie has hereto been unable to obtain any money from the broadcasting of their sound

recordings; if its common law copyright had been recognized, plaintiff could and undoubtedly

would have charged Sirius something to broadcast them.

Second, Flo and Eddie describes the fourth fair use factor too narrowly. The fourth factor

allows courts to consider not only presently existing markets, but also "potential" or "reasonable,

[] likely to be developed markets." Swatch Grp. Mgmt. Servs. Ltd v. Bloomberg L.P., 756 F.3d

73, 91 (2d Cir. 2014) (quoting Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 930 (2d

Cir.1994)). A market for licensing post-1972 sound recordings already exists. It has to, by law.

See 17 U.S.C. §§ 112, 114. It is not difficult to conceive that a similar market for pre-1972

recordings would develop if owners of those recordings asserted their rights.

The fourth factor also requires courts to consider "whether unrestricted and widespread

conduct of the sort engaged in by the defendant would result in a substantially adverse impact on

the potential market for the original." Campbell, 510 U.S. at 590. Widespread public performance

of sound recordings - that is, the conduct in which Sirius is engaged - could easily satisfy public

demand to hear those recordings. That, again as a matter of common sense, could result in a

substantial impact on Flo and Eddie's ability to sell and license Turtles recordings. If a subscriber

can easily hear recordings performed by Sirius, why buy a record or download the recording from

iTunes? If a potential licensee wants to perform Turtles recordings, why pay to do so, when Sirius

performs them for free?

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3. Sirius Engaged in Unfair Competition

Unfair competition is an "adaptable and capacious" tort that "has been broadly described

as encompassing 'any fonn of commercial immorality."' Roy Exp. Co. v. Columbia Broad Sys.,

Inc., 672 F.2d 1095, 1105 (2d Cir. 1982) (quoting Metro. Opera Ass'n, 101 N.Y.S.2d at 492).

More precisely, New York courts "have long recognized two theories of common-law unfair

competition: palming off and misappropriation." ITC Ltd. v. Punchgini, Inc., 9 N. Y.3d 467, 4 76-77

(2007). Palming off - "that is, the sale of the goods of one manufacturer as those of another," id

- is not at issue in this litigation. "An unfair competition claim involving misappropriation usually

concerns the taking and use of the plaintiffs property to compete against the plaintiffs own use of

the same property." Roy Exp. Co., 672 F.2d at 1105; see ITC Ltd, 9 N.Y.3d at 477-79.

Flo and Eddie's claim involves misappropriation. In particular, it argues that Sirius has

taken and used the Turtles recordings - its property - to compete against it. Sirius does not truly

dispute that it has "tak[en] and use[d]" Flo and Eddie's recordings. Instead Sirius raises two

objections to Flo and Eddie's unfair competition claim.

First, Sirius claims that under Naxos, unfair competition requires "distribution" of property.

See 4 N.Y.3d at 563. That is a strained reading of Naxos, which described a particular unfair

competition claim grounded in physically pirating and selling records. No other opinion of which

I am aware has described "distribution" as a requirement of the otherwise highly flexible and

adaptable unfair competition tort. In any event, as I explained above, public performance is a form

of distribution.

Second, Sirius argues that Flo and Eddie has not suffered any competitive injury. It is now

well established that "the existence of actual competition between the parties is no longer a

prerequisite" to sustaining an unfair competition claim. Metro. Opera Ass 'n, 101 N.Y.S.2d at 491-

92 (citing cases); see ITC Ltd., 9 N.Y.3d at 478. Some "competitive injury," however, is still

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required. Yantha v. Omni Childhood Ctr., Inc., No. 13-CV-1948, 2013 WL 5327516, at *7

(E.D.N.Y. Sept. 20, 2013). A plaintiff must therefore show, "a direct financial loss, lost dealings,

or lost profits resulting from the anticompetitive acts at issue or, at the very least, that defendant

diverted plaintiff's customers and business to defendant." Id (internal citations, quotation marks,

and alterations omitted).

Flo and Eddie has satisfied the competitive injury requirement. As I explained when

discussing fair use, it is a matter of economic common sense that Sirius harms Flo and Eddie's

sales and potential licensing fees (even ifthe latter market is not yet extant) by publicly performing

Turtles sound recordings. Evidence of the extent of that loss has not yet been presented because

discovery has not yet been conducted on damages.

VI. Flo and Eddie's Assertion of its Common Law Copyright Is Not Barred by the Dormant Commerce Clause

Finally, Sirius argues that Flo and Eddie's claims are barred by the Dormant Commerce

Clause. Sirius is wrong.

The Constitution grants to Congress "Power ... To regulate Commerce ... among the

several States .... " U.S. CONST. art. I, § 8. Although the Commerce Clause is written as an

affirmative grant of power to Congress, the Supreme Court has held that it includes a negative or

"dormant" implication that states may not interfere with interstate commerce. Healy v. Beer Inst.,

Inc., 491 U.S. 324, 326 n.l (1989).

States may run afoul of the Dormant Commerce Clause's implied limits on their power in

several ways: by discriminating against out-of-state goods, see, e.g., Wyoming v. Oklahoma, 502

U.S. 437, 454-57 (1992), by imposing generally applicable regulations that have the effect of

excessively burdening interstate commerce, see, e.g., Pike v. Bruce Church, Inc., 397 U.S. 137,

142-46 (1970), or by directly regulating commerce in other states, see, e.g., Healy, 491 U.S. at

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335-40. Sirius argues that the last prohibition - directly regulating commerce in other states -

applies here.

Flo and Eddie argues that the Court need not reach the constitutional question because

Congress has authorized New York to regulate pre-1972 sound recordings.

It is hombook law that "Congress may authorize the States to engage in regulation that the

Commerce Clause would otherwise forbid." Maine v. Taylor, 477 U.S. 131, 138 (1986). "But

because of the important role the Commerce Clause plays in protecting the free flow of interstate

trade, th[ e Supreme] Court has exempted state statutes from the implied limitations of the Clause

only when the congressional direction to do so has been 'unmistakably clear."' Id. at 138-39

(quoting S.-Cent. Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 91 (1984)); see Wyoming v.

Oklahoma, 502 U.S. at 458 (requiring an "unambiguous" congressional directive).

Flo and Eddie claims to find unambiguous Congressional authorization for New York's

common law copyright scheme to be exempted from the implied limitations of the Commerce

Clause in 17 U.S.C. § 301(c), which reads in full:

With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.

In one of the two companion cases between Flo and Eddie and Sirius, my colleague in the

District Court for the Central District of California found that § 301 ( c) unambiguously authorizes

Flo and Eddie's companion California-law action. In a footnote, it dismissed with almost no

discussion a Dormant Commerce Clause challenge similar to the one Sirius raises here, stating that

"Because Congress specifically authorized protection of pre-1972 sound recording rights by the

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states in 17 U.S.C. § 301(c), the California statute protecting those rights is not subject to the

Commerce Clause." Flo & Eddie Inc. v. Sirius XM Radio Inc., No. CV 13-5693, 2014 WL

4725382, at *9 n.1 (C.D. Cal. Sept. 22, 2014).

However, I do not find the California Court's analysis persuasive, as it does not explain

why the cited statute qualifies as a Commerce Clause exemption. And Flo and Eddie cites no

legislative history or case law indicating that Congress intended to eliminate Dormant Commerce

Clause scrutiny for state common law copyright. Instead, Flo and Eddie emphasizes the word

"any," which it argues is an indication that Congress intended to permit "all" state statutes

regulating copyright.

I do not read the cited section as Flo and Eddie does. I note that § 30 I ( c) is contained in

the section of the federal copyright law that addresses the law's preemptive scope. Thus, the

language cited by Flo and Eddie could plausibly be interpreted, not to allow states to impose

otherwise unconstitutional burdens on interstate commerce, but only to limit the scope of federal

copyright law - by excluding, for a period of time, otherwise preempted state laws from the

preemptive reach of 17 U.S.C. § 30l(a). Under this interpretation, although § 30l(c) broadly

reaches "any" state right or remedy, it shields state regulation only from statutory preemption, not

from Commerce Clause scrutiny.

The Supreme Court has construed an analogous statute in this very manner when analyzing

a Dormant Commerce Clause challenge. In New England Power Co. v. New Hampshire, 455 U.S.

331 ( 1982), the Court decided whether Section 201 of the Federal Power Act was "an affirmative

grant of power to the states to burden interstate commerce." Id at 341. Subsection 201 (b) provided

that no provisions of the subchapter of which it was a part - including the sweeping preemption

provisions of§ 201 (a)- "shall ... deprive a State or State commission of its lawful authority now

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exercised over the exportation of hydroelectric energy which is transmitted across a State line."

Id (quoting 16 U.S.C. § 824(b)).

The Court held that§ 20l(b) did "[n]othing ... to alter the limits of state power otherwise

imposed by the Commerce Clause," but "simply save[ d] from pre-emption under Part II of the

Federal Power Act such state authority as was otherwise lawful." Id (internal citations and

quotation marks omitted). So it is with 17 U.S.C. § 30 I ( c ). Like the statute at issue in New England

Power, § 30 I ( c) is framed as a limitation on preemption, not a relaxation of Commerce Clause

limitations. That interpretation is even more persuasive here because, unlike in the statute analyzed

in New England Power,§ 301(c) makes no explicit reference to any sort of interstate commerce.

Even if the matter is not free from doubt, at the very least it is reasonable to interpret §

30l(c) as a provision about federal statutory preemption, and not as an authorization for states to

interfere with interstate commerce. That being so,§ 30l(c) does not "unambiguous[ly]," Wyoming

v. Oklahoma, 502 U.S. at 458, or "unmistakably," S.-Cent. Timber, 467 U.S. at 91, permit state

interference with interstate commerce in connection with pre-1972 sound recordings.

Therefore, and applying the reasoning of New England Power, I decline to adopt Flo and

Eddie's interpretation of§ 30l(c).

However, Sirius's Dormant Commerce Clause challenge fails for a different reason: New

York does not "regulate" anything by recognizing common law copyright. The issue is nothing

more than a red herring.

The Clause itself"withholds from the states[, ]the power to regulate Commerce among the

several States." SSC Corp. v. Town of Smithtown, 66 F.3d 502, 510 (2d Cir. 1995) (original

alterations omitted). Thus, "the strictures of the dormant Commerce Clause are not activated unless

a state action may be characterized as a 'regulation."' Id; United Haulers Ass 'n, Inc. v. Oneida-

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Herkimer Solid Waste Mgmt. Auth., 261 F.3d 245, 254 (2d Cir. 2001) ajf'd, 550 U.S. 330 (2007);

Metro. Washington Chapter v. D.C., No. CV 12-853, --- F. Supp. 2d ----, 2014 WL 3400569, at

*16 (D.D.C. July 14, 2014).

Typically, courts have applied that principle in the context of the market participant

exception, holding that states do not "regulate" commerce by actively participating in commercial

markets. See, e.g., SSC Corp., 66 F.3d at 510.

But it is not only market participation that falls outside Dormant Commerce Clause

scrutiny. In Sherlock v. Alling, 93 U.S. (3 Otto) 99 (1876), the Supreme Court considered whether

an Indiana statute establishing liability for wrongful death, "if applied to cases of marine torts,

would constitute a new burden upon commerce." Id. at 101-02 The Court affirmed the general

principle that "States cannot by legislation place burdens upon commerce with foreign nations or

among the several States." Id. at 102. But it noted that in every case where it had found a Dormant

Commerce Clause violation, "the legislation adjudged invalid imposed a tax upon some instrument

or subject of commerce, or exacted a license fee from parties engaged in commercial pursuits, or

created an impediment to the free navigation of some public waters, or prescribed conditions in

accordance with which commerce in particular articles or between particular places was required

to be conducted." Id. By contrast, the Indiana statute at issue "only declare[d] a general principle

respecting the liability of all persons within the jurisdiction of the State for torts." Id. at 103.

The Court explained that "General legislation ... prescribing the liabilities or duties of

citizens of a State ... is not open to any valid objection because it may affect persons engaged in

foreign or inter-State commerce." Id. Otherwise, "Objection might with equal propriety be urged

against legislation prescribing the form in which contracts shall be authenticated, or property

descend or be distributed on the death of its owner, because applicable to the contracts or estates

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of persons engaged in such commerce." Id. Since Sherlock was decided, courts have rejected

Dormant Commerce Clause challenges for the reasons it cites. See, e.g., At!. Coast Line R. Co. v.

Mazursky, 216 U.S. 122, 132-34 (1910) (challenge to a law attaching liability to common carriers

who failed to settle loss claims within forty days); Stone ex rel. Estate of Stone v. Frontier Airlines,

Inc., 256 F. Supp. 2d 28, 46 (D. Mass. 2002) (challenge to tort action attaching liability to airline's

failure to carry a defibrillator); D. C. v. Beretta, US.A., Corp., 872 A.2d 633, 656-57 (D.C. 2005)

(challenge to statute attaching strict liability to actions by firearms manufacturers); West v.

Broderick & Bascom Rope Co., 197 N.W.2d 202, 214-15 (Iowa 1972) (challenge to negligence

action asserting failure-to-warn liability) (collecting cases).

What Sirius objects to is a "general principle respecting the liability of all persons within

the jurisdiction of' New York. Sherlock, 93 U.S. (3 Otto) at 103. In particular, Sirius objects to

property law principles that establish liability for infringing another party's copyright. But that

property law principle is not a state-imposed regulation - even when applied to public

performances by a national broadcaster. Sirius has not cited, and the Court has not found any cases

holding that a state's general property law and associated liability principles could, in and of

themselves, violate the Dormant Commerce Clause.

Holding Sirius liable might affect interstate commerce - just as a finding of liability did in

Sherlock. Id. at 103. But concluding that Sirius is liable under New York property law principles

would not amount to a "regulation" of interstate commerce by New York. It would, therefore, not

give rise to a Dormant Commerce Clause claim.

Sirius is correct that this holding is unprecedented (aside from the companion California

case, which reached the same result), and will have significant economic consequences. Radio

broadcasters - terrestrial and satellite - have adapted to an environment in which they do not pay

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royalties for broadcasting pre-1972 sound recordings. Flo and Eddie's suit threatens to upset those

settled expectations. Other broadcasters, including those who publicly perform media other than

sound recordings, will undoubtedly be sued in follow-on actions, exposing them to significant

liability. And if different states adopt varying regulatory schemes for pre-1972 sound recordings,

or if holders of common law copyrights insist on licensing performance rights on a state-by-state

basis (admittedly, an unlikely result, since such behavior could well cause broadcaster to lose

interest in playing their recordings) it could upend the analog and digital broadcasting industries.

But in the end, all this case presents me with is a suit between private parties seeking to

vindicate private property rights - not a challenge to state regulation. That lawsuit can and will be

resolved on its merits. The broader policy problems are not for me to consider. They are the

province of Congress, the New York Legislature, and perhaps the New York Court of Appeals.

CONCLUSION

For the foregoing reasons, Sirius's motion for summary judgment is DENIED. The Clerk

of the Court is directed to remove Docket# 46 from the Court's list of pending motions. Sirius is

ORDERED to advise the Court by Friday, December 5 of any remaining disputes of material fact

that would require a trial. Otherwise, the Court will enter summary judgment in favor of Flo and

Eddie as to liability and proceed to an inquest on damages.

Dated: November 14, 2014

U.S.D.J.

BY ECF TO ALL COUNSEL

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

FLO & EDDIE, INC.

Plaintiff,

-against-

SIRIUS XM RADIO, INC., and DOES 1-10,

Defendants.

USDCSDNY DOCUMENT ELECTRONICALLY FILED

DOC #: __ --r,~µ"77.7 >TJV"ilf D .-\TE Fl LED : _ __.i...;._':...f-.-1----'---.... --

No. 13 Civ. 5784 (CM)

MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION FOR RECONSIDERATION

McMahon, J.:

Defendant Sirius XM Radio, Inc. ("Sirius") has moved for reconsideration of the Court's

November 14, 2014 Memorandum Decision and Order Denying Defendant's Motion for Summary

Judgment ("the Order"), Docket #88, and in the alternative, for the Court to certify the Order for

interlocutory appeal. For the reasons stated below, Sirius's motion for reconsideration is DENIED.

Decision on the alternative motion for certification of an interlocutory appeal pursuant to

28 U.S.C. §1292(b) is deferred pending resolution of the outstanding order to show cause why a

summary judgment as to liability should not be awarded to Plaintiff.

The reader is presumed to be familiar with the facts of this case and with the Court's prior

decision.

DISCUSSION

I. Standard

To prevail on a motion for reconsideration, the movant must demonstrate "an intervening

change of controlling law, the availability of new evidence, or the need to correct a clear error or

prevent manifest injustice." See Doe v. NY. C. Dep 't of Soc. Servs., 709 F .2d 782, 789 (2d Cir.

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Case 1:13-cv-05784-CM Document 108 Filed 12/12/14 Page 1 of 12

1983). The decision to grant or deny the motion for reconsideration is within the sound discretion

of the district court, especially when there has been no appellate review of the prior decision. Mina

Invest. Holdings, Ltd. v. Lefkowitz, 184 F.R.D. 245, 250 (S.D.N.Y. 1999).

The Court's review "is narrow and applies only to already-considered issues; new

arguments and issues are not to be considered." See Morales v. Quintiles Transnat'l Corp., 25 F.

Supp. 2d 369, 372 (S.D.N.Y. 1998). A motion for reconsideration "is not a substitute for appeal

and may be granted only where the Court has overlooked matters or controlling decisions which

might have materially influenced the earlier decision." See id. (internal citations and quotation

marks omitted).

II. Sirius's Motion for Reconsideration is Denied

A. Whiteman Does Not Alter The Court's Analysis of New York Common Law

Sirius (represented by newly-retained counsel) predicates its motion on the Court's

admitted failure to consider in its decision a case not briefed, either by it or by Flo & Eddie, on the

original motion: RCA Manufacturing Co. v. Whiteman, 114 F.2d 86 (2d Cir. 1940). Sirius's new

lawyers from O'Melveny & Myers assert that Whiteman is the very case that this Court stated did

not exist: a case squarely holding that New York does not recognize any right of public

performance in sound recordings that are protected by common law copyright. Obviously

Whiteman is a very old case, and does not represent any "intervening change of controlling law,"

so the argument must be that the Court's failure to apply Whiteman constitutes "clear error."

The only clear error in this case is O'Melveny's. Sirius's former counsel had two perfectly

good reasons not to argue the lack of any public performance right on the basis of Whiteman: (1)

Whiteman does not hold that New York does not recognize a public performance right as part of

the common law copyright in sound recordings; and (2) its actual holding - which is that the sale

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of sound recordings to the public constituted "publication," which divested a creation of any

common law copyright whatsoever - is no longer good law, and has not been for 60 years.

Paul Whiteman was a legendary orchestra conductor; in 1924, at Aeolian Hall, he famously

conducted the first performance of George Gershwin's Rhapsody in Blue. Whiteman and his

orchestra made a number of sound recordings on the RCA label, which were sold to the consuming

public. The recordings bore a legend "Not Licensed for Radio Broadcast," or something similar.

Nonetheless, W.B.O. Broadcasting went to a record store, purchased copies of the records and

broadcast them over the radio. RCA Manufacturing sued to prevent W.B.O. from broadcasting

certain sound recordings owned by RCA, under theories of common law copyright and unfair

competition. Id. at 87.

The Second Circuit, in an opinion written by Judge Learned Hand, described the question

raised by the case as whether RCA "had any musical property at common-law in the records which

radio broadcasting invaded." Id. at 87. (emphasis added). The Court of Appeals held that RCA did

not have any common law rights, of any sort, because the sale of the recordings to the public

constituted "publication" of the recordings, which divested them of common law copyright

protection altogether. Since sound recordings were ineligible for federal statutory copyright

protection prior to 1972 (that is why we have this lawsuit), the effect of Judge Hand's ruling was

to deny any sort of copyright protection to the creators of sound recording performances that were

sold in the commercial marketplace.

Sirius argues that Whiteman rejected RCA's claims because New York law did not afford

public performance rights to holders of common law copyrights in sound recordings.

I disagree. So does every other court and authority that has considered the issue.

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The exact holding of Whiteman was this: "[W]e think that the 'common-law property' in

these performances ended with the sale of the records and that the restriction [the words on the

record jacket] did not save it." Id. All of the reasoning in Whiteman addressed that issue -whether

RCA had "published" its sound recordings by selling them to the public, thereby losing all of its

common law rights under then-applicable law. The Second Circuit did not decide what those rights

might have been, let alone specifically address whether those lost rights included an exclusive right

to publicly perform the sound recordings. One looks in vain in Whiteman for the statement, "New

York's common law copyright protection for sound recordings does not encompass any sort of

public performance right" - or words to that effect.

Sirius points to two sentences from Whiteman that it views as declaring public performance

rights to be unavailable for holders of common law copyrights in sound recordings.

Copyright in any form, whether statutory or at common-law, is a monopoly; it consists only in the power to prevent others from reproducing the copyrighted work. W.B.O. Broadcasting Corporation has never invaded any such right of Whiteman; they have never copied his performances at all; they have merely used those copies which he and the RCA Manufacturing Company, Inc.; made and distributed. Whiteman, 114 F.2d at 88.

Sirius argues that Judge Hand - a famously precise and articulate writer - was actually saying in

these sentences that New York common law copyright in sound recordings does not come with a

public performance right attached.

Even read out of context, it would be a stretch to conclude that Sirius's strained

interpretation of Hand's decision is correct. But read in the context of the Whiteman decision as a

whole (including the holding that this Court quotes above), it is perfectly clear that these sentences

simply restate, in a different way, what the case actually held: once RCA offered copies of the

recordings for sale (i.e., "published" them), any common law copyright was lost and the purchaser

could "use[]" the copies that it purchased in any way it chose - including by playing them over the

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radio. The reason W.B.O. "merely used" the sound recordings and "never invaded" RCA's rights,

was because those rights (whatever they were) had vanished when RCA sold copies of the sound

recordings.

Judge Hand's reasoning also gives the lie to Sirius' contorted reading of his decision. He

observed, for example, that if a composer published a musical composition by printing copies of

sheet music and selling them to the public, 1 he would have no right to limit how the purchaser used

those copies of the music. Similarly, Judge Hand described how selling a book was an act of

publication that destroyed common law copyrights. Judge Hand understood that both musical

compositions and books were eligible for statutory copyright, whereas sound recordings were not.

Nonetheless, he saw "no reason why the same acts that unconditionally dedicate the common-law

copyright in works copyrightable under the act, should not do the same in the case of works not

copyrightable" under federal law. Id.

Nothing in the justification offered for his decision so much as suggested that the Circuit

was pronouncing that the bundle of rights appurtenant to common law copyright in sound

recordings did not include a public performance right. Indeed, had Whiteman been predicated on

the absence of a public performance right in sound recordings, the entire discussion of whether

RCA's common law rights were divested by publication would have been superfluous; RCA could

not possibly have "lost" via publication a right that never existed in the first place! That the Second

Circuit felt the need to reach the publication issue actually suggests that it assumed the existence

of a public performance right in the context of common law copyright.

1 For this analogy to work, the copies sold would have lacked the familiar © legend; publication with the© divested common law copyright but preserved federal copyright (indeed, laid claim to federal statutory copyright) under the 1909 Copyright Act, which was in effect at the time Hand wrote Whiteman. That law was superseded in 1976.

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Case 1:13-cv-05784-CM Document 108 Filed 12/12/14 Page 5 of 12

Judge Hand also rejected RCA's suggestion that W.B.O. 's broadcasting of its recordings

constituted unfair competition, again on the ground that the loss of rights associated with

publication ended any unfairness. As he put it, if RCA "cannot bring themselves within the law of

common-law copyright, there is nothing to justify a priori any continuance of their control over

the activities of the public to which they have seen fit to dedicate the larger part of their

contribution" through the theory of unfair competition. Id. at 90.

I am hardly the only jurist or scholar who reads Whiteman in this way. All the courts and

secondary sources we have located interpret Whiteman as a case about publication, not about

whether public performance is part of the bundle of rights conferred by common law copyright.

See, e.g., Capitol Records v. Mercury Records Corp., 221F.2d657, 663 (2d Cir. 1955) (Whiteman

"stated that the common law property in the performances of musical artists which had been

recorded ended with the sale of the records and that thereafter anyone might copy them and use

them as he pleased."); Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540, 554 (2005)

(Whiteman "concluded that the sale of a record to the public is a general publication that ends

common-law copyright protection."); Sidney A. Diamond, Sound Recordings and Phonorecords:

History and Current Law, 1979 U. ILL. L. F. 337, 347 ("Whiteman stands for the principle that the

sale of a record divests the production company or the performing artists of their rights, if any, to

control its use."); Robert L. Bard & Lewis S. Kurlantzick, A Public Performance Right in

Recordings, 43 GEO. WASH. L. REV. 152, 155 (1974) ("Judge Learned Hand ... ruled that any

common law property of the record producer in the recorded performances ended with the record's

sale, thereby making the restrictive legend on the label legally ineffective.").

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Even if Whiteman stood for the proposition that Sirius asserts - and it does not - Sirius's

motion for reconsideration fails for a second reason: Whiteman has been overruled, so it stands for

nothing at all.

The Second Circuit in Whiteman was doing exactly what I am doing in this case: predicting

how the New York courts, which are the ultimate authority on New York common law, would rule

on an unsettled question of New York common law.2 After Whiteman, New York courts spoke to

the question, and they did not reach the same conclusion as Judge Hand. Metro. Opera Ass 'n v.

Wagner-Nichols Recorder Corp., 101 N.Y.S.2d483 (Sup. Ct. 1950) affd, 107N.Y.S.2d 795 (App.

Div. 1951 ). Recognizing this development, the Second Circuit concluded, in 1955, that: "the

quoted statement from the RCA case is not the law of the State of New York." Capitol Records v.

Mercury Records Corp., 221 F.2d 657, 663 (2d Cir. 1955) (citing Whiteman, 114 F.2d at 88-89)

(emphasis added). The "quoted statement" to which reference is made spans Whiteman's entire

discussion of the effect of publication on the existence of a copyright. So while Sirius tries to avoid

the impact of Whiteman 's reversal by arguing that the Second Circuit overruled only a single

statement about unlimited copying of published works from the earlier opinion, that is plainly not

the case. It overturned Judge Hand's ruling that the sale of sound recordings constituted publication

- as this Court recognized in the Order, when it said "it has been the law in New York for over 50

years that ... the public sale of a sound recording ... does not constitute a publication sufficient

to divest the owner of common-law copyright protection." Order at 28 (internal citations, quotation

marks, and alterations omitted)

2 The certification of questions to the New York Court of Appeals was almost unheard of in 1940, and that was true even when this Court was engaged in the practice of law; but it is now quite routinely done to settle issues like the one raised by this case. I rather expect that this case will be certified to the New York Court of Appeals once it goes up on appeal.

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In short, Whiteman affords no basis to reconsider my earlier Order; if anything, it reinforces

the decision reached by this Court.3

B. The Court Properly Rejected Sirius's Dormant Commerce Clause Challenge

Sirius also attempts to reargue its Dormant Commerce Clause challenge. Its arguments are

entirely without merit.

Sirius does not dispute that the reach of the Dormant Commerce Clause is only to state

actions properly characterized as "regulations." See Order at 37-38. Instead of explaining how

liability for common law copyright infringement constitutes a regulation, Sirius dodges and

misconstrues the issues.

I did not hold, and I do not hold now, that New York common law copyright is exempt

from Dormant Commerce Clause scrutiny because it is neutral and generally applicable. Nor did I

hold that the Commerce Clause does not apply because New York law establishes Sirius's liability

in some form. Rather, I said that the New York common law copyright - specifically a judicial

decision protecting Flo and Eddie's common law copyright - is not a "regulation" subject to

Commerce Clause scrutiny.

Sirius argues that state common law and state law as interpreted by courts can violate the

Dormant Commerce Clause. Sirius also argues that state regulation may run afoul of the Dormant

Commerce Clause entirely because of the "practical effects" on interstate commerce. That is all

true, but irrelevant. The question is whether the law at issue - common law copyright - constitutes

"regulation." In the one case Sirius does cite applying the Commerce Clause to a judicial finding

3 Sirius does add some new spin on its arguments, claiming that public performance rights for sound recordings are unique in that they affect multiple competing stakeholders. Recordings are not really unique - musical composition copyrights raise the same issues. More importantly, those stakeholders all have an incentive to negotiate over the use of copyrighted material. Sirius's result ensures Flo and Eddie can never receive compensation of any sort for public performance of its sound recordings.

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of liability, the law involved as a California statute requiring pre-approval for marketing cosmetic

products. See Allergan, Inc. v. Athena Cosmetics, Inc., 738 F.3d 1350, 1353 (Fed. Cir. 2013). The

cases holding that a law may violate the Dormant Commerce Clause because of its "practical

effects" on interstate commerce each involved state liquor-pricing schemes. See Healy v. Beer

Inst., 491 U.S. 332 (1989); Brown-Forman Distillers Corp. v. NY. State Liquor Auth., 476 U.S.

573 (1986). All of those state laws -pharmaceutical approval and liquor pricing laws - are classic

instances of states exercising their regulatory power, and are very different from this case, where

the issue is protection of property rights.

Protecting Flo and Eddie from the theft of its property is not "regulation"; a simple example

illustrates the point. Suppose, instead of stealing Flo and Eddie's property rights in the sound

recordings, someone stole its company car, which was then used to operate an interstate taxi

service. The Dormant Commerce Clause obviously would not bar Flo and Eddie from maintaining

an action at common law for conversion of the car. And that would be true even though the action,

and the return of the car and the end of the taxi service, would affect interstate commerce. State

laws barring theft do not violate the Dormant Commerce Clause.

Sirius also argues that the Court failed to address the balancing test Pike v. Bruce Church,

Inc., 397 U.S. 137 (1970). But that test, like the per se tests used in other cases, applies only to

regulations. Thus, there was no need to discuss it in the Order separate and apart from the per se

tests. All fail, and for the same reason.

Finally, Sirius that the Communications Act, 47 U.S.C. §§ 307 et seq. preempts any state

from recognizing a public performance right in sound recordings because recognizing such a right

would interfere with the ability of the FCC to regulate radio broadcasting. This is an entirely new

argument, which could have been raised in support of the original motion but was not. It is not

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properly raised on a motion for reconsideration; it is also inappropriately mentioned only in a

footnote.

But this argument is yet another example of how Sirius' new counsel are deliberately

missing the point. Nothing in this Court's Order "restricts content" of radio broadcasts. Congress

expressly provided that common law copyright would subsist in pre-1972 sound recordings. See

17 U.S.C. § 301(c). The federal government thus recognizes the existence of common law

copyright in older sound recordings. Flo and Eddie holds the common law copyright in the Turtles'

pre-1972 sound recordings. Common law copyright, as Judge Hand reminds us in the very portion

of his Whiteman decision on which Sirius relies, confers a legally recognized monopoly on the

holder. That legally recognized monopoly gives Flo and Eddie - not the State of New York- the

right to decide who, if anyone, is allowed to broadcast, or make any copies that are necessary to

do so.

Sirius does nothing but raise red herrings. This case is not about the content of radio

broadcasts; it is about whether Sirius has to pay for the privilege of copying and broadcasting pre-

1972 sound recordings - just as it pays royalties through ASCAP and BMI to the composers of the

music contained on all the recordings it broadcasts, and just as it pays statutory copyright holders

for the privilege of playing post-1972 sound recordings. The Dormant Commerce Clause does not

stand in the way of a purely private party's availing himself of his legal rights in order to protect

his property. This Court harbors no doubt whatsoever that Flo and Eddie will be perfectly delighted

to let Sirius play- for pay.

III. Sirius's Motion to Certify an Interlocutory Appeal is Deferred

A district judge may certify an order for interlocutory appeal if ( 1) "such order involves a

controlling question of law" (2) "as to which there is substantial ground for difference of opinion",

and (3) "an immediate appeal from the order may materially advance the ultimate termination of

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the litigation." 28 U.S.C. § 1292(a); see Childers v. N. Y & Presbyterian Hosp., No. 13 CIV. 5414,

--- F. Supp. 2d ----, 2014 WL 2815676, at *21 (S.D.N.Y. June 23, 2014).

"A controlling question of law exists if: (1) reversal of the district court's opinion could

result in dismissal of the action, (2) reversal of the district court's opinion, even though not

resulting in dismissal, could significantly affect the conduct of the action, or (3) the certified issue

has precedential value for a large number of cases." In re Lloyd's Am. Trust Fund Litig., No. 96

CIV. 1262, 1997 WL 458739, at *4 (S.D.N.Y. Aug. 12, 1997); see Klinghojfer v. S.N.C. Achille

Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21,

24 (2d Cir. 1990).

In considering a request for certification, the district court must carefully assess whether

each of the three conditions for certifications is met. See German v. Fed. Home Loan Mortg. Corp.,

896 F.Supp. 1385, 1398 (S.D.N.Y.1995); see also Gottesman v. General Motors Corp., 268 F.2d

194, 196 (2d Cir.1959) (certification is to be "strictly limited to the precise conditions stated in the

law"). The determination of whether § l 292(b) certification is appropriate under the above

standards is in the discretion of the trial court. See Ferraro v. Sec. of US. Dept. of Health and

Human Servs., 780 F.Supp. 978, 979 (E.D.N.Y.1992);

Sirius raises excellent arguments in favor of certification. However, I am going to defer

ruling on this motion until I first address the outstanding order to show cause why summary

judgment of liability should not be entered in favor of Flo and Eddie. The case for interlocutory

certification is much stronger if the issue of liability is settled.

11

Case 1:13-cv-05784-CM Document 108 Filed 12/12/14 Page 11 of 12

CONCLUSION

For the foregoing reasons, Sirius's motion for reconsideration is DENIED and decision

on the motion for Section 1292(b) certification is DEFERRED.

Dated: December 12, 2014

U.S.D.J.

BY ECF TO ALL COUNSEL

12

Case 1:13-cv-05784-CM Document 108 Filed 12/12/14 Page 12 of 12

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

FLO & EDDIE, INC., individually and on behalf of all others similarly situated,

Plaintiff,

-against-

SIRIUS XM RADIO INC., and DOES 1 through 10,

Defendants.

USDCSDNY DOCUMENT ELECTRONICALLY FILED

DOC #: __ ____,,TI,.-t-1 o-+-1, /-L-DA TE Fll ED: ti-_ l

l.=====================:=::::

No. 13 Civ. 5784 (CM)

DECISION AND ORDER CERTIFYING INTERLOCUTORY APPEAL

McMahon, J.:

Plaintiff Flo & Eddie, Inc. ("Flo and Eddie") brings this action under New York law for

common law copyright infringement and unfair competition against Sirius XM Radio Inc.

("Sirius"). On November 14, 2014, the Court denied Sirius's motion for summary judgment

dismissing the case and ruled that plaintiffs - the owners of the common law copyrights in certain

sound recordings made prior to February 1972 - had the right to exclusively publicly perform and

reproduce those recordings. (Docket #88). On December 12, 2014, the Court denied Sirius's

motion for reconsideration (Docket # 108).

In the alternative, Sirius asked this Court to certify an interlocutory appeal pursuant to 28

U.S.C. § 1292(b). That motion is GRANTED. Dockets #88 and Docket #108 are certified for

interlocutory appeal because they present the following legal question:

1

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 1 of 8

Under New York law, do the holders of common law copyrights in pre-1972 sound recordings have, as part of the bundle ofrights attendant to their copyright, the right to exclusive public performance of those sound recordings?'

DISCUSSION

I. Standard for Certifying an Order for Interlocutory Appeal

A district judge may certify an order for interlocutory appeal if (1) "such order involves a

controlling question of law" (2) "as to which there is substantial ground for difference of opinion,"

and (3) "an immediate appeal from the order may materially advance the ultimate termination of

the litigation." 28 U.S.C. § 1292(b); see Childers v. N. Y & Presbyterian Hosp., No. 13 CIV. 5414,

--- F. Supp. 2d ----, 2014 WL 2815676, at *21 (S.D.N.Y. June 23, 2014).

"A controlling question of law exists if: (1) reversal of the district court's opinion could

result in dismissal of the action, (2) reversal of the district court's opinion, even though not

resulting in dismissal, could significantly affect the conduct of the action, or (3) the certified issue

has precedential value for a large number of cases." In re Lloyd's Am. Trust Fund Litig., No. 96

CIV. 1262, 1997 WL 458739, at *4 (S.D.N.Y. Aug. 12, 1997); see Klinghoffer v. S.N.C. Achille

Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21,

24 (2d Cir. 1990).

In considering a request for certification, the district court must carefully assess whether

all three § l 292(b) requirements are satisfied. In re Face book, Inc., !PO Sec. & Derivative Litig.,

986 F. Supp. 2d 524, 529 (S.D.N.Y. 2014); see also Gottesman v. General Motors Corp., 268 F.2d

194, 196 (2d Cir. 1959) (certification is to be "strictly limited to the precise conditions stated in

the law"). The trial court is vested with discretion whether to certify an interlocutory appeal based

1 As per my letter endorsement of January 28, 2015, I decline to certify a subsequent decision addressing whether Flo and Eddie were entitled to an immediate entry of judgment on the issue of liability. (See Docket #114).

2

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 2 of 8

on the above criteria. See Ferraro v. Sec. of US. Dept. of Health and Human Servs., 780 F. Supp.

978, 979 (E.D.N.Y. 1992).

II. The Requirements for Certifying an Interlocutory Appeal are Met

Here, the requirements for certification are all met as to the question identified on the first

and second page of this decision.

First, there is indeed a critically important controlling question of law in this case: whether

the holders of common law copyrights in pre-1972 sound recordings have, as part of the bundle of

rights appurtenant to their copyright, the right to exclusive public performance. If the Court's

holding that they do have such a right is incorrect, then significant portions of this

lawsuit - including the public performance copyright infringement and unfair competition claims

- will have to be dismissed. Furthermore, reversal of this Court's ruling might well require

reconsideration of the Court's fair use analysis in the context of Plaintiffs claim for copyright

infringement on the basis of unauthorized copying - a right plaintiffs plainly enjoy, see Capitol

Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540, 563-64 (2005)- since it is at least arguable that

the making of temporary copies in order to facilitate the public performance of such sound

recordings qualifies as "fair use." That would dispose of the entire case.

This issue also qualifies as a "controlling question of law" because it will have

"precedential value for a large number of cases." Lloyd's Am. Trust Fund Litig., 1997 WL 458739,

at *4. I previously noted that, "Other broadcasters, including those who publicly perform media

and other sound recordings, will undoubtedly be sued in follow-on actions." Summary Judgment

Decision at 40. Receiving authoritative guidance from the Second Circuit (and, I rather imagine,

from the New York Court of Appeals) will help resolve those actions quickly and consistently.

3

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 3 of 8

The second criterion for certifying an interlocutory appeal is also satisfied because "there

is substantial ground for difference of opinion" concerning the Summary Judgment Decision. 28

U.S.C. § 1292(b).

Flo and Eddie correctly observes that substantial ground does not exist for differences of

opinion merely because an issue is one of first impression about which little case law exists. But

here there is far more than a previously unaddressed question of law. There is in fact a difficult

legal question about which reasonable minds can differ. See Klinghojfer, 921 F .2d at 25.

The Court held that under New York law the right to publicly perform sound recordings is

part of the bundle of rights associated with common law copyrights in those recordings. That

conclusion was reached primarily upon consideration of New York's treatment of common law

copyrights in other types of works. But while this Court believes it reached the correct result, I

appreciate that another judge might feel differently. In this regard, I note particularly that federal

statutory copyrights in sound recordings did not come with an associated right to exclusive public

performance until Congress passed a law in 1995, which provided a limited "exclusive right[] ...

to perform [copyrighted sound recordings] publicly by means of a digital audio transmission." 17

U.S.C. § 106; see Digital Performance Right in Sound Recordings Act of 1995, Pub. L. 104-39,

109 Stat. 336. Between 1971, when Congress first granted statutory copyright protection to sound

recordings, and 1995, Congress did not include public performance rights among the specifically

enumerated rights granted to holders of copyrights in sound recordings. Of course, the very fact

that Congress felt compelled to carve out a statutory exception for public performance rights, by

excluding them from the bundle ofrights associated with copyrights in sound recordings, suggests

that such rights would otherwise have existed, and so exist at common law. See Summary

Judgment Decision at 20-21 & n.3. However, the complicated history of public performance rights

4

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 4 of 8

and copyright in the discrete medium of sound recordings makes the answer to this question less

than straightforward, and warrants a close look by a controlling court.

Turning to the third factor, "an immediate appeal from [the Summary Judgment Decision]

may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). If I am

wrong about public performance rights for holders of copyrights in pre-1972 sound recordings

then this lawsuit will end, either immediately or in short order, after this Court revisits whether

Sirius's limited copying ofpre-1972 recordings qualifies as fair use.

If, however, this Court's ruling is affirmed, then Sirius and the holders of copyrights in

pre-1972 sound recordings will tum their attention to the thorny but ultimately soluble issue of

how to license and compensate public performances of those recordings. That negotiation, which

would also advance the termination of this litigation, will never proceed until there is a definitive

ruling on this question of first impression.

Following other district courts in this Circuit, I have identified a particular controlling

question of law which I am certifying to the Second Circuit. See, e.g., Transp. Workers Union of

Am., Local 100, AFL-CIO v. New York City Transit Auth., 358 F. Supp. 2d 347, 352 (S.D.N.Y.

2005); Maestri v. Westlake Excavating Co., 894 F. Supp. 573, 577 (N.D.N.Y. 1995); Morse/Diesel,

Inc. v. Trinity Indus., Inc., 664 F. Supp. 91, 95 (S.D.N.Y. 1987) rev 'don other grounds, 859 F.2d

242 (2d Cir. 1988); see also JS. ex rel. NS v. Attica Cent. Sch., 386 F.3d 107, 115 (2d Cir. 2004)

("The district court certified only the subject matter jurisdiction issue for interlocutory appeal and

denied the School District's motion insofar as it sought certification of the district court's ruling on

the sufficiency of plaintiffs' Section 504 and Section 1983 claims."). I recognize, however, that

"Though it is helpful for a district court to frame the controlling questions of law that the order

involves, ... the statutory procedure specifies appeal of the order, rather than certification of the

5

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 5 of 8

questions .... " United States v. Banco Cafetero Panama, 797 F .2d 1154, 1157 (2d Cir. 1986); see

also Jsra Fruit Ltd. v. Agrexco Agr. Exp. Co., 804 F .2d 24, 25 (2d Cir. 1986) ("[S]ection 1292(b)

authorizes certification of orders ... not certification of questions. Of course, in certifying an order

for interlocutory review it is helpful ifthe district judge frames the controlling question(s) that the

judge believes is presented by the order being certified.") (internal citations omitted). As a result,

although I am certifying only a "portion" of an order for interlocutory appeal, I recognize that the

Second Circuit's Circuit's review is "not necessarily limited to the certified issue;" the Court of

Appeals has "the discretion to consider any aspect of the order from which the appeal is taken."

J.S., 386 F.3d at 115. This includes a second question oflawthat Sirius asked this Court to certify:

assuming this Court answered the certified question correctly, does the Dormant Commerce Clause

prohibit the State of New York from enforcing a property right that it recognizes at common law?

That question, too, qualifies as "controlling," and its resolution could materially advance the

resolution of this lawsuit. However, I do not believe that there is substantial ground for a difference

of opinion on that issue, so I would not certify the case if that were the only question raised, and I

do not base my decision to certify an interlocutory appeal on the presence of this question in the

case.

III. Further Proceedings in The Action Are Stayed Pending Interlocutory Appeal

"The power to stay proceedings is incidental to the power inherent in every court to control

the disposition of the causes on its docket with economy of time and effort for itself, for counsel,

and for litigants." Nederlandse Erts-Tankersmaatschappij, N. V v. Jsbrandtsen Co., 339 F.2d 440,

441-42 (2d Cir. 1964) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936)). "A district

court's authority to stay a pending action is an aspect of its broad and inherent power over its own

process, to prevent abuses, oppressions and injustice, so as not to produce hardship, and to do

substantial justice. In issuing a stay, a court must weigh competing interests and maintain an even

6

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 6 of 8

balance." Soler v. G & U, Inc., 86 F.R.D. 524, 526 (S.D.N.Y. 1980) (internal citations, quotation

marks, and alterations omitted).

Here, the competing interests favor granting a stay.

As explained above, judicial economy strongly favors staying the proceedings pending

resolution of the legal question at the core of this action. Whether or not the Court's judgment on

appeal is affirmed, granting a stay now, rather than proceeding with cumbersome class-wide

discovery, a motion for certification, and ultimately a decision on damages, is very likely to save

time and money for the litigants - whether by resolving the case outright or by providing a basis

on which the parties can negotiate licenses for the public performance of pre-1972 sound

recordings.

It is true that Sirius would not suffer irreparable harm if a stay is denied. Its injury - if it is

in fact injured by the failure to grant a stay - would be in the form of monetary costs. However,

granting a stay would not impose substantial hardship on Flo and Eddie. Flo and Eddie has

tolerated public performances of sound recordings in which it holds common law copyrights, by

both digital and terrestrial broadcasters, for decades. If Flo and Eddie prevails on appeal, it can

obtain damages for all Sirius's acts of infringement dating from three years before its complaint

was filed. It loses not a dime's worth of potential damages by holding up until the legal issue is

resolved.

With the balance of hardships thus favoring neither side, the public interest in judicial

economy rules the day. The Court will stay this action.

7

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 7 of 8

CONCLUSION

For the foregoing reasons, Sirius's motion to certify the Summary Judgment Decision and

the Decision on Reconsideration for interlocutory appeal is GRANTED, and this action is

ST A YED pending a decision by the Second Circuit.

Dated: February 10, 2015

U.S.D.J.

BY ECF TO ALL COUNSEL

8

Case 1:13-cv-05784-CM Document 118 Filed 02/10/15 Page 8 of 8

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327

Constitutional Obstacles? Reconsidering Copyright Protection for Pre-1972 Sound Recordings

Eva E. Subotnik* June M. Besek**

Introduction ........................................................................................................... 328  I. Background ....................................................................................................... 329  II. The Copyright Office Report ........................................................................... 333  III. Potential Legal Effects of Federalization ....................................................... 335  

A. Assumptions Concerning Federalization ............................................. 335  B. The Legal Implications of the Change ................................................. 335  

1. Term of Protection ........................................................................ 335  2. Rights ............................................................................................ 336  3. Exceptions .................................................................................... 338  4. Ownership..................................................................................... 339  5. Remedies ...................................................................................... 341  6. Formalities .................................................................................... 341  

C. Potential Plaintiffs Who Might Claim a Constitutional Deprivation ... 342  IV. Retroactivity ................................................................................................... 343  

A. General Considerations ........................................................................ 343  B. Applications to Federalizing Legislation ............................................. 344  

V. The Fifth Amendment Analysis....................................................................... 347  A. Framework for Analysis ...................................................................... 350  B. Foreshortened Term of Protection ....................................................... 353  

1. Due Process .................................................................................. 353  2. Takings ......................................................................................... 355  

a. Per Se Taking ......................................................................... 356  b. Penn Central Taking ............................................................... 360  

* Assistant Professor of Law, St. John s University School of Law. ** Executive Director, Kernochan Center for Law, Media and the Arts and Lecturer-in-Law, Columbia Law School. We would like to thank the following people for their helpful contributions: Shyamkrishna Balganesh, Christopher Beauchamp, Steven Bernstein, Robert Brauneis, Michael Burstein, Robert Clarida, Matthew Aaron Collins, Elizabeth Townsend Gard, Camilla Hrdy, Brian Lee, Irina Manta, Mary Rasenberger, Mark Weiner, the participants in the Faculty Workshop at St. John s University School of Law, the participants in the Second Annual Intellectual Property Scholars Roundtable at the University of New Hampshire School of Law (2012), the participants in the Intellectual Property Scholars Conference (2011) and especially Thomas Merrill and Christopher Serkin.

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i. Economic Impact .......................................................... 360  ii. Distinct Investment-backed Expectations ................... 363  iii. Character of the Governmental Action ....................... 366  

C. Filing Obligations and Obligation to Make the Work Reasonably Available ........................................................................................... 367  

D. Registration .......................................................................................... 371  E. Substitution of Federal Rights and Remedies ...................................... 372  F. Restrictions on Users ............................................................................ 376  

Conclusion ............................................................................................................. 378  

IN T R O DU C T I O N

The typical complaint about intellectual property laws is that they are sluggish in responding to technological change. An unfolding question in the contemporary era, however, is the degree to which the threat of constitutional challenge will lead Congress to further adhere to the status quo. In the wake of the patent law overhaul several years ago,1 for example, the wisdom and scope of those amendments were widely debated, but concern about their constitutional soundness was also expressed in some quarters.2 Likewise, the latter concern is in play with respect to a proposed amendment of the law that applies to sound recordings.

Amidst the waves of technological innovation affecting access to music, the eyes and ears of the music industry, library associations, policy makers and others are focused on a legislative decision made some four decades ago. Specifically, these parties are staking out their positions on the possibility of extending federal copyright protection to pre-1972 sound recordings.3 Those sound recordings are currently protected through 2067 by a patchwork of state laws, and after that date all pre-1972 sound recordings will enter the public domain.4

The U.S. Copyright Office has issued a report recommending that pre-1972 sound recordings be brought under federal copyright protection in the near future.5 There are sound reasons for doing so. The Office s proposal would result in a shorter term of protection for some recordings and effect other changes in the rights and responsibilities of right holders and users.

1. Leahy-Smith America Invents Act (AIA), Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified in scattered sections of 35 U.S.C.). 2. See, e.g., Brooks v. Dunlop Mfg. Inc., 702 F.3d 624, 626 (Fed. Cir. 2012) (rejecting constitutional challenge); Andrew L. Sharp, Note, Misguided Patent Reform: The Questionable Constitutionality of F irst-to-F ile, 84 U. COLO. L. REV. 1227 (2013). 3. See, e.g., John Conyers, Music Legends Deserve R-E-S-P-E-C-T, USA TODAY (Dec. 1, 2013, 5:41 PM) http://www.usatoday.com/story/opinion/2013/12/01/john-conyers-music-copyright-column/ 3797485. 4. 17 U.S.C. § 301(c) (2012). 5. REGISTER OF COPYRIGHTS, FEDERAL PROTECTION FOR PRE-1972 SOUND RECORDINGS (2011), available at http://www.copyright.gov/docs/sound/pre-72-report.pdf [hereinafter COPYRIGHT OFFICE REPORT]. One of the coauthors of this Article, June M. Besek, served as a consultant to the U.S. Copyright Office in connection with the Copyright Office Report.

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2014] COPYRIGHT PROTECTION FOR PRE-1972 SOUND RECORDINGS 329

This Article examines the constitutional implications of legislation to bring pre-1972 sound recordings under federal copyright protection (referred to hereafter as federalizing legislation ). In particular, we consider whether such an amendment

could violate due process or constitute a taking pursuant to the Fifth Amendment of the Constitution.6 Using the Copyright Office s approach as a springboard, we consider the issues that would likely arise under any federalizing legislation. These issues, however, have implications far beyond the context of federalizing legislation for pre-1972 sound recordings. Given the proliferation of assets subject to intellectual property laws and the increasing role those assets play in the U.S. economy, the questions addressed in this Article may bear on Congress overall ability to amend those laws.7

This Article first lays out the relevant background to the special treatment of pre-1972 sound recordings. It then describes the legislative changes proposed by the Copyright Office. The Article identifies the most likely points of contention among the various stakeholders concerning federalizing legislation. It then assesses the viability of potential takings and due process claims. We conclude that if Congress were to adopt the type of proposal offered by the Copyright Office, along with the modifications suggested herein, the principal takings and due process concerns would be significantly alleviated. Such legislation could serve as a helpful framework for future amendments to the intellectual property laws.

I . B A C K G R O UND

Although they had existed in various formats for over one hundred years,8 sound recordings only received federal copyright protection in the United States effective February 15, 1972 through the Sound Recording Amendment.9 That protection extended prospectively to sound recordings fixed on or after that date. Sound recordings fixed prior to February 15, 1972 ( pre-1972 sound recordings ) continued to be protected under state law, where they remain today. At the time of the Sound Recording Amendment, most unpublished works in all media were also

6. The Fifth Amendment provides: No person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. U.S. CONST. amend. V. 7. For example, the U.S. Register of Copyrights has called for a comprehensive review of the Copyright Act, suggesting, inter alia, that Congress may want to alleviate the gridlock resulting from the lengthy term of copyright by reverting works to the public domain after a period of life plus fifty years unless heirs or successors register their interests with the Copyright Office. The Register s Call for Updates to the U .S. Copyright Law: Hearing Before the Subcomm. on Courts, Intell. Prop. & the Internet of the H. Comm. on the Judiciary, 113th Cong. 7 (2013) (statement of Maria A. Pallante, U.S. Register of Copyrights). 8. One of the earliest recordings is the French folksong Au Clair de la Lune, recorded on April 9, 1860 by Parisian Édouard-Léon Scott de Martinville. See Édouard-Léon Scott de Martinville s Phonautograms, FIRST SOUNDS (May 29, 2009), http://www.firstsounds.org/sounds/scott.php. 9. The Sound Recording Amendment, Pub. L. No. 92-140, 85 Stat. 391 (1971) (codified in scattered sections of 17 U.S.C.). The law was passed on October 15, 1971, and went into effect on February 15, 1972. Id. § 3.

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protected exclusively by state law.10 In 1976, Congress created a unitary system of copyright. The 1976 Copyright

Act explicitly extended federal copyright protection to unpublished works,11 which, up until that point, had enjoyed perpetual protection under state law. The Act also preempted rights equivalent to federal copyright that might be available under state common law or state statutory law.12 However, it left pre-1972 sound recordings,13 published or not, exclusively under state law protection until they enter the public domain on February 15, 2067.14

In recent years, scholarly groups seeking to promote the preservation and study of sound recordings have urged that pre-1972 sound recordings be brought under federal copyright law.15 In 2009, Congress directed the U.S. Copyright Office to evaluate the implications of such a change on the preservation of and access to sound recordings as well as the potential economic impact on right holders.16 In its December 2011 report, the Office concluded that the best course is for Congress to federalize protection for these older recordings.17

There are several reasons for Congress to extend federal protection to pre-1972 sound recordings. First, the elimination of disparate sources of protection in favor of a single federal scheme with a clearer, better defined regime for the enforcement of rights would better implement the basic constitutional aims of

10. Under the 1909 federal Copyright Act, works were eligible for federal protection only upon publication with a proper copyright notice. Some categories of works could be federally registered as unpublished under the 1909 federal Copyright Act. Courts generally held that such a federal registration divested the work of any state common law rights. See 2 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT § 7.16[A][2][c][i] [ii] (rev. ed. 2013) [hereinafter NIMMER ON COPYRIGHT]. 11. 17 U.S.C. § 303(a) (2012). 12. 17 U.S.C. § 301(a). 13. Sound recordings are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied. 17 U.S.C. § 101. 14. 17 U.S.C. § 301(c). The complete subsection states:

With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.

Id. As passed in 1976, the legislation provided that state laws would not be preempted until February 15, 2047, but that date was extended to February 15, 2067 by the Copyright Term Extension Act, Pub. L. No. 105-298, 112 Stat. 2827 (1998). 15. See, e.g., ASSOC. FOR RECORDED SOUND COLLECTIONS, LEGAL IMPEDIMENTS TO PRESERVATION OF AND ACCESS TO THE AUDIO HERITAGE OF THE UNITED STATES (2007), available at http://www.arsc-audio.org/pdf/ARSC-MLAcopyright.pdf. 16. STAFF OF H. COMM. ON APPROPRIATIONS, 111TH CONG., H.R. 1105, PUB. L. NO. 111-8 [LEGISLATIVE TEXT AND EXPLANATORY STATEMENT] 1769 (Comm. Print 2009). See also Notice of Inquiry, Federal Copyright Protection of Sound Recordings Fixed Before February 15, 1972, 75 Fed. Reg. 67,777 (Nov. 3, 2010). 17. See COPYRIGHT OFFICE REPORT, supra note 5, at 120.

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2014] COPYRIGHT PROTECTION FOR PRE-1972 SOUND RECORDINGS 331

uniformity and the promotion of writing and scholarship. 18 Currently, there is a significant disparity in the legal treatment of pre-1972 sound recordings, both with respect to the state laws and in comparison to other works of authorship protected under federal law.19 One consequence of this disparity is that there are almost no pre-1972 U.S. sound recordings in the public domain across the United States.20

Pre-1972 sound recordings are protected by an array of state laws, including criminal anti-piracy laws and civil laws occasionally through civil statutes, but usually by common law under a range of different legal theories, including unfair competition, misappropriation, common law copyright and others.21 Some states have well-defined causes of action; others have no law directly on point.22 In some states, right holders may bring claims only against direct commercial competitors.23 Moreover, states generally do not provide explicit protection for all of the same rights that are protected under federal law; for example, digital streaming is embraced under the federal right of public performance, but may have no explicit state law protection.24

Second, federal protection would permit scholars, researchers and others seeking to use pre-1972 sound recordings to benefit from vital exceptions and defenses to alleged infringement, such as fair use and the privileges for libraries and archives in § 108.25 As mentioned, states are entitled to protect pre-1972 sound recordings until 2067. Some states provide for a specific end date before 2067 for such protection, but most do not.26 Even recordings dating from the beginning of the

18. H.R. REP. NO. 94-1476, at 129 (1976) (setting out this goal as a basis for supporting the 1976 Copyright Act). 19. See COPYRIGHT OFFICE REPORT, supra note 5 20. See id. at 5. Sound recordings published without copyright notice from 1972 1989 are now in the public domain, absent mitigating circumstances. Id. at 5 n.13. There are some pre-1972 sound recordings that are no longer protected in a particular state or states, but very few are in the public domain nationwide. See, e.g., Capitol Records, Inc. v. Naxos of Am., Inc., 830 N.E.2d 250 (N.Y. 2005) (affirming New York s ability to grant common law copyright protection to pre-1976 sound recordings that were in the public domain in their country of origin). 21. JUNE M. BESEK, COPYRIGHT AND RELATED ISSUES RELEVANT TO DIGITAL PRESERVATION AND DISSEMINATION OF UNPUBLISHED PRE-1972 SOUND RECORDINGS BY LIBRARIES AND ARCHIVES

they impose a different regime of protection on published sound recordings. PROGRAM ON INFO. JUSTICE & INTELL. PROP., WASHINGTON COLLEGE OF LAW, AMERICAN UNIVERSITY, PROTECTION FOR PRE-1972 SOUND RECORDINGS UNDER STATE LAW AND ITS IMPACT ON USE BY NONPROFIT INSTITUTIONS: A 10-STATE ANALYSIS Jaszi Report]. 22. See COPYRIGHT OFFICE REPORT, supra note 5, at 48. It is impossible, however, to rule out the prospect of protection pursuant to common law tort claims, as the common law evolves over time. See id. 23. See id. 24. 17 U.S.C. §§ 106(6), 114 (2012). Other differences between state protection and federal protection will be discussed in greater detail below. 25. See 17 U.S.C. §§ 107, 108. Section 108 permits libraries and archives to make copies of protected works for preservation and replacement, and for individual users, under defined circumstances. Id. § 108. 26. California, for example, protects sound recordings only until February 15, 2047. CAL. CIV. CODE § 980(a)(2) (West 2012). Colorado law provides that, for purposes of criminal enforcement, a common law copyright may not last longer than 56 years from when it accrues. COLO. REV. STAT. § 18-

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twentieth century can potentially enjoy protection in many states. Because of the amorphous nature of civil law protection in many states, the

availability and scope of exceptions akin to fair use or those for libraries and archives is uncertain.27 Compounding the problem is the reluctance of many librarians and archivists to make certain uses of recordings when the law is ambiguous.28 There is also the concern that even if a use is permissible under a

laws, it may be actionable elsewhere.29 Indeed, the issues raised by librarians and archivists, and the effect of federalization of pre-1972 sound recordings on preservation, were a principal focus of the Copyright Office Study.30 Libraries and archives have also indicated that the absence of clear legal authority concerning preservation of, and access to, pre-1972 sound recordings adversely affects their ability to raise funds for preservation initiatives.31

Third, granting federal copyright protection would reduce the disparate treatment of foreign and domestic pre-1972 sound recordings. Certain foreign pre-1972 sound recordings are protected by federal copyright law. In implementing U.S. obligations under the TRIPS Agreement,32 Congress provided federal copyright protection for eligible sound recordings of foreign origin which were fixed before February 15, 1972.33 For most works, this copyright restoration

4-601(1.5) (2012). 2067 is effectively the end date in the many states that protect sound recordings pursuant to common law causes of action, for which there is often no specific end date under state law. See generally COPYRIGHT OFFICE REPORT, supra note 5, at 47. 27. See COPYRIGHT OFFICE REPORT, supra note 5, at 46. In some states that provide protection pursuant to a tort cause of action, certain activities permitted by exceptions under federal copyright law may be nonactionable because they do not cause a competitive injury (e.g., they involve uses of the recordings by persons other than competitors). But there nevertheless remains ambiguity about the permissibility of certain uses of sound recordings. This concern weighs more heavily in states like New York that base protection on common law copyright, which does not require a competitive injury as a component of a claim. See Capitol Records, Inc. v. Naxos of Am., Inc., 830 N.E.2d 250, 266 (N.Y. 2005). 28. See, e.g., Patrick Loughney, Library of Congress, Comments of Library of Congress in Response to Notice of Inquiry, in U.S. COPYRIGHT OFFICE, COMMENTS REGARDING FEDERAL COPYRIGHT PROTECTION OF SOUND RECORDINGS FIXED BEFORE FEB. 15, 1972, at 6 (Nov. 3, 2011), available at http://www.copyright.gov/docs/sound/comments/initial [hereinafter Loughney, Comments of Library of Congress in Response to Notice of Inquiry]; Tim Brooks, Ass n of Recorded Sound Collections, Comments at Pre-1972 Sound Recordings Public Meeting 194 (June 2, 2011), available at http://www.copyright.gov/docs/sound/meeting/transcript-06-02-2011.pdf [hereinafter Brooks, Comments at Pre-1972 Sound Recordings Public Meeting]. 29. See, e.g., Brooks, Comments at Pre-1972 Sound Recordings Public Meeting, supra note 28, at

30. See 155 Cong. Rec. H2397 (2009) (directing the Copyright Office to study the effect of federal coverage on the preservation of [pre-1972] sound recordings, the effect on public access to those recordings, and the economic impact of federal coverage on rights holders ). 31. Loughney, Comments of Library of Congress in Response to Notice of Inquiry, supra note 28, at 3 5; Sam Brylawski, Soc. for Am. Music, Comments at Pre-1972 Sound Recordings Public Meeting 51 (June 2, 2011), available at http://www.copyright.gov/docs/sound/meeting/transcript-06-02-2011.pdf. 32. Trade-Related Aspects of Intellectual Property Rights ( TRIPS ), Apr. 15, 1994, 33 I.L.M. 1199 (1994). U.S. obligations under TRIPS were implemented in the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) (codified as amended at 17 U.S.C. §§ 104A, 109). 33. See 17 U.S.C. § 104A(a)(1), (h)(6)(C) (2012). Eligible sound recordings were those which

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occurred automatically on January 1, 1996,34 and restored works are protected in the United States for the remainder of the term they would have enjoyed had they not entered the public domain.35 In many foreign countries, the term of protection for sound recordings on January 1, 1996 was fifty years from first publication or fixation.36 Consequently, most foreign sound recordings first fixed in 1946 or later have federal copyright protection.37

Thus, the disparity in the protections for sound recordings in the United States weighs in favor of adopting federal copyright protection for pre-1972 sound recordings.

I I . T H E C OPY RI G H T O F F I C E R EPO R T

In its December 2011 Report, F ederal Protection for Pre-1972 Sound Recordings, the Copyright Office concluded that federalization would best serve the interest of libraries, archives and others in preserving old sound recordings and increasing the availability to the public of old sound recordings. 38 Recognizing that librarians and archivists find the scope of existing federal copyright exceptions problematic, the Office nevertheless concluded that federal law would provide greater certainty and more opportunity to preserve and increase public access to old sound recordings than the current state law regime does.39 It also concluded that the objections raised by the record companies principally, that the change would wreak havoc on existing ownership rights could be satisfactorily addressed by drafting the legislation so as to ensure that it did not effect a change in ownership

were not in the public domain in their source country on the date of restoration due to expiration of the term of protection, had at least one author or right holder who was a national or domiciliary of an eligible country when the work was created and (if published) were published in an eligible country and not published in the United States within thirty days after foreign publication. Id. § 104A(a)(1), (h)(6). 34. For works whose source countries were members of the Berne Convention or the WTO at the time, the restoration date was January 1, 1996; for countries that joined later, it was the date of adherence. 17 U.S.C. § 104A(h)(2). This legislation is referred to as copyright restoration because it provided that copyright would be restored to many works that previously had but then lost protection. Pre-1972 sound recordings, however, were never eligible for federal copyright. 35. 17 U.S.C. § 104A(a)(1). See also Golan v. Holder, 132 S. Ct. 873 (2012) (holding that the URAA s copyright restoration provisions were within Congress s authority under the Copyright Clause of the Constitution, and the removal of works from the public domain did not violate the First Amendment rights of reliance parties who were using the works prior to restoration). 36. This is the minimum term of protection provided by the WIPO Performances and Phonograms Treaty art. 17, Dec. 20, 1996, S. TREATY DOC. No. 105-17, 36 I.L.M. 76. The European Union recently extended the term of protection for sound recordings (phonograms) to 70 years. Directive 2011/77/EU of the European Parliament and of the Council, 2011 O.J. (L 265) (Sept. 27, 2011). Implementation of the extension was required by Nov. 1, 2013 and does not apply to sound recordings already in the public domain. See id. 37. Conversely, almost all pre-1946 foreign sound recordings are in the public domain as far as federal copyright law is concerned. However, these pre-1946 foreign sound recordings may still be protected under state law. See (N.Y. 2005). 38. COPYRIGHT OFFICE REPORT, supra note 5, at viii. 39. Id.

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of rights in pre-1972 sound recordings.40 Specifically, the Office recommended that pre-1972 sound recordings be

brought under federal copyright law with the same rights, exceptions and limitations as sound recordings created in 1972 and thereafter.41 Furthermore, the initial owner of the federal copyright would be the person who owns the rights in the recording under state law just prior to when the federal law becomes effective.42

The proposed scheme would effectively give all newly-federalized sound recordings, no matter how old, some minimum period of protection.43 Sound recordings published before 1923 would get a transition period of at least three years of federal protection, with the possibility of twenty-five years in total if, during the transition period, the right holder met certain extended term requirements, which entail: (1) making the sound recording available to the public at a reasonable price; (2) filing a notice in the Copyright Office to signify its intent to achieve maximum protection and (3) continuing to make the work available at a reasonable price throughout the extended term.44

Sound recordings published in 1923 or later would be protected until the expiration of ninety-five years from first publication (as defined by the federal copyright law),45 though they would get a transition period of six to ten years of protection and the further possibility of federal protection until February 15, 2067 through compliance with the extended term requirements. Sound recordings unpublished as of the effective date of the federalizing legislation would get a term of 120 years from fixation, or to the end of a six-to-ten-year transition period (whichever expires later), but in no event beyond 2067.46 If the 120-year term would expire before 2067, the unpublished sound recordings like sound

40. Id. 41. Id. 42. The Report also recognized that certain adjustments should be considered with respect to the federal requirements of timely registration as a prerequisite to an award of attorney s fees and statutory damages in an infringement suit, and to other provisions such as 17 U.S.C. § 205 (2012), which deals with priority of conflicting transfers. 43. The proposed terms are analogous to the terms of protection provided for works created prior to the effective date of the 1976 Copyright Act. See purposely suggested a term that did not rely on a measuring life, in contrast to unpublished works brought under federal law in the 1976 Copyright Act, which received a term of life plus fifty years (later extended to life plus seventy years), as well as a minimum term of at least twenty-five years under 17 U.S.C. § 303. 44. COPYRIGHT OFFICE REPORT, supra note 5, at 177. The Report addressed the possibility of a Fifth Amendment takings claim and concluded that various aspects of its proposed legislation, including the transition period and the opportunity to achieve a longer period of protection, significantly diminish[] . . . the likelihood of success of any takings claim . . . . Id. 45. 17 U.S.C. § 101 (2011) defines publication as:

[t]he distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display, constitutes publication. A public performance or display of a work does not of itself constitute publication.

Id. 46. COPYRIGHT OFFICE REPORT, supra note 5, at ix.

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recordings published in 1923 or later would have the possibility of protection until 2067 through compliance with the extended term requirements.

I I I . PO T E N T I A L L E G A L E F F E C TS O F F E D E R A L I Z A T I O N

A . ASSU MPT I O NS C O N C E RNIN G F E D E R A L I Z A T I O N

In analyzing whether federalizing legislation would encroach on rights guaranteed by the Fifth Amendment, we operate on the assumption that the legislation would follow the broad outlines of the U.S. Copyright Office s proposal, discussed above. That this formulation, informed as it was by comments from many of the relevant stakeholders, is a useful starting point for our discussion. Even if federalizing legislation as enacted differs from the Copyright Office s proposal, the due process and takings concerns discussed below will remain relevant. Accordingly, as of the effective date of the legislation (assumed, for the purposes of this article, to be January 1, 2015), all pre-1972 sound recordings would be protected under federal copyright law, and all state rights with respect to copyright and copyright-like protection of pre-1972 sound recordings would be preempted.

Pre-1972 sound recordings would have the term of protection described in the Copyright Office Report, discussed above. A transition period of three years for sound recordings published prior to 1923 and a transition period of six years for other pre-1972 sound recordings will be assumed.

B . T H E L E G A L I MPL I C A T I O NS O F T H E C H A N G E

If protection for pre-1972 sound recordings were brought under federal law, how would the nature and scope of protection differ from what it is now?47

1. Term of Protection

If federalization of pre-1972 sound recordings effected a significant reduction in the term of protection, it could diminish an expected income stream for right holders who might otherwise market recordings with commercial value. The impact of federalization on the expected income stream would vary substantially with the value of the individual recording and with the number of years by which the term is diminished.

The potential term change is best analyzed with specific examples. In each of the examples below, the term of protection the recording would receive under the hypothetical federalizing statute is compared to a term of protection in New York, where pre-1972 sound recordings, whether published or not, are protected by

47. A comparison between state and federal law protection could itself be the basis of a law review article. We have tried to highlight here the principal differences that might bear on the takings and due process issues.

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common law copyright until 2067.48 1920 published recording: Under the federalizing legislation, protection for

such a recording would expire on January 1, 2018 (three years from the effective date of the legislation) unless, during that three-year transition period, the right holder were to meet the extended term requirements, in which case the recording would be protected under federal law for a total of twenty-five years, until 2040. Thus the term will be reduced by at least twenty-seven years in comparison with

-nine years if the right holder fails to 49

1923 published recording: Under the federalizing legislation, protection would last until 2018 (ninety-five years from publication), but the assumed six-year transition period would ensure protection until the beginning of 2021, for a loss of forty-holder could, however, achieve federal protection until 2067 by meeting the extended term requirements.

1960 published recording: Under the federalizing legislation, protection would expire in 2055 (ninety-five years from publication), for a loss of twelve years of

A right holder could, however, get federal protection until 2067 by meeting the extended term requirement.

Unpublished recording created in 1940:50 Under the federalizing legislation, unpublished recordings would be protected until 120 years after fixation, but no later than 2067. So the sound recording in question would be protected until 2060 (for a loss of seven years compared with New York), or until 2067 if the right holder meets the extended term requirements.

Unpublished recording created in 1970: Under the federalizing legislation, the term would last until 120 years after fixation, but no later than 2067. Since 1970 plus 120 years would be 2090, the unpublished recording would be protected under federal law until 2067 but no longer, and federalization would not alter its term of protection as compared with New York.

2. Rights

Federal copyright law provides right holders with a set of rights: reproduction,

48. See Capitol Records, Inc. v. Naxos of Am., Inc., 830 N.E.2d 250 (N.Y. 2005). Many states base protection on common law unfair competition principles, which have no temporal endpoint (other than the externally imposed federal preemption deadline of 2067); but protection would effectively cease if the sound recording at issue had no commercial value, so for any given recording, the term may effectively be shorter than 2047. The differences among states might become relevant if a right holder were to bring an as applied challenge alleging a taking had occurred. 49. These dates are approximate because federal preemption occurs on Feb. 15, 2067, 17 U.S.C. § 301(c), but federal terms generally last until the end of the year in which they would otherwise expire, 17 U.S.C. § 305. 50. While one might argue that a sound recording that has not been commercialized is less likely to create a takings problem, it does not necessarily follow that such recordings have no commercial value (such that takings claims could not even be raised).

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adaptation, distribution, public performance and public display.51 The public performance right in sound recordings is limited to the right to perform the work publicly by means of a digital audio transmission. 52 Performance by other means, such as analog transmission, is not restricted by federal copyright.53

Although not technically a right of the owner, some protection for pre-1972 sound recordings is provided by criminal anti-piracy laws in nearly every state, although the laws vary and it is not clear how many cases are brought pursuant to these laws.54 On the civil side, states generally provide protection for pre-1972 sound recordings through common law, although some states, like California, have civil statutes that address unauthorized use of pre-1972 sound recordings. States may treat unauthorized reproduction and distribution of pre-1972 sound recordings as unfair competition or misappropriation, a violation of common law copyright, or as another type of civil wrong.55 Where the cause of action is grounded in unfair competition or misappropriation, evidence of a competing use and/or commercial benefit to the user is usually required to establish a claim. A claim grounded in common law copyright does not require such a showing.56

It is apparent that duplication and distribution rights are recognized under state law.57 The existence of a derivative work right under state law is less well established; there is some support for its existence, but there are too few cases to establish whether it can be considered similar in scope to the derivative work right under federal law.58

51. 17 U.S.C. § 106. The federal display right is not of major significance for sound recordings themselves, though it may be for cover artwork. 52. 17 U.S.C. § 106(6). See Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995), amended by the Digital Millennium Copyright Act of 1998, Pub. L. No. 105-304, 112 Stat. 2860 (1998) (codified at 17 U.S.C. § 114 (2000)). Certain types of digital audio transmissions, such as webcasting, are subject to a statutory license. The sound recording copyright owner may not prevent these transmissions, but the transmitting party must pay royalties. 17 U.S.C. § 114(d)(2). The rate is set by the Copyright Royalty Board, and the royalties are distributed to recording companies and performers by an organization called SoundExchange. Performances such as interactive digital audio services (on-demand streaming) that are perceived to involve a high risk of copying, or of substituting for the sale of copies, require a negotiated license. 17 U.S.C. § 114(d)(2), (3), (4)(A). 53. Legislation is pending in Congress to, inter alia, include audio transmissions within the public performance right for sound recordings. Free Market Royalty Act, H.R. 3219, 113th Cong. (2013). 54. See COPYRIGHT OFFICE REPORT, supra note 5 55. Id. see also Jaszi Report, supra note 21, at 13 19. Some states have no reported cases on pre-1972 sound recordings, so it is unclear whether and how they would provide civil law protection against unauthorized uses. Most states would likely protect unpublished sound recordings under a common law copyright regime. See id. against unauthorized use of recordings prior to their first publication). 56. See, e.g., Capitol Records, Inc. v. Naxos of Am., Inc., 830 N.E.2d 250, 266 (N.Y. 2005). 57. See, e.g., Columbia Broad. Sys., Inc. v. Melody Recordings, Inc., 341 A.2d 348 (N.J. Super. Ct. App. Div. 1975); Capitol Records, Inc. v. Erickson, 82 Cal. Rptr. 798 (Cal. Ct. App. 1969). 58. In Capitol Records v. Naxos, for example, the New York Court of Appeals rejected Naxos s claim that its remastering of the Capitol recordings to enhance sound quality resulted in new products that did not infringe the originals, since the remastered recordings still utilized elements of the original recordings. Capitol Records, Inc., 830 N.E.2d at 267. The federal derivative work right for sound recordings is narrower than that for other copyrighted works; it does not encompass imitations of a

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In general, states do not appear to recognize a right of public performance in pre-1972 sound recordings,59 and a few states restrict such a right by statute.60 Such recordings are regularly played, broadcast and streamed without a performing rights license;61 they do not have the benefit of an explicit right of public performance by means of digital audio transmissions provided to federally protected sound recordings by § 106(6) of the Copyright Act.62

Thus, bringing pre-1972 sound recordings under the protection of federal law would provide right holders with a clearer and more consistent set of rights, including a better defined derivative work right, as well as a right of public performance for digital transmissions.63

3. Exceptions

Federal copyrights are subject to various exceptions and limitations, as set out in §§ 107 to 122 of the Act. The exceptions include, inter alia, fair use, exceptions for libraries and archives and educational exceptions for face-to-face classroom use and distance education.64

It is often unclear what exceptions and limitations are available under the various state laws.65 Most of the state cases involve commercial duplication and distribution of entire recordings, and there is little law addressing commercial, transformative uses of less than an entire recording, such as might be found in typical sampling practices, or noncommercial uses generally. In many states, noncommercial uses for scholarship, teaching and preservation would simply not

performance in a sound recording if the sounds in the recording are independently fixed. 17 U.S.C. § 114(b) (2012). Performers have succeeded in bringing right of publicity actions against sound-alikes under state law. See, e.g., Midler v. Ford Motor Co., 849 F.2d 460 (9th Cir. 1988). Presumably, such holdings would be unaffected by federalizing protection for pre-1972 sound recordings. 59. See, e.g., RCA Mfg. Co. v. Whiteman, 114 60. See, e.g., N.C. GEN. STAT. § 66-28 (2012); S.C. CODE ANN. § 39-3-510 (2011). 61. See David Oxenford, Comments at Pre-1972 Sound Recordings

available at http://www.copyright.gov/docs/sound/meeting/ transcript-06-02-2011.pdf; see generally R. Bruce Rich, Todd D. Larson & Cynthia Greer, Sirius XM Radio, Comments of Sirius XM Radio in Response to Notice of Inquiry, in U.S. COPYRIGHT OFFICE, COMMENTS REGARDING FEDERAL COPYRIGHT PROTECTION OF SOUND RECORDINGS FIXED BEFORE FEB. 15, 1972 (2011), available at http://www.copyright.gov/docs/sound/comments/reply. 62. See 17 U.S.C. §§ 106(6), 114. It is possible that a court might find streaming, particularly on-demand streaming, to be a violation of state rights in a pre-1972 sound recording because it could, in effect, substitute for a purchase of the recording. However, no court has yet been confronted with this issue, which will likely be resolved in the context of pending suits. See, e.g., Complaint at 6, SoundExchange, Inc. v. Sirius XM Radio Inc., No. 1:13-CV-01290, 2013 WL 521902 (D.D.C. Aug. 26, 2013) (alleging that Sirius withheld from SoundExchange royalties owed for the performance of pre-1972 sound recordings, in violation of §§ 112 and 114 of the Copyright Act); see also Hannah Karp, Sirius is Sued Over Music Royalties for Pre-1972 Recordings, WALL ST. J. (Aug. 26, 2013), http://online.wsj.com/news/articles/SB10001424127887324591204579037260890310376. 63. 17 U.S.C. §§ 106, 114. 64. 65. The California civil statute has exceptions, as do many state criminal laws (discussed below), but they do not cover the range of uses for which exceptions are available under federal law. See COPYRIGHT OFFICE REPORT, supra note 5

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meet the criteria for a cause of action under state law, since there is no commercial benefit to the user.66

State common law copyright provides a broad form of protection to right holders that is more analogous to federal copyright, since no competitive injury need be shown. While a recent New York case applied fair use under common law to the use of a pre-1972 sound recording,67 that is but a single state law case, and provides no basis from which to conclude that other state courts would apply a robust fair use doctrine. Moreover, there are no state common law doctrines analogous to other federal law exceptions, such as § 110(2) for distance education or § 108 for library and archive uses. If protection for pre-1972 sound recordings were federalized, fair use and library exceptions would be consistently available.68

4. Ownership

The laws regarding ownership and transfers of rights in sound recordings may differ between state and federal law. For example, federal copyright law contains provisions to determine who the initial author of a work is, and whether a valid transfer of copyright rights has occurred. Under federal law, the individual creator of a work is the initial author unless the work is a work made for hire. 69 If the work qualifies as a work made for hire, then the employer or commissioning party, and not the individual creator, is deemed the author (and thus the initial owner of all rights, unless the parties agree otherwise).70 The extent to which any particular state would recognize the work made for hire doctrine with respect to pre-1972 sound recordings, and under what circumstances, is unclear; in many states, there

66. See id. at 27; Jaszi Report, supra note 21 67. EMI Records Ltd. v. Premise Media Corp., No. 601209/08, 2008 N.Y. Misc. Lexis 7485 (N.Y. Sup. Ct. Aug. 13, 2008). 68. Another change that might occur if pre-1972 sound recordings were brought under federal protection has to do with the safe harbor from copyright liability for service providers in § 512 of the federal copyright law. Two courts have now read § 512 to encompass common law copyright claims concerning pre-1972 sound recordings. Capitol Records, Inc. v. MP3Tunes, LLC, 821 F.Supp.2d 627, 640 42 (S.D.N.Y. 2011); (N.Y. Sup. Ct. 2012). If these rulings are sustained, it appears that federalization of pre-1972 sound recordings would work no change, at least as to claims denominated as copyright. See Capitol Records, LLC v. Vimeo, LLC, Nos. 09 Civ. 10101(RA), 09 Civ. 10105(RA), 2013 WL 5272932 (S.D.N.Y. Sept. 18, 2013) (denying safe harbor protection for pre-1972 sound recordings), certified for interlocutory appeal, Capitol Records, LLC v. Vimeo, LLC Nos. 09 Civ. 10101(RA), 09 Civ. 10105(RA), 2013 WL 6869648 (S.D.N.Y. Dec. 31, 2013); COPYRIGHT OFFICE REPORT, supra note 5, at

§ 512 encompasses common law copyright claims concerning pre-1972 sound recordings). Nevertheless, other types of claims with respect to pre-1972 sound recordings unfair competition, misappropriation, conversion and the like are presumably not covered by § 512. See Michael Erlinger, Jr., An Analog Solution in a Digital World: Providing F ederal Copyright Protection for Pre-1972 Sound Recordings, 16 UCLA ENT. L. REV. 45, 66 (2009). Accordingly, if pre-1972 sound recordings were brought under federal law, service providers would have a more comprehensive safe harbor with respect to those recordings. 69. NIMMER ON COPYRIGHT, supra note 10, at § 5.03 [A], [B][1][a][i]. 70. 17 U.S.C. § 201(b).

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are no cases on point.71 Another principle of current federal copyright law is that ownership of the

physical copy in which a protected work is embodied is distinct from ownership of the underlying intellectual property rights, and transfer of the physical object does not convey the underlying rights, in the absence of an agreement to that effect.72 State law applicable to pre-1972 recordings could differ. In some cases, courts prior to 1978 found that the sale or transfer of a material object also transferred the common law copyright with respect to the work embodied in that object, unless the creator specifically reserved those rights.73 This principle, sometimes referred to as the Pushman doctrine, was repudiated by statute in New York and California, at least for works of fine art.74 Nevertheless, it remains possible that courts would apply this principle to pre-1972 sound recording masters, and this might vary from state to state.75

In any event, application of federal law rather than state law to pre-1972 sound recordings could effect a change in ownership, upsetting existing business expectations. To avoid potential confusion, federalizing legislation should provide that initial ownership of the federal copyright in these recordings be determined by state law, as would the validity of any transfers made prior to the effective date of the legislation.76 Even without an explicit statutory directive, it is likely that courts would endeavor to uphold expectations about ownership;77 nevertheless, an explicit

71. We thank Professor Elizabeth Townsend Gard, her student Dan Collier, and the Tulane Law Center for Intellectual Property, Media and Culture for providing us with helpful research on the methodologies for determining rights ownership in pre-1972 sound recordings under state law. 72. 17 U.S.C. § 202. 73. See, e.g., Pushman v. N.Y. Graphic Soc., Inc., 39 N.E.2d 249, 251 (N.Y. 1942) ( [A]n artist must, if he wishes to retain or protect the reproduction right, make some reservation of that right when he sells the painting. ). 74. See 3 NIMMER ON COPYRIGHT, supra note 10, § 10.09[B][2]. 75. See Polygram Records, Inc. v. Legacy Entm t Grp., 205 S.W.3d 439 (Tenn. Ct. App. 2006) (owner of original acetate recordings of Hank Williams radio shows retrieved from the trash did not hold the intellectual property rights therein; possession of tangible copies alone did not convey intangible rights). 76. See COPYRIGHT OFFICE REPORT, supra note 5 accord Erlinger, supra note 68, at

Accordingly, the federal Copyright Act should not be used to determine ownership interests [including initial and transfer rights] in domestic, pre-1972 sound recordings. Rather, courts should look to determine ownership by applying the law of the state with the most significant relationship to the sound recording and the parties. ). 77. By analogy, despite some initial concern that the 1976 Copyright Act might be applied to determine copyright ownership in works created before the Act came into effect, case law has not borne out this concern. See 1 NIMMER ON COPYRIGHT, supra note 10, § 1.11. In litigation occurring after the effective date of the 1976 Act, courts have continued to look to the law in effect at the time of the relevant conduct either the 1909 Copyright Act or state law in determining copyright ownership. See, e.g., Twentieth Century Fox Film Corp. v. Entm t Distrib., 429 F.3d 869, 876 (9th Cir. 2005) (applying work for hire doctrine of 1909 Act where allegedly infringed work was published before the effective date of the 1976 Act, even though alleged act of infringement occurred after the effective date of the 1976 Act); Roth v. Pritikin, 710 F.2d 934, 938 (2d Cir. 1983) ( Section 301 [of the 1976 Act] does not . . . purport to determine who holds a copyright for works created before January 1978. It merely clarifies the rights of individuals owning copyrights on that date, whomever they may be. ).

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textual commitment to preserve ownership status is clearly preferable.78

5. Remedies

Federal copyright law provides that an infringer of copyright is liable for the actual damages suffered by the copyright owner, as well as any profits of the infringer attributable to the infringement to the extent they have not been taken into account in determining actual damages.79 In addition, a prevailing plaintiff who has registered his copyright in a timely manner is eligible to instead opt for statutory damages.80 Statutory damages can range from $750 to $30,000 per work, and up to $150,000 per work if the infringement was committed willfully.81 While actual or compensatory damages are also available under state law, statutory damages are not.82 Instead, state laws may permit the award of punitive or exemplary damages,83 an avenue not permitted under federal copyright law.84

Another remedy available under federal law to right holders who have timely registered their works is an award of costs and attorney s fees at the court s discretion.85 There is no corollary under state law.

6. Formalities

In order to bring an action for copyright infringement of a work of U.S. origin, the right holder must first register the work in the United States Copyright Office.86

78. Similarly, provision would have to be made to ensure that owners of rights in pre-1972 sound recordings are not disadvantaged for failing to comply with federal priority-of-transfer rules prior to federalization. See 17 U.S.C. § 205 (2012); infra note 106 and accompanying text. 79. It also provides for remedies other than damages: a court may enter a preliminary or permanent injunction against continuing infringement and may order impoundment and reasonable disposition of infringing articles. 17 U.S.C. §§ 502, 503. 80. The copyright owner may elect statutory damages at any time before final judgment. 17 U.S.C. § 504(c)(1). For what constitutes timely registration for this purpose, see the discussion of formalities infra Part III.B.6. 81. The court may reduce the award to $200 per work if the infringement was innocent, and must remit statutory damages entirely when the infringement was done by an employee or agent of a nonprofit library, archive or educational institution who believed and had reason to believe the use was a fair use. Id. § 504(c)(2). There is a similar provision with respect to certain nonprofit activities of a public broadcasting entity. Id. 82. See, e.g. t. App. 1977) (defendant may be assessed damages for unfair competition); GAI Audio of N.Y., Inc. v. Columbia

punitive damages for record piracy). 83. See, e.g., Bridgeport Music, Inc. v. Justin Combs Publ g, 507 F.3d 470, 490 (6th Cir. 2007) (awarding $3.5 million in punitive damages for unlicensed sampling of a recording deemed unconstitutionally excessive; remanding case to district court with instruction to apply a punitive to compensatory damages ratio of 2:1 or 1:1); U.S. Sporting Prods., Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 223 (Tex. Ct. App. 1993) (affirming punitive damages award for misappropriation of a sound recording); see 4 NIMMER ON COPYRIGHT, supra note 10, § 14.02[C][2]. 84. See, e.g., On Davis v. The Gap, Inc., 246 F.3d 152, 172 (2d Cir. 2001); Hays v. Sony Corp. of Am., 847 F.2d 412, 415 (7th Cir. 1988). 85. 17 U.S.C. § 505. 86. 17 U.S.C. § 411(a). To register, the claimant must file an application for registration, pay the

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Thus, registration is a condition of suit, but registration may be made any time before suit is filed. If, however, a right holder wants to ensure the availability of statutory damages or attorney s fees, registration must be made before the infringement commences or, in the case of a published work, within three months of first publication.87 State laws have no comparable registration requirements.

C . PO T E N T I A L PL A IN T I F FS W H O M I G H T C L A I M A C O NST I T U T I O N A L D EPRI V A T I O N

Having briefly considered how current state law rights differ from the rights that would be available under federalized protection for pre-1972 sound recordings, this Article will now identify the possible stakeholders who might claim a constitutional deprivation.88

The first group is comprised of right holders whose sound recordings would have abbreviated terms of protection under federal law. These right holders fall, in turn, into two categories. The first are those who would be entitled to federal copyright protection until 2067 provided that they meet the extended term requirements.89 Such right holders might attempt to claim that those requirements unconstitutionally burden their rights in pre-1972 sound recordings. The second overlapping category of right holders are those whose rights will be truncated regardless of whether they meet the extended term requirements: specifically, owners of sound recordings published prior to 1923 whose recordings would, at most, receive only twenty-five years of federal protection.90

The second group is comprised of right holders who might argue that the federal rights and remedies are substantively inferior to a significant enough extent that their application would violate due process or constitute a taking. Among the claims that might conceivably be raised are the financial and logistical demands of

2014, the fee for online registration will be $55, unless it is an online registration of a single work (not a work made for hire) by an individual author, in which case it will be $35. Paper filings will have an $85 fee. See Copyright Office Fees, U.S. COPYRIGHT OFFICE, http://www.copyright.gov/fls/sl04_2014.pdf (last visited Apr. 11, 2014). The effective date of registration is the date that the application, fee and deposit copies have all been received by the Copyright Office. 17 U.S.C. § 410(d). 87. 17 U.S.C. § 412. In other words, if a work is published and then infringed, the right holder will be entitled to statutory damages even if the registration is made after the infringement commences, as long as the effective date of the registration is within three months of first publication. See id. The statute also provides for preregistration of certain unpublished works being prepared for commercial distribution, including sound recordings, that have a history of infringement prior to commercial distribution. 17 U.S.C. § 408(f). 88. The Tucker Act provides that the Court of Federal Claims has jurisdiction over claims against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort. 28 U.S.C. § 1491(a)(1) (2012); accord Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016 (1984) ( Generally, an individual claiming that the United States has taken his property can seek just compensation under the Tucker Act, 28 U.S.C. § 1491. ). 89. See supra Part II. 90. See supra Part II.

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timely registering the copyrights in pre-1972 sound recordings, a prerequisite to statutory damages under federal copyright law,91 and relatedly, the loss of the potential for punitive damages under state law.

The third group is comprised of users of pre-1972 sound recordings whose pre-federalization activities arguably did not violate state laws but may, upon federalization, violate the ambit of federal law protections accorded to right holders.92

Accordingly, we now consider the merits of these claims.

I V . R E T R O A C T I V I T Y

Congressional extension of federal protection would necessarily entail a concomitant revocation of the state law regime that currently governs pre-1972 sound recordings. The concerns raised by a revocation of these protections did not arise when Congress first extended federal copyright protection to sound recordings in 1971. As discussed earlier, that legislation operated prospectively, providing an exclusive federal right to reproduce and distribute sound recordings fixed, published, and copyrighted on and after February 15, 1972.93

A . G E N E R A L C O NSID E R A T I ONS

As a starting point, [r]etroactivity is not favored in the law. 94 Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly; settled expectations should not be lightly disrupted. 95 Thus, [s]tatutes are disfavored as retroactive when their application would impair rights a party possessed when he acted, increase a party s liability for past conduct, or impose new duties with respect to transactions already completed. 96 Determining whether a statute

91. Timely registration is also required for an award of attorney s fees to a prevailing plaintiff in a copyright action, and registration is required as a condition of suit for U.S. works. 17 U.S.C. §§ 411(a), 412. 92. See, e.g., Abigail Phillips, Elec. Frontier Found., Comments of E F F in Response to Notice of Inquiry 13 15, in U.S. COPYRIGHT OFFICE, COMMENTS REGARDING FEDERAL COPYRIGHT PROTECTION OF SOUND RECORDINGS FIXED BEFORE FEB. 15, 1972 (2011), available at http://www.copyright.gov/ docs/sound/comments/initial/. Certain users (webcasters and on-demand streamers) would, in the wake of the federalizing legislation, have to pay a performance royalty under 17 U.S.C. §§ 112 and 114 in connection with the digital transmission of pre-1972 sound recordings. It seems doubtful that the imposition of royalties (which right holders in post-1972 sound recordings already pay) would raise cognizable Fifth Amendment problems. 93. See Sound Recording Amendment, Pub. L. No. 92-140, § 3, 85 Stat. 391, 392 (1971) (providing, in pertinent part, an effective date of February 15, 1972). 94. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988). 95. Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994); see also Republic of Austria v. Altmann, 541 U.S. 677, 696 (2004) ( The aim of the presumption [against retroactivity] is to avoid unnecessary post hoc changes to legal rules on which parties relied in shaping their primary conduct. ). 96. Fernandez-Vargas v. Gonzales, 548 U.S. 30, 37 (2006) (quoting Landgraf, 511 U.S. at 280); see also Altmann, 541 U.S. at 693 ( [R]etroactive statutes may upset settled expectations by tak[ing] away or impair[ing] vested rights acquired under existing laws, or creat[ing] a new obligation,

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operates retroactively, however, is no simple or mechanical task. 97 On the one hand, the Supreme Court has framed the inquiry as whether the new statute attaches new legal consequences to events completed before its enactment. 98 On

the other hand, the Court has also said that a statute is not retroactive merely because it is applied in a case arising from conduct antedating the statute s enactment or upsets expectations based in prior law. 99

Fortunately, it is not necessary to address in the abstract the question of the potential retroactive effects of any federalizing legislation. Where Congress is clear as to a statute s reach, the statute may operate retroactively as long as it does not run afoul of the specific anti-retroactivity restrictions imposed by the Constitution.100 The reason for this is that

[r]etroactivity provisions often serve entirely benign and legitimate purposes, whether to respond to emergencies, to correct mistakes, . . . or simply to give comprehensive effect to a new law Congress considers salutary. However, a requirement that Congress first make its intention clear helps ensure that Congress itself has determined that the benefits of retroactivity outweigh the potential for disruption or unfairness.101

Therefore, if Congress enacts federalizing legislation with a clear temporal reach, it will only remain to consider constitutional barriers to its enactment.

B . APPL I C A T IO NS T O F E DE RA L I Z IN G L E G ISL A T IO N

This Article first identifies lines that Congress could draw clearly and that would minimize any retroactive effect of the federalizing legislation. Accordingly, it

impos[ing] a new duty, or attach[ing] a new disability, in respect to transactions or considerations already past. (citations omitted) (alterations in original)). 97. See Landgraf, 511 U.S. at 268; id. at 270 ( Any test of retroactivity will leave room for disagreement in hard cases, and is unlikely to classify . . . legal changes with perfect philosophical clarity. ); see also Jill E. Fisch, Retroactivity and Legal Change: An Equilibrium Approach, 110 HARV. L. REVdetermination and more of a classification by degree of effect). Retroactivity concerns may arise when a court is asked to apply a new statutory provision to pending proceedings. See, e.g., Martin v. Hadix, 527 U.S. 343, 347 (1999); Landgraf . They may also arise when a court must decide whether to apply a statute to conduct that allegedly pre-dates the effective date of the statute. See, e.g., Vartelas v. Holder, 132 S. Ct. 1479, 1484 (2012); F ernandez-Vargas 98. Landgraf, 511 U.S. at 270; accord Vartelas, 132 S. Ct. at 1491. 99. Landgraf, 511 U.S. at 269 (citation omitted). 100. INS v. St. Cyr, 533 U.S. 289, 316 (2001) ( Despite the dangers inherent in retroactive legislation, it is beyond dispute that, within constitutional limits, Congress has the power to enact laws with retrospective effect. A statute may not be applied retroactively, however, absent a clear indication from Congress that it intended such a result. (citation omitted)); Landgraf, 511 U.S. at 266 (identifying as the relevant provisions: the Ex Post Facto Clauses, the Contracts Clause, the Takings Clause, the prohibitions against Bills of Attainder and the Due Process Clause). 101. Landgraf reach of the legislation clear, the Supreme Court has instituted a judicial presumption against giving legislation retroactive effect. See id. It has applied this presumption against statutory retroactivity most frequently to new provisions affecting contractual or property rights, matters in which predictability and stability are of prime importance. Id. at 271.

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assumes that a further constitutional analysis is not warranted with respect to the following topics.

First, and critically, federalizing legislation should make explicit that it would not effect a change in ownership. Second, Congress should make clear that federalizing legislation applies only to cases commenced after the effective date of the legislation. Even with respect to litigation commenced after the statute s effective date, Congress should make clear that federal copyright law would be applicable only to infringement-related activities in connection with pre-1972 sound recordings that occur on or after the effective date. That is, it should be modeled after the 1976 Copyright Act, which provided that federal law would not annul or limit any state law rights or remedies with respect to any cause of action arising from undertakings commenced before January 1, 1978. 102 Accordingly, a federal action for copyright infringement of pre-1972 sound recordings should not reach allegedly infringing activities that occur prior to the effective date.

Similarly, federal limitations and exceptions should be applied only to post-federalization activities. Thus, a fair use defense to alleged infringement occurring before the statute s effective date should be available only to the extent it would have been available under the applicable state law. Likewise, webcasting a pre-1972 sound recording would be subject to the digital audio performance right under 17 U.S.C. § 114, including the statutory license, only if done after the effective date.103

There are many other ways in which Congress could minimize any retroactive effect. In brief, the federalizing legislation s termination provisions should be made applicable only to post-federalization grants.104 Right holders should be given a reasonable opportunity to register their works. Likewise, the term infringement in the federal provisions concerning statutory damages and

attorney s fees105 should be defined to mean infringement under federal law. This would prevent a right holder from being foreclosed from seeking those remedies for failure to register before any unauthorized reproduction or distribution commenced, even though the work was not then eligible for federal copyright registration. By the same token, federal statutory damages should apply only to infringing conduct that occurred after federalization to avoid attaching new

102. 17 U.S.C. § 301(b)(2). In general, undertakings has referred to infringement. See infra note 295 and accompanying text. 103. See Golan v. Gonzales, No. Civ.01-B-1854(BNB), 2005 WL 914754, at *17 (D. Colo. Apr. 20, 2005) (holding URAA Section 514 not retroactive because while it grants many retroactive benefits to authors, it does not impose retroactive burdens upon the plaintiffs. This is because Section 514 does not impose upon the plaintiffs liability for, or new duties as a result of, their past conduct. Nor does Section 514 impair rights that the plaintiffs possessed when they acted. In short, Section 514 does not alter the legal consequences of the plaintiffs completed acts (citations omitted)). 104. See COPYRIGHT OFFICE REPORT, supra note 5, at ix. Federal law provides for the possibility of terminating a grant made by the author after thirty-five years, to allow the author or her heirs to renegotiate a grant that may have been made when the value of the work was not known. See 17 U.S.C. § 203(a). Certain grants with respect to works published prior to January 1, 1978 can be terminated under different conditions. See id. § 105. Id. § 412.

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consequences to prior acts.106 Finally, under federal law, it is criminal infringement to willfully infringe a

copyright for purposes of commercial advantage or private financial gain or to make copies with a total retail value of more than $1,000 within a 180-day period.107 State criminal laws generally require proof that the infringing activity was done for commercial advantage and do not provide that such intent can be imputed by the volume or dollar value of the copies made.108 To ensure the federalizing legislation has no retroactive effect in violation of the Ex Post Facto Clause,109 it should be made clear that the volume or retail value of copies illegally sold prior to the effective date of federalization would not be considered in determining federal criminal liability.110

The following areas comprise the central focus of the remainder of this Article: Foreshortened term of protection. For sound recordings published prior to

1923, right holders would have to relinquish years of state law copyright ownership because they would be eligible for a maximum of twenty-five additional years of protection. (Right holders in later or unpublished recordings, if they took no action, would also face such forced relinquishment.)

Obligation to make the work reasonably available and to file a notice in the Copyright O ffice. To meet the extended term requirements, right holders of sound recordings would have to file notices in the Copyright Office and make the recordings available. These obligations might conceivably entail financial or other hardships.

Registration. Right holders would have to expend funds to register their recordings with the Copyright Office to qualify for statutory damages or attorney s fees, or to bring an infringement action if the recording is a United States work.

Substitution of federal rights and remedies. Federal rights would displace

106. The priority of transfer rules in § 205(d) should be amended to give right holders a reasonable opportunity to register and record past transfers in the Copyright Office. Section 205(d) provides that where there are conflicting transfers, priority is given to the one executed first if it is recorded in the Copyright Office within one month after its execution (or within two months if it was executed outside the United States). 17 U.S.C. § 205(c). 107. 17 U.S.C. § 505. 108. See, e.g., FLA. STAT. § 540.11 (2012); N.J. STAT. ANN. 2C:21 21(c) (West 2012). The volume sold may, however, affect the penalty. See, e.g., FLA. STAT. § 540.11(2)(b) (2012); N.Y. PENAL CODE § 275.05 (McKinney 2012). To the extent that right holders are dissatisfied with the displacement of state criminal law by federal criminal law, the Supreme Court has held that the benefit that a third party may receive from having someone else arrested for a crime generally does not trigger protections under the Due Process Clause, neither in its procedural nor in its substantive manifestations. Town of Castle Rock v. Gonzales, 545 U.S. 748, 768 (2005). 109. U.S. CONST. art. I, § 9, cl. 3. 110. To avoid complicated issues concerning the copyright status of musical or other works embodied only in a phonorecord prior to when sound recordings were eligible for federal copyright, and in particular, concerning whether those underlying works should be considered to have been fixed, we recommend that the federalizing legislation provide that it is not intended to affect the copyright status of any underlying work.

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state rights; statutory damages claims would replace state punitive damages claims.

Restrictions on users. Uses currently being made under state law might be restricted if federal law is applied.

With respect to these issues, we also assume that Congress could draft the operative language to make clear the activities to which it applies. But, anticipating the argument that such aspects work a constitutionally impermissible retroactive change, we spend the remainder of the Article considering whether these aspects would violate the two relevant constitutional provisions: the Takings Clause and the Due Process Clause.

V . T H E F I F T H A M E ND M E N T A N A L YSIS

The Fifth Amendment protects property against incursions by the federal government in at least two ways. It ensures both that [n]o person shall . . . be deprived of . . . property, without due process of law and that private property [shall not] be taken for public use, without just compensation. 111 Whereas the Takings Clause presupposes that the government has acted in pursuit of a valid public purpose, the Due Process Clause addresses the anterior question of whether a regulation fails to serve any legitimate governmental objective. 112 The relationship between takings and due process analyses is complex.113 Indeed, in the copyright context, the plaintiffs in recent litigation over the removal of certain foreign works from the public domain challenged the operative federal statute on the ground of substantive due process, rather than takings.114 Accordingly, both

111. U.S. CONST. amend. V. The Takings Clause applies to the states by way of the Fourteenth Amendment. See Kelo v. City of New London, 545 U.S. 469, 472 n.1 (2005) (citing Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226 (1897)). Cases addressing takings challenges to federal activities routinely rely upon case law addressing takings challenges to state activities. See, e.g., Hodel v. Irving,

analyzing possible takings challenges to the federalizing legislation. Similarly, the texts of the Fifth and Fourteenth Amendment Due Process Clauses are substantively identical. Thomas W. Merrill, The Landscape of Constitutional Property, 86 VA. L.

REV. 885, 886 n.1 (2000). In considering due process challenges to economic legislation, the Supreme Court has applied the same principles to state and federal legislation. See, e.g., Gen. Motors Corp. v. Romein, 503 U.S. 181, 191 (1992); Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717,

This Article also draws upon both lines of precedent. 112. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 542 43 (2005); see also id. at 543 (noting that the question of a regulation s underlying validity or whether the government has acted so arbitrarily as to violate due process is logically prior to and distinct from the question whether a regulation effects a taking ); id. (Kennedy, J., concurring in the judgment and dissenting in part). 113. See, e.g., Stop the Beach Renourishment, Inc. v. Fla. Dep t of Envtl. Prot., 130 S. Ct. 2592, 2606 (2010) (plurality opinion) (identifying problems with using Substantive Due Process to do the work of the Takings Clause ). Justice Kennedy, joined by Justice Sotomayor, disagreed with the need to extend takings and emphasized that the Court has long recognized that property regulations can be invalidated under the Due Process Clause. Id. at 2614 (Kennedy, J., concurring in part and concurring in the judgment) (citations omitted). 114. Golan v. Holder, 132 S. Ct. 873, 883 n.15 (2012) (noting the claim in passing); Golan v. Gonzales, No. Civ.01-B-1854(BNB), 2005 WL 914754, at *17

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clauses will be considered here. To begin with, both clauses target the diminishment of property interests.115

Many scholars have addressed the overarching question of the extent to which intellectual property should be characterized, both analytically and rhetorically,

as a species of property. 116 Among other things, they have considered how the theoretical justifications for property rights apply to intellectual property,117 whether intellectual property rights are more appropriately enforced through property rules or through liability rules118 and how the digital era should shape any conception of intellectual property rights as a form of property rights.119 The very decision by a court to apply the Takings and Due Process Clauses to a state-protected copyright or copyright-like interest could be viewed as a momentous conceptual move to entrench the treatment of intellectual property as property.

the government summary judgment on the substantive due process claim). For further discussion of this case, see infra Part V.F. 115. The property interests protected by each clause are not necessarily coextensive. See, e.g., E. Enters. v. Apfel, 524 U.S. 498, 557 (1998) (Breyer, J., dissenting); accord Merrill, supra note 111, at 889 ( After College Savings Bank, one thing seems reasonably clear: Parties seeking to protect an economic interest under the Due Process or Takings Clauses, whether advancing a procedural or a substantive claim, must be prepared to demonstrate that their interest is property. ); Carlos Manuel Vázquez, What Is Eleventh Amendment Immunity?, 106 YALE L.J. A. Radin, Note, Rights as Property, 104 COLUM. L. REV. 1315, 1319 & n.23 (2004). 116. The literature is too vast to set forth comprehensively. See, e.g., NEIL WEINSTOCK NETANEL, COPYRIGHT S PARADOX -fledged Blackstonian property right); Tom W. Bell, Copyright as Intellectual Privilege, 58 SYRACUSE L. REV. 523, 524 (2008) (arguing for copyright as privilege rather than property); Mark A. Lemley, Romantic Authorship and the Rhetoric of Property, 75 TEX. L. REV ng JAMES BOYLE, SHAMANS, SOFTWARE, AND SPLEENS: LAW AND THE CONSTRUCTION OF THE INFORMATION SOCIETY (1996)) (contending that the rhetoric and economic theory of real property are increasingly dominating the discourse and conclusions of the very different world of intellectual property ); Henry E. Smith, Intellectual Property as Property: Delineating Entitlements in Information, 116 YALE L.J. 1742, 1744 (2007) ( At the core of controversies over the correct scope of intellectual property lie grave doubts about whether intellectual property is property. ). 117. See, e.g., Justin Hughes, The Philosophy of Intellectual Property, 77 GEO. L.J. 287, 290 (1988) (arguing that the labor and personality theories together exhaust the set of morally acceptable justifications of intellectual property ); Tom G. Palmer, Are Patents and Copyrights Morally Justified? The Philosophy of Property Rights and Ideal Objects, 13 HARV. J.L. & PUB. POL Y 817, 820 21 (questioning whether patents and copyrights are legitimate forms of property at all ) (1990); Alfred C. Yen, Restoring the Natural Law: Copyright as Labor and Possession, 51 OHIO ST. L.J. 517, 547 (1990) (calling for the development of a natural law copyright jurisprudence ). 118. See, e.g., Dane S. Ciolino & Erin A. Donelon, Questioning Strict Liability in Copyright, 54 RUTGERS L. REV. 351, 364 (2002) ( Although intellectual property has long been compared to property, and infringement of copyright compared to trespass to realty, these analogies are

problematic . . . . (footnotes omitted)); Daniel A. Crane, Intellectual Liability, 88 TEX. L. REV. 253, property-liability debate ); Mark A. Lemley &

Philip J. Weiser, Should Property or Liability Rules Govern Information?, 85 TEX. L. REV. 783, -based relief where injunctive relief cannot be narrowly

tailored); Robert P. Merges, Of Property Rules, Coase, and Intellectual Property, 94 COLUM. L. REV. 994) (describing intellectual property disputes as largely compatible with a property

rules framework). 119. See, e.g., Adam Mossoff, Is Copyright Property?, 42 SAN DIEGO L. REV(favoring retained, and evolving, notion of intellectual property rights as property rights).

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While not intending to take a stance on the important, broader question of intellectual property as property vel non, we think it is likely that the Court would hold the interests at stake here to constitute property for purposes of the Due Process and Takings Clauses.120

In Ruckelshaus v. Monsanto Co., the Supreme Court was faced with a takings claim that designated trade secrets as the relevant property interest.121 The Court accepted plaintiff Monsanto s claim that the data it had submitted to the Environmental Protection Agency (EPA) under the requirements of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) was property, in the form of a trade secret, under Missouri state law.122 As with trade secrets, pre-1972 copyright interests are assignable, can form the res of a trust, and pass to a trustee in bankruptcy.123 Later courts in other settings have also signaled that they view intellectual property rights, including copyrights, as property for purposes of Takings Clause protection.124

In the present context, courts defining the property right in a pre-1972 sound recording would look to the applicable state law,125 since it is well established that

120. See Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 673 (1999) ( The Lanham Act may well contain provisions that protect constitutionally cognizable property interests notably, its provisions dealing with infringement of trademarks, which are the property of the owner because he can exclude others from using them. ); id. at 675 (noting that the assets of a business (including its good will) unquestionably are property within the scope of the Fourteenth Amendment s Due Process Clause); Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 642 (1999) (determining that a patent is property protected by the Fourteenth Amendment s Due Process Clause); accord Roth v. Pritikin, 710 F.2d 934, 939 (2d Cir. 1983) ( An interest in a copyright is a property right protected by the due process and just compensation clauses of the Constitution. ). While the Court in College Savings Bank warned against the dangers of using unfair competition law to define constitutionally protected property interests, the state law interests at stake in our context manifest the approved-of hallmark of a right to exclude. 121. Ruckelshaus v. Monsanto Co., 467 122. Id. found support for the general perception of [trade secrets ] property-like nature in Congress characterization of trade secrets in the legislative history. Id. at 1002, 1003 n.8. 123. See id. at 1002 (limning characteristics of trade secrets that made them protectable property interests under state law and under the Takings Clause). 124. In a split decision, five Supreme Court Justices agreed that intellectual property is within the purview of the Takings Clause. E. Enter. v. Apfel, 524 U.S. 498, 540 (1998) (Kennedy, J., concurring in the judgment and dissenting in part); id. at 554 (Breyer, J., dissenting); see also Lane v. First Nat l Bank of Bos., 871 F.2d 166, 174 (1st Cir. 1989) (stating that a copyright is property and suggesting that a Takings Clause claim might provide a remedy); Roth v. Pritikin, 710 F.2d 934, 939 (2d Cir. 1983) ( An interest in a copyright is a property right protected by the due process and just compensation clauses of the Constitution. ). But see Davida H. Isaacs, Not All Property is Created Equal: Why Modern Courts Resist Applying the Takings Clause to Patents, and Why They Are Right to Do So, 15 GEO. MASON L. REVcategorization of a patent as property does not necessitate the protections of the Takings Clause). 125. For the purposes of this analysis, state law interests are referred to collectively as state law copyrights, even though many states protect published pre-1972 sound recordings through unfair competition and misappropriation causes of action rather than through a tort denominated common law copyright. All of these state law claims have in common the right to exclude others from certain uses. However, the scope of the right holder s interest varies. See generally Jaszi Report, supra note 21, at

. Accordingly, the claim to have property cognizable under the Constitution may be stronger in some states than in others.

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[p]roperty interests . . . . are created and their dimensions . . . defined by existing rules or understandings that stem from an independent source such as state law. 126 Thus, a court might consider the law of the jurisdiction where the sound recording was recorded or where the right holder is located.127 Notably, even the uncertain or minimal economic value of the state law copyrights in older or more esoteric pre-1972 sound recordings would not necessarily defeat a property-based claim.128 Accordingly, the interests affected by a revocation of state law protections would likely constitute property for constitutional purposes.129 At the very least, since we cannot rule out that they would constitute property under the law of some state, we assume due process and takings protections would apply.130

A . F R A M E W O R K F O R A N A L YSIS

Federalizing legislation for pre-1972 sound recordings falls easily under the heading of economic legislation. It is well established that laws adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that one complaining of a due process violation must establish that the legislature has acted in an arbitrary and irrational way. 131

Moreover, such a legislative adjustment is not unlawful solely because it upsets

126. Webb s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980) (quoting Board of Regents v. Roth, 408 U.S. 564, 577 (1972) (internal quotation marks omitted)); cf. Stop the Beach Renourishment, Inc. v. Fla. Dep t of Envtl. Prot., 130 S. Ct. 2592, 2612 (2010) ( The Takings Clause only protects property rights as they are established under state law, not as they might have been established or ought to have been established. ). 127. Recent case law reflects the difficulties inherent in identifying the situs of injury for purposes of personal jurisdiction in the Internet age. See Penguin Grp. (USA) Inc. v. Am. Buddha, 946 N.E.2d

see also Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 32 (2d Cir. 2010). 128. See Phillips v. Wash. Legal Found., 524 U.S. 156, 170 (1998) ( While the interest income at issue here may have no economically realizable value to its owner, possession, control, and disposition are nonetheless valuable rights that inhere in the property. ); id. at 172 (holding that the interest income generated by funds held in IOLTA accounts is the private property of the owner of the principal ). 129. See Thomas F. Cotter, Do Federal Uses of Intellectual Property Implicate the F ifth Amendment?, 50 FLA. L. REVdistinguishing rights recognized under the federal law of unfair competition, such as the right to be free from dilution as more difficult to classify as property). 130. Clearly, if the Court were to decide otherwise, then no further constitutional analysis would be warranted. In Dowling v. United States, the Supreme Court stated that [t]he copyright owner . . . holds no ordinary chattel, and refused to deem bootlegged phonorecords stolen goods under 18 U.S.C. § 2314. 473 U.S. 207, 216 (1985). That case is distinguishable, however, on three grounds: (1) the criminal nature of the statute drove the Court to apply a narrow construction of its reach; (2) the present concern is whether right holders have sufficient property-based interests under state law, not whether they own goods or wares and (3) in Ruckelshaus v. Monsanto, the Court did deem trade secrets as property protected under the Takings Clause. 467 U.S. 986, 10the nature of copyright ownership is distinct from other forms of property ownership, Dowling, 473 U.S. at 217, it is likely that stakeholders in this context would raise colorable claims of a deprivation of constitutionally protected property. We thank Professor Irina Manta for helpful discussion on this point. 131. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976) (citing Ferguson v. Skrupa, 372 U.S. 726 (1963); Williamson v. Lee Optical Co. 55)).

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otherwise settled expectations. 132 The Court long ago proclaimed that [n]o person has a vested interest in any rule of law, entitling him to insist that it shall remain unchanged for his benefit. 133 Rather, the retroactive and prospective aspects of economic legislation simply must meet the due process requirement of a legitimate legislative purpose furthered by rational means. 134 Demonstrating

that they do not meet this requirement is a high burden, and courts are reluctant to find violations.135 Indeed, the Court has gone so far as to say that a legislative determination provides all the process that is due. 136

As a general proposition, it is indisputable that Congress legitimately may determine that the current patchwork of state law protections does not adequately promote the [p]rogress of [s]cience and useful [a]rts 137 and that a unified federal

scheme would better do so. Indeed, as discussed above, Congress made that legislative determination when, in 1976, it federalized copyright protectionwithout repercussions for unpublished works that had already been created.138 That aspect of the 1976 Copyright Act ended what had been perpetual protection for unpublished works. The House Report concluded that this substitution of federal rights for state rights was fully in harmony with the constitutional requirements of due process as long as Congress provided a reasonable period of federal protection for those works.139 Likewise, the 1976 Act capped what had been perpetual protection for pre-1972 sound recordings, providing a hard end date (ultimately, 2067) for state law protections.140

Both of these changes each arguably more drastic than those currently under consideration, since they terminated what had been perpetual protection of works under state law were enacted without legal challenge. Thus, there is strong precedent for allowing Congress to amend the legislative scheme if it concludes,

132. Usery, 428 U.S. at 16. 133. N.Y. Cent. R.R. Co. v. White, 243 U.S. 188, 198 (1917) (rejecting due process challenge to state workers compensation legislation that abrogated common law rules); cf. LON L. FULLER, THE MORALITY OF LAW 53, 60 (rev. ed. 1969) (describing the ossifi[cation] of law that would occur if people were secure[d] against any change in legal rules ). 134. Gen. Motors Corp. v. Romein, 503 U.S. 181, 191 (1992) (considering a Michigan statute but invoking same principles as federal due process analysis); see also Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 542 (2005) ( [A] regulation that fails to serve any legitimate governmental objective may be so arbitrary or irrational that it runs afoul of the Due Process Clause. ); Pension Benefit Guar. Corp. v. R.A. Gray & Co. showing that the retroactive application of the legislation is itself justified by a rational legislative purpose ). 135. Lingle, 544 U.S. at 545 ( [W]e have long eschewed . . . heightened scrutiny when addressing substantive due process challenges to government regulation. ); accord Fisch, supra note 97, at 1074 (noting that the Court has not subjected retroactive legislation to close due process scrutiny, only rational basis scrutiny). But see Lingle, 544 U.S. at 548 (Kennedy, J., concurring) (noting the possibility that a regulation might be so arbitrary or irrational as to violate due process ). 136. Logan v. Zimmerman Brush Co., 455 U.S. 422, 433 (1982). 137. U.S. CONST. art. I, § 8, cl. 8; accord Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 645 (1999) ( The need for uniformity in the construction of patent law is undoubtedly important, [and] that is a factor which belongs to the Article I patent-power calculus . . . . ). 138. 17 U.S.C. § 303(a) (2012); see discussion supra Part I. 139. See H.R. REP. NO. 94-1476, at 139 (1976). 140. 17 U.S.C. § 301(c).

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for example, that the patchwork scheme of state law protections makes users reluctant to engage in socially beneficial activities, such as preservation, scholarship and teaching.141 The devil, of course, is in the details, and it remains to be considered whether legislation addressing the most contentious areas identified above would pass muster.

The Takings Clause does not prohibit the taking of private property, but instead places a condition on the exercise of that power. 142 Thus, it is not designed to limit the governmental interference with property rights per se, but rather to

secure compensation in the event of otherwise proper interference amounting to a taking. 143 The purpose of this provision, the Court has said, is to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. 144 The analysis turns on at least four considerations: (1) whether the subject matter at issue is a protectable private property interest; (2) whether a taking of the property has occurred; (3) if a taking has occurred, whether it is for a public use; (4) whether just compensation has been provided.145 With respect to the first, as discussed above, It is assumed that courts would deem the property interests at stake to be constitutionally protected for these purposes. It is also assumed that the third element, public use, would also be satisfied under the broad view taken by the Supreme Court in Kelo v. City of the New London.146

141. See generally COPYRIGHT OFFICE REPORT, supra note 5; JUNE M. BESEK, COPYRIGHT AND RELATED ISSUES RELEVANT TO DIGITAL PRESERVATION AND DISSEMINATION OF UNPUBLISHED PRE-1972 SOUND RECORDINGS BY LIBRARIES AND ARCHIVES (2009), available at http://www. clir.org/pubs/reports/pub144/pub144.pdf (surveying state laws and exploring difficulties arising from non-uniform state law copyright protection); JUNE M. BESEK, COPYRIGHT ISSUES RELEVANT TO DIGITAL PRESERVATION AND DISSEMINATION OF PRE-1972 COMMERCIAL SOUND RECORDINGS BY LIBRARIES AND ARCHIVES (2005), available at http://www.clir.org/pubs/reports/pub135/pub135.pdf (same). 142. First English Evangelical Lutheran Church of Glendale v. L.A. County, 482 U.S. 304, 314 (1987); see also [T]he text of the Fifth Amendment imposes two conditions on the exercise of such authority: the taking must be for a public use and just compensation must be paid to the owner. ). 143. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005). 144. Id. (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). 145. Ruckelshaus v. Monsanto Co., 467 U.S. 986, takings claim involving trade secrets). 146. part of an economic revitalization plan, the city of New London authorized a private nonprofit entity to acquire parcels of land from private owners by purchase or by exercising eminent domain in the name of the City. Id. at 475. In considering whether this forced transfer of property between private parties would satisfy a public use, the Court reiterated that there was no strict requirement that condemned property be put into use for the general public. Id. at 479. Rather, public purpose is the touchstone of the inquiry. Id. at 480. In light of the comprehensive character of the plan and the thorough deliberation that preceded its adoption, the Court evaluated the claims of the individual owners not on a piecemeal basis, but rather in light of the entire plan, which, it determined, served a public purpose. Id. at 484. In the case of sound recordings, there would likely not be, for the reasons explained above, a naked transfer of ownership of the pre-1972 state law copyrights to other private parties equivalent to that seen in Kelo. The principal effect of federalization would be to eliminate the exclusive rights of current right holders ahead of schedule, with the goal of enhancing preservation and public access. Thus, federalizing legislation should satisfy the public use element of the takings analysis under Kelo.

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Accordingly, the remainder of this Article will focus on the second question (whether a taking has occurred) and, to a lesser extent, the fourth question (whether just compensation has been provided).

B . F O RESH O R T E N E D T E R M O F PR O T E C T I O N

The most significant impact federalization is likely to have is on the term of protection. As detailed above in Part III.B., the term of protection could be cut short for almost all published pre-1972 recordings, as well as for all unpublished recordings created prior to 1947. With the proposed ninety-five-year term for published sound recordings (or 120 years for unpublished recordings), a sound recording published before 1923 could potentially lose anywhere from twenty-seven years (if the extended term requirements are met) to forty-nine years of state law protection, assuming the effective date of federalizing legislation were January 1, 2015.147 For those pre-1923 recordings, federalizing legislation would result in a loss of years of exclusivity no matter what steps right holders undertook. Many other pre-1972 sound recordings would also lose years of protection unless right holders met the extended term requirements. This potential foreshortening of ownership for some categories of recordings, and the need to comply with the extended term requirements in others, could most predictably give rise to a cognizable claim.

1. Due Process

The Due Process analysis is relatively straightforward and should not pose a significant problem for federalizing legislation. Critically, the federalizing legislation would reflect a legitimate purpose: to enhance the preservation of and access to early sound recordings. It is in large measure the lack of parity in the treatment of early sound recordings and works created contemporaneously in other media that supports a legislative amendment.148 Specifically, works in other media copyrighted before 1978, and still under copyright, are entitled to a maximum of ninety-five years of copyright protection,149 and are subject to unfettered

The fact that certain members of the public, such as librarians and archivists, might particularly wish to access these works should not defeat this analysis. Quite simply, the government s pursuit of a public purpose will often benefit individual private parties. Id. at 485. 147. See supra note 49 and accompanying text. 148. See, for example, United States v. Sperry Corp., 4Court rejected a due process challenge to legislation that imposed a 1.5% deduction, in favor of the U.S. Treasury, from awards secured in the Iran-United States Claims Tribunal. The appellee had obtained its award three months prior to the enactment of the statute, which had the effect of imposing a $42,000 fee on the appellee. Id. Nevertheless, the Court upheld the legislation because the retrospective legislation aimed at ensuring consistency whereby the costs of a program [were] borne by the entire class of persons that Congress rationally believe[d] should bear them. Id. at 65. Thus, successful Tribunal claimants, who had all benefited from its mechanisms, could justifiably be compelled to pay fees, regardless of whether they happened to secure their awards prior to or subsequent to the legislation. Id.

149. 17 U.S.C. § 304 (2012).

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preservation efforts and public access at the conclusion of that term. By contrast, almost no sound recordings are currently in the public domain throughout the country, nor are they likely to be so until 2067.150

The comparison is particularly stark with respect to works published prior to 1923. For example, a musical composition published in 1922 would have become part of the public domain at the end of 1997;151 by contrast, a sound recording of the same vintage, which may be physically deteriorating and irreplaceable,152 will not enter the public domain until 2067 that is, seventy years later. Through the federalizing legislation, Congress could put right holders of all categories of pre-1978 works, including those of all pre-1978 sound recordings,153 on a more even footing with respect to the term of protection. The arbitrary distinction between the legal treatment of pre- and post-February 15, 1972 sound recordings would largely disappear.154

While the legislative fix comes many years after the initial legislation,155 it nonetheless is rationally related to the specified purpose. The call for renewed Congressional attention to early sound recordings arose, in part, from a series of reports sponsored or commissioned by the National Recording Preservation Board between 2005 and 2010.156 The delay in ameliorative legislation would simply reflect a delay in the emergence of evidence that there was a problem.

The rational relationship between the federalizing legislation and its purposes is further demonstrated by the narrow tailoring of its harshest elements: the sole category of pre-1972 sound recordings that would never be eligible for an extended term until 2067 are those that were published before 1923; as described above, these extremely old recordings would only be eligible for an additional twenty-five years of protection. However, all works in other media published before 1923 are already in the public domain. Thus, the fact that the federalizing legislation confines its most demanding aspects to these earliest sound recordings indeed, those which may be in most need of preservation reflects rational tailoring.157

150. See supra note 20 and accompanying text. 151. See COPYRIGHT OFFICE REPORT, supra note 5, at 5. 152. Id. 153. As mentioned, different treatment is accorded to certain foreign sound recordings. See supra notes 32 37 and accompanying text. Furthermore, right holders of sound recordings published before 1923 would still enjoy a privileged position through compliance with the extended term requirements, since they could still obtain an additional twenty-five years of protection, whereas works in other media published before 1923 are in the public domain. 154. Accord United States v. Carlton, 512 U.S. 26, 35 (1994) (upholding a curative amendment to the federal tax code that retroactively closed a tax loophole fourteen months after the enactment of the original law, thereby depriving an estate of a deduction that would have reduced estate taxes by $2.5 million). 155. It is true that the legislative fix implemented by federalizing legislation would be much further removed in time from the original legislation than in Sperry or Carlton. See Fisch, supra note 97, at 1074 ( In its opinion in Carlton, the Court suggested criteria for evaluating the rationality of retroactive legislation, including the remedial nature of the statute and the period of retroactive operation. ). But the nature of the problem to be fixed was more immediately recognized in those settings than in the present context. 156. See COPYRIGHT OFFICE REPORT, supra note 5, at 3 (citing sources). 157. The Copyright Office recommended a maximum of twenty-five years of federal protection for

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For these reasons, although the federalizing legislation might deprive certain right holders of the value of their state law copyrights for a portion of the current state law term, we think that federalizing legislation would not violate due process. While these right holders may have relied on the state law regime, even [a]n entirely prospective change in the law may disturb the relied-upon expectations of individuals, but such a change would not be deemed to be therefore violative of due process. 158

2. Takings

With respect to whether a taking has occurred, the Supreme Court has developed two categories of takings jurisprudence. A taking in the classic sense is a direct government appropriation or physical invasion of private property, 159 which imposes upon the government the categorical duty to compensate the former owner. 160 The foreshortening of a copyright term is better analyzed under the Court s regulatory takings jurisprudence.161 The goals in applying this framework are to measure the severity of the burden that government imposes upon private property rights, and to assess whether the governmental action is functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain. 162 The principal challenge undertaken in this Article is to convert the jurisprudence, which focuses on land rights and usage, to the present copyright-oriented context.163

pre-1923 recordings in part because recordings from that era are usually of such low quality that relatively few of them are marketable. COPYRIGHT OFFICE REPORT, supra note 5, at 164. 158. Carlton 159. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005). Such a transfer of property can be either to the government or to a private party. See Stop the Beach Renourishment, Inc. v. Fla. Dep t of Envtl. Prot., 130 S. Ct. 2592, 2596 (2010) (plurality opinion) ( [C]lassic taking is a transfer of property to the State or to another private party by eminent domain . . . . ); see also Kelo v. City of New London, 545 U.S. 469, 475 (2005) (assessing takings in the context of an economic revitalization plan under which private property would be transferred by eminent domain from one set of private parties to another). 160. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg l Planning Agency, 535 U.S. 302, 322 (2002). In addition, while property may be regulated to a certain extent, if regulation goes too far it will [also] be recognized as a taking. Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). In determining how far is too far, courts must remain cognizant that government regulation by definition involves the adjustment of rights for the public good. Lingle, 544 U.S. at 538 (2005) (quoting Andrus v. Allard, 444 U.S. 51, 65 (1979)). 161. The frameworks used in the land-use exaction cases do not seem relevant here, as those cases involved land use permits and, in any event, no analogous conduct is implicated by the mere promulgation of federalizing legislation. See Koontz v. St. John s River Water Mgmt. Dist., 133 S. Ct. 2586 (2013); Dolan v. City of Tigard, 512 U.S. 374 (1994); Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987). 162. Lingle, 544 U.S. at 539. 163. An important subsidiary question is whether a regulatory takings claim would be framed as a facial or as applied challenge. Claimants seeking to mount a facial challenge face an uphill battle. Tahoe-Sierra Pres. Council, 535 U.S. at 320 (quoting Keystone Bituminous Coal Ass n v. DeBenedictis, 480 U.S. 470, 495 (1987)). As the Court has formulated it, the test for a facial challenge is whether a statute, by its mere enactment, denies an owner of the economically viable use of his

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a. Per Se Taking

A regulation through which the government requires a property owner to endure a permanent physical invasion of his property will effect a per se taking.164 A per se rule will also apply to a total regulatory taking that completely deprives a property owner of all economically beneficial use[] of the property.165 The latter two are categories of regulatory action [that are] . . . compensable without case-specific inquiry into the public interest advanced in support of the restraint. 166

In contrast to these acquisitions of property for public use are regulations prohibiting private uses. 167 Such prohibitions require complex factual assessments of the purposes and economic effects of government actions. 168 This more common type of government regulation is evaluated by the standards outlined in the Penn Central balancing test.169 One significant difference between the categorical, per se approach and the ad hoc Penn Central approach is the degree of individualized factual development required to bring a successful claim. Unlike the Penn Central framework, the per se framework would allow the court to apply a clear rule. 170 The Supreme Court has explained that one reason for distinguishing between classic, categorical takings and Penn Central-type regulatory takings is that if courts were to treat all land-use regulations which are ubiquitous and inevitably affect property values as per se takings, that approach would transform government regulation into a luxury few governments could afford. 171 By contrast, physical appropriations are relatively rare, easily identified, and

usually represent a greater affront to individual property rights. 172 At first blush, there would seem to be a mismatch between a physically invasive

regulatory taking and the act of extending federal copyright protection to intangible interests like state law copyrights.173 Such per se takings are typically tied to a

property. Id. If a facial challenge fails, plaintiffs typically are able to bring an as applied challenge. See Guggenheim v. City of Goleta, 638 F.3d 1111, 1119 (9th Cir. 2010) (en banc). 164. See Lingle, 544 U.S. at 538 (citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)). 165. See accord United States v. Sec. Indus. Bank, 459 U.S. 70, 82 (1982) ( Since the governmental action here would result in a complete destruction of the property right of the secured party, the case fits but awkwardly into the analytic framework employed in Penn Central Transportation Co. . . . . ). 166. Lucas, 505 U.S. at 1015. 167. Tahoe-Sierra Pres. Council, 535 U.S. at 323. 168. Id. 169. Lingle, 544 U.S. at 538 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978)). 170. Brown v. Legal Found. of Wash., 538 U.S. 216, 234 (2003) (quoting Yee v. Escondido, 503 U.S. 519, 523 (1992) (internal quotation marks omitted)). 171. Tahoe-Sierra Pres. Council, 535 U.S. at 324. 172. Id. 173. We think that the other category of per se regulatory taking, under Lucas, ought not to apply here in light of Tahoe-Sierra, 535 U.S. at 331, which emphasizes the treatment of a parcel of property as a whole, rather than deprivations that were effectuated during any particular temporal segment, in determining which takings framework is applicable. Under the federalizing legislation as conceived, there would not be a total taking of the entire state-protected copyright interest. Id. at 331; accord

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government intrusion upon a real property interest. Nevertheless, there is precedent that would support such an approach. In Brown v. Legal Foundation of Washington, the Supreme Court considered the appropriate framework through which to assess the compulsory transfer of interest accruing in so-called interest on lawyers trust accounts (IOLTAs).174 In an earlier case, the Court determined that the interest income earned by funds held in the IOLTA accounts was the private property of the owner of the principal. 175 In Brown, the Court reasoned that something akin to a permanent physical invasion (and hence, taking) had occurred.176 Without explaining in any detail why the analogy was appropriate, the Court simply stated its conclusion that the transfer of IOLTA account interest from its owner to a public interest foundation, as required by state law, was a per se taking.177

As discussed above, federalizing legislation should be drafted to ensure that, at the outset of the federal term, ownership of the federal copyright in pre-1972 sound recordings is determined according to the prior existing state law.178 Nevertheless, there would still remain the naked transfer of rights in the recording from the right holders to the public with respect to the truncated portion of the state law term. Can it be said that federalizing legislation with this characteristic categorically takes that portion of the term? The Court has contrasted per se takings with Penn Central-type regulatory takings, saying that the latter do not give the government any right to use the property, nor [do they] dispossess the owner or affect her right to exclude others. 179 Arguably, by eliminating in some cases portions of the terms of the state law copyrights which entitle the right holder to exclude others for many purposes the federalizing legislation would tread close to this line of demarcation.

Professor Thomas Cotter has addressed the question of which takings framework should be used to assess government uses of intellectual property.180 In particular, he draws upon two lines of precedent that may be compared to the

Nestor M. Davidson, The Problem of Equality in Takings, 102 NW. U. L. REV. 1, 31 (2008) ( [A]nything short of a total deprivation must be decided under Penn Central . . . . ). Furthermore, the Lucas Court itself suggested that its analysis was more applicable to real, rather than personal, property

174. 538 U.S. 216 (2003); see also Koontz v. St. John s River Water Mgmt. Dist., 133 S. Ct. 2586, 2600 (2013) (suggesting that when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property, a per se [takings] approach is the proper mode of analysis ). 175. Phillips v. Washington Legal Foundation, 524 U.S. 156, 172 (1998). 176. Brown, 538 U.S. at 235 (citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)). At issue in Loretto was a New York statute that required landlords to permit the installation of cable facilities on their rooftops and exteriors. Loretto, 458 U.S. at 421. The Court held that permanent physical occupation of even a small portion of an owner s parcel constituted a per se taking. Id. 177. Brown, 538 U.S. at 235. The Court concluded, however, that no compensation was due because no pecuniary loss had been incurred by the property owners. Id. at 240. 178. See discussion supra Part III.B.4. 179. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg l Planning Agency, 535 U.S. 302, 324 n.19 (2002). 180. See Cotter, supra note 129.

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present inquiry into sound recordings. First are cases in the patents area, where courts have struggled with the question of whether the government s use of a patented invention without a license can constitute a compensable taking.181 The second is the Supreme Court s decision in Ruckelshaus v. Monsanto Co., which involved a challenge to a federal law allowing the Environmental Protection Agency (EPA) to use and publicly disclose trade secret-protected data that applicants for the registration of pesticides had submitted.182

Noting the seeming contrast between the tradition of categorical compensation for patent owners and the Court s application of an ad hoc approach in Ruckelshaus, Cotter argues that perhaps the categorical approach is preferable because uses by the government interfere with the fundamental property right of exclusion.183 Importantly, he suggests that in some respects this right to exclude may be more fundamental in the context of intellectual property than it is in the context of real property. 184 His justification is that intellectual property rights typically confer on the right holder only negative rights to exclude others from engaging in certain acts, rather than affirmative rights to take those steps oneself. Thus, deprivation of the right to exclude eviscerates precisely what makes the property worth owning.185

The present context should be distinguished, however. First, as part of his analysis, Cotter attaches weight to the kind of singling out that occurs in the government uses he has identified.186 Thus, in the patent cases, the government was actively practicing the patented inventions without payment in some cases, like defense weapons systems, where the government itself was likely to have been the only possible paying licensee for the patented invention.187 And, under the legislative regime scrutinized in Ruckelshaus, the authorized uses included the EPA s use of the data to evaluate the applications of later pesticide registrants as long as the second comer offered to compensate the original submitter.188

By contrast, the government is not seeking, through the federalizing legislation, to use or gain access to pre-1972 sound recordings.189 That is, the government

181. In protracted patent litigation, the Federal Circuit has wrestled with whether alleged patent infringement by the government could constitute a Fifth Amendment taking. See Zoltek Corp. v. United

fringement by government could be addressed as Fifth Amendment taking under Tucker Act), vacated by Zoltek Corp. v. United States, 672 F.3d 1309, 1327 (Fed. Cir. 2012). 182. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 990 (1984). 183. Kaiser Aetna v. United S 184. See Cotter, supra note 129, at 560. 185. See Ruckelshaus Patents as Constitutional Private Property: The Historical Protection of Patents Under the Takings Clause, 87 B.U. L. REV. 689, 720 (2007) (describing the evolution from the nineteenth century conception of patent rights as use-rights to the contemporary twentieth century conception of them as exclusion rights). 186. See Cotter, supra note 129, at 562. 187. See id. 188. Ruckelshaus, 467 U.S. at 994. 189. That is, the federalizing legislation does not appear to be conscript[ing] property through seemingly proscriptive rules. See Jed Rubenfeld, Usings, 102 YALE L.J. 1077, 1080 (1993) (arguing that such activity lies at the heart of the takings analysis).

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would not be singling out certain right holders so that the government (through federally operated libraries and archives) or the public could freely reproduce or distribute the recordings. Rather, the contemplated legislation would be a legislative fix to ensure that a large category of works, pre-1972 sound recordings, is brought within the fold of a unified federal copyright system. The legislation would aim to ensure that pre-1972 sound recordings do not retain preferable treatment to other works in a way that puts their very preservation and survival at risk. It is for precisely these sorts of reasons that Professor Davida Isaacs forcefully argued against the extension of takings protections to patents: concern that a proliferation of regulatory takings claims would lead the government to hesitate to make socially valuable reforms [to patent law], thus injuring the

public. 190 Under Professor Cotter s analysis, it is true that if the government s use of a

single patent is a categorical taking because it interferes with the exclusive rights of the patentee, then a fortiori, a generally applicable law that interferes with the exclusive rights of all sound recordings published before 1923 should be all the more subject to a categorical analysis. But this ignores the fact that the federalizing legislation would not simply be taking away the final years of protection for the earliest pre-1972 sound recordings so as to make the term of protection more comparable to that enjoyed by works in other media of the same era. Critically, during the minimum guaranteed federal term that would be granted to right holders in return, the federalizing legislation would also be guaranteeing certain valuable exclusive rights that may not exist under the laws of the several states, including a more certain derivative work right and public performance right in the case of digital audio transmissions. In this sense, there is arguably implicit compensation to right holders within the federalizing legislation itself.191

Accordingly, it is not accurate to describe the federalizing legislation solely as an acquisition . . . of property for public use 192 requiring the per se treatment applied in Brown, where all IOLTA account interest was transferred away from every owner without any compensating benefits. Here, some right holders may actually prefer the slate of federal rights to a longer, but less clear, term of state law protection. Furthermore, even in Ruckelshaus, where the EPA was actively using the proprietary information at issue, the Court applied the Penn Central framework to legislation affecting trade secrets.193 Finally, given Congress unremarked upon pattern of bringing federal unity to copyrightable subject matter,194 and in particular

190. See Isaacs, supra note 124, at 3. 191. See, e.g., RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN Incomplete Compensation for Takings, 11 N.Y.U. ENVTL. L.J. 110, 121 22 (2002); see also Carol M. Rose, Mahon Reconstructed: Why the Takings Issue Is Still a Muddle, 57 S. CAL. L. REV. 561, 581 82 (1984). 192. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg l Planning Agency, 535 U.S. 302, 323 (2002). 193. Ruckelshaususe a kind of per se approach with respect to data the right holder submitted during one particular window of time because of the legislation s effect on the right holder s reasonable investment-backed expectations in submitting that data. See Cotter supra note 129, at 561. 194. In another context in which congressional power to regulate the term of copyright protection

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its prior withdrawal of perpetual protection for pre-1972 sound recordings and unpublished works in all media, the Penn Central balancing test which would obligate a complaining stakeholder to prove certain kinds of economic reliance and harm is more appropriate.195

Even if a court were to apply a per se takings analysis, however, the lengthy period of state law protection already enjoyed by pre-1972 sound recordings is akin to an amortization period for nonconforming uses under zoning law, which some courts have found to vitiate takings claims.196

b. Penn Central Taking

A reviewing court should instead apply the Penn Central regulatory takings factors. Primary among these factors are [t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations. 197 Also relevant is the character of the governmental action, such as whether the interference amounts to a physical invasion by government rather than to some public program adjusting the benefits and burdens of economic life to promote the common good 198 in a manner that secures an average reciprocity of advantage to everyone

concerned. 199

i. Economic Impact

Even if revocation of some period of state law protection were to reduce the value of copyright holders interests in their pre-1972 recordings, the Supreme Court in Penn Central rejected the notion that diminution in property value, standing alone, can establish a taking. 200 In that case, the Court considered the

was challenged, the Court explicitly relied upon historical practice: To comprehend the scope of Congress power under the Copyright Clause, a page of history is worth a volume of logic. Eldred v. Ashcroft, 537 U.S. 186, 200 (2003) (quoting New York Trust Co. v. Eisner, 256 U.S. 345, 349 (1921) (Holmes, J.)). The fact that Eldred dealt with expanded terms, rather than foreshortened terms, does not refute the importance of the history of congressional activity in this area. 195. Accord Ark. Game & Fish Comm n v. United States, 133 S. Ct. 511, 518 (2012) (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978)) (emphasizing that most takings claims turn on situation-specific factual inquiries rather than on the application of bright line rules). 196. See Christopher Serkin, Existing Uses and the Limits of Land Use Regulations, 84 N.Y.U. L. REV Billboards and Big Utilities: Borrowing Land-Use Concepts to Regulate Nonconforming Sources Under the Clean Air Act, 112 YALE L.J. 2553,

197. Penn Central, 438 U.S. at 124. 198. Id. 199. Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1018 (1992) (quoting Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)). More recently, the Court has emphasized that the magnitude or character of the burden a particular regulation imposes upon private property rights and how any regulatory burden is distributed among property owners factor into the Penn Central inquiry. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 542 (2005). 200. Penn Central, 438 U.S. at 131; accord Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 645 (1993) ( [O]ur cases have long established that

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application of New York City s Landmarks Preservation Law to Grand Central Terminal, pursuant to which the building s owners (Penn Central) had been denied the right to construct an office tower atop the Terminal.201 In evaluating the impact of the landmarks law on the owners parcel, the Court found it significant that the landmark designation did not interfere with the primary uses to which the Terminal had been put for the prior sixty-five years, namely, a railroad terminal with office space and concessions.202 It remarked that, from the record before it, the law permitted Penn Central not only to profit from the Terminal but also to obtain a reasonable return on its investment. 203

Furthermore, the Court found other aspects of the regulatory regime mitigated the impact of the law s restriction on Penn Central s air rights. It noted that even if Penn Central could not build the contemplated tower on the desired property, Penn Central s pre-existing air rights had not been abrogated since they were transferable to other parcels that Penn Central owned in the vicinity of the Terminal, some of which were well suited for new office building construction.204 While the transferable development-rights program might not have been ideal,

[t]he rights afforded [to Penn Central in this case] are valuable. While these rights may well not have constituted just compensation if a taking had occurred, the rights nevertheless undoubtedly mitigate whatever financial burdens the law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of regulation.205

Later cases underscore that any statutory provisions that moderate and mitigate the economic impact are relevant to this analysis.206

Building on Penn Central, the Court has emphasized the treatment of a parcel of property as a whole, rather than deprivations that were effectuated during any particular temporal segment.207 In Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, the Court held that a thirty-two-month moratorium on virtually all development that is, all economically viable useby property owners of their property was not a categorical taking but should be judged through the ad hoc, context-specific Penn Central framework,208 which

requires careful examination and weighing of all the relevant circumstances. 209

mere diminution in the value of property, however serious, is insufficient to demonstrate a taking. ). 201. Penn Central 202. Id. at 136. 203. Id. 204. Id. at 137. 205. Id. 206. Connolly v. Pension 207. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg l Planning Agency, 535 U.S. 302, 331 (2002) (collecting cases); see also Penn Central, 438 U.S. at 130 ( Taking jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. ). 208. Tahoe-Sierra Pres. Councilone moratorium, in fact there were two moratoria, which together lasted thirty-two months. Id. at 306. 209. Id. at 335 (quoting Palazzolo v. Rhode Island, 533 U.S. 606, 636 (2001) (O Connor, J., concurring)).

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Specifically, the Court stated that

the District Court erred when it disaggregated petitioners property into temporal segments corresponding to the regulations at issue and then analyzed whether petitioners were deprived of all economically viable use during each period.210

The Tahoe-Sierra Preservation Council Court was not, however, unanimous in this view,211 and that case is distinguishable from the present inquiry in significant ways. In Tahoe-Sierra Preservation Council, the Court noted that the temporary deprivation of use would be alleviated when the restriction a moratorium intended to arrive at a comprehensive plan for use of the land ended.212 Furthermore, the reason for the moratorium was to maintain the status quo while studying the impact of development on Lake Tahoe and designing a strategy for environmentally sound growth. 213 Thus, one could expect that despite, or even because of, the moratorium on development, property values would actually rise, to the ultimate benefit of the affected property owners, reflect[ing] the added assurance that Lake Tahoe will remain in its pristine state. 214 The Court conceded that [i]t may well be true that any moratorium that lasts for more than one year should be viewed with special skepticism, but it said that the thirty-two months required was not unreasonable and that we could not possibly conclude that every delay of over one year is constitutionally unacceptable. 215

By contrast, in the case of pre-1972 sound recordings, any suspension in a state copyright holder s exclusive use would arise in connection with an irreversible termination of state law rights. It is also difficult to argue that the foreshortening of the state law term of its own accord would ultimately inure to the benefit of those right holders. (Although, as previously underscored, the federalizing legislation would secure for right holders a set of exclusive federal rights in return.) Furthermore, as described above, the elimination of the number of years of protection could far exceed the two to three years of use at issue in Tahoe-Sierra Preservation Council.

Although the Court s cautioning against the employment of temporal segments in Tahoe-Sierra Preservation Council addressed the discrete question of which takings framework is applicable, its analysis is also relevant to the measurement of the economic impact of the federalizing legislation on right holders. The economic impact of the legislation should be measured against the value of the entire life of the rights in the pre-1972 sound recording.

210. Id. at 331 (citation omitted). 211. In his dissent, Justice Thomas, joined by Justice Scalia, argued against the notion that a regulatory taking must be judged in relation to the parcel as a whole. Id. at 355 (Thomas, J., dissenting). He argued that a regulation effecting a total deprivation of the use of a so-called temporal slice of property is compensable under the Takings Clause unless background principles of state property law prevent it from being deemed a taking . . . . Id. (Thomas, J., dissenting). Nevertheless, this was not the position of the majority. 212. Tahoe-Sierra Pres. Council, 535 U.S. at 332. 213. Id. at 306. 214. Id. at 341. 215. Id. at 341 42.

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Perhaps the strongest case law that would counsel against the finding of a taking in the context of federalization of pre-1972 sound recordings is Andrus v. Allard.216 Decided just one year after Penn Central, the Court in Andrus noted the fact that the regulations at issue, which prevented the sale of parts of birds legally killed before the birds became subject to statutory protection, did not require the parts be surrendered, nor did it entail physical invasion or restraint of them.217 Thus, although one means of disposing them had been significantly impaired (i.e., by sale), the denial of one traditional property right does not always amount to a taking. At least where an owner possesses a full bundle of property rights, the destruction of one strand of the bundle is not a taking, because the aggregate must be viewed in its entirety. 218 And in this case, it was crucial that appellees retain[ed] the rights to possess and transport their property, and to donate or devise the protected birds. 219 Thus, it was not clear that appellees [would] be unable to derive economic benefit from the artifacts; for example, they might exhibit the artifacts for an admissions charge. At any rate, loss of future profitsunaccompanied by any physical property restriction provides a slender reed upon which to rest a takings claim. 220

If the current Court were to apply this reasoning, it would seem at the very least to require direct evidence of economic impact from current copyright holders rather than vague claims about lost value pertaining to the portion of the state copyright term that is forfeited under federalization.221

ii. Distinct investment-backed expectations

Investment decisions and contractual arrangements have likely been built around a state law based framework for protection. Such protection for pre-1972 sound recordings has long been in place and the 1976 Act arguably buttressed the expectation of uninterrupted state law protection of those recordings until the middle of the twenty-first century.222 Thus, one argument is that not only have investment-backed expectations been in place for decades, but such expectations were also reaffirmed by the significant overhaul of the copyright system that occurred in 1976.

216. 444 U.S. 51 (1979). 217. Id. at 65. 218. Id. at 219. Id. at 66. 220. Id. 221. By way of comparison to concrete figures, in Hodel v. Irving, the Court suggested that while loss of $100 might be inconsequential, the value of the other interests at issue in the case, which would escheat on account of the legislation, were $2,700 and $1,816 not trivial sums. Hodel v. Irving, 481 U.S. 704, 714 (1987). In Eastern Enterprises, the Court found the payments required of the petitioner under the Coal Act of $50 million to $100 million to be a considerable financial burden. Eastern Enters. v. Apfel, 524 U.S. 498, 529 (1998) (plurality opinion). 222. Federal preemption of state laws protecting sound recordings was initially set to occur on February 15, 2047; with the Sonny Bono Copyright Term Extension Act, Pub. L. No. 105-298, 112 Stat. 2827 (1998), the date was extended by twenty years, until February 15, 2067.

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Nevertheless, as explained above, copyright law more generally has been the subject of legislative revision.223 The 1976 Act changed the framework for protection, across media, of unpublished works.224 With respect to pre-1972 sound recordings in particular, the 1976 Act revoked what had been perpetual state law protection for these recordings. Thus, expectations of such changes from time to time arguably are now built into the fabric of these property rights.225 By itself, however, the pattern of frequent amendment of the copyright statute would not automatically weigh against a takings claim. That is, the mere fact that holders of copyright interests in pre-1972 sound recordings might be deemed to have notice of the frequent changes in federal copyright law would not necessarily prevent a takings claim. In Palazzolo v. Rhode Island, for example, the Supreme Court held that the fact that the property owner had acquired the land at issue with notice of regulations restricting use did not foreclose a takings claim.226 Thus, even those copyright holders who had acquired their interests in recent years, with additional knowledge of the frequency with which the law has been amended, might not be defeated by this factor. Nevertheless, the reasonableness of expectations in the context of the regulatory scheme is a factor to be considered.227 The Court has made clear that those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end. 228

Furthermore, the presence or absence of an average reciprocity of advantage from the legislative change is also relevant. In Hodel v. Irving, for example, the statute at issue required that certain undivided fractional interests in land owned by Native Americans would escheat, upon the death of the owner, to his or her tribe.229 Three members of the Oglala Sioux Tribe brought suit challenging the statute. The Supreme Court noted that many members of the Tribe whose fractional interests

223. See, e.g., Eldred v. Ashcroft 224. Of course, with respect to works that a creator never plans to publish, it is unlikely that investment-backed expectations are significant. 225. See Isaacs, supra note 124, at 28 (noting that it is unclear how the courts would apply the concept of background principles to patents ). 226. See Palazzolo v. Rhode Island, 533 U.S. 606, 628 (2001) (noting that [a] blanket rule that purchasers with notice have no compensation right when a claim becomes ripe is too blunt an instrument to accord with the duty to compensate for what is taken and remanding for application of Penn Central factors); see also Philip Morris, Inc. v. Reilly, 312 F.3d 24, 34 n.5, 37 (1st Cir. 2002) (en banc) (describing the Palazzolo holding as whether property is acquired before or after a regulation is enacted does not completely determine the owner s reasonable investment-backed expectations ); Abbott Labs. v. CVS Pharmacy, Inc., 290 F.3d 854, 860 (7th Cir. 2002). 227. Palazzolo, 533 U.S. at 633 (O Connor, J., concurring) ( [I]nterference with investment-backed expectations is one of a number of factors that a court must examine. Further, the regulatory regime in place at the time the claimant acquires the property at issue helps to shape the reasonableness of those expectations. ); Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). 228. Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 645 (1993) (citation omitted). Moreover, the fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking ; rather, [i]f the regulatory statute is otherwise within the powers of Congress . . . its application may not be defeated by private contractual provisions. Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 224 (1986). 229. Hodel v. Irving, 481 U.S. 704, 709 (1987).

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would escheat would actually benefit from the escheat of the interests of other members of the Tribe.230 Accordingly, it determined that this average reciprocity of advantage would weigh weakly in favor of the statute. Could an equivalent tradeoff exist for sound recording copyright owners to the extent that they get equivalent rights that make up for the loss of years of protection?

In Eastern Enterprises v. Apfel, a plurality of the Court determined that reasonable investment-backed expectations favored the party challenging the statute.231 In that case, petitioner Eastern Enterprises would have been liable under the Coal Act for lifetime medical benefits for employees who had worked for the company thirty to fifty years before the statute was enacted, a liability which was expected to total between $50 million and $100 million.232 This liability was imposed without any regard to responsibilities that Eastern accepted under any benefit plan the company itself adopted. 233 The Court determined that the premiums for which Eastern would now be liable were not calibrated either to Eastern s past actions or to any agreement implicit or otherwise by the company. Nor would the pattern of the Federal Government s involvement in the coal industry have given Eastern sufficient notice that lifetime health benefits might be guaranteed to retirees several decades later. 234 Assessing the Penn Central factors, the Court found the statute to effect a severe, disproportionate, and extremely retroactive burden on Eastern, which violated the Takings Clause as applied to Eastern.235

In Ruckelshaus v. Monsanto Co., the Court examined a takings claim with respect to trade secrets.236 During the time frame in which the Court found a potential taking, Monsanto had submitted its health, safety and environmental data to the EPA under a statutory assurance of confidentiality and exclusive use.237 The Court characterized the right to exclude others as central to the very definition of the property interest at stake when it comes to trade secrets, for once they are disclosed or others are allowed to use them, the holder of the trade secret has lost his property interest in the data. 238

At the Pre-1972 Sound Recordings Public Meeting in June 2011, it was suggested that this concern might not carry the same weight with respect to sound recordings.239 This is so because those who hold the masters or otherwise have a lead-time advantage can still monetize their recordings even should they fall into the public domain. Nevertheless, it is not clear how much purchase such an

230. Id. 231. Eastern Enters. v. Apfel, 524 U.S. 498, 529 (1998) (plurality opinion). 232. Id. at 531. 233. Id. 234. Id. at 536. 235. Id. at 538. 236. Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984). 237. Id. at 1011. 238. Id. 239. Eric Harbeson, Music Library Ass n, Comments at Pre-1972 Sound Recordings Public Meeting 19 (June 2, 2011), available at http://www.copyright.gov/docs/sound/meeting/transcript-06-02-2011.pdf.

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argument should have, since a similar argument was rejected by the Supreme Court in Ruckelshaus:

That the data retain usefulness for Monsanto even after they are disclosed for example, as bases from which to develop new products or refine old products, as marketing and advertising tools, or as information necessary to obtain registration in foreign countries is irrelevant to the determination of the economic impact of the EPA action on Monsanto s property right. The economic value of that property right lies in the competitive advantage over others that Monsanto enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.240

Critically, the Court rejected EPA s argument in favor of uniformity in the form of a comprehensive FIFRA registration scheme even more important in view of its tie to public health and safety than copyright legislation to displace the vagaries of state law.241

iii. Character of the Governmental Action

Under this prong of the Penn Central analysis, courts consider whether the government physically invade[s] or permanently appropriate[s] property, or whether it is creating a public program that adjusts the benefits and burdens of economic life to promote the common good. 242 They also consider whether the government is forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. 243 With respect to the latter consideration, is a shift from state to federal protection likely to entail a singling out of current state law interest holders? If so, the character of the

governmental action might weigh in favor of a taking.244 If the character of the action is to abrogate a fundamental property right, such as

the right to exclude others, 245 or the right to devise property to one s heirs,246 such an action is likely to weigh in favor of a taking. With respect to the latter, the Court in Hodel decided that the ability to control the disposition of property upon death through complex inter vivos transactions such as revocable trusts was not

240. Ruckelshaus, 467 U.S. at 1012. 241. Id. (quoting Webb s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 164 (1980)) (other citations omitted). The Court refrained from definitively finding a takings problem at this stage, since it was possible that the negotiation and arbitration provisions of the statute might have resulted in just compensation to Monsanto for the loss in the market value of its trade-secret data. Id. at 1013. 242. Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 225 (1986). 243. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005) (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). 244. See Cienega Gardens v. United States But see Davidson, supra note 173, at 4 (challenging the emerging equality dimension in regulatory takings analysis). 245. Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979). 246. See, e.g., Hodel v. Irving, 481 U.S. 704of the action at issue: virtual abrogation of the right to pass on a certain type of property the small undivided interest to one s heirs in light of the fact that such a right has been part of the Anglo-American legal system since feudal times ).

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an adequate substitute for the rights taken.247 Likewise, as mentioned above, the property interests at stake in Hodel were not de minimis.248 Both of these features further persuaded the Court that the character of the government action in abrogating an essential right was extraordinary. 249

It is hard to know exactly how to apply these precedents to pre-1972 sound recordings. Together, they suggest that if the value of the pre-1972 sound recording copyrights were de minimis, the character of the government action might not weigh in favor of a taking. Since, however, it is unlikely that copyright with only de minimis value would be the subject of a constitutional challenge because it is doubtful that anyone would expend the funds to litigate, it is not clear that this tells us much. The other lesson appears to be that if roughly equivalent rights are substituted in place of the pre-1972 sound recording interests, that substitution might ameliorate the character of the government action.250 Certainly, if the earlier case Andrus v. Allard had continuing force, the denial of one traditional property right does not always amount to a taking, 251 and would not where appellees retain the rights to possess and transport their property, and to donate or devise the protected birds. 252

C . F I L IN G O B L I G A T I O NS A ND T H E O B L I G A T I O N T O M A K E T H E W O R K R E ASO N A B L Y A V A I L AB L E

The proposed federalizing legislation requires that right holders of pre-1972 sound recordings take certain steps in order to preserve their rights to those recordings. Specifically, as mentioned, holders of published post-1923 recordings (and never-published recordings) would have to: (1) make, and continue to make, the recordings available to the public at a reasonable price and (2) file a notice with the Copyright Office confirming the availability of the recordings at a reasonable price, as well as that the owner intends to preserve his or her copyright protection until 2067.253 For recordings published before 1923, similar steps are required, except that the protection may extend only as long as twenty-five years.254 Complying with these requirements may well entail some degree of financial hardship.

247. Id. at 716. 248. Id. at 717. 249. Id. at 716 17. 250. See Henry Lee Mann, As Our Heritage Crumbles into Dust: The Threat of State Law Protection for Pre-1972 Sound Recordings, 6 WAKE FOREST INTELL. PROP. L.J. 45, 52 (2006) (noting that the drawback of the temporal limitation [on copyright holders] would be at least partially offset by the benefit of uniform and predictable protection, as is currently enjoyed by post-1972 sound recordings ); see also Erlinger, supra note 68 -offs and stating that [w]here the term of federal protection provided is significantly less than the term of state protection

lost, the replacement begins to look more like a taking and less like an equitable tradeoff ). 251. Andrus v. Allard 252. Id. at 66. 253. See supra 254. See supra text accompanying note 45.

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The Supreme Court s decisions in Texaco, Inc. v. Short255 and United States v. Locke256 strongly indicate that these steps required to preserve ownership are constitutionally permissible. In Texaco, the Court considered an Indiana statute providing that segregated mineral interests not used for twenty years would automatically lapse and pass to the surface owner of the land, unless the mineral rights owner filed a statement with the county recording office within a two-year grace period.257 Use was defined to include mineral production, or the payment of rents, royalties or taxes.258 The purpose of this legislative provision was to extinguish stale and abandoned interests that impeded the public interest in the development of mineral and surface rights.259

In consolidated cases that arose over the ownership of certain mineral interests claimed to have lapsed, the Court held that the statute was constitutional. As an initial matter, the Court stated broadly that

[w]e have no doubt that, just as a state may create a property interest that is entitled to constitutional protection, the State has the power to condition the permanent retention of that property right on the performance of reasonable conditions that indicate a present intention to retain the interest.260

The Court described the required filing of a statement of claim, in the absence of use, to be a slight burden on the mineral interest owners while providing such clear benefits to the public by identifying the owners of the interests from whom developers could acquire operating rights and the county could collect taxes.261 In Locke, the Court upheld an analogous federal scheme requiring holders of unpatented mining interests to make certain filings in order to preserve their interests.262 The purposes of the filings in that scheme were to eradicate stale mining claims and allow federal officials to make informed land management decisions.263 In both of these cases, the Court cited a long tradition of upholding legislation that required property owners to take affirmative steps in order to retain

255. Texaco, Inc. v. Short, 454 U.S. 516 (1982). 256. United States v. Locke, 471 U.S. 84 (1985). 257. Texaco, 454 U.S. at 518. 258. Id. at 519. 259. Id. at 523. 260. Id. at 526; accord Locke, 471 U.S. at 104 ( Even with respect to vested property rights, a legislature generally has the power to impose new regulatory constraints on the way in which those rights are used, or to condition their continued retention on performance of certain affirmative duties. As long as the constraint or duty imposed is a reasonable restriction designed to further legitimate legislative objectives, the legislature acts within its powers in imposing such new constraints or duties. ). 261. Texaco, 262. Locke, 471 U.S. at 109. 263. Id. at 87. The Court did emphasize that unpatented mining claims are a unique form of property over which the government retains substantial regulatory power. Id. its general statements about the right of government to condition the retention of property interests were just as broad as those in Texaco. And, in any event, given the history of reform of the copyright statute, one might say that copyright interests, too, remain subject to substantial regulatory power.

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their rights.264 It is thus worth noting at the outset that such precedent also exists in the

copyright context. The URAA s copyright restoration provisions, which have now been upheld by the Supreme Court, require right holders of restored copyrights in certain foreign works to file a notice of intent to enforce those rights against reliance parties that is, against third parties who had been making use of the works.265 The notices can be filed either with the Copyright Office or directly on the reliance parties.266 While the Supreme Court did not directly pass on the takings or due process aspects of the requirement of filing these notices, their inclusion in the applicable statutory scheme reflects precedent for the sort of requirement being contemplated here.

Also permeating the Court s analyses in Texaco and Locke were undercurrents of the responsibilities of property ownership and the ability of government officials to identify those owners. In Texaco, there was demonstrated neglect a failure of property owners to make productive use of the mineral rights, including the payment of taxes.267 In Locke, more than six million unpatented mining claims existed on public lands, many of which were dormant for decades and impeded the government s ability to take any action regarding federal lands.268

In the case of pre-1972 sound recordings, the animating purposes of the federalizing legislation would reflect such a lack of stewardship. The legislation is aimed, in part, to ameliorate a widespread failure to preserve fragile, decaying sound recordings.269 Many copyright owners of older recordings simply are not in a position to preserve them and to make them available to the public.270 Simply put, the filing requirements would enable libraries and archives to preserve old recordings that have been abandoned. As in Texaco and Locke, the requirement of filing a notice to indicate an intention to retain the extended term of protection would be a strong indication that the interests have not been abandoned.

If the Public Meeting on Pre-1972 Sound Recordings was any indication, however, some opposition to the federalizing legislation may come from right holders of sound recordings that are in wide circulation and have been well preserved.271 Such parties might argue that any concerns about abandonment simply do not apply to their own well-known, economically valuable recordings. But the point of the filing requirements is precisely to address this problem by

264. Id. Texaco, 265. 17 U.S.C. § 104A(c), (e) (2012); Golan v. Holder, 132 S. Ct. 873, 883 (2012). 266. 17 U.S.C. § 104A(c), (e). 267. Texaco, 268. Locke, 471 U.S. at . 269. See COPYRIGHT OFFICE REPORT, supra note 5, at 90. 270. See id. at 60. 271. See U.S. Copyright Office, Pre-1972 Sound Recordings Public Meeting (June 2, 2011), available at http://www.copyright.gov/docs/sound/meeting/transcript-06-02-2011.pdf; see also Comments of Recording Industry Ass n of America (RIAA) and American Ass n of Independent Music (A2IM) (Nov. 3, 2010), in U.S. COPYRIGHT OFFICE, COMMENTS REGARDING FEDERAL COPYRIGHT PROTECTION OF SOUND RECORDINGS FIXED BEFORE FEB. 15, 1972, available at http://www.copyright.gov/docs/sound/comments/initial.

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separating the wheat from the chaff that is, separating the well-tended-to recordings from those that have been effectively abandoned. Many of the valuable rights are held by corporate entities which presumably have adequate records as to the recordings whose terms they would like to extend until 2067. They would thus be able to comply with the federalizing legislation.

Right holders with large catalogs may argue in response that the sheer number of filings they would have to make far surpasses what the Court characterized as a slight burden in Texaco.272 To address this problem, any statutory amendments

and implementing regulations should streamline the filing process for right holders. In any event, the Court should give wide berth to the kinds of requirements that Congress imposes. In Locke, the imposition of both an initial and an annual filing requirement relating to already-existing property interests passed constitutional muster because the means were rational to support clearly legitimate legislative purposes.273 This was true even though, had every interest holder participated, the statute would potentially have required filings with respect to more than six million mining interests.

The Court s specific due process and takings pronouncements on these requirements will be briefly considered. With respect to generally applicable laws that alter substantive rights, constitutionally adequate process usually consists of enacting the statute, publishing it, and, to the extent the statute regulates private

conduct, affording those within the statute s reach a reasonable opportunity both to familiarize themselves with the general requirements imposed and to comply with those requirements. 274 The federalizing legislation would provide for a transition period in which a right holder would need to take certain steps to secure the maximum available extended term of protection. During that transition period, the right holder would need to make the work available to the public at a reasonable price and file a one-time notice verifying the work s availability and stating intent to achieve protection for the applicable extended term.275

This sort of transition period, in which property owners must take certain steps and file certain notices to preserve their interests, fits comfortably within the requirements of due process. In Texaco and Locke, for example, the Supreme Court approved both two- and three-year grace periods in which to make filings required to preclude deemed abandonment of the property interests at stake.276 Accordingly, as long as the federalizing legislation spells out the nature of the required notice and the definition of what it meant to make a work available at a

272. Texaco, 454 U.S. at 530. 273. Locke, claim with respect to the physical location of their interests and, annually thereafter, a notice of intention to hold the claim, an affidavit of assessment work performed on the claim or a detailed reporting form, or else they would face abandonment of the interest. Id. requirement that gave rise to the dispute on appeal. Id. 274. Id. at 108. 275. Under the federalizing legislation as currently formulated, the transition period is three years for sound recordings published before 1923, and six years for those published after 1923 or never published at all. See supra Part II. 276. Locke, 471 U.S. at 108; Texaco,

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reasonable price, due process will be satisfied. With respect to takings, the Court in Texaco held that the Takings Clause does

not require compensation of an owner for the consequences of his own neglect. 277 Under the applicable statute there, interests that were not used for twenty years and for which no claims were filed were deemed abandoned, and it was the owner s failure to make any use of the property and not the action of the State that cause[d] the lapse of the property right. 278 Thus, the deprivation of these abandoned interests was not a taking. Nor was the requirement that a mineral interest holder come forward and file a claim, if he wanted to preserve the interest, itself a taking. 279

In contrast to Texaco, the federalizing legislation would not preserve state law copyright interests based solely on the use of those recordings. So, for example, it would not be sufficient for a right holder to point to the wide circulation and sales of Elvis Presley and Ella Fitzgerald tracks to secure an extended federal term of protection until 2067. Rather, as stated, all right holders would have to make certain filings to secure the extended federal term, no matter how widely available their recordings. Nevertheless, this was exactly the set-up in Locke, which required filings not just use by all property owners who wished to retain their interests.280 The Court in Locke relied on Texaco to conclude that any property deprivation was based on the right holders failure to comply with the minimal burden of annually filing the requisite documentation.281 Thus, the forfeiture of their rights was not a taking.282

D . R E G IST R A T I O N

Right holders of pre-1972 sound recordings would have to expend funds to register their recordings with the Copyright Office in order to qualify for statutory damages or to bring an action if the recording is a U.S. work.283 As of May 1, 2014, registration fees are set at $55 for an online registration and $85 for a paper registration per work.284 These fees are required for all new works sought to be registered, and thus right holders of pre-1972 sound recordings would simply be placed in the same position as all other creators and owners. If followed, the Ninth

277. Texaco, 454 U.S. at 530. 278. Id. 279. Id. 280. See Locke, 471 U.S. at 106. 281. Finally, the restriction attached to the continued retention of a mining claim imposes the most minimal of burdens on claimants; they must simply file a paper once a year indicating that the required assessment work has been performed or that they intend to hold the claim. Id. 282. See id. at 107 ( Regulation of property rights does not take private property when an individual s reasonable, investment-backed expectations can continue to be realized as long as he complies with reasonable regulatory restrictions the legislature has imposed. ). 283. See, e.g., 17 U.S.C. §§ 411, 412 (2012) (delineating registration as a prerequisite for these purposes in the case of works in other media). 284. See Copyright Office Fees, U.S. COPYRIGHT OFFICE, http://www.copyright.gov/fls/sl04_2014. pdf.

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Circuit s reasoning in Ladd v. Law & Technology Press would seem to foreclose a takings claim on this ground.285 Citing Ruckelshaus v. Monsanto Co., the Ladd court said that Congress indubitably can place conditions on the grant of a statutory benefit. 286 In deflecting challenges by the copyright holder that the deposit requirement is not a valid condition, the Ninth Circuit said that [c]onditioning copyrights on a contribution to the Library of Congress furthers

th[e] overall purpose of the Copyright Clause.287 Even though deposit is not a precondition to copyright under the 1976 Act, it is still a requirement, and thus precedent on statutory conditions, such as Ruckelshaus, is still applicable.288

Another option to consider, of course, is to modify the registration requirements for newly federalized pre-1972 sound recordings.289

E . SUBST I T UT I O N O F F E DE RA L RI G H TS A ND R E M E DIES

It is clear that the federalizing legislation contemplates not just a quantitative shift, but also a qualitative shift in the rights and remedies state copyright holders would enjoy and in users defenses thereto. Federal rights and defenses would be put in place of state rights and defenses; federal remedies would replace state remedies. As discussed, with respect to rights, the federal regime generally offers right holders more most prominently, an established derivative work right and public performance right (the latter with respect to digital audio transmissions). These rights, and others, would of course be subject to the same important exceptions and limitations that apply to uses of other works, such as fair use. With respect to remedies, although both systems allow for actual damages, the federal system would replace the possibility of punitive damages with the possibility of statutory damages beyond what is necessary to compensate the right holder.290

Therefore, the property right at stake in this context might be framed in a different way from those posited in the prior sections. Specifically, stakeholders might claim vested interests in a particular bundle of exclusive rights available under state law, or in a particular set of remedies. Accordingly, the Article next considers the due process and takings implications of claims framed in this way.

If, as hypothesized, the federalizing legislation were to become effective on January 1, 2015, many scenarios are imaginable; three will be addressed. First, parties might already be engaged in litigation on that date. For example, Party A might have sued Party B for making and distributing unauthorized copies of a

285. Ladd v. Law & Tech. Press, 762 F.2d 809 (9th Cir. 1985). 286. Id. at 813 (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)). 287. Id. at 814; cf. Figueroa v. United States, 466 F.3d 1023, 1026 (Fed. Cir. 2006) (holding that Congress has wide constitutional latitude to impose patent application and issuance fees). 288. Ladd, 762 F.2d at 814. Ladd also distinguished a line of cases limiting the federal government s ability, when acting in a proprietary rather than sovereign capacity, to appropriate patented devices. Id. 289. See, e.g., 17 U.S.C. § 411 (2012) (waiving registration requirement for copyright litigation involving non-U.S. works). 290. Federal copyright law also explicitly provides for non-monetary relief in the form of injunctions and impounding. 17 U.S.C. §§ 502, 503 (2012).

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sound recording fixed in 1965. The Supreme Court has held that a cause of action may be considered property protectable under the Due Process Clause.291 Where there is pending litigation, therefore, the case should be adjudicated under the preexisting state law.292 Such an application of state law would mean, for example, that punitive damages should remain available to Party A, but that Party A could not amend its complaint to claim a violation of a derivative work right (assuming such a right did not exist under state law).293 It would also mean that Party B could defend only on the basis of pre-existing state law defenses, which may or may not include fair use or other defenses.

A second scenario is that some time prior to January 1, 2015, Party C made unauthorized reproductions and distributions of sound recordings to which Party D holds rights. Let s assume that, also prior to January 1, 2015, Party D knew of Party C s activities and hired a lawyer to sue Party C, but that Party D did not actually file suit until January 1, 2016. In such a case, the cause of action has accrued before the effective date of legislation. Here, too, the best course of action to avoid due process problems is to adjudicate the case under state law, with the implications described above.

Both of these scenarios could be accomplished by modeling the federalizing legislation on the current § 301(b)(2) to remove from federal preemption the state law rights and remedies pertaining to any cause of action arising from undertakings commenced before [its effective date]. 294 In general, the reference to

291. See, e.g., Logan v. Zimmerman Brush Co., 455 U.S. 422, 428 (1982) (citing Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950)) (noting that a cause of action is a species of property protected by the Fourteenth Amendment s Due Process Clause ). 292. As long as Congress was clear as to the temporal application of the federalizing legislation, see Landgraf v. USI Film Prods., the new (federal) law to such cases even to the point of extinguishing pending state law claims in favor of federal claims would necessarily pose a due process problem. See, e.g., Ileto v. Glock, Inc., 565

that preempted state tort law claims in pending cases); cf. Eddings v. Volkswagenwerk, A.G., 835 F.2d 1369, 1374 (11th Cir. 1988) (applying state supreme court decision to pending cases that had the effect of extinguishing plaintiffs tort-based causes of action). In Hammond v. United States, the plaintiff claimed that the filing of a suit on an accrued common-law or state statutory cause of action gives her a vested property right in that action, and that Congress cannot retroactively abolish that cause of action and legislate the dismissal of plaintiff s suit without violating due process. 786 F.2d 8, 11 (1st Cir. 1986). The court rejected the due process challenge. Id. at 10 11. First, it determined that [b]ecause rights in tort do not vest until there is a final, unreviewable judgment, Congress abridged no vested rights of the plaintiff by enacting [the statutory provision] and retroactively abolishing her cause of action in tort. Id. at 12. In any event, the statute passed rational basis scrutiny. Id. accord (9th Cir. 2009). But see Ileto v. Glock, Inc., 565 F.3d 1126, 1148 (Berzon, J., concurring in part and dissenting in part) (citing Logan, 455 U.S. at 428, to conclude that a pending cause of action, therefore, may be more or less valuable at various points during its pendency, but, even before it is reduced to a final dollar amount, it is a species of property protected by the . . . Due Process Clause ). 293. Any prospective injunctive relief obtained under state law would need to expire at termination of new federal term. 294. 17 U.S.C. § 301(b)(2) (2012); see also § 301(c)(2) ( With respect to sound recordings fixed before [its effective date], any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. ).

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undertakings commenced has been interpreted to mean infringement[s] taking place. 295 Even clearer language, however, could be chosen to solidify the point.

A third scenario is as follows: After January 1, 2015, Party E makes unauthorized reproductions and distributions of Party F s recordings. At this point, federal law would apply to the case of Party F v. Party E, and it seems clear that the application of federal law would comport with due process.296 Conceivably, however, a disaffected right holder might object that the mere displacement by federal law of the state law regime governing pre-1972 sound recordings violates due process.

In Duke Power Co. v. Carolina Environmental Study Group, Inc., however, the Court rejected a similar due process challenge to the federal Price-Anderson Act, which capped private and government liability in the event of a nuclear incident.297 Without any nuclear incident having occurred, objectors claimed that the liability-limitation provision . . . fails to provide those injured by a nuclear accident with a satisfactory quid pro quo for the common-law rights of recovery that the federal law abrogates.298 Noting, as an initial matter, that it is not even clear that due process requires that a legislatively enacted compensation scheme either duplicate the recovery at common law or provide a reasonable substitute remedy, the Court determined that, in any event, the federal act does provide a reasonably just substitute for the common-law or state tort law remedies it replaces and satisfies due process requirements.299 The legislative history reflected Congress determination that reliance on state tort law remedies and state-court procedures was an unsatisfactory approach to assuring public compensation for nuclear accidents, while at the same time providing the necessary incentives for private development of nuclear-produced energy. 300 Thus, the statutory limitations on liability bore a rational relationship to Congress s goal of increasing private production of such energy sources.301

Applying this reasoning to the pre-1972 sound recordings context, it seems

295. 1 NIMMER ON COPYRIGHT, supra note 10, § 1.01[C] (collecting cases). 296. See e.g., Ducharme v. Merrill-Nat l Labs., 574 F.2d 1307, 1310 (5th Cir. 1978) (concluding that because plaintiffs cause of action did not arise until after passage of the federal act, they had no prior vested right in a cause of action under state law and rejecting due process claim); Carr v. United

accord Jeremy A. Blumenthal, Legal Claims as Private Property: Implications for Eminent Domain, 36 HASTINGS CONST. L.Q. 373, 398 (2009) ( Prospective regulations that diminish or eliminate unaccrued causes of action (or defenses) do not implicate property rights. ); Radin, supra note 115, at 1328 (arguing that [c]hanges to accrued rights (retroactive change) can implicate a property interest, while changes to nonaccured rights (prospective change) should not and that accrual occurs once a party can determine the legal consequences of an action because the injury has happened and the law at the time of injury is known ). 297. See Duke Power Co. v. Carolina Envtl. Study Grp., Inc. see also Silver v. Silver, 280 U.S. 117, 122 (1929) ( [T]he Constitution does not forbid the creation of new rights, or the abolition of old ones recognized by the common law, to attain a permissible legislative object. ). 298. See Duke Power 299. See id. at 88. 300. See id. at 89. 301. See id. at 84.

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readily apparent that as long as the federalizing legislation bears a rational relationship to a legitimate legislative goal, which this Article argues it does, then the mere substitution of federal rights and remedies will not trigger a due process violation. The Court has approved these sorts of legislative substitutions in the past.302 And, as in Duke Power, the federal rights and remedies while not exactly co-extensive are reasonably just substitute[s] for the state law rights and remedies they replace.303 Moreover, the revocation of punitive damages in favor of a statutory damages scheme should not be deemed to violate due process even if it can be demonstrated that statutory damages generally yield a smaller monetary award for right holders successful in litigation. In approving the substitution of workers compensation regimes in place of common law standards (and as reaffirmed in Duke Power) due process is not violated simply because an injured party would not be able to recover as much under the Act as before its enactment. 304

Courts should be reluctant to find a cognizable takings claim based solely on an objection to the substitution of governing regimes.305 While there is limited Supreme Court precedent directly on point, considerable precedent from the Ninth Circuit strongly suggests that this line of argument would not be fruitful for stakeholders.306 For example, that court recently rejected a takings claim raised by plaintiffs challenging the legislative revision of a state program whereby property owners could seek either just compensation or exemptions from land use regulations.307 The new law curtailed the remedies and processes available to property owners who had already begun seeking relief under the old program.308 Indeed, the plaintiffs had all been granted exemptions prior to the revision but, following the legislative overhaul, were unable to develop their land pursuant to the

302. We have not here distinguished at a more granular level among causes of action that are based on tort, contract or property. There is some support for the notion that the abridgment of accrued causes of action to enforce vested intellectual property rights created by statute is more suspect than the abridgement of the typical tort cause of action. See Hammond v. United States, 786 F.2d 8, 11 (1st Cir. 1986) (citing Richmond Screw Anchor Co. v. United States, 275 U.S. 331 (1928), which dealt with patent rights). But, as the Hammond court noted, the vitality [of such older cases] may now be in doubt because more recent cases have upheld retroactive application of statutes that abridge economic and real property rights created under a prior statute without always carefully distinguishing the older cases. Id. at 11. 303. Accord Bowers v. Whitman, 671 F.3d 905, 917 (9th Cir. 2012) (rejecting substantive due process challenge where state replaced one set of remedies with another set of remedies). 304. Duke Power, 438 U.S. at 93 (citing N.Y. Cent. R.R. Co. v. White, 243 U.S. 188, 201 (1917)). 305. One commentator, surveying the case law, suggests that courts rarely treat legal rights as private property for purposes of the Takings Clause. Radin, supra note 115, at 1319. 306. In Duke Power, for example, the Court essentially found such a claim too speculative because it assumed that compensation for physical property damage would still be available under the Tucker Act. See Duke Power, 438 U.S. at 94 n.39; see also In re Consol. U.S. Atmospheric Testing Litig., 820 F.2d 982 (9th Cir. 1987) (concluding that federal statute, which substituted a remedy against the government under the Federal Tort Claims Act for causes of action against contractors arising under state law, did not effect a taking). 307. See Bowers 308. See id. at 910.

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exemptions; nor had they received any monetary compensation.309 The court rejected the plaintiffs claim to property in the form of an accrued

cause of action under the prior law.310 The court underscored that although a cause of action is a species of property, a party s property right in any cause of action does not vest until a final unreviewable judgment is obtained, because the interest is still inchoate and does not afford certainty of expectation.311 The exemptions previously granted failed in and of themselves to convey vested interests because they did not entitle the property owners to any particular compensation or use of their property. Because the plaintiffs had at most only a cause of action and not a final judgment under the prior law, they possessed an insufficient property interest. Their right to sue, said the court, was therefore not a property interest protected by the Takings Clause. 312 In another case, the same court put the point more bluntly: a plaintiff s interest in a prospective punitive damages award does not qualify as property under the Takings Clause. 313

Such precedent suggests that courts should reject a takings claim based on the mere displacement of state rights and remedies by federal rights and remedies.

F . R EST RI C T I O NS O N USE RS

The federalizing legislation could effectively restrict the activities of users who engaged in activities that were permitted (or at least tolerated) under state law for example, certain noncommercial uses. This Article next examines the likelihood that such users might successfully raise a due process or takings claim.314

The Golan v. Gonzales case addressed a due process claim in somewhat analogous circumstances.315 The subject of the Golan case was the Uruguay Round Agreements Act (URAA), which restored the copyrights in certain works of foreign origin that had been in the public domain in the United States.316 The Golan plaintiffs claimed that the law impermissibly curtailed their use of those works, which they had exploited in reliance on those works being (and remaining) in the public domain. They argued, inter alia, that the URAA imposed retroactive burdens on them and that the provisions in the law designed to protect them as

309. See id. at 911. 310. See id. at 913. 311. Id. at 914 (citations and internal quotation marks omitted). 312. Id. The court also rejected a takings argument on the ground of a statutory entitlement to compensation because, among other things, no monetary commitment was unequivocally made. Id. at 915. Nor had plaintiffs exhausted the remedies that were available to them. See id. at 916. 313. Engquist v. Or. Dept. of Agric., 478 F.3d 985, 1004 (9th Cir. 2007). 314. As one commentator has pointed out, often it can be more difficult for defendants than plaintiffs to persuade courts as to retroactivity problems. See Radin, supra note 115, at 1344 (noting that defendants find it difficult to successfully challenge statutes that retroactively create new rights of

action because they cannot point to an explicit legal right that the legislation impaired ). 315. See Golan v. Gonzales, No. Civ.01-B-1854(BNB), 2005 WL 914754 (D. Colo. Apr. 20, 2005), aff d, 501 F.3d 1179 (10th Cir. 2007), remanded to Golan v. Holder, 611 F. Supp. 2d 1165 (D. Colo. 2009), rev d, remanded to 609 F.3d 1076, (10th Cir. 2010), aff d, 132 S. Ct. 873 (2012). 316. See supra notes 32 37 and accompanying text.

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reliance parties were insufficient.317 According to plaintiffs, the law effectively denied them their Fifth Amendment right to due process.

The district court acknowledged that plaintiffs had invested in uses of the works, but rejected their contention that the URAA imposed retroactive burdens on them. The court explained that [a] statute does not operate retrospectively merely because it is applied in a case arising from conduct antedating the statute s enactment, or upsets expectations based in prior law. 318 The court went on to observe that whether a change to the law operates retroactively depends on the nature and extent of the change and the degree of connection between the

operation of the new rule and the relevant past event. 319 It held that [t]hough the plaintiffs reasonably relied upon the entry of the works at issue into the public domain, any expectations they had of perpetual rights of exploitation could not reasonably have been settled. 320 The court explained that because Congress had on several occasions removed works from the public domain, plaintiffs rights were anything but inviolate. 321

Even if copyright restoration were considered retroactive in effect, according to the court, it would not violate the Fifth Amendment since it is rationally related to a legitimate government objective extending protection to foreign authors to achieve similar protection for U.S. authors abroad and it contains provisions to ameliorate its effect on reliance parties.322 The plaintiffs apparently did not pursue the due process claim on appeal,323 so neither the Tenth Circuit Court of Appeals nor the Supreme Court had an opportunity to rule on it.

Any claim that the federalizing legislation under discussion would defeat users expectations of perpetual rights of exploitation in pre-1972 sound recordings appears to be weaker than that mounted in Golan, where most of the restored works were in the public domain throughout the United States. The uncertainty of the law, the evolving nature of common law and the existence of strong protection in some states would make it difficult for a challenger to claim its expectations were reasonable. Moreover, there is little doubt that Congress, in enacting the federalizing legislation, would be pursuing legitimate government objectivescreating a single regime of protection for sound recordings, and enhancing the ability to preserve and use pre-1972 recordings in a rational manner.

One commentator has suggested that the federalizing legislation should contain a graduated phase-in aspect, modeled after the URAA, by which users who were

317. For example, the law provides that a reliance party who was using a restored work prior to restoration may continue to exploit existing copies for one year after that party receives actual or constructive notice of the right holder s intent to enforce the copyright. See 17 U.S.C. § 104A(d)(2), (e) (2012). If the reliance party had created a derivative work prior to restoration, the reliance party could continue to use the work if it compensated the right holder. See id. § 104A(d)(2). 318. Golan, 2005 WL 914754, at *17 (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 269 (1994) (citations omitted)). 319. Id. at *18. 320. Id. 321. Id. 322. See id. 323. See

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reliance parties that is, who made investments and agreements for the use of a sound recording in a context that is permissible under state law but improper under federal law would have a chance to adjust their behavior before being deemed copyright infringers.324

It also seems unlikely that a court would recognize a takings claim asserted on behalf of users who would argue that their use of pre-1972 sound recordings prior to federalization established a cognizable property interest. As discussed above in Part V.E., this appears to be a mere substitution of regimes, which would result in more clearly defined and consistently available exceptions and limitations. Indeed, it is telling that users (including libraries), rather than right holders, have been the primary motivating force behind the initiative to federalize pre-1972 sound recordings, with many claiming that federal exceptions are more certain and predictable than what state law provides.325

There is no Supreme Court precedent directly on point. In Golan v. Holder, however, the Court rejected the claim that pre-restoration users of foreign works whose U.S. copyrights were restored by the URAA established a vested First Amendment interest that entitled them to continue to use the restored works without obligation to the right holders.326 In fact, a claim that use of pre-1972 sound recordings prior to their federalization established an ownership interest in those recordings appears weaker than the claim made in Golan. Arguably some of pre-1972 recordings were effectively in the public domain in some states. But in other states, those recordings could not be considered to be in the public domain, and any property rights therefore belong to the initial right holders and their transferees, rather than to users.

C O N C L USI O N

To conclude, if Congress were to adopt the type of proposal offered by the Copyright Office, cognizant of the modifications suggested herein, it should significantly alleviate the principal takings and due process concerns that have been discussed. Such legislation could serve as a helpful framework for future legislative amendments to the intellectual property laws.

324. Erlinger, supra note 68 325. E .g., Loughney, Comments of Library of Congress in Response to Notice of Inquiry, supra note 28 -1972 Sound Recordings Public Meeting, supra note 28, at

But see Brandon Butler, Ass n of Research Libraries, Comments at Pre-1972 Sound Recordings available at http://www.copyright.gov/docs/sound/meeting/

transcript-06-02-2011.pdf. 326. See Golan v. Holder, 132 S. Ct. 873 (2012).